MNI US OPEN - EZ Retail Contracts For Third Consecutive Month

NEWS

EU-RUSSIA (MNI): Council Approves 8th Round Of Sanctions, Including Oil Price Cap

The European Council has this morning approved the eighth round of sanctions to be imposed on Russia in response to its invasion of Ukraine. The raft of sanctions includes a cap on the price of Russian oil transported via sea in relation to third party countries.

The latest package of sanctions is the most focused so far on third country actors. Previously measures almost totally focused on Russia, but now if third country actors transport sanctioned goods from the EU to Russia they could be placed on sanctions list themselves.

UK (MNI): Firms' One Year Inflation Expectations 9.5% - BOE

Inflation expectations rose markedly in the Bank of England's September business executive survey, its Decision Makers Panel survey, with year ahead expectations 9.5% -- compared to 8.4% in August -- and 4.8% three years out.

While the rise in expectations would at first glance appear to bolster the case championed by Monetary Policy Committee members Cathy Mann that aggressive tightening is needed to crush inflation expectations and prevent inflation spiraling other measures of inflation pressures in the survey were more mixed. The DMP found that firms expected wage growth to ease back, however, from 6.5% in the 12 months to September to 5.9% over the next 12 months.

JAPAN (MNI): BOJ Policy Waits on Small Firm Wage Hikes

Bank of Japan officials are concerned smaller companies may not be able to lift wages as much as major corporates, potentially undermining the delivery of a "virtuous cycle" of rising wages and prices viewed as key to any shift away from its easing policy, MNI understands.

Policymakers believe major companies passing on higher costs to customers and benefitting from the weaker yen can deliver reasonable wage hikes to relieve workers' cost of living pressures caused by higher food and energy prices. However, they are concerned smaller firms that haven’t fully transferred high costs to prices will have difficulty raising wages as their profits are squeezed, clouding the prospects for broadly stronger wage growth among Japan's workers.

JAPAN (MNI): BOJ Regional Report Shows Wages Set to Rise

The Bank of Japan's October regional economic report found businesses that had recorded strong profits and were suffering from labor shortages are considering raising wages next spring, while others remained cautious about wage hikes amid high costs and a squeeze on profits.

JAPAN/SOUTH KOREA (MNI): Kishida & Yoon Hold Call Following NK Missile Launches

Yonhap news reporting that Japanese PM Fumio Kishida and South Korean President Yoon Suk-yeol held a 25-minute phone call today regarding the recent spate of missile launches by the North Korean military.

EUROPE (MNI): Leaders Meet for First 'European Political Community' Summit

Leaders from across Europe are meeting in Prague, Czechia for the inaugural summit of the European Political Community today in what the group's proposer, French President Emmanuel Macron, wants to see as a forum for debate between European leaders that can set aside contentious issues such as EU accession and Brexit.

OIL (MNI): G7 Price Cap Adding to Market Uncertainty: Saudi Energy Minister

The G7 oil price cap is “fanning uncertainty” according to Saudi Energy Minister Prince Abdulaziz bin Salman in a Bloomberg tv interview after the OPEC+ meeting. “The lack of details and the lack of clarity” about how the price cap will be implemented add to the sense the coming two months will be “a period of uncertainty,”

The EU agreed yesterday they are supportive of a price cap but the final details of such a cap still need ironed out. The G7 group hope that keeping Russian oil on the market will avoid market tightness but in doing so want to try and limit the Kremlins revenue.

DATA

EUROZONE (MNI): Retail Contracts for the Third Month Running

• EUROZONE AUG RETAIL TRADE -0.3% M/M (= FCST); JUL -0.4% M/M
• EUROZONE AUG RETAIL TRADE -2.0% Y/Y (FCST -1.7%); JUL -1.2% Y/Y

Eurozone retail trade contracted for the third consecutive month in August, slumping by -0.3% m/m and -2.0% y/y and led by contractions in the Netherlands and Germany. The contraction was lessened by the increase in automotive fuels sales, up 3.2% m/m in August as fuel prices bounced.

Despite the continued downwards trend, retail trade for the euro area remains above pre-pandemic levels. This data is however a clear signal of declining consumer demand due to soaring inflation, which will drag on growth for the euro area.

EUROZONE SEP CONSTRUCTION PMI 45.3; AUG 44.2 (MNI)

GERMANY (MNI): Slowing EZ Fuels Factory Orders Contraction

• GERMANY AUG FACTORY ORDERS -2.4% M/M (FCST -0.7%); JUL +1.9%r M/M
• GERMANY AUG FACTORY ORDERS -4.1% Y/Y (FCST -5.5%); JUL -11.0%r Y/Y

Large-scale orders drove the decline in August factory orders, which contracted by 2.4% m/m. Excluding large-scale orders, factory orders increased by 0.8% m/m.

The 2.4% m/m decline in capital goods and 4.2% m/m decline in intermediate goods implies a fall in both business investment and firms gearing for slow demand into the year-end.

Orders both domestic and from the eurozone were substantially weaker, highlighting waning demand in the region. This underscores slowdown fears for the ECB battling surging inflation, with growth likely to have stalled at best. The data foreshadows the slump in German August industrial production due tomorrow.

