Price action in assets calm down for the time being

Notes/Observations

- Price action in assets calm down for the time being aided by UK Treasury and Bank of England recent verbal intervention; main question is whether the pause in selling may be short-lived???

- Focus on Italy/German bond spread with caution over Italy's next government.

- Nord Stream operator noted of unprecedented damage to system due to gas leaks.

- Florida prepares for Hurricane Ian.

Asia

- RBNZ Gov Orr stated that its tightening cycle was 'very mature’ but still had a little bit more to do in terms of tightening.

- Taiwan Central Bank Gov: May adopt FX control measures in case of severe outflows; Outflows under control so far.

- Bank of Japan (BOJ) announced ¥250B in special bond buying operations (unscheduled).

Europe

- BOE Gov Bailey stated that was monitoring developments in financial markets very closely in light of the significant repricing of financial assets; Would not hesitate to change rates as much is necessary.

- SNB's Maechler: Raising rates was intended to send a clear signal that the SNB is determined to bring down inflation.

Americas

- Fed's Mester (FOMC voter)stated that further rate hikes would be needed and would need a restrictive stance for some time.

- BOC Gov Macklem reiterated that inflation was too high and that interest rates needed to go up to decelerate spending and give economy time to catch up.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 +0.54% at 390.82, FTSE -0.02% at 7,019.75, DAX +0.50% at 12,289.08, CAC-40 +0.63% at 5,805.75, IBEX-35 +0.26% at 7,527.89, FTSE MIB -0.30% at 21,143.00, SMI +0.73% at 10,146.20, S&P 500 Futures +1.22%].

Market Focal Points/Key Themes: European indices open higher across the board but moderated gains as the session progressed; all sectors start the day in the green; sectors among those leading to the upside include consumer discretionary and materials; lagging sectors include financials and utilities; reportedly Banco BPM considering selling some properties; Biffa receives takeover bid; earnings expected in the upcoming US session include TD Synnex, Jabil and Cracker Barrel.

Equities

- Consumer discretionary: Biffa [BIFF.UK] +28% (new offer), Ferguson [FERG.UK] -0.5% (trading update), Hugo Boss [BOSS.DE] -1.5% (analyst action).

- Energy: TotalEnergies [TTE.FR] +1% (CEO comments).

- Industrials: Balfour Beatty [BBY.UK] +1% (contract).

- Utilities: SSE [SSE.UK] -1.5% (trading update), United Utilities [UU.UK] -2% (trading update).

- Materials: Akzo Nobel [AKZA.NL] -1% (profit warning).

Speakers

- Russia Dep Chair of Security Council Medvedev (former Pres) reiterated govt stance that Russia had the right to use nuclear weapons if necessary; threat was not a bluff.

- China Commerce Ministry (MOFCOM) said to issue measures to support foreign trade.

- China Vice Commerce Min stated that pressure to stabilize imports and exports is increasing.

- Fed's Evans (non-voter) reiterated that inflation was high, getting it under control was a top priority job; End-2022 consensus view on rates was between 4.25% to 4.50%. Real rate may be 1.5% next spring and by then could sit and wait on rates. If things became better perhaps we could do less.

- Sweden Nord Stream operator issued warning of two gas leaks on Nord Stream 1 pipeline in Swedish and Danish water. Stated that damage was detected at three lines along the gas pipeline system and was unprecedented. Difficult when can say they would be fixed.

Currencies/fixed income

- USD consolidates its recent gains among the major pairs.

- GBP/USD hovered around the 1.08 area after BOE Gov Bailey stated on Monday that would not hesitate to change interest rates and was monitoring markets.

- EUR/USD at 0.9630 with focus on upcoming EU inflation data in the coming sessions and its trajectory. Energy concerns and its impact on growth remained a headwind. Sweden Nord Stream operator noted that damage was detected at three lines along the gas pipeline system and was unprecedented in its magnitude.

- Italian/German 10-year bond spread widened to test 250bps.

- UK 10-year Gilt yield was lower in the session by almost 10bps to test below 4.14%.

Economic data

- (FI) Finland Sept Consumer Confidence: -18.3 v -14.9 prior; Business Confidence: -1 v +2 prior.

- (SE) Sweden Aug PPI M/M: +3.3% v -1.5% prior; Y/Y: 22.0% v 20.4% prior.

- (SE) Sweden Aug Trade Balance (SEK): -18.4B v -3.9B prior (2nd straight deficit).

- (SE) Sweden Aug Household Lending Y/Y: 5.6% v 5.9% prior.

- (EU) Euro Zone Aug M3 Money Supply Y/Y: 6.1% v 5.4%e.

- (TW) Taiwan Aug Leading Monitoring Indicator: 23 v 24 prior.

Fixed income issuance

- (ID) Indonesia sold total IDR10.75T vs. IDR19.0T target in bills and bonds.

- (NL) Netherlands Debt Agency (DSTA) opened its book to sell new 3.00% Jan 2054 DSL bond via syndicate; guidance seen +33.5-37.5bps to 2052 Bund.

