Slightly softer UK inflation data unlikely to settle the debate on BOE policy

Notes/Observations

- Inflation fears continue to weigh on market sentiment.

- UK Sept CPI slowed slightly to 3.1% (still the 2nd month above BOE 2% target).

- German Bundesbank President Weidmann to resign citing personal reasons.

Asia

- China PBoC Monthly Loan Prime Rate (LPR) Operation left both 1-year and 5-year Loan Prime Rate unchanged at 3.85% and l4.65% respectively.

- China PBOC Backed Newspaper (Financial News) noted that expectations for a Q4 RRR cut had eased due to high factory gate inflation (PPI).

- China Vice Commerce Min Wang Bingnan: Will roll out measures to boost consumption as the rebound has been uneven.

- China State Planner (NDRC) Official noted that Govt needed to closely monitor operation issues for property developers.

- China PBOC Open Market Operation (OMO) injected CNY100B in 7-day reverse repos v CNY10B prior; Net inject CNY90B .The increased injections said to be due to tax and govt bond issuance payments.

- Japan Sept Trade Balance: -¥622.8B v -¥520.7Be v; Exports Y/Y: 13.0% v 10.3%e; Imports Y/Y: 38.6% v 34.5%e.

Europe

- UK govt reportedly plans to cut tax surcharge on bank profits by over 60% from 8% to 3% in upcoming budget; measures would begin in April 2023. Aimed to keep banking activity in the UK.

- UK govt reportedly reiterated it aims to end sale of new petrol cars in 2030. UK Treasury said to warn that new taxes will be needed to make Britain “ net zero” in carbon emissions by 2050 as taxes currently linked to the driving of polluting vehicles will disappear over that time.

Americas

- Fed's Waller (hawk, voter) stated that did support Fed beginning taper in Nov; Substantial progress had been made on both inflation and employment. If inflation expectations become unanchored, we would likely need to take action.

- Fed's Barkin (FOMC voter, hawk) noted that labor shortages might outlast the pandemic; Seen strong wage increases for entry level positions.

- White House and Democrats said to be getting close to a deal on framework for major package of legislation on social programs/climate that could be announced in the coming days (Note: package was originally $3.5T but the number could be reduced to between $1.9-2.2T). Sen Manchin (D-VW) reiterated that he remains at $1.5 trillion topline.

Energy

- Weekly API Crude Oil Inventories: +3.3M v +5.2M prior r (4th straight weekly build).

Speakers/Fixed income/FX/Commodities/Erratum

Equities

Indices [Stoxx600 +0.13% at 469.20, FTSE -0.09% at 7,211.07, DAX +0.15% at 15,538.70, CAC-40 -0.16% at 6,659.26, IBEX-35 +0.02% at 8,998.50, FTSE MIB +0.34% at 26,422.00, SMI +0.98% at 12,060.28, S&P 500 Futures 0.00%].

Market Focal Points/Key Themes: European indices open generally lower but later turned around to trade slightly in the green; better performing sectors include materials and healthcare; while sectors among those leading to the downside are consumer discretionary and technology; oil and gas subsector under pressure after China announced intervention to bring down the price of energy; debut of AutoStore on the market; Prodware receives takeover offer from Phast Invest; earnings expected during the upcoming US session include Nasdaq, Abbott Laboratories, Verizon and Deutsche Boerse.

Equities

- Consumer discretionary: Nestle [NESN.CH] +3.5% (earnings; raises outlook), Deliveroo [ROO.UK] +3% (trading update; raises outlook).

- Healthcare: Roche [ROG.CH] -1% (earnings; raises outlook).

- Industrials: Vinci SA [DG.FR] +1.5% (earnings), Antofagasta [ANTO.UK] -4.5% (production).

- Technology: ASML [ASML.NL] -1.5% (earnings), AutoStore [AUTO.NO] +6% (1st day of IPO trading).

