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EQUITIES

E-Minis Pull Lower

JGBS

Bland 5-Year Auction

IDR

Consumer Confidence Data Take Focus

JGBS AUCTION

The Japanese MOF sells Y2.0327tn 5-Year JGBs:

JGBS AUCTION

The Japanese MOF sells Y2.8069tn 6-Month Bills:

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EXECUTIVE SUMMARY

  • FED SET TO TAPER, RATE HIKE TIMING UNDER DEBATE (MNI)
  • CHINESE PRODUCER PRICES RISE AT FASTEST PACE SINCE 1995 (BBG)
  • ERDOGAN RIDS TURKEY INTEREST-RATE PANEL OF OPPONENTS TO CUTS (BBG)
  • EU OFFERS TO SCRAP 80% OF NI FOOD CHECKS BUT PREPARES FOR JOHNSONTO REJECT DEAL (Guardian)

Fig. 1: China PPI Y/Y (%) vs. U.S. CPI Y/Y (%)

Source: MNI - Market News/Bloomberg


UK

BOE: The Bank of England has banned its Monetary Policy Committee members from having private discussions with bankers after rumours swirled that a deputy governor had revealed policy information in a recent meeting with an investment bank. Market traders have been excited for a week about rumours that Ben Broadbent, deputy governor for monetary policy, had ruled out an interest rate rise at the coming November MPC meeting in a private gathering with bankers. (FT)

ECONOMY: Eight in 10 U.K. companies struggled to find workers last month despite many of them increasing wages, according to a survey that shows labor shortages are intensifying. The proportion was up sharply from three months earlier, with the squeeze most pronounced in the catering and hospitality sectors where 92% of firms that attempted to recruit reported difficulties, the British Chambers of Commerce said Wednesday. "It's clear that staff shortages are worsening, impacting on recovery and growth for manufacturers and services businesses alike," said Jane Gratton, head of people policy at the business lobby group. Unless the government takes action, companies face "extreme difficulty in meeting demand, and consumers will see further reductions in the goods and services available to them as we progress into winter." (BBG)

ECONOMY: Ministers are looking to relax rules shielding tens of millions of UK retirement savers from high charges as they step up efforts to funnel pension fund cash into the government's "levelling up" agenda. Officials are working on proposals to dilute the 0.75 per cent ceiling on annual management fees, which was put in place in 2016 to protect workers auto-enrolled into workplace pensions from having their savings eroded by high charges. Chancellor Rishi Sunak is looking at ways to tap billions of pounds of pension fund cash to invest in long-term projects, including infrastructure schemes, renewable energy projects and innovative tech firms, to help deliver on UK prime minister Boris Johnson's pledge to spread economic growth across the UK. (FT)

BREXIT: The EU will scrap 80% of checks on foods entering Northern Ireland from Britain but Brussels officials were "preparing for the worst" amid signs Boris Johnson is set to reject the terms of the deal. Maroš Šefčovič, the EU's Brexit commissioner, also announced that customs checks on manufactured goods would be halved as part of a significant concession to ease post-Brexit border problems. He said he would meet David Frost, his UK counterpart who has demanded a scrapping of the entire Northern Ireland protocol, on Friday as he sought to bring an end to a month-long tussle. "I hope with a constructive spirit we indeed could be in the home stretch, and I would be very happy if we can start the new year with new agreements," Šefčovič told a press conference in Brussels as he presented four papers on his "new model" for the protocol. An appeal was made for pragmatism from Johnson, with Šefčovič insistent that he remained positive. But the chances of a compromise appeared low. (Guardian)

BREXIT: The EU is open to a compromise deal that would limit the role of European judges in Northern Ireland in an effort to remove the last significant hurdle to a new Brexit agreement. Yesterday the EU's chief negotiator outlined proposals to sweep away the majority of checks on goods crossing from Britain to the province under a revised Northern Ireland protocol. The plans were farther reaching than had been anticipated by ministers in London, with government figures describing them as encouraging. (Times)

