MNI US OPEN - Putin Dips Into Reserves

NEWS

RUSSIA (MNI): Putin Announces 'Partial' Mobilization, Prompting Blip in Risk Sentiment

Reuters cites Putin's national address, delayed from yesterday afternoon, as calling for partial military mobilization, adding that The West wants to destroy Russia and that the military operation goals remain the same.

Partial mobilization effectively means that those already in the armed forces reserves and those who have historically served will now be subject to conscription. These units will undergo additional military training before heading to the Russian-occupied territories ahead of touted referendums later this month on their intention to break away from Ukraine formally.

On numbers and size of Russia's reserves, the International Institute for Strategic Studies estimate that there are at least 2 million reserve personnel and 20 million former military personnel, 10% of whom have seen active service within the last five years. Russia are estimated to have had 900,000 active service personnel at the start of 2022.

UK (MNI): Gov't Outlines Energy Price Support for Business

The UK gov't has published its plans for assisting businesses with the rising cost of energy this winter. "Through a new Government Energy Bill Relief Scheme, the Government will provide a discount on wholesale gas and electricity prices for all non-domestic customers... whose current gas and electricity prices have been significantly inflated in light of global energy prices."

AUSTRALIA (MNI): RBA Loss From Bond Buying Could Hit AUD58Bln

The Reserve Bank of Australia's review of its AUD281 billion Bond Purchase Program has warned of losses as high as AUD58 billion but that won't deter it from buying bonds again in "extreme" circumstances.

AUSTRALIA (MNI): RBA's Bullock Says Rates Not Restrictive Yet

Reserve Bank of Australia Deputy Governor Michele Bullock said the cash rate was not "necessarily in restrictive territory yet" as she defended losses related to its Bond Buying Program.

JAPAN (BBG): BOJ Spends More Than 1 Trillion Yen on Fixed-Rate Bond Buying

The BOJ spends 1.26t yen on its fixed-rate bond-buying operations as yields are at the upper end of the trading range that it tolerates. It is the largest daily amount since June.

MNI CENTRAL BANK PREVIEWS:

• Federal Reserve:https://roar-assets-auto.rbl.ms/documents/18423/FedPrevSeptember2022.pdf
• Bank of England:https://roar-assets-auto.rbl.ms/documents/18459/MNI%20BoE%20Preview%20-%20Sep22.pdf
• Bank Indonesia:https://roar-assets-auto.rbl.ms/documents/18428/MNI%20BI%20Preview%20September%202022.pdf
• Brazil Central Bank:https://roar-assets-auto.rbl.ms/documents/18425/MNI%20Brazil%20Central%20Bank%20Preview%20-%20September%202022.pdf
• Swiss National Bank:https://roar-assets-auto.rbl.ms/documents/18479/MNISNBPrevSep22.pdf
• Norges Bank:https://roar-assets-auto.rbl.ms/documents/18422/MNINBPrevSep22.pdf
• South Africa Reserve Bank:https://roar-assets-auto.rbl.ms/documents/18457/MNISARBPrevSept22.pdf
• Central Bank for the Republic of Turkey:https://roar-assets-auto.rbl.ms/documents/18456/MNICBRTPrevSep22.pdf
• Bangko Sentral ng Pilipinas:https://roar-assets-auto.rbl.ms/documents/18485/MNI%20BSP%20Preview%20September%202022.pdf

DATA

UK AUG PSNB-X GBP+11.82 BN (MNI)

UK AUG PSNB GBP+11.06 BN (MNI)

UK AUG PSNCR GBP5.32 BN (MNI)

UK AUG CGNCR GBP4.85 BN (MNI)

SWEDEN AUG UNEMPLOYMENT 6.6% (MNI)

FOREX: USD Touches Fresh Cycle Best as Putin Rounds Up Troops

• Risk appetite took an early knock in European hours as President Putin began his delayed address to the nation, confirming that a partial mobilisation is effective today across Russia. The decree sees reservists called up to the armed forces, with the Kremlin looking to use imminent referendums as justification to send in more troops to defend what they see as newly-earned Russian soil.
• As a result, haven currencies are the outperformers, with the greenback on top and putting USD Index at a new cycle high of 110.869. Putin's call suggests the Ukraine war will likely persist through the winter, and could elicit a response from Western powers, who have put down planned votes as illegitimate.
• EUR/USD plumbed a new intraday low of $0.9885 in response, narrowing the gap with key support at the cycle and multi-decade low of $0.9864. This level comes into particular focus ahead of what's expected to be a hawkish FOMC meeting.
• Elsewhere, SEK is spiraling, extending the weakness seen following the Riksbank rate decision yesterday, with the accompanying rate path strongly suggesting the tightening bias will ease going forward.
• Focus understandably turns to the FOMC rate decision after the London close Wednesday, with the Fed expected to keep pace with a 75bps rate hike. Attention will be paid to the voting split made among the committee and any suggestions of the terminal rate at the Fed.

