MNI US OPEN - EZ CPI Hits Double Figures

NEWS

ECB (MNI): More ECB Policymakers See Restrictive Rates

More European Central Bank policymakers are becoming convinced that the benchmark interest rate will need to move to a restrictive setting to contain inflation, although there is no clear agreement amongst Governing Council members as to the neutral level of interest rates and many stress extreme uncertainty, senior Eurosystem sources have told MNI.

US (MNI): Fed Needs Restrictive Policy At Least Through 2023 - Daly

The Fed needs to hike interest rates this year and next bringing them into clearly restrictive territory and holding at least through 2023, San Francisco President Mary Daly told reporters Thursday, some of her most hawkish comments in this cycle.

It's too soon to tell if tensions in the U.K. will become an event that tightens global financial conditions in an environment of other forces such as a rush of central bank hikes and the Ukraine war, Daly said. While tighter financial conditions are needed in the U.S., Daly said there needs to be "clear and convincing" evidence inflation is moving back to where it needs to be before policy can be relaxed.

JAPAN (BBG): BOJ to Boost Buying of Long and Super-Long Debt in Oct-Dec

The Bank of Japan will buy more bonds with maturities of at least five years in the October-December period, according to a statement from the central bank on Friday. The move follows several unscheduled bond-buying operations and upsized purchases at regular operations this month as the BOJ sought to contain a rise in yields fueled by volatility in global markets.

CHINA (BBG): FX Body Said to Ask Banks to Trade Yuan Closer to Fixing

An organization formed by China’s biggest foreign-exchange traders asked banks to trade the currency at levels closer to the central bank’s fixing at the market open, according to people familiar with the matter.

Lenders that submit the daily fixing to Beijing should trade the yuan around the reference level in the first few minutes after the market opens onshore, the self-regulatory group for the foreign exchange market told the banks this week, according to traders from institutions that received these instructions, who declined to be identified as the information is private.

RBI (BBG): India’s RBI Delivers Half-Point Hike to Rein in Inflation

India’s central bank delivered a hat-trick of half-point interest-rate hikes, sustaining its battle to rein in inflation while flagging “calibrated action” to shield the economy amid fears of a global recession. The benchmark repurchase rate was raised by 50 basis points to 5.90%, Reserve Bank of India Governor Shaktikanta Das said after the six-member monetary policy committee’s 5-1 decision. The move was expected by 34 of 46 economists in a Bloomberg survey.

INDIA (RTRS): India's central bank encouraging state refiners to cut spot dollar buying -sources

India's central bank is encouraging state-run refiners to reduce dollar buying in the spot market to contain a sharp fall in the rupee, two sources said, adding they have been asked to lean on a special credit line instead.

The Reserve Bank of India has ensured $9 billion has been made available at overseas branches of some Indian banks for the country's three state-run refiners to tap, said the sources who have direct knowledge of the matter, adding that the funds are available at market rates.

THAILAND (BBG): Thai PM Stays in Power as Court Finds No Breach in Term Limits

Thailand’s Prime Minister Prayuth Chan-Ocha will remain in office after the highest court ruled he hadn’t breached a constitutional term limit, handing him a victory as political jockeying increases ahead of elections that must be called by March.

DATA

EUROZONE DATA (MNI): CPI Jumps to +10% y/y, Supporting a 75bp Hike

• EUROZONE SEP FLASH CPI +1.2% M/M (FCST +0.9%); AUG +0.6% M/M
• EUROZONE SEP FLASH CPI +10.0% Y/Y (FCST +9.7%); AUG +9.1% Y/Y
• EUROZONE SEP FLASH CORE CPI +1.0% M/M, +4.8% Y/Y (FCST +4.7%); AUG +4.3% Y/Y
• EUROZONE AUG UNEMPLOYMENT RATE 6.6%

A sharp 0.9pp surge in headline inflation brought euro area inflation to a fresh record high of +10.0% y/y in the September flash, outpacing forecasts by 0.3pp.

Of particular concern to the ECB will be the core print, which accelerated by half a point to +4.8% y/y, jumping +1.0% m/m alone. Almost all sub-indexes saw prices surge, energy was up 3.0% m/m, industrial goods up 2.8% m/m and food up 1.0% m/m.

This data provides strong evidence of accelerating broad-based price pressures, supporting a larger 75bp hike for the October meeting (prior to this data markets were pricing 69bp). Despite downside surprises in French and Spanish CPI yesterday, this failed to outweigh the hot German beat.

UK AUG M4 MONEY SUPPLY -0.2% M/M, +3.8% Y/Y (MNI)

UK BOE AUG MORTGAGE APPROVALS 74,340 (MNI)

GERMANY SEP UE RATE (SA) 5.5% (FCST 5.5%); AUG 5.5% (MNI)

JAPAN AUG INDUSTRIAL OUTPUT +2.7% M/M; JULY +0.8% (MNI)

JAPAN AUG JOBLESS RATE FALLS TO 2.5% FROM JULY 2.6% (MNI)

JAPAN (MNI): Japan Sep Consumer Confidence Drops

Japan's consumer confidence index fell in September as all components deteriorated from the previous month but the Cabinet Office left its economic assessment unchanged, data released by the Cabinet Office on Friday showed

The consumer confidence index fell to 30.8 in September from 32.5 in August, the latest Consumer Confidence Survey data showed. The index dropped after two months of gains. The latest survey was conducted from September 6 to September 20.

