• Major bourses in Europe portray a mixed picture with no clear conviction seen heading into the US mid-term elections, US equity futures post mild gains but with price action contained
• DXY gleaned some traction across the board amidst a firmer rebound in Treasury yields, renewed weakness in the Yuan and general consolidation ahead of impending risk events
• US Treasuries were first off the block in terms of paring more losses from worst levels to turn marginally positive, Gilts followed suit, Bunds remain depressed
• WTI and Brent futures are softer intraday as DXY picked up overnight and in early European trade, whilst China’s COVID woes remain a grey cloud for the complex, with daily new cases in China rising to a six-month high for Sunday
• Bitcoin was pressured and slipped below the USD 20,000 level, with headwinds also as FTX Token sold off overnight
• Looking ahead, highlights include US Midterms, supply from US

8th November 2022

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EUROPEAN TRADE

EQUITIES

• Major bourses in Europe portray a mixed picture with no clear conviction seen heading into the US mid-term elections
• Sectors are mostly firmer (vs a mostly lower open) with Tech leading the charge with additional help from declining bond yields. Energy and Basic Resources sit as the sectoral laggards amid declines in underlying commodity prices.
• US equity futures post mild gains but with price action contained; ES +0.1%.
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FX

• DXY gleaned some traction across the board amidst a firmer rebound in Treasury yields, renewed weakness in the Yuan and general consolidation ahead of impending risk events.
• Yen managed to keep afloat of 147.00 and bucked the overall trend after Japan’s Cabinet approved a second supplementary budget and the BoJ’s SOO highlighted risks of a sharp price overshoot.
• European G10s sit as the current laggards, with EUR, GBP, and CHF towards the bottom of the bunch.
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Notable FX Expiries, NY Cut:

• EUR/USD: 0.9970-85 (1.42BN), 0.9990-00 (1.022BN)
• AUD/USD: 0.6450 (1.73BN)
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FIXED INCOME

• US Treasuries were first off the block in terms of paring more losses from worst levels to turn marginally positive
• Gilts followed suit as books closed on a well sought after 2038 syndicated offering.
• Bunds remain depressed in wake of a somewhat mixed Schatz auction given a bigger retention and hefty concession needed to achieve a 1.2 cover ratio for the new 2 year benchmark.
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COMMODITIES

• WTI and Brent futures are softer intraday as DXY picked up overnight and in early European trade, whilst China’s COVID woes remain a grey cloud for the complex, with daily new cases in China rising to a six-month high for Sunday.
• Spot gold moves in tandem with the Buck and oscillates on either side of its 50 DMA at USD 1,672/oz today in the run-up to the midterms.
• Base metals are mixed with LME copper trading with mild gains just under the USD 8,000/t mark.
• Chile's Codelco offers Chinese copper buyers 2023 supply at a premium USD 140/t (prev. USD 105/t; +33.3% Y/Y) according to Reuters sources.
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NOTABLE EUROPEAN HEADLINES

• BoE urged lenders to do more to avoid a repeat of the pensions fund turmoil seen in September, according to FT.
• UK PM Sunak is expected to increase pensions and benefits in line with inflation, according to The Times.
• UK Chancellor Hunt is to announce a tax raid on inheritance in the Autumn statement, according to The Telegraph and FT.
• UK plan to review or repeal all EU laws by end-2023 suffered another setback after 1,400 additional pieces of legislation were discovered, according to FT.
• UK and France are reportedly in the final stage of reaching an agreement concerning illegal English Channel crossing, according to FT.
• ECB's de Guindos says ECB will continue raising rates to levels that ensure price stability; levels will depend on data, the evolution of inflation, economic conditions, demand, and energy prices, via Reuters.
• ECB's Nagel says he will do his utmost to make sure the ECB does not let up in the inflation fight, according to Reuters.
• SNB's Jordan says policy decisions must be based on firm commitment to price stability objective; policy decisions must not be based exclusively on inflation forecast, via Reuters.
• BoE Chief Economist Pill says there is a danger of self-fulfilling dynamics on wage-cost nexus. Cannot declare victory against second-round effects but is entering a recession. Pill reiterated that there is more to do, and need to raise rates to tighten monetary policy. Pill is sceptical that front-loading hikes has big expectations effect, via Reuters.
• UBS (UBSG SW) branches have been searched by German criminal investigators in relation to sanctioned Russian oligarch Usmanov, according to Der Spiegel; searches related to money laundering.

