Bond yields continue their ascent

- Yields continue to rise as central bank hawkish rhetoric to combat inflation; US 10-year hit the 4.00% mark for its highest level since 2008.

- Plethora of central bank speak continues.

- EU Confidence data in session disappoints and remained on a downward trend (Germany, France, Italy all miss consensus).

Asia

- Chinese banks reportedly planned to restart counter-cyclical factor in CNY midpoint fixing formula.

- BOJ July Minutes (two decisions ago) reiterated stance to closely monitoring impact of covid on economy, won't hesitate to add easing if necessary.

- Fitch affirmed South Korea Sovereign rating at AA-: Outlook stable.

Ukraine conflict

- Four Russian-occupied provinces voted to join Russia. Once the results were in Russian lower house of parliament (Duma) would vote on whether the regions should be incorporated into the federation. Ukraine territory annexation could be discussed at the Oct 4th meetings with approval likely to be swift.

Europe

- IMF spokesperson stated that it was closely monitoring economic developments in the UK and was engaged with authorities; Did not recommend large and untargeted fiscal packages given elevated inflation. Believed UK fiscal measures would likely increase inequality and urges the govt to rethink the measures.

Americas

- Fed's Daly (non-voter) stated that sought to bring inflation down, but not unnecessarily tip economy into recession; Important to navigate through high inflation environment as carefully as possible.

- Fed's Kashkari (non-voter) stated that Fed policymakers were united and committed to bringing down inflation; How much needed to be done would be determined partly by the supply side.

- Fed’s Harker (non-voter) stated that the Fed was working to stabilize inflation.

- Treasury Sec Yellen stated that financial markets were functioning well and not seeing liquidity issues or deleveraging; Financial turmoil of recent days appeared to be confined to Britain and was not spreading to the global economy.

- White House said to be considering Treasury Sec Yellen exit after Nov midterm election.

- White House Econ Advisor Deese stated that it did not anticipate headed toward Plaza type accord to adjust FX values. Noted the stronger USD was a reflection of relative strength of US economy.

- Apple [AAPL] said to have given up plans on increased iPhone production due to lower demand; Anticipated demand surge never materialized.

Energy

- Weekly API Crude Oil Inventories: +4.2M v +1.0M prior.

- EU Commission said to discuss a proposal to impose a “dynamic cap” on gas purchases and imports on Friday, Sept 30th; Chances of the cap actually being adopted reportedly was still low, as long as Germany, Denmark and the Netherlands oppose it.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 -1.22% at 383.52, FTSE -1.40% at 6,886.70, DAX -1.28% at 11,983.91, CAC-40 -0.89% at 5,702.86, IBEX-35 -1.70% at 7,319.24, FTSE MIB -1.38% at 20,669.00, SMI +0.29% at 10,156.26, S&P 500 Futures -0.68%].

Market Focal Points/Key Themes: European indices open down across the board and fell further as the session wore on (with Switzerland notable exception); all sectors start the day in the red; geopolitical concerns seen weighing on risk sentiment; Czechia closed for holiday; less negative sectors include telecom and health care; sectors leading to the downside include technology and materials; clothing subsector under pressure following Boohoo results, outlook cut; aquaculture stocks drop following proposal by Norway government to tax sea farms; Spirax-Sarco to acquire DIC; no major earnings expected during the upcoming US session.

Equities

- Consumer discretionary: Burberry [BRBY.UK] +3% (Chief Creative Officer steps down), boohoo.com [BOO.UK] -9% (earnings).

- Consumer staples: Salmar [SALM.NO] -18%, Mowi [MOWI.NO] -13% (Norway Finance Ministry proposes to raise tax on resource production).

- Financials: Credit Suisse [CSGN.CH] -5% (SEC settlement).

- Healthcare: Roche [ROG.CH] +6%, Morphosys [MOR.DE] +16% (Biogen drug news).

- Technology: Infineon [IFX.DE] -4% (Apple production plans).

Speakers

- ECB chief Lagarde stated that it needed to give strong signal that inflationary expectation would not become de-anchored. Reiterated stance to continue with rate hikes at the upcoming meetings as price stability was its key objective. ECB was not at the neutral rate at this time.

- ECB's Rehn (Finland): Need significant hike in Oct either 50bps or 75bps; saw a stronger case for front loading and determined action.