- Materials: Akzo Nobel [AKZA.NL] -3% (earnings).

Speakers

-- German Bundesbank President Weidmann to resign at year-end citing personal reasons.

- ECB’s Villeroy (France) reiterated stance that pick-up in inflation was seen as transitory. Policy to be vigilant but patient.

- Norway Central Bank (Norges) Gov Olsen stated that the current high inflation seen as likely transitory. Added that inflation targeting regime had been robust over the past two decades.

- China Vice Premier Liu He noted that China was able to achieve annual economic targets; property market risks were controllable. Reiterated govt view of “individual problems” in the property market. Reasonable capital demand for property sector was being met.

- China State Asset Regulator SASAC spokesperson: Urges power plants to purchase more coal and maintain stockpile.

- China FX Regulator SAFE noted that 2-way CNY currency (Yuan) fluctuations have increased and able to better absorb short-term disturbances.

- Iraq Oil Min Jabbar state that he expect oil prices to hit $100/barrel in Q1/Q2 of 2022; global oil inventories are at their lowest level (**Note: On Oct 13th Jabbar stated then that oil prices were unlikely to rise further. Oil price between $75-80 seen fair to both producers and consumers).

Currencies/Fixed Income

- USD was slightly stronger in the session as various inflation data came out.

- GBP/USD moved back below the 1.38 level after Sept CPI data eased a touch to 3.1%. Overall dealers noted that the data miss would not likely alter the likelihood that interest rates would rise soon. The pause in inflation readings not likely to last as energy price surge continued.

- EUR/USD drifted from highs of 1.1652.

- USD/JPY continued to registered fresh 4-year highs as the pair approached the 114.70 area. Rate divergence between Fed and BOJ opening the door for a retest of 120 level in coming months.

Economic data

- (UK) Sept CPI M/M: 0.3% v 0.4%e; Y/Y: 3.1% v 3.2%e (2nd month above target); CPI Core Y/Y: %2.9 v 3.0%e; CPIH Y/Y: 2.9% v 3.0%e.

- (UK) Sept RPI M/M: 0.4% v 0.2%e; Y/Y: 4.9% v 4.7%e; RPI-X (ex-mortgage interest payments) Y/Y: 5.0% v 4.8%e; Retail Price Index: 308.6 v 308.1e.

- (UK) Sept PPI Input M/M: 0.4% v 1.0%e; Y/Y: 11.4% v 11.8%e.

- (UK) Sept PPI Output M/M: 0.5% v 0.5%e; Y/Y: 6.7% v 6.8%e.

- (DE) Germany Sept PPI M/M: 2.3% v 1.1%e; Y/Y: 14.2% v 12.8%e.

- (AT) Austria Sept Final CPI M/M: 0.5% v 0.4% prelim; Y/Y: 3.3% v 3.2% prelim.

- (TW) Taiwan Sept Export Orders Y/Y: 25.7% v 17.0%e (19th month of increases).

- (EU) Euro Zone Aug Current Account Balance: €13.4B v €22.6B prior.

- (ZA) South Africa Sept CPI M/M: 0.2% v 0.3%e; Y/Y: 5.0% v 5.0%e (7th straight reading within target band).

- (ZA) South Africa Sept CPI Core M/M: 0.3% v 0.2%e; Y/Y: 3.2% v 3.1%e.

- (PL) Poland Sept Sold Industrial Output M/M: 11.0% v 10.2%e; Y/Y: 8.8% v 8.0%e.

- (PL) Poland Sept PPI M/M: 0.7% v 0.6%e; Y/Y: 10.2% v 10.0%e.

- (PL) Poland Oct Consumer Confidence: -17.8 v -14.5e.

- (UK) Aug ONS House Price Index Y/Y: 10.6% v 8.5% prior.

- (IT) Italy Aug Current Account Balance: €5.0B v €8.0B prior.

- (GR) Greece Aug Current Account Balance: €1.4B v €0.6B prior..

