MNI US OPEN - German Regions Show Little Sign of Slowing  Inflation

NEWS

UK (MNI): Truss: 'Our Economic Plan Is The Right Plan'

Prime Minister Liz Truss speaking as part of a round of interviews on local radio stations across England as fallout from the fiscal event continues to impact financial markets.

Truss offers no signal of any change to the policies announced last week by Chancellor of the Exchequer Kwasi Kwarteng last week. Says that ‘This is the right plan going forward... we are taking the steps to improve growth levels in our economy ‘

OPEC (BBG): OPEC+ Is Discussing Cutting Oil Output at Next Week’s Meeting

OPEC+ has begun discussions about making an oil-output cut when it meets next week, a delegate said. The size of a potential supply reduction is still under consideration, the delegate said, asking not to be named because the information is private. The Organization of Petroleum Exporting Countries and its allies made a modest output cut at their last meeting and are scheduled to gather again on Oct. 5.

NATURAL GAS (MNI): Swedish Coastguard Find Fourth Nord Stream Leak

A fourth leak has been found on the Nord Stream pipelines by the Swedish coast guard the Svenska Dagbladet newspaper has reported. "Two of these four are in Sweden's exclusive economic zone," a coast guard spokesperson said. The fourth leak was on the Nord Stream 2 pipeline, in close proximity to a larger hole found on the nearby Nord Stream 1. The damage is now widely suspected as sabotage and investigations are underway.

ECB (BBG): ECB’s Muller Says Inflation Outlook Calls for ‘Significant’ Hike

The European Central Bank should raise interest rates next month by an amount resembling the large increases it has already delivered, according to Governing Council member Madis Muller. “We have had two significant hikes already, and I think something in the same ballpark would be called for if we’re looking at the outlook as of now,” the Estonian central bank chief told Bloomberg Television on Thursday in an interview.

ECB (BBG): Simkus Says He Favors Three-Quarter-Point October Hike

European Central Bank Governing Council member Gediminas Simkus said he’s leaning toward supporting a three-quarter-point increase in interest rates next month as inflation approaches another all-time high. The Lithuanian central bank chief told Bloomberg Television on Thursday that a move of 100 basis points would “definitely” be too much at the moment, and that 50 basis points is the minimum.

ITALY (MNI): Draghi Resisting Budget Changes - Officials

Caretaker Italian Prime Minister Mario Draghi is resisting attempts by the incoming right-wing coalition to make significant changes to the 2023 budget, but if necessary could ask for an extension of the Oct 15 deadline to submit a draft of the spending plans to the European Commission, finance ministry sources told MNI.

CHINA (BBG): China Vows to Speed Up Delayed Homes With Special Loans

China’s central bank vowed to expand a special lending program if it’s needed to ensure the delivery of delayed housing projects, and called on banks to provide financing support for this effort. China will roll out city-specific property policies to support demand, implement special loans dedicated to ensuring property completion and increase its magnitude within reason, the People’s Bank of China said in a statement Thursday.

DATA

EUROZONE SEP ECONOMIC SENTIMENT INDEX 93.7 (MNI)

GERMANY (MNI): Nat'l Inflation Tracking Around 10%

• NRW 22% weighting- 10.1% Y/Y (8.1% prior)
• Bavaria 17% weighting - 10.8% Y/Y (8.4% prior)
• Baden-W 14% weighting - 9.5% Y/Y (7.3% prior)
• Hesse 8% weighting - 9.4% Y/Y (8.0% prior)
• Brandenburg 3% weighting - 9.9% Y/Y (7.9% prior)

Around 2/3 of German states (on a weighted basis for the nat'l inflation reading) have reported September CPI this morning. National German CPI is roughly tracking a sliver above 10% so far - keeping in mind nat'l CPI Y/Y consensus coming into today is 9.5% Y/Y, HICP 10.2%, that would be a significant "beat" (though consensus has obviously shifted on the state-by-state readings, with Bunds selling off sharply).

SPAIN (MNI): Energy Aids Spanish CPI Ease in September Flash

SPAIN SEP FLASH HICP 0.0% M/M (FCST +0.6%); AUG +0.3% M/M

SPAIN SEP FLASH HICP +9.3% Y/Y (FCST +10.0%); AUG +10.5% Y/Y

The fall in electricity and fuel costs was largely responsible for the fall in headline Spanish CPI in the September flash. Price growth stalled on the month (0.0%), whilst year-on-year inflation slowed by 1.2pp to +9.3% y/y following three consecutive months at (and above) +10%.

Despite energy prices being the key downwards driver, core CPI softened by 0.2pp to +6.2% y/y. This is the first core deceleration in 16 months, which will be taken as cautiously positive news for the ECB.

AUSTRALIA (MNI): RBA 50bps Hike Odds Firm After August CPI Hits 6.8%

A surge in inflation to a three decade high has firmed expectations the Reserve Bank of Australia will raise its cash rate 50bps at its Oct 4 meeting.

Monthly Consumer Price Index indicator data released by the Australian Bureau of Statistics showed headline inflation rose to 7% y/y in July - the fastest pace since 1990 - before retreating to 6.8% in August. The fall in August was due to lower fuel prices, but the reinstatement of the full fuel excise from Sep 29 will add AUD25.3 cents per litre in taxes according to the Australian Competition and Consumer Commission.