- ECB’s Holzmann (Austria, hawk) reiterated Council stance that interest rates would be raised further. ECB was taking its foot off the gas and not hitting the brakes. Prepared to raise rates above the neutral level if needed. To discuss quantitative tightening at the Oct meeting in Cyprus. Saw75bps was a good figure for Oct meeting and added that a100bps was currently too much. No rate cuts seen in 2023..

- ECB's Kazimir (Slovakia, hawk) stated that a 75bps was a good option for Oct 27th's meeting; needed to avoid 2nd effects of inflation. Had a consensus to reach the neutral level but not where that exactly was.

- Sweden Central Bank (Riksbank) Jansson: Very important to address inflation at this time but hard to determine how much rates need to be raised. Weaker SEK currency (Krona) was not very welcomed from its perspective.

- UK Chancellor of the Exchequer (Fin Min) Kwarteng said to plan asking financiers not to bet against GBP currency (pound) at an upcoming banker meeting (**Note: later refuted by UK Treasury official).

- Germany Debt Agency (DFA) Q4 issuance plan stated that it would increase borrowing by €22.5B in quarter due to govt steps on energy crisis.

- Russia Central Bank Dep Gov reiterated stance that might improve 2022 GDP outlook to be a smaller contraction at the Oct meeting.

- Greece PM Mitsotakis confirmed 15 EU countries to back a price cap on natural gas.

- Thailand Central Bank Policy Statement noted that the decision to hike by 25bps was unanimous . Medium-term inflation expectations remained anchored. THB currency (Baht) weakness was due to a strong USD but would closely monitor situation. It did raise its 2022 tourist arrivals to 9.5M (prior was 6M).

- Thailand Central Bank updated its Staff Projections which maintained 2022 GDP growth at 3.3% but cut the 2023 GDP growth forecast from 4.2% to 3.8%. BOT raised the 2022 Headline CPI forecast from 6.2% to 6.3% and raised the 2023 Headline CPI forecast from 2.5% to 2.6%.

- Taiwan Central Bank stated that saw inflation gradually failing in H2. To continue to take a tightening monetary policy stance to maintain overall economic and financial stability.

- South Korea said to believe that North Korea could conduct a nuclear test between Oct 16th and Nov 7th period.

Currencies/fixed income

- Safe-haven flows continued to aid the USD as rising global interest rates percolated recession concerns. The greenback received an additional boost after US Administration showed no concern at all with the strong dollar and downplayed the need for another Plaza type accord to adjust FX value. Numerous Fed officials reiterated the need to raise rates to raise interest rates to a range between 4.50% and 4.75%.

- GBP/USD unable to capitalize on comments from BOE chief economist Pill who advocated a "significant monetary policy response”. Chancellor of the Exchequer (Fin Min) Kwarteng said to plan asking financiers not to bet against GBP currency (pound) during the meeting later on Wed.

- EUR/USD tested fresh 20-year lows in Asia at 0.9535. A rash of ECB speak of need to hike rates to combat inflation did little to bring the currency higher.

- Onshore Yuan (CNY) falls to test 7.2235 for a 14-year low (weakest Yuan since the global financial crisis in 2008.

Economic data

- (DE) Germany Oct GFK Consumer Confidence: -42.5 v -39.0e (10th straight negative reading and record low).

- (NO) Norway Aug Retail Sales M/M: +0.7% v -0.5%e.

- (SE) Sweden Aug Retail Sales M/M: -0.4% v -0.2% prior; Y/Y: -5.1% v -3.8% prior.

- (DK) Denmark Aug Retail Sales M/M: 0.1% v 0.2% prior; Y/Y: -5.0% v -8.6% prior.

- (FR) France Sept Consumer Confidence: 79 v 80e.

- (TH) Thailand Central Bank (BOT) raised the Benchmark Interest Rate by 25bps to 1.00% (as expected).

- (ES) Spain July Total Mortgage Lending Y/Y: 18.8% v 20.1% prior; Mortgage Approvals Y/Y: 2.3% v 12.0% prior.

- (SE) Sweden Sept Consumer Confidence: 49.7 v 53.0e; Manufacturing Confidence: 110.0 v 115.7 prior; Economic Tendency Survey: 90.8 v 95.0e.

