Focus turning to upcoming Fed speak and US payroll data

Notes/Observations

- Bond yields face opposing pressures from hawkish central banks and weak economic growth.

- Markets are muted ahead of US jobless claims and tomorrows non-farm payrolls with unemployment data.

-Economic data mixed in general but provided light on localized industry strength with notable beats in Spain's Industrial Production and UK's Construction PMI.

-ECB expected to release Sept meeting minutes with market focus on any nuanced clues to the timing of rate path changes.

-Asia closed mixed with Kospi outperforming at +1.0%. EU indices are flat to mixed, with bond yields lower. US futures are -0.4%. Gold +0.2%, DXY +0.2%; Commodity: Brent +0.3%, WTI +0.2%, UK Nat Gas +10.8%; Crypto: BTC +0.2%, ETH +1.2%.

Asia

- Australia Aug Trade Balance (A$): 8.3B v 10.0Be.

- South Korea Sept Foreign Reserves: $416.8B v $436.4B prior; Lowest since July 2020, fastest decline in 14 years.

Europe

- Fitch revises UK outlook to Negative from Stable; Affirms AA- rating (second rating agency cuts UK outlook in wake of mini-Budged.

Americas:

- Fed's Bostic (non-voter) stated that low unemployment meant Fed had maneuvering room to continue tightening; Fed should not over-react if 2% inflation was not reached quickly. Still decidedly in the inflationary woods, not out of them.

Energy

- OPEC+ JMMC technical panel agrees to oil output cut of 2Mbpd (biggest cut since 2020).

- Russia Dep PM Novak: OPEC+ agreed to extend co-operation deal until end 2023.

- Pres Biden: Disappointed by the short-sighted decision made by OPEC+ today; Will direct SPR releases as appropriate.

- Biden administration said to be preparing to scale down sanctions on Venezuela to allow.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 +0.38% at 400.42, FTSE -0.12% at 7,044.26, DAX +0.18% at 12,539.26, CAC-40 +0.02% at 5,986.59, IBEX-35 +0.10% at 7,587.12, FTSE MIB -0.49% at 21,255.00, SMI +0.05% at 10,482.50, S&P 500 Futures -0.44%].

Market Focal Points/Key Themes: European indices open higher across the board but then paired gains to trade mixed after a few hours of trading; better performing sectors include industrials and real estate; underperforming sectors include energy and telecom; oil & gas subsector dragged after Shell reports trading update; reportedly Generali might be looking to acquire BrightSphere; Sacyr looking to sell services and water units; focus on EU leader comments during “EU+” meeting later in the day; earnings expected during the upcoming US session include Conagra and Constellation Brands.

Equities

- Consumer discretionary: home24 [H24.DE] +124% (offer), Motorpoint Group [MOTR.UK] -13% (trading update).

- Consumer staples: Imperial Brands [IMB.UK] +4.5% (trading update; buyback), Diageo [DGE.UK] -0.5% (AGM update).

- Energy: Shell [SHEL.UK] -3.5% (Q3 update; OPEC+ decision).

- Healthcare: Merck KGaa [MRK.DE] +2% (targets).

- Industrials: Volution Group [FAN.UK] +12% (reported FY22), Chemring Group [CHG.UK] +3.5% (trading update), Kloeckner & Co [KCO.DE] -8% (rating downgrade), Tomra Systems [TOM.NO] -11% (rating downgrade).

Speakers

- EU Commissioner for the Internal Market Breton: EU countries need equal access to energy-related debt. EU to examine whether Germany’s plan to shelter companies and households from surging energy costs respects the bloc’s rules on public subsidies.

- BOE Decision Maker Panel Survey noted that companies looked to raise prices by 6.6% over the next year. Companies saw 1-year CPI at 9.5% and 3-year CPI at 4.8%

- BoE Letter to Treasury Committee noted that liquidity condition were very poor in the run up to the BoE Gilt intervention; Identified LDI concerns on day of fiscal plan.

- EU formally approved 8th package of Russia sanctions.

Currencies/fixed income

- USD trying to muster some fresh momentum ahead of Friday’s non-farm payroll report. Dealers also citing the upcoming inflation data that will be release next week. Fed had repeatedly stressed it would hike and hold rates high until inflation subsided. Markets have seen some central banks temper their tightening and had pondered that perhaps the Fed might do so as well.

