Risk appetite tries to find its groove again

Notes/Observations

- Inflation outlook continue to be the focus.

- Emerging market central banks continue tightening (overnight saw Chile, Singapore).

Asia

- China Sept CPI Y/Y: 0.7% v 0.8%e; PPI Y/Y: 10.7% v 10.5%e (20-year high).

- Australia Sept Net Employment Change: -138.0K v -110.0Ke; Unemployment Rate: 4.6% v 4.8%e.

- Singapore Monetary Authority (MAS): semiannual monetary policy statement noted it would move to tightening and raise slightly the slope of S$NEER currency band. Slope increase to ensure price stability over medium term, while recognizing the risks to economic recovery (Note: The S$NEER slope was previously zero).

- Singapore Q3 Advance GDP Q/Q: 0.8% v 1.1%e; Y/Y: 6.5% v 6.6%e.

- BOJ Official Noguchi noted that reduction in monetary easing as seen at other central banks was not an option for Japan for awhile.

- Japan LDP Lawmaker Yamamoto stated that the govt must compile stimulus package of at least ¥32-33T. Weaker JPY currency (yen) was beneficial for economy and increases competitiveness.

- South Korea Fin Min Hong: Recent FX declines in KRW currency (won) were 'fast', closely monitoring movements.

- Japan confirmed has dissolved Parliament in preparation for Oct 31st election.

Europe

- EU Commission presented its counter-proposal on Northern Ireland Protocol; Proposed to cut Northern Ireland customs checks and paperwork but would not renegotiate EU court oversight. EU would not threaten UK but 'plans for all eventualities'.

- EU’s EU's Sefcovic stated that there was no deadline for agreement on Northern Ireland trade rules with UK but hoped for new arrangement in the new year. 'Would be good for a change' if UK reciprocated constructive spirit.

- Ireland's DUP party spokesperson: EU's proposals were a starting point but appeared to fall far short of the fundamental change needed.

- Turkey President Erdogan removed three central bank MPC members ; kept Gov Kavcioglu.

Americas

- FOMC Sept Minutes: The rise in covid cases had slowed the recovery. Inflation was elevated but largely reflecting transitory factors. Tapering could begin this year and end by mid-2022.

- Chile Central Bank raised the Overnight Rate Target by 125bps to 2.75% (more-than-expected).

Energy

- Weekly API Crude Oil Inventories: +5.2M v +1.0M prior (gasoline had a draw).

Speakers/Fixed income/FX/Commodities/Erratum

Equities

Indices [Stoxx600 +0.89% at 464.48, FTSE +0.70% at 7,191.53, DAX +0.73% at 15,360.15, CAC-40 +0.74% at 6,646.20, IBEX-35 +0.89% at 8,960.50, FTSE MIB 0.91% at 26,197.00, SMI 0.00% at 11,815.03, S&P 500 Futures +0.68%].

Market Focal Points/Key Themes: European indices open generally higher and advanced into the green as the session progressed; sectors trending to the upside include materials and technology; laggard sectors include consumer discretionary and consumer staples; oil and gas subsector supported as crude prices move above $81/bbl; unofficial start of third quarter earnings season; earnings expected during the upcoming US session includes Bank of America, Walgreens Boots, Morgan Stanley and Well Fargo.

Equities

- Consumer discretionary: Publicis [PUB.FR] +3% (earnings), Kesko [KESKOB.FI] +4.5% (prelim earnings), Hays [HAS.UK] +3% (trading update), TomTom [TOM2.NL] +1% (earnings; cuts margin guidance), Domino's Pizza Group [DOM.UK] -1% (trading update).

- Energy: Hurricane Energy [HUR.UK] +17% (earnings).

- Financials: Sabre Insurance Group [SBRE.UK] -2% (trading update).

- Industrials: Demant [DEMANT.UK] -4% (implants recall).

Speakers

- BOE's Tenreyro stated that inflation should be transitory.

- Poland MPC Member Ancyparowicz stated that the recent rate hike was not the beginning of a cycle; not a given that central bank would not hike by Feb.

- Russia Dep PM Novak stated that Europe had not asked Russia to increase gas supplies.

- Saudi Oil Min Abdulaziz stated that saw oil market balanced by end of year. Saw challenging year ahead for OPEC+ (refers to 2022); need gradual and phased approach.

- China Premier Li Keqiang stated that Q3 growth leveled off due to a varied of factors; recovery remained unbalanced but confident to achieve full year targets. Had ample policy reserves to cope with challenges.

Currencies/Fixed income

- USD rally entered a pause following the release of the FOMC Sept Minutes. Profit-taking appeared to be the catalyst as September meeting confirmed tapering of stimulus is all but certain to start this year, and showed a growing number of policymakers worried that high inflation could persist.

- GBP/USD was back at 1.37 by mid-session aided by speculation about an imminent BOE interest-rate hike. Dealers noted that headwinds remain in the pair as UK faced further political and economic risks from its post-Brexit negotiation position.

- EUR/USD back above the 1.16 on profit-taking.

- TRY currency (Lira) continued to make fresh record lows against USD; pair approaching 9.19 level in the session after Turkey President Erdogan again removed several central bank MPC members.

Economic data

- (FI) Finland Sept CPI M/M: 0.3% v 0.2% prior; Y/Y: 2.5% v 2.2% prior.