- (IT) Italy Sept Consumer Confidence: 94,8 v 95.1e; Manufacturing Confidence Index: 101.3 v 102.2e; Economic Sentiment: 105.2 v 109.2 prior.

- (CH) Swiss Sept Expectations Survey: -69.2 v -56.3.

- (AT) Austria Aug Manufacturing PMI: 48.8 v 48.8 prior (2nd straight contraction).

- (IT) Italy July Industrial Sales M/M: -0.1% v -0.4% prior; Y/Y: 16.3% v 17.9% prior.

- (IS) Iceland Sept CPI M/M: 0.1% v 0.3% prior; Y/Y: 9.3% v 9.7% prior.

Fixed income issuance

- (IN) India sold total INR210B vs. INR210B indicated in 3-month, 6-month and 12-month bills.

- (UK) DMO opened its book to sell 1.50% July 2053 green Gilt via syndication; guidance seen +1.0-1.5bps to UK treasuries; order book over £19B.

- (IT) Italy Debt Agency (Tesoro) sold €5.0B vs. €5.0B indicated in 6-month bills; Avg Yield: 1.978% v 0.182% prior; Bid-to-cover: 1.42x v 1.46x prior.

- (SE) Sweden sold SEK5.0B vs. SEK5.0B indicated in 3-month Bills; Avg Yield: 1.5306% v 1.141% prior; Bid-to-cover: 1.79x v 3.05x prior.

Looking ahead

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

- 05:30 (GR) Greece Debt Agency (PDMA) to sell 26-week Bills.

- 05:30 (EU) ECB allotment in 3-month LTRO.

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

- 06:00 (RU) Russia canceled planned OFZ Bond auction.

- 06:00 (IE) Ireland Aug Retail Sales M/M: No est v -1.6% prior; Y/Y: No est v -8.1% prior.

- 06:45 (US) Daily Libor Fixing.

- 07:00 (US) MBA Mortgage Applications w/e Sept 23rd: No est v +3.8% prior.

- 07:00 (UK) Weekly PM Question time in House.

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

- 08:30 (US) Aug Advance Goods Trade Balance: -$89.0Be v -$90.2B prior (revised from -$89.1B).

- 08:30 (US) Aug Preliminary Wholesale Inventories M/M: 0.4%e v 0.6% prior; Retail Inventories M/M: 1.0%e v 1.1% prior.

- 08:30 (BR) Brazil July Total Outstanding Loans (BRL): 5.046Te v 4.96T prior; M/M: 0.9%e v 1.6% prior; Personal Loan Default Rate: No est v 5.2% prior.

- 08:35 (US) Fed’s Bostic.

- 10:00 (US) Aug Pending Home Sales M/M: -1.5%e v -1.0% prior; Y/Y: -24.5%e v -22.5% prior.

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

- 11:00 (NL) ECB’s Elderson (Netherlands, SSM).

- 11:30 (US) Treasury to sell 2-Year FRN Reopening.

- 12:00 (RU) Russia Aug Industrial Production Y/Y: -0.9%e v -0.5% prior.

- 12:00 (RU) Russia Aug Real Retail Sales Y/Y: -8.5%e v -8.8% prior.

- 12:00 (RU) Russia Aug Unemployment Rate: 4.1%e v 3.9% prior.

- 12:00 (RU) Russia July Real Wages Y/Y: -4.2%e v -3.2% prior.

- 12:00 (CA) Canada to sell 30 Year Bonds.

- 13:00 (US) Treasury to sell 7-Year Notes.

- 13:30 (BR) Brazil Aug Total Federal Debt (BRL): No est v 5.804T prior.

- 14:00 (US) Fed’s Evans at the London School of Economics.

- 14:00 (UK) BOE’s Dingra.

- 17:00 (KR) South Korea Oct Business Manufacturing Survey: No est v 82 prior; Non-Manufacturing Survey: No est v 82 prior.

- 20:00 (NZ) New Zealand Sept Business Confidence: No est v -47.8 prior; Activity Outlook: No est v -4.0 prior.

- 21:30 (AU) Australia Q2 Job Vacancies Q/Q: No est v 13.8% prior.

- 23:35 (JP) Japan to sell 2-Year JGB Bonds.