SWEDEN AUG INDUSTRIAL ORDERS -4.2% M/M; JUL +2.8% M/M (MNI)

SWEDEN AUG INDUSTRIAL ORDERS NSA -0.6% Y/Y; JUL +4.1% Y/Y (MNI)

AUSTRALIA (MNI): Aussie Trade Surplus Disappoints, Record Run Over

• AUSTRALIA AUG TRADE BALANCE A$+8324

Australia's run of record trade surpluses looks to be at an end despite strong exports of liquefied natural gas (LNG) and thermal coal, with the trade surplus falling to AUD8.3 billion in August.

The surplus was AUD643 million lower than July - and well shy of market expectations for AUD10 billion - as imports rose 4.5% m/m and exports increased 2.6% m/m, according to the Australian Bureau of Statistics. Steering the surplus lower was an 11.1% m/m increase in fuel imports and a 7.1% m/m rise in consumable imports. The report highlighted a mixed performance from Australia's main commodities exports, with increased LNG and thermal coal exports helping offset weaker exports of iron ore lump and fines.

FOREX: Major Pairs Near Wednesday Support, Keeping USD Bias Pointed Higher

• Trends are extending across currency markets ahead of the Thursday NY crossover, with the greenback recovering off Asia-Pac session lows and pushing most major pairs toward Wednesday's lowest levels. These levels mark a key support ($0.9835 in EUR/USD, $1.1227 in GBP/USD, Y144.85 in USD/JPY) and a break through these marks could prompt an extension of the dollar bounce and target 111.8592 for the USD Index, the 38.2% retracement for the downleg off late September's cycle high.
• At the bottom end of the table, NOK is slipping against all others in G10 as the currency partially reverses the oil-inspired strength seen since the beginning of the week. EUR/NOK targets 10.5165 initially, and a break above here opens 10.5375, the 1.0% 10-dma envelope.
• GBP is faring poorly, slipping against most others and allowing EUR/GBP to extend the bounce off Tuesday's 0.8649 low, keeping the 50-dma resistance exposed. Next key levels cross at 0.9066/9266 the High Sep 28 / High Sep 26.
• Focus turns to the weekly jobless claims data as well as challenger job cuts for September as markets watch for clues ahead of this Friday's US jobs report. The central bank speakers slate is busier, with seven FOMC members due as well as BoE's Haskel and BoC's Macklem.

BOND SUMMARY: Gilts again the most volatile

• The higher volatility of gilts vs USTs or Bunds continues with gilts underperforming this morning as Fitch lowered the UK's outlook to negative (but affirmed the AA- rating). The gilt curve has bear steepened this morning.
• The German curve has flattened with 10-year Bunds little moved but Schatz under some pressure this morning. There is a general re-pricing of the outlook for the ECB policy rate - with year-ahead expectations reversing the moves seen earlier in the week.
• Looking ahead we have the Accounts of the ECB's September meeting due for release at 12:30BST / 7:30ET.
• We also have a number of Fed speakers: Mester, Kashkari, Evans, Waller and Mester are all on the schedule.
• TY1 futures are down -0-3 today at 112-14 with 10y UST yields up 0.9bp at 3.765% and 2y yields up 1.6bp at 4.167%.
• Bund futures are down -0.09 today at 139.67 with 10y Bund yields up 0.1bp at 2.030% and Schatz yields up 6.4bp at 1.739%.
• Gilt futures are down -0.85 today at 968.88 with 10y yields up 5.8bp at 4.086% and 2y yields up 3.1bp at 4.011%.

EQUITIES: Equity Futures Targeting 50-Day EMAs

EUROSTOXX 50 futures have established a bullish short-term tone following this week’s strong reversal. The 20-day EMA, at 3431.10 has been cleared, the break signals scope for an extension and this opens 3510.30, the 50-day EMA - a key resistance. Key support has been defined at 3236.00, the Oct 3 low. S&P E-Minis traded higher again Wednesday, extending Monday’s reversal from 3571.75. Prices have now topped the 20-day EMA, opening the 50-day EMA of 3931.31 for direction. Key support has been defined at 3571.75.

• Japan's NIKKEI closed higher by 190.77 pts or +0.7% at 27311.3 and the TOPIX ended 9.55 pts higher or +0.5% at 1922.47.
• Across Europe, Germany's DAX trades higher by 85.24 pts or +0.68% at 12602.37, FTSE 100 higher by 18.67 pts or +0.26% at 7072.21, CAC 40 up 19.07 pts or +0.32% at 6003.43 and Euro Stoxx 50 up 19.19 pts or +0.56% at 3466.57.
• Dow Jones mini down 40 pts or -0.13% at 30270, S&P 500 mini down 5.75 pts or -0.15% at 3788.25, NASDAQ mini down 12.5 pts or -0.11% at 11611.

COMMODITIES: WTI Prints Recovery High, Breaks Through 50-Day EMA

WTI futures printed a new recovery high late Wednesday at 88.42, resulting in a clear break of both the 20- and 50-day EMAs. This signals scope for a stronger reversal and opens the $90.00 handle in the interim. Initial firm support is at $79.14, the Sep 30 low. Gold has traded sharply higher this week reinforcing the current short-term bull cycle. The rally has resulted in a break of the 20-day EMA. Sights are on $1735.1, the Sep 12 high and a key short-term resistance. Initial support is at $1695.2, the former trendline resistance-now-support.

• WTI Crude up $0.46 or +0.52% at $88.5
• Natural Gas up $0.1 or +1.46% at $7.049
• Gold spot up $0.29 or +0.02% at $1718.47
• Copper up $7.05 or +2.01% at $357.55
• Silver down $0.12 or -0.57% at $20.5471
• Platinum up $2.89 or +0.31% at $923.21