- (FI) Finland Aug Final Retail Sales Volume Y/Y: 3.4% v 1.2% prelim.

- (IN) India Sept Wholesale Prices (WP) Y/Y: 10.7% v 11.1%e.

- (CH) Swiss Sept Producer & Import Prices M/M: 0.2% v 0.7% prior; Y/Y: 4.5% v 4.4% prior.

- (ES) Spain Sept Final CPI M/M: 0.8% v 0.8% prelim; Y/Y: 4.0% v 4.0% prelim.

- (ES) Spain Sept Final CPI EU Harmonized M/M: 1.1% v 1.1% prelim; Y/Y: 4.0% v 4.0% prelim.

- (ES) Spain Sept CPI Core M/M: 0.3% v 0.1% prior; Y/Y: 1.0% v 0.7% prior.

- (SE) Sweden Sept CPI M/M: 0.5% v 0.6%e; Y/Y: 2.5% v 2.7%e; CPI Level: 345.74 v 346.22e.

- (SE) Sweden Sept CPIF M/M: 0.5% v 0.7%e; Y/Y: 2.8% v 3.0%e.

- (SE) Sweden Sept CPIF (ex-energy) M/M: 0.2% v 0.4%e; Y/Y: 1.5% v 1.7%e.

- (CZ) Czech Aug Current Account Balance (CZK): -37.8B v -12.0Be.

- (IS) Iceland Sept International Reserves (ISK): 939B v 931B prior.

Fixed income issuance

- (SE) Sweden sold total SEK1.25B vs. SEK1.25B indicated in 2028 and 2032 inflation-linked bonds.

- (IE) Ireland Debt Agency (NTMA) sold total €1.5B vs. €1.0-1.5B indicated range in 2031, 2045 and 2050 IGB Bonds.

Looking ahead

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

- 05:30 (HU) Hungary Debt Agency (AKK) to sell 12-month Bills.

- 06:00 (IE) Ireland Sept CPI M/M: No est v 0.6% prior; Y/Y: No est v 2.8% prior.

- 06:00 (IE) Ireland Sept CPI EU Harmonized M/M: No est v 0.7% prior; Y/Y: No est v 3.0% prior.

- 06:00 (IE) Ireland Aug Property Prices M/M: No est v 1.7% prior; Y/Y: No est v 8.6% prior.

- 06:00 (RO) Romania to sell 4.25% 2036 Bonds.

- 06:00 (RO) Romania to sell 12-month Bills.

- 06:10 (UK) BOE's Tenreyro speaks on currency and monetary policy.

- 07:15 (SE) Sweden Central Bank (Riksbank) Dep Gov Skingsley on digital currency.

- 08:00 (PL) Poland Aug Current Account Balance -€0.9Be v-€1.8B prior; Trade Balance: -€0.7Be v -€0.7B prior; Exports: €21.5Be v €22.4B prior; Imports: €22.2Be v €23.1B prior.

- 08:00 (BR) Brazil Aug IBGE Services Sector Volume Y/Y: 16.1%e v 17.8% prior.

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

- 08:30 (US) Sept PPI Final Demand M/M: 0.6%e v 0.7% prior; Y/Y: 8.7%e v 8.3% prior.

- 08:30 (US) Sept PPI (ex-food/energy) M/M: 0.5%e v 0.6% prior; Y/Y: 7.1%e v 6.7% prior.

- 08:30 (US) Sept PPI (ex-food/energy/trade) M/M: 0.4%e v 0.3% prior; Y/Y: 6.4%e v 6.3% prior.

- 08:30 (US) Initial Jobless Claims: 320Ke v 326K prior; Continuing Claims: 2.69Me v 2.714M prior.

- 08:30 (CA) Canada Aug Manufacturing Sales M/M: +0.3%e v -1.5% prior.

- 08:30 (NL) ECB's Knot (Netherlands).

- 09:00 (RU) Russia Gold and Forex Reserve w/e Oct 8th: No est v $611.9B prior.

- 10:00 (MX) Mexico Central Bank (Banxico) Sept Minutes.

- 10:00 (US) Fed’s Bostic participates on Panel.

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

- 10:40 (UK) BOE's Mann speaks on Covid-19.

- 11:00(US) Weekly DOE Oil Inventories.

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

- 12:00 (US) Fed’s Logan on Policy Implementation.

- 13:00 (US) Fed’s Barkin.

- 14:00 (UK) BOE’s Cunliffe.

- 15:00 (AR) Argentina Sept National CPI M/M: 3.0%e v 2.5% prior; Y/Y: 51.7%e v 51.4% prior.

- 17:30 (NZ) New Zealand Sept Business Manufacturing PMI: No est v 40.1 prior.

- 18:00 (US) Fed’s Harker on economic outlook.

- 20:00 (AU) Australia to sell A$1.0B in 4.25% 2026 Bonds.

- 22:00 (ID) Indonesia Sept Trade Balance: $3.8Be v $4.7B prior; Exports Y/Y: 51.0%e v 64.1% prior; Imports Y/Y: 49.5%e v 55.3% prior.

- 22:30 (KR) South Korea to sell KRW350B in 50-year Bonds.

- 23:00 (CN) China to sell 30-year Bond.

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