NOTABLE EUROPEAN DATA

• UK BRC Retail Sales YY (Oct) 1.2% (Prev. 1.8%)
• UK BRC Total Sales YY (Oct) 1.6% (Prev. 2.2%)
• EU Retail Sales YY* (Sep) -0.6% vs. Exp. -1.3% (Prev. -2.0%, Rev. -1.4%)
• EU Retail Sales MM* (Sep) 0.4% vs. Exp. 0.4% (Prev. -0.3%)

NOTABLE US HEADLINE

• China Auto Industry Body CPCA says Tesla (TSLA) exported 54.504 vehicles (vs 5,522 in Sept), via Reuters.

CRYPTO

• Bitcoin was pressured alongside the cautious risk tone and slipped below the USD 20,000 level, with headwinds also as FTX Token sold off overnight.

RUSSIA-UKRAINE

• Ukrainian President Zelensky said it is vital to force Russia to participate in genuine peace negotiations, according to Reuters.
• White House Press Secretary said US President Biden has no intention of meeting Russian President Putin, while State Department spokesman Price said Russia signals that it is focused on escalation, according to Bloomberg.

OTHER

• North Korea’s military denied exporting weapons to Russia in which it stated that it has never exported weapons or ammunition to Russia and has no plans to do so, according to Yonhap.
• Chinese Foreign Ministry, on President's Xi's visit to Saudi Arabia, says don't know the information referred to, according to Reuters.
• Chinese President Xi will comprehensively strengthen military training and preparation for any war, according to state media. China's security is increasingly unstable and uncertain.

APAC TRADE

EQUITIES

• APAC stocks were mixed as the region only partially sustained the early momentum seen following the positive handover from Wall St with Chinese stocks pressured overnight as infections continued to rise.
• ASX 200 traded marginally higher with the index kept afloat by strength in the top-weighted financial industry and gains in consumer-related sectors.
• Nikkei 225 was firmer and edged closer to the 28,000 level as participants digested earnings releases and shrugged off mixed household spending data although Average Cash Earnings accelerated.
• Hang Seng and Shanghai Comp were subdued despite the reopening rumours which officials pushed back against, while the number of daily new infections continued to climb from 6-month highs.

NOTABLE ASIA-PAC HEADLINES

• Hong Kong Chief Executive Lee dismissed calls to drop the health code for travellers and mask-wearing rules, according to SCMP.
• Japanese PM Kishida is to approve USD 198bln extra budget for the stimulus plan, according to Bloomberg. Furthermore, Japan's government is to add JPY 1.4tln of fiscal loans for the second extra budget and will issue JPY 20.4tln in deficit-covering bonds, according to a draft cited by Reuters.
• Japan's cabinet has approved a second supplementary budget with JPY 29.1tln (in-line with prior reports) for FY to fund an economic stimulus package, according to MoF.
• BoJ Summary of Opinions stated that Japan's consumer inflation is likely to continue accelerating as firms pass on higher costs. Furthermore, consumer inflation is likely to slow back below 2% next fiscal year due to the impact of slowing global growth but cannot rule out chances that prices will sharply overshoot forecasts.
• RBNZ reappointed Governor Orr as the head for another five-year term, according to Reuters.
• Chinese interbank market regulator is to boost support by financing to private firms, will initially support around CNY 250bln of bond financing by private firms including property developers; supported by central bank refinancing.

DATA RECAP

• Japanese All Household Spending MM* (Sep) 1.8% vs. Exp. 1.7% (Prev. -1.7%)
• Japanese All Household Spending YY* (Sep) 2.3% vs. Exp. 2.7% (Prev. 5.1%)
• Japanese Average Cash Earnings YY (Sep) 2.1% (Prev. 1.7%)
• Australian NAB Business Confidence* (Oct) 0 (Prev. 5.0)
• Australian NAB Business Conditions* (Oct) 22 (Prev. 25.0)
• Australian Westpac Consumer Sentiment Index (Nov) 78.0 (Prev. 83.7)
• New Zealand 1yr Inflation Expectations (Q4) 5.1% (Prev. 4.9%)
• New Zealand 2yr Inflation Expectations (Q4) 3.6% (Prev. 3.1%)