EUROPE

ECB: MNI INTERVIEW 1: ECB Set To End PEPP In March -Belgium's Wunsch

  • The eurozone economy should be strong enough for the European Central Bank to end its EUR1.85 trillion Pandemic Emergency Purchase Programme on schedule in March, National Bank of Belgium Governor Pierre Wunsch told MNI, adding that the ECB should use its other tools to ensure monetary policy remains supportive - on MNI MainWire and email now, for more details please contact sales@marketnews.com.
ECB: MNI INTERVIEW 2: ECB Risking Wrong Inflation Message-Wunsch
  • The European Central Bank should be careful not to over-emphasise the temporary nature of the recent surge in consumer prices, lest it create the impression that it does not want inflation to return to target, National Bank of Belgium Governor and ECB Governing Council Member Pierre Wunsch told MNI - on MNI MainWire and email now, for more details please contact sales@marketnews.com.

EU: The European Union set out proposals for member states to help protect their most vulnerable companies and citizens from the unprecedented surge in energy prices. The rally in natural gas, power and emission permits is hurting consumers from German chemicals producers to Spanish households just as economies recover from the pandemic, boosting demand. With the bloc saying Tuesday it expects high prices through the winter, calls for coordinated action are getting louder. The measures include short-term tax cuts for parts of the population and aid to industry to cope with rising costs, according to the proposals that will be presented to national leaders at a meeting next week. The plan is designed to support the green transition without increasing the use of fossil fuels. "Winter is coming and for many, electricity bills are larger than they have been for a decade," EU Energy Commissioner Kadri Simson said Wednesday at a press briefing. "We have to make our energy system better prepared and more resilient so we don't have to face a similar situation in the future." (BBG)

SPAIN: The Spanish government said proposals presented by the European Commission about energy prices are "incongruous" and fall short of what's needed. While the Commission is aware of the impact of the high level of natural gas prices, "its proposals don't address the exceptional nature of the situation we're in, with exceptional measures to meet the challenge we have ahead," Ecological Transition Minister Teresa Ribera said on Wednesday in an emailed statement. (BBG)

NORWAY: Five people have been killed and two more injured in Norway after a man used a bow and arrow to attack them. A Danish man aged 37 has been arrested on suspicion of carrying out the attack. (BBC)

ROMANIA: Romania's Prime Minister designate Dacian Ciolos failed to convince his allies to restore the ruling coalition that he helped torpedo last week in a first attempt to end the country's political crisis. Initial talks between Ciolos and his former ruling partners -- the Liberals and the ethnic Hungarian party -- yielded no clear results on Wednesday, Liberal leader and outgoing Prime Minister Florin Citu said. The parties will continue negotiations in the coming days. (BBG)

US

FED: MNI: Fed Set to Taper, Rate Hike Timing Under Debate - Minutes

  • The Federal Reserve is set to begin reducing its USD120 billion monthly bond purchases as early as its next meeting in November, but the timing of eventual interest-rate increases remain in question, minutes to the Fed's September meeting showed - on MNI MainWire and email now, for more details please contact sales@marketnews.com.

FED: "Provided the economy continues to improve as I expect, I am very comfortable at this point with a decision to start to taper our asset purchases before the end of the year and, preferably, as early as at our next meeting in November," says Fed Governor Michelle Bowman. (bbg)

FED: MNI BRIEF: Fed Must Pause Regulatory Reforms, Top Senator Says

  • A top Democratic senator Wednesday urged the Federal Reserve to pause regulatory reforms until President Joe Biden nominates and Congress confirms appointees for upcoming terms at the central bank - on MNI MainWire and email now, for more details please contact sales@marketnews.com.

CORONAVIRUS: Vaccination rates against COVID-19 in the United States have risen by more than 20 percentage points after multiple institutions adopted vaccine requirements, while case numbers and deaths from the virus are down, Biden administration officials said on Wednesday. White House COVID-19 response coordinator Jeff Zients told reporters that 77% of eligible Americans had received at least one shot of a vaccine. Vaccination rates went up thanks to mandates put into place by private businesses, healthcare systems, social institutions and state and local governments, he said in a briefing. (RTRS)

ECONOMY: President Biden on Wednesday vowed to call out companies that don't step up and address the global supply chain bottlenecks, urging support from the whole private sector. "If the private sector doesn't step up, we're going to call them out and ask them to act," the president said in remarks at the White House. The White House announced on Wednesday that Walmart, FedEx and UPS will move to working 24 hours a day, seven days a week and that the Port of Los Angeles will also move into 24/7 service. (Hill)

