MNI US MARKETS ANALYSIS - Eurozone Inflation Hits a Record High

US TSYS SUMMARY: Data Eyed For Inflation Clues

US Rates broadly weaker with EGBs, curves bear steepening for a change (for the moment at least) as bonds currently extending overnight lows (30YY tapped 2.0231%) amid robust volumes (TYZ1>490k, USZ1>125k). Equities in the red (ESZ1 -25.0 at 4562.5), Gold -2.85, WTI crude up slightly.

• Carry-over widening in sovereign spds on the back of Thu's ECB policy annc (mkt underwhelmed w/ECB Lagarde presser: "not for her to say" if markets had got ahead of themselves; specs piling on rate hike bets targeting 3Q'22.
• Currently Greece 10Y vs. Bunds +18.8, Italy +12.5, Portugal and Spain wider by single digits.
• It's largely inflation-related data that will be eyed today: 0830ET sees the Q3 Employment Cost Index, as well as the Sept personal income / spending report, which includes the Fed's preferred PCE price gauge.
• At 0945ET we get Oct MNI Chicago PMI, with the final Oct UMich Sentiment to wrap up the week in data.
• No supply; NY Fed buys ~$1.425B in 10-22.5 Tsys.
• The 2-Yr yield is up 2.6bps at 0.5148%, 5-Yr is up 3.1bps at 1.2155%, 10-Yr is up 2.8bps at 1.6084%, and 30-Yr is up 3.1bps at 2.0125%.

EGB/GILT SUMMARY - Big moves in peripheral

• Most of the action has been in peripheral spreads for EGBs.
• BTP/Bund is now wider by over 10nps, and Greece/Bund by 18bps, and widest since November 2020.
• Bund remains offered ahead of the US inflation data.
• Gilts have mostly traded inline with Bund, albeit 0.9bp wider.UK 5/30s lean steeper, but we still trade at multi year low.
• Looking ahead, US Core PCE, MNI Chicago PMI and Final Michigan are the data release.
• Gilt futures are down -0.61 today at 124.88 with 10y yields up 4.8bp at 1.053% and 2y yields up 3.2bp at 0.671%.
• Bund futures are down -0.90 today at 168.16 with 10y Bund yields up 4.4bp at -0.93% and Schatz yields up 2.0bp at -0.603%
• BTP futures are down -2.24 today at 148.20 with 10y yields up 15.3bp at 1.203% and 2y yields up 10.7bp at -0.8%.
• OAT futures are down -1.22 today at 164.09 with 10y yields up 6.5bp at 0.278% and 2y yields up 1.2bp at -0.642%.

EUROPE OPTION FLOW SUMMARY

Eurozone:
ERH3 100.125^^, bought for 51 in 1.5k

UK:
3LZ1 98.625p, bought for 4 in 10k

FOREX: Dollar Clawing Back Small Portion of Losses

• The greenback trades toward the top-end of the G10 table so far Friday, with the dollar inching higher against most others. This reverses a small part of the Thursday weakness, dragging EUR/USD off the 1.1692 highs to trade either side of the 1.1650 level ahead of NY hours.
• Equity indices generally trade lower, with European markets off 0.5-0.8%. This has worked in favour of CHF which puts USD/CHF at fresh multi-month lows. This keeps focus on the 0.9100 handle, with EUR/CHF adding downside pressure. EUR/CHF has traded through the lows printed earlier in the week, putting the cross in close proximity to the 1.0607 level printed in July 2020.
• NOK, NZD and SEK are the poorest performers, with the greenback, CHF and CAD among the strongest so far.
• The US personal income/spending and PCE data later today takes focus, with PCE deflator seen inching higher to 4.4% for the Y/Y reading. MNI Chicago PMI crosses shortly afterwards, with markets seeing a moderation to 63.5. Canadian GDP and a joint meeting between G20 finance and health ministers are also due.