- (PT) Portugal Aug Current Account Balance: +€0.5B v -€0.2B prior.

- (EU) Euro Zone Sept Final CPI Y/Y: 3.4% v 3.4%e (3rd month above target); CPI Core Y/Y: 1.9% v 1.9%e.

Fixed income Issuance

- (IT) Italy Debt Agency (Tesoro) opened its book to sell EUR-denominated Apr 2045 green BTP bond via syndicate; guidance seen +12bps to mid-swaps.

- (IN) India sold total INR200B vs. INR200B indicated in 3-month, 6-month and 12-month bills.

- (DK) Denmark sold total DKK3.04B in 2024 and 2031 DGB bonds.

- (UK) DMO sold £2.25B in 0.25% July 2031 Gilts; Avg Yield: 1.144% v 0.740% prior; bid-to-cover: 2.65x v 2.52x prior; Tail: 0.2bps v 0.2bps prior.

- (SE) Sweden sold total SEK3.5B vs. SEK3.5B indicated in 2028 and 2045 bonds.

Looking Ahead

- (AR) Argentina Sept Budget Balance (ARS): No est v -124.8B prior.

- (AR) Argentina Sept Leading Indicator: No est v -0.7% prior.

- (MX) Citibanamex Survey of Economists.

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

- 05:30 (DE) Germany to sell €3.0B in 0.0% Aug 2031 Bunds.

- 05:30 (ZA) South Africa announces details of next bond auction (held on Tuesdays).

- 06:00 (EU) EU Commission to sell combined €3.0B in 3-month and 6-month Bills (prior Oct 6th 2021).

- 06:45 (US) Daily Libor Fixing.

- 07:00 (RU) Russia to sell RUB20B in 2031 OFZ Bond.

- 07:00 (US) MBA Mortgage Applications w/e Oct 15th: No est v 0.2% prior.

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

- 08:30 (CA) Canada Sept CPI M/M: 0.1%e v 0.2% prior; Y/Y: 4.3%e v 4.1% prior; Consumer Price Index: 142.7e v 142.6 prior.

- 08:30 (CA) Canada Sept Teranet House Price Index (HPI) M/M: No est v 1.0% prior; Y/Y: No est v 18.4% prior; HPI Index: No est v 284.59 prior.

- 09:40 (AT) ECB’s Holzmann (Austria) at financial regulation conference.

- 09:45 (UK) BOE to buy £1.147B in APF Gilt purchase operation (7-20 years).

- 10:30 (US) Weekly DOE Oil Inventories.

- 11:00 (FR) ECB’s Villeroy (France).

- 11:20 (IT) ECB’s Visco (Italy).

- 12:00 (RU) Russia Sept PPI M/M: 0.8%e v 1.5% prior; Y/Y: 29.7%e v 28.6% prior.

- 12:00 (US) Fed’s Bostic with Kashkari, Evans and Bullard.

- 12:00 (SE) Sweden Central Bank (Riksbank) Jansson participates on panel.

- 13:00 (US) Fed’s Quarles.

- 13:00 (US) Treasury to sell 20-Year Notes.

- 14:00 (US) Federal Reserve Beige Book.

- 17:00 (KR) South Korea Sept PPI Y/Y: No est v 7.3% prior.

- 20:00 (KR) South Korea Oct 1-20th Exports Y/Y: No est v 22.9% prior; Imports Y/Y: No est v 38.8% prior.

- 20:30 (AU) Australia Q3 Business Confidence: No est v 17 prior.

- 21:00 (CN) China Sept Swift Global Payments (CNY): No est v 2.2% prior.

- 22:00 (NZ) New Zealand Sept Credit Card Spending M/M: No est v -14.3% prior; Y/Y: No est v -6.3% prior.

- 23:00 (TH) Thailand Central Bank to sell THB25B in 2023 Bonds.

- 23:30 (JP) Japan to sell 6-Month Bills.