- (UK) DMO sold £1.2B in 0.125% Aug 2031 inflation-linked Gilts (UKei); Real Yield: +0.277% v -1.335% prior; bid-to-cover: x v 2.77x prior.

- (IT) Italy Debt Agency (Tesoro) sold €2.5B vs. €2.0-2.5B indicated range in 1.75% May 2024 BTP bonds; Avg Yield: 3.27% v 1.86% prior; bid-to-cover: 1.70x v 1.78x prior.

- (IT) Italy Debt Agency (Tesoro) sold €1.25B vs. €0.75-1.25B indicated range in 0.10% May 2033 inflation-linked bonds (BTPei); Avg Yield: 2.45% v 1.37% prior; bid-to-cover: 1.31x v 1.84x prior.

Looking ahead

- 05:15 (CH) Switzerland to sell 6-month Bills.

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

- 05:30 (ZA) South Africa Q2 Non-Farm Payrolls Q/Q: No est v 0.4% prior; Y/Y: No est v 2.0% prior.

- 05:30 (HU) Hungary Debt Agency (AKK) to sell 3-Month Bills.

- 05:30 (DE) Germany to sell €3.0B in 1.30% Oct 2027 BOBL.

- 05:30 (EU) ECB allotment in 7-Day Main Refinancing Tender (MRO).

- 05:30 (ZA) South Africa to sell combined ZAR3.9B in 2030, 2037 and 2040 bonds.

- 06:15 (US) Fed’s Evans on economic outlook.

- 06:45 (US) Daily Libor Fixing.

- 06:50 (PT) ECB’s Centeno (Portugal).

- 07:00 (MX) Mexico Aug Unemployment Rate NSA (unadj): 3.4%e v 3.4% prior; Unemployment Rate (Seasonally adj): No est v 3.2% prior.

- 07:00 (MX) Mexico Aug Trade Balance: -$5.0Be v -$6.0B prior.

- 07:00 (BR) Brazil Sept FGV Construction Costs M/M: 0.0%e v 0.3% prior.

- 07:00 (BR) Brazil Central Bank (BCB) Sept Minutes.

- 07:00 (UK) BOE’s Pill (chief economist).

- 07:00 (FR) ECB’s Villerory (France).

- 07:30 (US) Fed chief Powell.

- 07:30 (IT) ECB’s Panetti (Italy).

- 07:30 (EU) ECB chief Lagarde.

- 08:00 (HU) Hungary Central Bank (MNB) Interest Rate Decision: Expected to raise Base Rate by 100bps to 12.75%.

- 08:00 (BR) Brazil end-Sept IBGE Inflation IPCA-15 M/M: -0.2%e v -0.7% prior; Y/Y: 8.2%e v 9.6% prior.

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

- 08:00 (RU) Russia announcement on upcoming OFZ bond issuance (held on Wed).

- 08:30 (US) Aug Preliminary Durable Goods Orders: -0.3%e v -0.1% prior; Durables (Ex-Transportation): 0.2%e v 0.2% prior; Capital Goods Orders (non-defense/ex-aircraft): 0.2%e v 0.3% prior; Capital Goods Shipments (non-defense/ex-aircraft): 0.2%e v 0.5% prior.

- 09:00 (US) July FHFA House Price Index M/M: 0.0%e v 0.1% prior.

- 09:00 (US) July S&P/Case-Shiller House Price Index (20-City) M/M: 0.20%e v 0.44% prior; Y/Y: 17.50%e v 18.65% prior; House Price Index (overall) Y/Y: No est v 17.96% prior.

- 09:00 (EU) Weekly ECB Forex Reserves.

- 09:00 (ES) ECB’s De Guindos.

- 09:00 (EU) ECB weekly QE bond buying update.

- (NG) Nigeria Central Bank (CBN) Interest Rate Decision: Expected to raise Interest Rate by 50bps to 14.50%.

- 09:55 (US) Fed’s Bullard.

- 10:00 (US) Sept Consumer Confidence: 104.5e v 103.2 prior.

- 10:00 (US) Sept Richmond Fed Manufacturing Index: -11e v -8 prior.

- 10:00 (US) Aug New Homes Sales: 500Ke v 511K prior.

- 13:00 (US) Treasury to sell 5-Year Notes.

- 15:00 (AR) Argentina July Shop Center Sales Y/Y: No est v 114% prior; Supermarket Sales Y/Y: No est v 2.0% prior.

- 16:30 (US) Weekly API Oil Inventories.

- 19:01 (UK) Sept BRC Shop Price Index Y/Y: No est v 5.1% prior.

- 20:35 (US) Fed’s Daly.

- 21:30 (AU) Australia Aug Retail Sales M/M: 0.4%e v +1.3% prior.

- 22:00 (KR) South Korea Aug Department Store Sales Y/Y: No est v 31.6% prior.

- 22:35 (CN) China to sell 10-year Upsized Bond.