- EUR/USD hovering above the 0.99 area. Dealers noted that OPEC+ recent move to cut production would send prices higher and hit hardest for Europe and UK. Focus on ECB Sept minutes to be released later in today’s session.

- GBP/USD dipping below the 1.1330 level. Fitch revised its UK outlook to Negative from Stable while affirming its AA- rating. Dealers noted it was the second rating agency to cut UK outlook in wake of mini-Budged. Better PMI Construction data failed to life sentiments.

Economic data

- (NL) Netherlands Sept CPI M/M: 2.4% v 2.0% prior; Y/Y: 14.5% v 12.0% prior.

- (NL) Netherlands Sept CPI EU Harmonized M/M: 2.8% v 2.4% prior; Y/Y: 17.1% v 13.7% prior.

- (IN) India Sept PMI Services: # v 57.2 prior; PMI Composite: % v 58.2 prior.

- (DE) Germany Aug Factory Orders M/M: -2.4% v -0.7%e; Y/Y: -4.1% v -5.5%e.

- (SE) Sweden Aug GDP Indicator M/M: -1.3% v -0.7%e; Y/Y: 3.6% v 2.0% prior.

- (SE) Sweden Private Sector Production M/M: -1.3% v +1.2% prior; Y/Y: 4.3% v 4.3% prior.

- (SE) Sweden Aug Industrial Orders M/M: -4.2% v +2.8% prior; Y/Y: -0.6% v +4.1% prior.

- (SE) Sweden Aug Industry Production Value Y/Y: 2.1% v 7.3% prior; Service Production Value Y/Y: 4.6% v 4.3% prior.

- (SE) Sweden Aug Household Consumption M/M: 0.0% v -1.1% prior; Y/Y: 1.7% v 1.3% prior.

- (FI) Finland Aug Preliminary Trade Balance: -€1.3B v -€1.2B prior.

- (ES) Spain Aug Industrial Production M/M: +0.4% v -0.3%e; Y/Y: 5.5% v 4.3%e; Industrial Output NSA (unadj) Y/Y: 5.8% v 1.4% prior.

- (AT) Austria Sept Wholesale Price Index M/M:+0.2 % v -1.2% prior; Y/Y: 20.6% v 21.3% prior.

- (HU) Hungary Aug Retail Sales Y/Y: 2.4% v 4.7%e.

- (HU) Hungary Aug Industrial Production M/M: 0.1% v 1.1% prior; Y/Y: 9.3% v 8.4%e.

- (CZ) Czech Aug Retail Sales (ex-auto) Y/Y: -8.8% v -6.5%e.

- (HU) Hungary Central Bank leaves One Week Deposit Rate unchanged at 13.00% (as expected).

- (DE) Germany Sept Construction PMI: 41.8 v 42.6 prior.

- (TW) Taiwan Sept CPI Y/Y: 2.8% v 2.8%e; CPI Core Y/Y: 2.8% v 2.6%e; WPI Y/Y: 12.8% v 11.5% prior.

- (UK) Sept Construction PMI: # v 48.0e (1st expansion in 3 months).

- (EU) Euro Zone Aug Retail Sales M/M: -0.3% v -0.3%e; Y/Y: -2.0% v -1.7%e.

- (CY) Cyprus Sept CPI M/M: -0.2% v -0.3% prior; Y/Y: 8.7% v 8.9% prior.

Fixed income issuance

- (ES) Spain Debt Agency (Tesoro) sold total €4.902B vs. €4.0-5.0B indicated range in 2029, 2032 and 2050 Bonds.

- Sold €1.151B in 6.0% Jan 2029 SPGB; Avg Yield: 2.632% v 1.538% prior, bid-to-cover: 2.42x v 1.96x.

- Sold €2.183B in 2.55% Oct 2032 SPGB bond, Avg Yield: 3.225% v 2.813% prior, bid-to-cover: 1.42x v 1.76x prior.

- Sold €1.568B in 1.00% Oct 2050 SPGB Avg Yield: 3.565% v 1.404% prior; bid-to-cover: 1.56x v 1.56x prior.

- (ES) Spain Debt Agency (Tesoro) sold €505M vs. €250-750M indicated range in 1.00% Nov 2030 inflation linked bonds (SPGBi); Real Yield: +0.688% v -1.335% prior; Bid-to-cover: 2.51x v 2.38x prio.

