MNI US OPEN - Clues on Jobs Tightness to Shape Market React

NEWS

US (MNI): MNI US Payrolls Preview: Significant Two-Sided Risk

Consensus sees NFP growth moderating to 260k in Sept after the 315k from August’s ‘goldilocks’ report. Indications of tightness from AHE and the u/e rate combined with recovery in participation will help shape the market reaction after the u/e rate ticked up two tenths and wage growth cooled moderately in Aug.

US (MNI): Mester Continues Pushback Against Pivot Idea

Comments from Cleveland Fed President Mester ('22 voter, hawk) underlined her focus on the fight against inflation, as she stressed a singular focus on the matter, expressed her preference for a rate path that is above the median dot in the SEP owing to a greater worry re: inflation than most of her colleagues and stressed that she doesn't foresee rate cuts in '23, in a continued pushback against the pivot narrative.

JAPAN (BBG): Fitch affirms Japan at 'A'; Outlook Stable

Japan's 'A' ratings balance the strengths of an advanced, wealthy economy with correspondingly robust governance standards and public institutions, against weak medium-term growth prospects and very high public debt. The central bank's monetary strategy and the home bias of private-sector investors support the government's financing capacity. Persistent current account surpluses, a large net external creditor position and the yen's status as a reserve currency underpin strong external finances.

EU (MNI): Demand Emerging as Key Inflation Driver - ECB Study

The importance of demand in driving euro area headline inflation excluding energy and food (HICPX), has increased in the latter pandemic period, a paper published by the ECB argues. The increase in HICPX inflation beginning in the third quarter of 2021 was principally supply-driven, the study’s authors report, although its influence has since declined relative to demand factors.

EU (BBG): ECB Steps Up Pressure on Banks to Exercise Caution on Bonuses

The European Central Bank is ratcheting up pressure on some banks to keep 2022 bonuses in check amid fears about the darkening economic outlook, according to people with knowledge of the matter.

EU-UK (MNI): Irish FM-New Air of Optimism on Brexit Has Created Flicker of Opportunity

Speaking to RTE, Irish Foreign Minister Simon Coveney states that on Brexit, a 'new air of optimism has created a flicker of opportunity' but that 'we shouldn't get carried away with it'.

OPEC+ (MNI): Sec-Gen: Output Cut Not a Decision of Group of Countries Against Another

Wires carrying comments from OPEC Secretary-General Haitham Al Ghais, 'the decision of OPEC+ is not a decision of a country in itself or a group of countries against another. The decision of OPEC+ is proactive and deliberate and was taken unanimously by 23 countries". Ghais' slightly defensive comments come after significant US criticism of the decision to cut production by 2mn bpd from November. It is unusual for the White House to comment directly on an OPEC+ production decision, highlighting the strength of feeling in the Biden administration towards the prospect of higher oil prices.

AUSTRALIA (MNI): RBA Warns of Mortgage Debt Servicing Pain In 2023

The Reserve Bank of Australia warned that 25% of variable rate mortgage borrowers could face a minimum debt servicing ratio of greater than 30% of their income if rates were to rise by another 100bp by the end of 2023, its Financial Stability Review released Friday showed.

AUSTRALIA (MNI): Banks "Well Placed" For Funding Tasks Ahead - RBA

The Reserve Bank of Australia said domestic banks are "well placed" to meet their funding tasks as they seek to repay funds borrowed from the RBA's Term Funding Facility over the next 18 months, according to the Bank's Financial Stability Review released on Friday.

DATA

EUROZONE (MNI): Consumers' Inflation Outlook Unchanged - ECB

Inflation expectations for both 1- and 3-years ahead were unchanged on 3 months ago, a European Central Bank survey of consumers expectations published Friday showed, offering further hope to policymakers that a leading prices anchor remains in place. According to the latest Consumer Expectations Survey, prices were seen higher by 5.0% in 12 months time and 3.0% in 3 tears, both unchanged on the July survey.

GERMAN DATA: Energy Costs Fire Cuts In Production Levels

• GERMANY AUG IND PROD. +2.1% Y/Y (FCST +2.3%); JUL -0.8%r Y/Y
• GERMANY AUG IND PROD. -0.8% M/M (FCST -0.5%); JUL 0.0%r M/M

Expansion in consumer goods (+1.8% m/m) and capital goods (+1.2% m/m) show that both short-term and long-term productions plans remain relatively in tact, however the -2.4% m/m slide in intermediate goods production implies that medium-term production plans are being slowed into year-end.

As energy costs remain elevated and factory orders contract (notably in the eurozone), German industrial production is likely to be a substantial drag on euro area growth into year-end.

