- US stocks were lower with cyclical weakness amid a slew of central bank rate hikes including from the BoE, SNB, Norges Bank and SARB, while Treasuries sold off amid anticipation around Japanese dollar reserve sales in the aftermath of Japan's FX intervention.
- Japan’s Vice Minister for Financial Affairs said the government and BoJ took decisive action in FX markets and intervened in FX in which the government and the BoJ stepped into the market to buy JPY for USD.
- Looking ahead, highlights include Australian PMIs, Singapore IP & CPI, Japan Holiday. EU, UK & US PMIs, UK Mini Budget & Fed Chair Powell Speech.
- Australian PMIs, Singapore IP & CPI, Japan Holiday. EU, UK & US PMIs, UK Mini Budget & Fed Chair Powell Speech.
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- US stocks were lower with cyclical weakness amid a slew of central bank rate hikes, while Treasuries sold off amid anticipation around Japanese dollar reserve sales in the aftermath of Japan's FX intervention.
- SPX -0.84% at 3,757, NDX -1.17% at 11,501, DJIA -0.35% at 30,076, RUT -2.26% at 1,722.
- Click here for a detailed summary.
- US House Speaker Pelosi said they are prepared to take the short-term government funding bill from the Senate, hopefully on Tuesday.
- US Leading Index Change MM* (Aug) -0.3% vs. Exp. -0.1% (Prev. -0.4%, Rev. -0.5%)
- US Initial Jobless Claims w/e 213k vs. Exp. 218.0k (Prev. 213.0k, Rev. 208k)
- US Continued Jobless Claims w/e 1.379M vs. Exp. 1.4M (Prev. 1.403M, Rev. 1.401M)
- T-note (Z2) futures settled 1 point + 15+ ticks lower at 112-24; Treasuries saw pronounced selling in the NY session amid anticipation around Japanese Dollar reserve sales.
- DXY was choppy and ultimately softened with pressure seen after Japan intervened in the FX market.
- EUR returned to relatively flat territory after an early failed attempt to reclaim the 0.9900 handle.
- GBP traded indecisively after the BoE's 50bps rate hike which was a split rate decision which contained a 25bps dissenter from new MPC member Dinghra and considering the market was skewed to risks of a 75bps move.
- JPY outperformed after Japan's government announced that intervened in the FX market with the BoJ.
- Japan Vice Minister for Financial Affairs said the government and BoJ took decisive action in FX markets and intervened in FX in which the government and the BoJ stepped into the market to buy JPY for USD.
- Japanese currency diplomat Kanda said they can act on FX at any time and are ready to respond under any circumstances, while FX action can be undertaken any day, anywhere, including on holidays. Kanda added Japan never thought about levels in deciding to intervene and the size of FX intervention would normally be announced at month-end, possibly on September 30th.
- US Treasury said they understand Japan's action in Yen intervention and acknowledged BoJ forex intervention, while it added that the US did not participate in Yen intervention.
- UK BOE Bank Rate* (Sep) 2.25% vs. Exp. 2.25% (Prev. 1.75%). The decision was made by 5-4 vote in which Haskel, Mann and Ramsden voted for 75ps, while Dinghra voted for 25bps. BoE stated that should the outlook suggest more persistent inflationary pressures including from stronger demand, the Committee would respond forcefully, as necessary.
- SNB hiked its Policy Rate by 75bps to 0.5% as expected and said it is willing to be active in the FX market as necessary, while further rate hikes cannot be ruled out. SNB Chair Jordan said the SNB is ready to intervene to prevent excessive weakening or strengthening of the CHF and that recent appreciation has helped dampen inflation, while he reiterated that the SNB can do interim rate decisions if needed.
- Norges Bank hiked its key policy rate by 50bps as expected to 2.25% and said the policy rate will most likely be raised further in November, while it added that may suggest a more gradual approach to policy rate setting ahead. Norges Bank Governor Bache said the central bank is likely to hike by 25bps in November and the main objective is to ensure low and stable inflation.
- Turkish CBRT Weekly Repo Rate* (Sep) 12% vs. Exp. 13.0% (Prev. 13.0%). CBRT stated the weakening effects of geopolitical risks on global economic activity continue to increase and global growth forecasts for the upcoming period are being revised downwards, while it added recession is increasingly assessed as an inevitable risk factor.
- South African Prime Rate* (Sep) 9.75% (Prev. 9.0%). South African Central Bank statement noted risks to inflation outlook assessed to the upside and load shedding will continue to create headwinds to growth.
- Taiwan Central Bank hiked rates by 12.5bps to 1.625% and said it will intervene if the FX rate overly fluctuates.
- Oil prices were firmer, aided by the softer Dollar and lower Russian supply forecasts, although price action was choppy as aggressive central bank hiking kept the demand outlook pressured.
- EU's ESMA proposed a temporary new emergency brake for halting trading in energy derivatives during price spikes, while the emergency brake should be calibrated at the EU level, while it added that EU carbon emission allowances are not suitable for use as collateral in energy derivatives trading.
- EU cast doubt on the ability to intervene in energy derivatives markets and concluded that big swings in power prices are not due to "market malfunction", according to FT citing the Commission presentation to diplomats on Wednesday. Furthermore, officials expressed doubt on the degree to which collateral rules could be broadened as the ESMA recommended.