GILTS: Underperforming vs German curve as focus turns to MPC and Growth Statement

• Gilts have underperformed the German curve this morning with the SONIA strip also seeing less upside pressure (Whites/Reds/Greens largely unchanged versus the 3-6 ticks moves in Euribor Reds/Greens).
• More details on the government's energy price support scheme for businesses have been announced this morning, with the amount of support available largely in line with that outlined a couple of weeks ago.
• Focus is now turning to tomorrow's MPC meeting and the "Growth Plan" AKA "Fiscal Statement" which is due to outline other tax cuts on Friday (NI, income tax, VAT, fuel duty, stamp duty are all under discussion according to media reports).
• We argued in our BOE preview that there is a good case for the MPC to delay the start of active gilt sales, at least until November when there will be more certainty over the remit and the market's ability to digest to notable increase in issuance that is expected from the government's energy and other fiscal plans.
• For our full discussion on the options for active QT and the MNI BOE Preview see here.
• 2y yields down -1.1bp today at 3.287%, 5y yields down -0.8bp at 3.288%, 10y yields down -3.6bp at 3.252% and 30y yields down -3.6bp at 3.551%.
• 2s10s down -2.5bp today at -0.35.bp and 10s30s unch at 29.9bp.

EQUITIES: US Futures Shrug Off Putin-Inspired Downtick

S&P E-Minis remain soft despite the recent stabilisation and have shrugged off an initial down move on headlines that Putin has called for partial mobilisation across Russia. Prices continue to trade closer to recent lows. Last week’s breach of 3900.00, the Sep 7 low, strengthened bearish conditions and signals scope for a move towards 3819.54 next, 76.4% retracement of the Jun 17 - Aug 16 bull leg. A break would open 3741.75, the Jul 14 low. EUROSTOXX 50 futures maintain a bearish tone following the reversal on Sep 13 and the subsequent move lower. A key support at 3423.00, the Sep 5 low, has been pierced. A clear break would expose 3360.00, the Jul 16 low.

• Japan's NIKKEI closed lower by 375.29 pts or -1.36% at 27313.13 and the TOPIX ended 26.47 pts lower or -1.36% at 1920.8.
• Elsewhere, in China the SHANGHAI closed lower by 5.229 pts or -0.17% at 3117.177 and the HANG SENG ended 336.8 pts lower or -1.79% at 18444.62.
• Across Europe, Germany's DAX trades lower by 25.88 pts or -0.2% at 12646.65, FTSE 100 higher by 44.43 pts or +0.62% at 7238.07, CAC 40 down 3.78 pts or -0.06% at 5975.69 and Euro Stoxx 50 down 4.71 pts or -0.14% at 3462.38.
• Dow Jones mini up 26 pts or +0.08% at 30827, S&P 500 mini up 3.25 pts or +0.08% at 3876.25, NASDAQ mini up 2.25 pts or +0.02% at 11925.75.

COMMODITIES: Gold Trades Higher Following Putin Comments

Gold traded to an intraday high following Putin's announcement of 'partial' mobilization. Technically, however, the commodityremains in a clear downtrend with last Thursday’s bearish extension reinforcing this theme - price has cleared support at $1681.0, the Jul 21 low and this confirms a resumption of the downtrend that started early March. Attention is on $1640.9 next, the Aug 8 2020 low. In the Oil space, the WTI futures outlook is bearish and today’s gains are considered corrective. The recent break of support at $85.37, Aug 16 low, confirmed a resumption of the downtrend that started Jun 8

• WTI Crude up $2.3 or +2.74% at $86.07
• Natural Gas up $0.17 or +2.18% at $7.875
• Gold spot up $6.59 or +0.4% at $1671.18
• Copper down $1.65 or -0.47% at $348.45
• Silver up $0.14 or +0.71% at $19.4057
• Platinum up $8.81 or +0.95% at $933.11