POLITICS: The Jan. 6 select committee issued a subpoena to Jeffrey Clark, a former Justice Department official who reportedly helped former President Donald Trump amplify false claims around the election. Why it matters: The announcement comes on the heels of a report by the Senate Judiciary Committee that detailed the extent of Trump's efforts to overturn the results of the 2020 election. (Axios)

ENERGY: The White House is discussing options to address fuel and natural gas shortages that have driven prices higher, White House press secretary Jen Psaki told reporters Wednesday. "The president has asked his economic team, as they do on any range of issues impacting the public, to continue to discuss what the options are that we can take to address these shortages," Psaki said at an afternoon briefing. (Hill)

OTHER

CHINA/U.S./TAIWAN: The United States sends irresponsible and wrong signals with the meeting between two U.S. StateDepartment officials and Bi-khim Hsiao from Taipei Economic and Cultural Representative Office, and by extendingan invitation to Taiwan's army commander to visit the U.S., Chinese embassy in the U.S. says in a statement. (BBG)

CHINA/TAIWAN: Taiwan will not start a war with China but will defend itself "full on", Defence Minister Chiu Kuo-cheng said on Thursday, amid a spike in tensions across the Taiwan Strait that has raised concern internationally. Taiwan, a major semiconductor producer, has repeatedly said it will defend itself if attacked, but that it will not "advance rashly" and wants to maintain the status quo with China. "What is clearest is that the Republic of China absolutely will not start or set off a war, but if there are movements we will meet the enemy full on," Chiu told a parliament committee meeting, using Taiwan's official name. (RTRS)

BOJ: Bank of Japan policy board member Asahi Noguchi says the most important thing for the bank is to maintain its current easing because inflation remains far below target. Even after the pandemic is over, it will take time for the bank to get to a point where it can consider reining in monetary stimulus, Noguchi says in a speech to local business leaders in Tottori. Japan is unlikely to face a need to tamp down high inflation, though some other countries are confronting it now. A mix of aggressive fiscal measures and monetary easing is important as the economy faces a challenge in hitting the 2% inflation goal. (BBG)

JAPAN: Japan's new Prime Minister Fumio Kishida dissolved the House of Representatives on Thursday afternoon for a general election at the end of this month as he seeks a public mandate for his government launched just last week. The election, with the coronavirus response and economic policies of the various parties to the fore, will be held on Oct. 31 after the four-year term of lower house members expires on Oct. 21. The Liberal Democratic Party headed by Kishida is hoping to capitalize on a recent lull in COVID-19 cases, while opposition leaders are still scrambling to create a united front. (Kyodo)

AUSTRALIA: Victorian Premier Daniel Andrews has vowed to reopen next week, despite the state reporting a national record for daily COVID-19 cases and fears undetected community transmission of the virus could see cases continue to climb. (AFR)

RBNZ: The strength of New Zealand Inc's balance sheet going into the pandemic played a very important role in the "better than expected outcomes" for our economy, Reserve Bank Deputy Governor Geoff Bascand says. In a speech to the Citi Australia & New Zealand Investment Conference 2021, Bascand said the health of business, household and bank balance sheets going into the recession were crucial. Rather than "negative cycles of deleveraging under stress and credit restrictions due to limited equity or collateral that were seen in the 1990 and GFC recessions, 2020-21 witnessed a quick return to household credit growth, and a business sector that was able to move quickly into growth rather than repair". "Moreover, with stronger capital and liquidity positions, the banking system was able to meet credit demand rather than limit it," Bascand said. "We have learned that stronger balance sheets reduce the magnitude of a downturn and facilitate a stronger, faster recovery." (interest.co.nz)

RBNZ: Reserve Bank of New Zealand Deputy Governor Geoff Bascand speaks at Citi Australia and New Zealand Investment Conference on Thursday. Asked about inflation pressures, says: "Foreign supply, global supply chains aren't fixing themselves quickly, that's going to go on for some time." "We've started to see a little bit more flow into core underlying inflation and into wages, which gives us a little bit of confidence that we think we are going to see some sustainability in our inflation pressures, which is obviously leading to believing that we don't need to retain emergency monetary policy settings and can start to adjust interest rates on a path upwards over time." (BBG)