- (FR) France Debt Agency (AFT) sold total €9.988B vs. €9.0-10.0B indicated range in 2032, 2053 and 2066 Bonds.

- Sold €5.926B in 2.00% Nov 2032 Oat; Avg Yield: 2.59% v 2.21% prior; Bid-to-cover: 2.35x v 1.98x prior (Sept 1st 2022).

- Sold €2.884B in 0.75% May 2053 Oat; Avg Yield: 2.84% v 2.52% prior; bid-to-cover: 1.91x v 1.58x prior (July 7th 2022).

- Sold €1.188B in 1.75% May 2066 Oat; Avg Yield: 2.74% v 1.04% prior, Bid-to-cover: 1.94x v 2.78x prior.

Looking ahead

- (IL) Israel Sept Foreign Currency Balance: No est v $192.2B prior.

- (RU) Russia Sept Light Vehicle Car Sales Y/Y: No est v -62.4% prior.

- 05:25 (EU) Daily ECB Liquidity Stats.

- 05:30 (HU) Hungary Debt Agency (AKK) to sell 5-year, 10-year and 20-year bonds.

- 06:00 (RO) Romania to RON400M in 4.85% 2029 bonds.

- 06:45 (US) Daily Libor Fixing.\

- 07:00 (ZA) South Africa Aug Electricity Consumption Y/Y: No est v -6.2% prior; Electricity Production Y/Y: No est v -7.7% prior.

- 07:00 (BR) Brazil Sept FGV Inflation IGP-DI M/M: -0.9%e v -0.6% prior; Y/Y: 8.3%e v 8.7% prior.

- 07:00 (MX) Mexico July Gross Fixed Investment: 4.0%e v 7.8% prior.

- 07:00 (MX) Mexico Sept Vehicle Production: No est v 316.8K prior; Vehicle Exports: No est v 248.7K prior.

- 07:30 (US) Sept Challenger Job Cuts: No est v +20.5K prior; Y/Y: No est v 30.3% prior.

- 07:30 (EU) ECB Publishes Account of September Policy Meeting (Minutes).

- 07:30 (CL) Chile Central Bank Traders Survey.

- 08:00 (CL) Chile Aug Nominal Wage Y/Y: No est v 9.8% prior.

- 08:00 (BR) Brazil CONAB Crop Report.

- 08:00 (UK) Daily Baltic Dry Bulk Index.

- 08:30 (US) Initial Jobless Claims: 203Ke v 193K prior; Continuing Claims: 1.35Me v 1.347M prior.

- 08:30 (US) Weekly USDA Net Export Sales.

- 09:00 (RU) Russia Gold and Forex Reserve w/e Sept 30th: No est v $549.7B prior.

- 09:45 (UK) BOE Gilt buyback operation.

- 10:00 (CA) Canada Sept Ivey Purchasing Managers Index (seasonally adj): No est v 60.9 prior.

- 10:30 (US) Weekly EIA Natural Gas Inventories.

- 11:30 (US) Treasury to sell 4-Week and 8-Week Bills.

- 13:00 (US) Fed’s Evans participates on panel.

- 13:00 (US Fed’s Cook at Peterson Institute.

- 15:00 (AR) Argentina Aug Industrial Production Y/Y: No est v 5.1% prior; Construction Activity Y/Y: No est v 5.2% prior.

- 17:00 (US) Fed’s Waller.

- 18:30 (US) Fed’s Mester on economic outlook.

- 19:00 (KR) South Korea Aug Current Account Balance: No est v $1.1B prior; Balance of Goods (BOP): No est v -$1.2B prior.

- 19:00 (PE) Peru Central Bank (BCRP) Interest Rate Decision: Expected to raise Reference Rate by 25bps 7.00%.

- 19:30 (JP) Japan Aug Household Spending Y/Y: 6.7%e v 3.4% prior; Labor Cash Earnings Y/Y: 1.4%e v 1.3% prior (revised from 1.8%).

- 19:30 (JP) Japan Aug Real Cash Earnings Y/Y: No est v -1.8% prior (revised from -1.3%).

- 20:30 (AU) RBA-Financial Stability Review.

- 23:00 (ID) Indonesia Sept Foreign Reserves: No est v $132.2B prior.

- 23:30 (JP) Japan to sell 3-Month Bills.