FX OPTIONS: Expiries for Oct29 NY cut 1000ET (Source DTCC)

• EUR/USD: $1.1480-00(E842mln), $1.1595-00(E1.3bln), $1.1645-55(E933mln)
• USD/JPY: Y113.00($674mln), Y113.75-90($1.3bln), Y114.60-75($1.4bln)
• NZD/USD: $0.7210(N$645mln)
• USD/CAD: C$1.2300($982mln), C$1.2345($610mln)
• USD/CNY: Cny6.4750($600mln)

Price Signal Summary - EURUSD Bear Channel Top Remains Intact

• In the equity space, S&P E-minis are consolidating but remain in a clear uptrend. The next objective is 4591.25, the 1.00 projection of the Jul 19 - Aug 16 - Aug 19 price swing. Scope is also seen for a break of the 4600.00 handle. Support to watch is at 4543.75, Wednesday's low. EUROSTOXX 50 futures yesterday probed key resistance at 4223.00, Sep 6 high and the bull trigger. A clear break would confirm a resumption of the broader uptrend and open 4290.50, 1.00 projection of the Jul 19 - Sep 6 - Oct 6 price swing. The outlook remains bullish.
• In FX, EURUSD rallied yesterday and did probe the 50-day EMA. While this is a positive development, a key resistance at 1.1706 remains intact, the bear channel top drawn off the Jun 1 high. A channel breakout is required to signal a more decisive reversal. Initial support lies at 1.1582, yesterday's low. GBPUSD short-term bullish conditions remain intact and corrections so far have been shallow. The focus is on 1.3913, Sep 14 high and a key resistance. Support to watch is at 3710, Wednesday's low. USDJPY remains below recent highs but maintains a bullish tone. Scope is seen for a climb towards 114.99, 1.50 projection of the Apr 23 - Jul 2 - Aug 4 price swing. The support zone to watch is 113.14-00, the 20-day EMA and Oct 12 low respectively.



• On the commodity front, Gold is consolidating but maintains a positive short-term tone. Scope is seen for a climb towards $1834.0, the Sep 3 high. Initial support is at$1780.8, the 50-day EMA. WTI broader trend conditions are unchanged although futures have faced selling pressure this week. Support to watch is at $80.58, the 20-day EMA and yesterday's low.
• In the FI space, price action was extremely volatile yesterday. Bund futures sights are on 167.79, 2.50 projection of the Sep 9 - 17 - 21 price swing. Key resistance at 169.92, Oct 14 high, remains intact. Gilts breached and closed above resistance at 152.57 Wednesday, Oct 14 high. This confirmed a double bottom reversal on the daily chart and signals scope for a climb towards 126.39, 50.0% retracement of the Aug - Oct downleg. Initial support is at 124.55, Oct 27 low. BTPs continue their slide, extending yesterday' sharp sell-off. The focus is on 148.04 1.236 projection of the Sep 23 - Oct 6 - 14 price swing.

EQUITIES: Stocks Sag On Apple/Amazon Earnings Reports

• Asian stock markets closed mixed, with Japan's NIKKEI up 72.6 pts or +0.25% at 28892.69 and the TOPIX up 1.52 pts or +0.08% at 2001.18. China's SHANGHAI closed up 28.919 pts or +0.82% at 3547.336 and the HANG SENG ended 178.49 pts lower or -0.7% at 25377.24
• European equities are weaker, with the German Dax down 116.77 pts or -0.74% at 15696.33, FTSE 100 down 29.93 pts or -0.41% at 7249.47, CAC 40 down 27.36 pts or -0.4% at 6804.22 and Euro Stoxx 50 down 29.3 pts or -0.69% at 4233.87.
• U.S. futures are lower following disappointing quarterly results from giants Amazon and Apple, with the Dow Jones mini down 76 pts or -0.21% at 35537, S&P 500 mini down 23.25 pts or -0.51% at 4564.25, NASDAQ mini down 133.5 pts or -0.85% at 15631.25.

COMMODITIES: Precious Metals Weaken As Dollar Regains Some Ground

• WTI Crude down $0.01 or -0.01% at $82.84
• Natural Gas down $0 or -0.03% at $5.735
• Gold spot down $7.24 or -0.4% at $1797.29
• Copper down $2.2 or -0.5% at $442.15
• Silver down $0.2 or -0.85% at $23.9036
• Platinum down $3.15 or -0.31% at $1017.75