INDONESIA: Bali's airport is set to reopen to foreign visitors on Thursday (Oct 14) for the first time since the start of the Covid-19 pandemic early last year, as the government of President Joko Widodo struggles to restart the nation's valuable tourism industry. However, strict quarantine rules and cumbersome visa requirements, including finding a guarantor, threaten to keep visitors away at least for now, officials said. And as at late on Wednesday, airport officials said there were no international flights scheduled to arrive at Ngurah Rai International Airport. (Straits Times)

PHILIPPINES: The Philippines targets to lengthen the maturity of its debt as it prepares for fresh borrowings to help fund its pandemic response, Finance Secretary Carlos Dominguez said. "We want to stretch our tenors further," while considering the borrowing cost and foreign exchange risk, Dominguez said in an interview Thursday with Bloomberg Television's Kathleen Hays. The government is looking to return to the overseas market after raising $3 billion in dollar bonds, the equivalent of $2.5 billion in euros and $500 million in Samurai debt earlier this year, he said. A debt-to-GDP ratio of 60% is manageable for the Philippines, Dominguez said. The ratio is forecast to rise to 60.8% of gross domestic product in 2022 from projected 59.1% this year. That comes as its neighbors are raising mandatory debt ceiling to accommodate more fundraising. Thailand boosted debt-to -GDP cap to 70% and Malaysia to 65%. The country is seeing signs of economic recovery as it reopens, allowing the government to meet a gross domestic growth target of 4%-5% this year and keep price increases under control. Inflation will hold within target as long as oil stays below $90 per barrel for a country that imports almost all its fuel needs, he said. (BBG)

TURKEY: Turkish President Recep Tayyip Erdogan fired three members of the central bank's interest-rate setting committee in a midnight decree after meeting with Governor Sahap Kavcioglu on Wednesday evening. The lira dropped to a record low against the dollar. Erdogan removed deputy governors Semih Tumen and Ugur Namik Kucuk, along with Monetary Policy Committee member Abdullah Yavas, according to the decree. He appointed Taha Cakmak as deputy governor and Yusuf Tuna as an MPC member. The changes follow a meeting between Erdogan and Kavcioglu on Wednesday evening, where the two discussed changes to the committee, people familiar with the discussion told Bloomberg earlier. Kucuk was the only member of the committee who voted against Kavcioglu's interest-rate cut last month, according to people with knowledge of the matter. Yavas didn't vote because he had contracted Covid-19 in the U.S., where he lives. The changes rid the committee of members who disagreed with Erdogan's calls to continue cutting interest rates, according to people familiar with the composition of the committee. (BBG)

MIDDLE EAST: The United States and Israel said Wednesday they are exploring a "Plan B" for dealing with Iran if the Islamic Republic does not return in good faith to negotiations to salvage the languishing landmark 2015 nuclear deal. Secretary of State Antony Blinken and Israeli Foreign Minister Yair Lapid said discussions between their two countries have begun on "other options" should Iran reject an offer to come back into compliance with the agreement if the U.S. rejoins it. They did not elaborate on what those options might be, but there are a wide range of non-diplomatic options that could be considered, ranging from stepped up sanctions to covert or military actions. A Biden administration priority has been to revive the deal and abandoning that goal would be a blow to its foreign policy objectives. (AP)

ISRAEL: Days after being ousted as prime minister, Benjamin Netanyahu passed a message to Russian President Vladimir Putin promising a quick comeback, a source close to Netanyahu and a European diplomat told me. (Axios)

IRAN: The Biden administration is grappling with a new dilemma as nuclear negotiations with Iran remain frozen: whether more pressure on Iran would help push the Iranians back to the 2015 deal, or lead Iran to escalate its nuclear program, U.S. and Israeli officials told Axios. (Axios)