GERMANY REAL AUG RETAIL SALES -4.3% Y/Y (FCST -4.1%)

GERMANY REAL AUG RETAIL SALES -1.3% M/M (FCST -1.2%)

JAPAN AUG HOUSEHOLD SPENDING +5.1% Y/Y; JULY +3.4%

JAPAN AUG HOUSEHOLD SPENDING -1.7% M/M; JULY -1.4%

SWISS SEP UNEMPLOYMENT RATE +2.1%

SWISS SEP UNEMPLOYMENT -2% M/M, -25.6% Y/Y

NORWAY AUG MAINLAND GDP +0.4% M/M, AGG GDP +1.4% M/M

FOREX: USD Softer Pre-Payrolls, With Focus on AHE

• The greenback is fading into the NY crossover, with a brief blip higher for the USD Index being largely erased into US hours. EUR/USD neared the weekly low of 0.9753, coinciding with a fade in GBP/USD to 1.1116.
• GBP is the firmest currency in G10, but recent ranges are largely being respected. EUR/GBP is within range of yesterday's lows at 0.8718, a break below which opens key support and the bear trigger at 0.8649.
• AUD/USD sits higher, narrowing the gap with first resistance at 1.1373 - the 23.6% retracement for the August - September upleg. A break above here opens 1.1434 ahead of the cycle high at 1.1491.
• Focus turns to nonfarm payrolls, with markets looking for ~260k jobs added this month, while the unemployment rate is seen unchanged at 3.7%. Fedspeak takes focus following the figure, with Fed's Williams, Kashkari and Bostic due after the release.

BOND SUMMARY: Weaker Pre-Payrolls

Global core FI is a little weaker in the lead-up to the US nonfarm payrolls release at 0830ET/1330BST.

• Treasuries, Bunds and Gilts cheapened in early European trade, with 10Y Tsy yields inching a little closer to 4%, and 10Y Germany punching decisively above 2.1%, helped by a beat on German industrial production data.
• For the US employment report, consensus sees NFP growth moderating to 260k in Sep. MNI sees significant two-sided risk (preview here)
• Outside of payrolls, not much on the calendar for the rest of the week (and note a long weekend ahead in the US, Canada and Japan): FOMC speakers include Williams, Bostic, and Kashkari.

Latest levels:

• US: 2Y yield unch at 4.2556%, 5Y up 2.1bps at 4.0879%, 10Y up 1.3bps at 3.8367%, 30Y up 0.5bps at 3.7888%.
• DE: 2Y yield up 2.3bps at 1.821%, 5Y up 4.6bps at 1.996%, 10Y up 4.8bps at 2.133%, 30Y up 2.5bps at 2.065%.
• UK: 2Y yield up 3bps at 4.155%, 5Y up 2.2bps at 4.399%, 10Y up 3.3bps at 4.202%, 30Y up 3.2bps at 4.339%.
• Italy / German 10Y spread 0.5bps tighter at 242.8bps

EQUITIES: Futures Off Slightly, But Still Hold Bulk of Week's Gains

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 lower on Thursday, though have held onto the majority of gains from Monday's reversal from 3571.75. Prices had topped the 20-day EMA on an intraday basis, turning focus to the the 50-day EMA of 3912.75 for direction. Key support has been defined at 3571.75.

• Japan's NIKKEI closed lower by 195.19 pts or -0.71% at 27116.11 and the TOPIX ended 15.67 pts lower or -0.82% at 1906.8.
• Across Europe, Germany's DAX trades lower by 48.33 pts or -0.39% at 12423.87, FTSE 100 lower by 8.1 pts or -0.12% at 6990, CAC 40 down 13.11 pts or -0.22% at 5924.47 and Euro Stoxx 50 down 16.31 pts or -0.48% at 3417.94.
• Dow Jones mini down 54 pts or -0.18% at 29912, S&P 500 mini down 13 pts or -0.35% at 3741.75, NASDAQ mini down 64 pts or -0.55% at 11469.25.

COMMODITIES: WTI, Gold Holding Onto Most of Week's Gains

WTI futures printed new weekly highs of 89.37 through the Thursday close, extending gains above 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. Key support lies at $76.25, the Sep 26 low. Gold has traded sharply higher earlier this week and has held the bulk of the week’s gains through to Friday morning. 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 $0.36 or +0.41% at $88.68
• Natural Gas down $0.23 or -3.28% at $6.739
• Gold spot up $0.15 or +0.01% at $1711.79
• Copper down $1.3 or -0.38% at $341.8
• Silver up $0.14 or +0.66% at $20.7677
• Platinum up $5.43 or +0.59% at $930.39