CHINA (MNI): China Sep Manufacturing PMI Rises Above 50

CHINA SEP CAIXIN MANUFACTURING PMI 48.1 VS 49.5 IN AUG

China's Purchasing Managers' Index (PMI) unexpectedly rebounded to 50.1 in September from 49.4 in August, rising back to the expansionary zone above 50 after contracting for the past two months as pro-growth policies kick in and the impact of heatwaves subsided, data from the National Bureau of Statistics on Friday showed.

FOREX: GBP Extends Bounce, With GBP/USD Nearing Pre-Budget Levels

• The recovery in UK assets continues, with GBP/USD nearing the Friday (i.e. pre-mini budget) levels at 1.1274 and rallying against all others in G10. The moves coincide with a further pull lower in the UK yield curve, putting the longer-end under additional pressure as the BoE's emergency action in the middle of the week tempers market uncertainty.
• The more stable market backdrop has helped risk assets find bottom, putting the e-mini S&P back above the 3650 level and around 60 points above the late Thursday low.
• For currencies, this has meant the dollar trades on the backfoot, while AUD trades more favourably. NOK should be benefiting from the calmer market sentiment, however the Norges Bank's larger-than-expected FX sales across October have tempered any progress in the currency. The bank are to sell NOK 4.3bln per day on behalf of the sovereign wealth fund.
• Personal income and spending data crosses Friday, with further focus on September's MNI Chicago PMI as well as the final Michigan confidence read for this month.

BOND SUMMARY: Gilts outperform with core FI higher across the board

• Gilts are the outperformers in core fixed space this morning with the front-end of the curve seeing the most repricing with 2-year gilt yields down over 25bp on the day. 10-year gilt yields are down over 10bp on the day too, while the 10s30s curve is flatter on the day (i.e. more inverted) but still around 7bp off yesterday's cycle lows. PM Liz Truss and Chancellor Kwasi Kwarteng are due to meet OBR Chair Richard Hughes this morning with the market hoping that the Budget and full OBR forecast (scheduled for 23 November will be brought forward).
• In the Eurozone the focus has been on inflation - with French HICP surprising to the downside, but the Eurozone print higher than expected (Italian HICP was in line). Markets have not fully reversed the rally on the back of the French disappointment this morning and EGBs are bull steeper on the day.
• In the US we have personal income / spending data due at 13:30BST alongside the PCE deflator. We also have the MNI Chicago Business Barometer and the final print of Michigan sentiment.
• There are a number of Fed speakers due: Bullard, Brainard, Bowman, Barkin and Williams. We will also see comments from ECB's Visco and Schnabel.
• TY1 futures are up 0-6 today at 112-20+ with 10y UST yields down -7.9bp at 3.710% and 2y yields down -3.3bp at 4.162%.
• Bund futures are up 1.09 today at 138.59 with 10y Bund yields down -7.2bp at 2.106% and Schatz yields down -4.6bp at 1.739%.
• Gilt futures are up 0.48 today at 970.01 with 10y yields down -9.5bp at 4.042% and 2y yields down -24.6bp at 4.087%.

EQUITIES: Recent Gains Corrective with Futures Outlook Still Bearish

S&P E-Minis trend conditions remain bearish and short-term gains are considered corrective. The recent move lower strengthens bearish conditions and attention is on key support at 3657.00, the Jun 17 low. EUROSTOXX 50 futures trend conditions remain bearish and yesterday’s fresh trend low reinforces current conditions. This week's bearish extension confirms a continuation of the reversal on Sep 13 from 3678.00.

• Japan's NIKKEI closed lower by 484.84 pts or -1.84% at 25937.21 and the TOPIX ended 32.86 pts lower or -1.76% at 1835.94.
• Elsewhere, in China the SHANGHAI closed lower by 16.815 pts or -0.55% at 3024.39 and the HANG SENG ended 56.96 pts higher or +0.33% at 17222.83.
• Across Europe, Germany's DAX trades higher by 147.93 pts or +1.24% at 12124.5, FTSE 100 higher by 68.39 pts or +0.99% at 6949.98, CAC 40 up 67.7 pts or +1.19% at 5745.23 and Euro Stoxx 50 up 37.08 pts or +1.13% at 3316.32.
• Dow Jones mini up 219 pts or +0.75% at 29493, S&P 500 mini up 33.5 pts or +0.92% at 3685.5, NASDAQ mini up 104.25 pts or +0.93% at 11325.

COMMODITIES: WTI Approaches Week Highs Amid Dollar Weakness

WTI futures traded higher again Thursday. 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 has recovered from Wednesday's low of $1615.0. Short-term gains are considered corrective and the downtrend remains intact. The next resistance is at $1678.3, the 20-day EMA.

• WTI Crude up $0.96 or +1.18% at $82.06
• Natural Gas up $0.07 or +1.02% at $6.934
• Gold spot up $10.05 or +0.61% at $1671.34
• Copper up $5 or +1.46% at $346.9
• Silver up $0.33 or +1.74% at $19.1525
• Platinum up $10.89 or +1.26% at $877.73