ARGENTINA: The Argentine government aims to extend a price control program to 1,247 household goods in its latest attempt to recover ground with the voter base ahead of a midterm election next month. The new Interior Commerce Secretary Roberto Feletti told business leaders at top food firms Wednesday in Buenos Aires that the government wanted companies to extend a program that caps prices on certain goods, according to people with knowledge of the meetings who asked not to be named because they were private. Argentina has a price control program known as Precios Cuidados, which currently has more than 700 products in supermarkets whose prices can marginally increase each quarter. The government later confirmed that the price control agreement, which includes the items under Precios Cuidados, involves holding prices at their values on Oct. 1 and will apply until Jan. 7. In a statement, Feletti said the government is concerned that the basic food basket accounts for 11% of of expenses for average salaries, up from 9% in Dec. 2019. (BBG)

CHILE: Chilean opposition lawmakers launched impeachment proceedings against President Sebastian Pinera on Wednesday over possible irregularities in the sale of a mining company, after new details emerged about the deal in the Pandora Papers leak. The move comes after Chile's public prosecutor said this month it would open an investigation into possible bribery-related corruption charges as well as tax violations related to the sale. (RTRS)

RUSSIA: Russian President Vladimir Putin said Wednesday that his country is not using energy as a weapon against Europe and that Russia stands ready to help the region as its energy crisis continues. "We are not using any weapons," Putin told CNBC in Moscow on Wednesday, according to a translation. "Even during the hardest parts of the Cold War Russia regularly has fulfilled its contractual obligations and supplies gas to Europe," he said. Describing reports that Russia has withheld gas supplies to Europe, Putin called such accusations "politically motivated blather" and there was "nothing to support it [the idea] that we use energy as a kind of weapon." On the contrary, he said, Russia was "expanding its supplies to Europe." (CNBC)

RUSSIA: Russia insists on the need for an honest and open dialogue with European countries and is ready to work to prevent problems in the energy markets of Europe, Russian President Vladimir Putin said at the plenary session of the Russian Energy Week. (TASS)

SOUTH AFRICA: Rich nations shouldn't force South Africa to ban new coal-power projects and impose other conditions as a requirement for funding to help reduce its environmental footprint, the country's energy minister said. Gwede Mantashe last month skipped a meeting with climate envoys from the U.K., U.S., Germany, France and the European Union, where an initial amount of almost $5 billion in concessional loans and grants was discussed. South Africa's environment and public enterprises ministers attended the talks, as did the deputy finance minister. (BBG)

ETHIOPIA: An air and ground offensive by Ethiopian troops and their allies against rebellious forces from the northern Tigray region is intensifying, a spokesperson for the Tigrayan forces said on Wednesday, claiming "staggering" casualties. Getachew Reda of the Tigray People's Liberation Front (TPLF) told Reuters by phone that the Ethiopian military and allies from the Amhara region were fighting the Tigrayan forces on several fronts, in both the Amhara and Afar regions which neighbour Tigray. (RTRS)

OIL: OPEC revised down its estimate for 2021 global oil consumption in its monthly market report. The group said that while the spike in natural gas prices could boost petroleum use in some areas, such as power generation, it could potentially curb demand in other areas, such as refining. Meanwhile, the industry-funded American Petroleum Institute reported a 5.21 million-barrel gain in U.S. crude supplies last week, according to people familiar with the data. (BBG)

CHINA

CHINA/U.S.: China has overcome the difficulties of an economic recovery more effectively, so it has a powerful foundation to resist U.S. censure and lead international competition, the Global Times said in a commentary. The U.S. and Western countries are dependent on Chinese products in many areas, and it is difficult to implement an alternative strategy, said the newspaper. However, China faces a debt default represented by real estate giant Evergrande Group, a sluggish property market, and a shortage of electricity, which pressured growth, said the newspaper. China should speed up measures to alleviate the power shortage, and the government needs to carry out regulation based on facts and reality, and not hesitate to break through restrictions, the newspaper said. (MNI)

ECONOMY: China should pursue loose monetary policies to counter a slowdown, and the central bank should cut RRRs in due course to enhance banks' lending to new growth drivers and weak links of the economy, Yicai.com reported citing Wu Chaoming, chief economist of Chasing Securities. The average forecast for China's Q3 GDP growth is 5.35%, with the expectation of annual GDP forecast revised to 8.15% from 8.72%, as real estate regulations and power cuts will continue to hamper the economy, Yicai said. Real estate investments and exports, the two main drivers of the recovery from the epidemic, may head downward, while power cuts could affect production and further suppress business activities, with the risk of stagflation rising, the newspaper said citing Luo Zhiheng, deputy dean of Yuekai Securities Research Institute. (MNI)