- UAE ADNOC chief said thin spare capacity doesn't leave much room to manoeuvre in a world where markets may face further disruption and said the situation is a "recipe for disaster" rather than one for progress.
- Nigerian oil minister said OPEC may be forced to make further production cuts if prices continue to fall, according to Bloomberg.
- Russian Finance Minister proposed hiking the export duty on nat gas (pipeline and LNG) and proposed the introduction of export duties for fertilizers and coal.
- Russian oil output is seen declining to 490mln tons in 2023, according to RIA citing a government document.
- US Treasury Secretary Yellen said Russia is giving enormous discounts on oil to China and India.
- Eastward gas flows along Yamal-Europe pipeline resume, according to Gascade data.
- Azerbaijan Energy Minister said they intend to extend gas deliveries from southeast Europe to the west Balkans, although this cannot be done overnight.
- Russian Deputy Chair of Security Council Medvedev said Russian weapons including nuclear can be used to defend territories in Russia.
- Russian Kremlin said the Ukraine "campaign" is still a "special military operation" not a war, while it added that the opposition by NATO and its powers led to the need for mobilisation.
- Russia’s military is reportedly divided over how best to counter Ukraine’s unexpected battlefield advances this month, according to CNN citing sources familiar with US intelligence.
- A bipartisan group of 17 members of Congress are urging US Defense Secretary Austin to provide advanced drones to Ukraine and said the tech could be key to giving Kyiv a battlefield advantage, according to WSJ citing a letter dated Wednesday.
- UK, Poland and Ukraine are to develop trilateral cooperation.
- Oil caps, more curbs on high-tech exports to Russia, and more sanctions on Russian individuals are on the table as the EU prepares more sanctions, according to diplomats.
- Chinese Foreign Minister Wang Yi said energy suppliers and consumers should work together to keep the global energy market stable amid the Ukrainian war and said no country should resort to arbitrary, unilateral sanctions.
- Iranian Chief of Staff said they will conduct a naval exercise in the Northern Ocean with Russia, China, and possibly Pakistan, Oman and other countries, according to Al Jazeera.
- US Defense Department spokesman said they are not likely to get to a deal any time soon, but still want to see a diplomatic solution on return to the JCPOA, according to Iran International.
- US issued Iran-related sanctions which involve the morality police and targets six individuals, according to the Treasury website.
- IRGC called on the Judiciary to prosecute "those who spread false news", as tensions mount over the death of a woman in police custody.
- Chinese President Xi stressed the need to strengthen food security and for the agricultural industry to consolidate, according to CCTV. It was also reported that China's cabinet urged the implementation of policies to promote economic stability.
- China’s Ministry of Commerce said it is concerned about the US Inflation Reduction Act’s EV subsidy rules.
- China's spokesperson for Xinjiang said they are ready for the fight if there is a resolution against China at the Human Rights Council and will take countermeasures against any such resolution.
- US Secretary of State Blinken is to meet with his Chinese counterpart in New York on Friday to discuss efforts to maintain communication.
- China's Foreign Ministry spokesperson expressed hope that the US will find a way to work with China on win-win cooperation and a peaceful co-existence, via Global Times.
- US accounting watchdog chair said officials arrived in Hong Kong to begin inspections of Chinese companies, while Chinese regulatory officials have been sent to Hong Kong in order to assist US audit inspections of Chinese Co.s with China Southern Airlines and GDS Holdings among those selected for inspection, according to Reuters sources.
- Hong Kong government expects to announce the removal of the COVID hotel quarantine policy for overseas arrivals next week, according to HKO1 citing sources.
- Macau is actively considering relaxing restrictions relating to arrivals, according to Bloomberg.
- Japanese PM Kishida said Japan is to relax border controls from October 11th and he will issue instructions to ministers on an economic package on September 30th, while he said it’s important for forex to be stable and said that Japan will take decisive steps against excessive forex fluctuations.
- European stock markets were pressured and the STOXX Europe 600 finished down 1.8%.
- UK government said the 1.25% increase in National Insurance will be reversed from November 6th and it will cancel the planned health and social care levy, while the UK is to confirm that the planned increase to dividend tax rates will be scrapped.
- BoE's Haskel (hawkish dissenter) said it is difficult having fiscal expansion at a time when supply chains and labour market are still tight.
- ECB's Schnabel said there are reasons to believe that inflation will still rise and said the labour market is proving quite resilient, while she added that risks of a recession have risen and that inflation is more persistent than initially thought.
- German Economy Minister said Germany is losing EUR 60bln economically in 2022 and EUR 100bln in 2023 due to high energy costs, while he added that they must make full use of financial policy to maintain economic substance domestically and that Chancellor Scholz will close LNG contracts during a visit to the UAE.
- Germany commenced discussions on urgent financial support for regional public energy providers and the municipal utilities head said the support may have to reach the double-digit billions of Euros, according to Reuters sources.
- Spain is reportedly weighing the possibility of creating a new temporary tax for "large fortunes" which will potentially come into force next year, according to El Pais.
- EU Consumer Confidence Flash (Sep) -28.8 vs. Exp. -25.8 (Prev. -24.9, Rev. -25.0)