FOREX: Lofty German Regional Inflation Prompts Renewed Risk-Off

• German regional CPI data has unsettled risk sentiment further this morning, with just over 2/3 of regions having reported so far. The regional data - and in particular Bavaria - are posing upside risks to the national reading later today, and has prompted renewed core bond sales and some resilience in the EUR.
• Nonetheless, the USD is rallying against all others, partially reversing the rare downtick in the USD Index posted yesterday. Wednesday's high at 114.778 remains the cycle high, and EUR/USD's recovery off the day's lows may keep that mark out of reach for now.
• Further evidence of unsettled markets in equity space, with core indices off 1.5-2.0% in Europe. High beta and growth proxy currencies including the NOK are therefore suitably lower, putting EUR/NOK again within range of key resistance and the bull trigger at the mid-June highs of 10.5402.
• Focus looking ahead turns to the national German CPI print as well as Canadian monthly GDP, the weekly US jobless claims data as well as the tertiary Q2 GDP from the US.
• Central bank speakers include no fewer than 16 scheduled ECB appearances (a handful of governing council members appear more than once) as well as speeches from BoE's Pill, Ramsden, Tenreyro and Fed's Bullard, Mester and Daly.

BOND SUMMARY: Bunds Underperform As German CPI Eyes Double-Digits

Core FI is reversing the prior session's relief rally, with curves mixed (though short-end mostly outperforming). Implied volatility in US / European bonds is touching fresh post-2009 highs.

• High German state inflation has seen Bunds underperform: MNI is tracking September CPI (out at 1300UK time) north of 10% Y/Y, vs expectations of 9.5% coming into the session.
• Against that backdrop, another parade of ECB speakers this morning with a clear message: a 75bp October hike is the baseline. That expectation remains mostly market-priced (70bp, up one or two bps this morning).
• UK Nov hike pricing remains fairly steady too, at 160bp. PM Truss' media appearances this morning have done nothing to calm Gilts.
• Data ahead includes third reading of US GDP and jobless claims.
• We hear from BoE's Tenreyro, Ramsden, and Pill; and Fed's Bullard and Daly, with Mester alongside ECB's Lane on a panel.

Latest levels:

• US: 2-Yr yield up 7.6bps at 4.2109%, 5-Yr up 13bps at 4.0779%, 10-Yr up 11.5bps at 3.8461%, 30-Yr up 8.2bps at 3.7806%.
• DE: 2-Yr yield up 7.4bps at 1.93%, 5-Yr up 12.1bps at 2.149%, 10-Yr up 13.8bps at 2.258%, and 30-Yr up 11bps at 2.127%.
• UK: 2-Yr yield up 11.4bps at 4.407%, 5-Yr up 11.8bps at 4.41%, 10-Yr up 13bps at 4.142%, and 30-Yr up 1.6bps at 3.948%.
• Italy / German 10-Yr spread 2.5bps wider at 243.4bps

EQUITIES: Bounce Off Lows Deemed Corrective as Futures Fade

S&P E-Minis trend conditions remain bearish following last week’s extension lower and the bearish follow through this week. Short-term gains are considered corrective. EUROSTOXX 50 futures trend conditions remain bearish despite yesterday’s recovery - gains are considered corrective. This week’s fresh cycle lows mark an extension of the reversal on Sep 13 from 3678.00.

• Japan's NIKKEI closed higher by 248.07 pts or +0.95% at 26422.05 and the TOPIX ended 13.65 pts higher or +0.74% at 1868.8.
• Elsewhere, in China the SHANGHAI closed lower by 3.862 pts or -0.13% at 3041.205 and the HANG SENG ended 85.01 pts lower or -0.49% at 17165.87.
• Across Europe, Germany's DAX trades lower by 156.54 pts or -1.28% at 12026.09, FTSE 100 lower by 125.6 pts or -1.79% at 6879.92, CAC 40 down 73.7 pts or -1.28% at 5692.5 and Euro Stoxx 50 down 42.65 pts or -1.28% at 3293.39.
• Dow Jones mini down 317 pts or -1.07% at 29432, S&P 500 mini down 41.25 pts or -1.11% at 3690, NASDAQ mini down 141.75 pts or -1.23% at 11412.75.

COMMODITIES: WTI, Gold Retrace Off Wednesday Highs

WTI futures traded higher Wednesday. Bearish conditions remain intact though and the climb from Monday’s low is considered corrective. The contract has recently cleared support at $80.89, Sep 8 low. Gold bounced yesterday but has already started retracing the recovery. The trend outlook remains bearish. This week’s extension of the bear cycle confirms a resumption of the downtrend and maintains the bearish price sequence of lower lows and lower highs.

• WTI Crude down $1.09 or -1.33% at $81.14
• Natural Gas up $0.07 or +0.93% at $7.021
• Gold spot down $14.62 or -0.88% at $1645.53
• Copper down $3.3 or -0.98% at $332.55
• Silver down $0.3 or -1.58% at $18.6109
• Platinum down $17.76 or -2.05% at $849.05