CREDIT: China's new loans and aggregate financing are likely to rise in Q4, as fiscal spending and the sale of local government special bonds accelerate while rebounding consumption drives credit demand, Yicai.com reported citing analysts. New loans slowed significantly in September due to the contraction of medium and long-term lending to residents and businesses amid cooling housing market as well as rising producer costs, the newspaper said. Analysts are divided on the necessity of an RRR cut in Q4, with some calling for a 0.5 pp cut to stabilize credit growth, while others arguing further easing will dilute the policy goal of stabilizing the macro-leverage ratio and supporting the real economy, the newspaper said. (MNI)

COAL: China's attempts to address its power shortage have received a boost through efforts to increase imports of coal and electricity from Russia, according to state media and government agencies. The country's overall coal purchases in September rose 17 per cent month on month to 32.9 million tonnes, the highest this year, according to the customs authority on Wednesday, as the government moved to ensure stable energy supply before the peak winter demand. (SCMP)

OVERNIGHT DATA

CHINA SEP CPI +0.7% Y/Y; MEDIAN +0.8%; AUG +0.8%
CHINA SEP PPI +10.7% Y/Y; MEDIAN +10.5%; AUG +9.5%

JAPAN AUG, F INDUSTRIAL OUTPUT +8.8% Y/Y; FLASH +9.3%
JAPAN AUG, F INDUSTRIAL OUTPUT -3.6% M/M; FLASH -3.2%

JAAN AUG CAPACITY UTILISATION -3.9% M/M; JUL -3.4%

AUSTRALIA SEP UNEMPLOYMENT RATE 4.6%; MEDIAN 4.8%; AUG 4.5%
AUSTRALIA SEP EMPLOYMENT CHANGE -138.0K; MEDIAN -110.0K; AUG -146.3K
AUSTRALIA SEP FULL-TIME EMPLOYMENT CHANGE +26.7K; AUG -68.0K
AUSTRALIA SEP PART-TIME EMPLOYMENT CHANGE -164.7K; AUG -78.2K
AUSTRALIA SEP PARTICIPATION RATE 64.5%; MEDIAN 64.7%; AUG 65.2%

AUSTRALIA OCT CONSUMER INFLATION EXPECTATIONS +3.6% Y/Y; SEP +4.4%

SOUTH KOREA SEP EXPORT PRICE INDEX +20.2% Y/Y; AUG +18.9%
SOUTH KOREA SEP EXPORT PRICE INDEX +1.0% M/M; AUG +1.3%
SOUTH KOREA SEP IMPORT PRICE INDEX +26.8% Y/Y; AUG +22.4%
SOUTH KOREA SEP IMPORT PRICE INDEX +2.4% M/M; AUG +1.3%

UK SEP RICS HOUSE PRICE BALANCE

CHINA MARKETS

PBOC NET DRAINS CNY90BN VIA OMOS THURS

The People's Bank of China (PBOC) injected CNY10 billion via 7-day reverse repos with the rate unchanged at 2.2% on Thursday. The operations lead to a net drain of CNY90 billion after offsetting the maturity of CNY100 billion reverse repos today, according to Wind Information.

  • The operation aims to keep the liquidity reasonable and ample, the PBOC said on its website.
  • The 7-day weighted average interbank repo rate for depository institutions (DR007) increased to 2.2000% at 09:37 am local time from the close of 2.1977% on Wednesday.
  • The CFETS-NEX money-market sentiment index closed at 40 on Wednesday vs 42 on Tuesday.

PBOC SETS YUAN CENTRAL PARITY AT 6.4414 THURS VS 6.4612

The People's Bank of China (PBOC) set the dollar-yuan central parity rate lower at 6.4414 on Thursday, compared with the 6.4612 set on Wednesday.

MARKETS

SNAPSHOT: Fed Signals Impending Taper Start, China PPI Soars

Below gives key levels of markets in the second half of the Asia-Pac session:

  • Nikkei 225 up 331.89 points at 28472.17
  • ASX 200 up 62.855 points at 7335.4
  • Shanghai Comp. up 5.376 points at 3567.138
  • JGB 10-Yr future up 14 ticks at 151.39, yield down 1.0bp at 0.083%
  • Aussie 10-Yr future up 5.5 ticks at 98.34, yield down 5.3bp at 1.638%
  • U.S. 10-Yr future +0-02 at 131-09, yield up 1.39bp at 1.551%
  • WTI crude up $0.54 at $80.98, Gold down $3.21 at $1789.82
  • USD/JPY up 31 pips at Y113.56
  • FED SET TO TAPER, RATE HIKE TIMING UNDER DEBATE (MNI)
  • CHINESE PRODUCER PRICES RISE AT FASTEST PACE SINCE 1995 (BBG)
  • ERDOGAN RIDS TURKEY INTEREST-RATE PANEL OF OPPONENTS TO CUTS (BBG)
  • EU OFFERS TO SCRAP 80% OF NI FOOD CHECKS BUT PREPARES FOR JOHNSONTO REJECT DEAL (Guardian)

BOND SUMMARY: U.S. Tsy Yield Curve Steepens, ACGBs Bid After Aussie Jobs Report

The initial impetus from Wednesday's eventful NY session gradually dissipated, while further acceleration in China's PPI growth poured fuel on global inflation worries. Australia's labour market report and Japan's 5-Year debt auction provided remaining regional highlights.

  • T-Notes meandered within a 0-04 range, struggling for a clear direction. The contract last trades +0-01+ at 131-08+. Cash Tsy curve runs steeper as we type, unwinding some of yesterday's move, with yields sitting -0.5bp to +3.2bp. 30-Year Tsys underperform, despite yesterday's solid offering of that tenor. Eurodollar futures last seen unch. to +2.5 ticks through the reds. U.S. factory-gate inflation and weekly jobless claims take focus on the data front, while there is plenty of Fedspeak coming up today.
  • JGB futures edged higher into the Tokyo lunch break but trimmed gains thereafter. The contract changes hands at 151.36, 11 ticks above last settlement. Cash JGB yield curve bull flattened. The MoF auctioned 5-Year JGBs, drawing bid/cover ratio of 3.86x (prev. 4.42x), with low price matching dealer expectations. PM Kishida dissolved parliament, setting the scene for the Oct 31 general election.
  • Cash ACGB curve was paring its initial bull flattening, but the release of a net negative Australian jobs market report reversed that trend, inspiring fresh demand for Aussie bonds. The curve still runs flatter, with yields sitting +1.0bp to -7.7bp. Aussie bond futures moved away from lows, YM trades -1.0 & XM +5.5 at typing. Bills run 1-2 ticks through the reds. Australia's employment shrank more than forecast, which was driven exclusively by part-time positions. Unemployment edged higher, but not as much as expected, while participation dipped. Comments from RBA Dep Gov Debelle offered little of note, while the Reserve Bank offered to buy A$1.6bn of ACGBs with maturities of Apr '29 to Nov '32, but excluding ACGB May '32.

JGBS AUCTION: Japanese MOF sells Y2.0188tn 5-Year JGBs:

The Japanese Ministry of Finance (MOF) sells Y2.0188tn 5-Year JGBs:

  • Average Yield -0.079% (prev. -0.103%)
  • Average Price 100.42 (prev. 100.52)
  • High Yield: -0.077% (prev. -0.101%)
  • Low Price 100.41 (prev. 100.51)
  • % Allotted At High Yield: 98.5189% (prev. 7.3785%)
  • Bid/Cover: 3.861x (prev. 4.419x)

EQUITIES: Mostly Higher, China Fluctuates

Most equity markets in the region higher, taking a positive lead from the US where equity markets eked out small gains. Hong Kong markets were shut in observance of Chung Yeung Festival. Bourses in Japan lead the way higher with gains of over 1%, in Japan a survey showed that corporates support PM Kishida's additional fiscal stimulus plan with hopes it will be worth at least JPY 10tn. Kishida is expected to formally sign off on dissolution of the House of Representatives today and schedule a general election for Oct 31. Markets in China are slightly lower but off worst levels of the session, data showed CPI slowed slightly while PPI picked up and rose at the fastest pace since 1995. In Australia equity indices gained over 1%, supported by higher commodity prices. E-minis rose, S&P futures broke out of the previous two day's range, markets look ahead to PPI data and speeches from Fed's Bullard and Bostic.

OIL: Stockpile Build Doesn't Concern Crude

Crude futures broadly flat, holding near Wednesday's highs after managing a positive close. Price action has been more reminiscent of consolidation and profit-taking rather than any sea change in sentiment as both oil contracts remain in a bullish trend. Monday's gains confirmed an extension of the current bullish price sequence of higher highs and higher lows, reinforcing the uptrend. Note that the $80.00 psychological hurdle has also been cleared. The focus is on $82.89, a Fibonacci projection. Concerns among global policy markets over the current high price of oil and energy continues to be reflected in headline newsflow, with an MNI report showing the Bank of Japan's concerns over both high energy prices and high import costs as working against corporate profits. This sentiment was reflected in Reuters reports citing sources as saying the White House is conversing with US oil and gas producers on how the industry can help bring down prices.

  • Further evidence of the global shortage of energy supplies arose just after the London close, as the Moldovan Deputy PM formally issued a state of emergency in the domestic energy sector thanks to the natural gas shortage in the country. Elsewhere API inventory data showed US crude stocks rose 5.21m bbls, while Cushing hub saw stocks fall 2.28m bbls and downstream products also saw draws. Markets look ahead to the delayed US DOE inventory figures.

GOLD: Softens

The yellow metal slipped in Asia-Pac trade on Thursday after jumping in the wake of US CPI data. Gold rose from intraday lows of $1758.03 before jumping to highs of $1796.25, last trading down $3.11 at $1789.84. Support now seen at $1781.4/87.4 - High Oct 8 / High Sep 22 and key resistance while next resistance is at $1808.7 - High Sep 14. Markets look ahead to speeches from Fed's Bullard and Bostic after the FOMC minutes yesterday showed that tapering could be on the table as soon as November.

FOREX: Yen Resumes Losses, Commodity-Tied FX Outperform

Yen sales resumed after the currency took a breather yesterday. The Nikkei 225 advanced, while upticks in all three main U.S. e-mini futures inspired hope for a continued pick-up in risk appetite. BoJ's Noguchi pointed to a continued need for an aggressive fiscal and monetary stimulus, in another reminder of the Bank's divergence with its major peers. His comments came after FOMC minutes suggested that tapering is in sight.

  • The redback went offered after a weaker than expected PBOC fix. China's central bank set their central USD/CNY mid-point at CNY6.4414, 44 pips above sell-side estimate (the largest weak bias since May 10).
  • China's factory-gate inflation accelerated to the fastest pace in almost 26 years, overshooting consensus estimate. The report came after U.S. CPI topped expectations, reinforcing broader inflation concerns.
  • AUD showed a limited reaction to domestic labour market report, which showed a smaller than expected uptick in the unemployment rate coupled with an above-forecast dip in participation. Employment shrank more than projected, exclusively on the back of losses in part-time jobs.
  • Broader commodity-tied FX space was generally firmer, with NZD leading gains. RBNZ Dep Gov Bascand noted that New Zealand's economy recovered strongly from 2020 but the Delta outbreak weighs on outlook. NZD/USD re-tested its monthly highs, while NZD/JPY rose to its best levels since early Jun.
  • U.S. weekly jobless claims & PPI take focus on the data front going forward. The global central bank speaker slate is tightly packed with Fed, ECB & BoE members.

FOREX OPTIONS: Expiries for Oct14 NY cut 1000ET (Source DTCC)

  • EUR/USD: $1.1485-00(E691mln), $1.1550-65(E904mln), $1.1600(E1.4bln), $1.1700-20(E999mln)
  • EUR/GBP: Gbp0.8510-25(E1.2bln)
  • USD/JPY: Y113.00($835mln), Y113.75-90($700mln)
  • USD/CAD: C$1.2495($520mln), C$1.2550-60($578mln)
  • USD/CNY: Cny6.4500($1.3bln)

UP TODAY (Times GMT/Local)