MNI US OPEN: BOE Operations In Focus

NEWS

US-EU (MNI): EU Trade Chief - We Have Deep Concerns About US Inflation Reduction Act

Speaking at the annual EU Ambassadors Conference in Brussels, Exec VP Valdis Dombrovskis, the European Commissioner for Trade states that 'We have deep concerns particularly concerning the US Inflation Reduction Act'. Commission spox Miriam Garcia Ferrer stated that "There are a number of subsidy schemes in the IRA, which include discriminatory and unnecessary local content, production or assembly requirements."

UK (MNI): BOE Adds Linkers to GBP40bln Bond Buying Scheme

The Bank of England said Tuesday it will include index-linked gilts in its daily up to GBP10 billion gilt purchases, widening the scope of its up to GBP40 billion operation for the next 4 trading days.

In a statement, the BOE said its daily operations would now purchase up to GBP5 billion in conventional gilts and GBP5 billion in index-linked gilts. These additional operations "will act as a further backstop to restore orderly market conditions by temporarily absorbing selling of index-linked gilts in excess of market intermediation capacity, the BOE said.

UK (MNI): UK Debt Cost Doubling, Debt/GDP Likely Rising - IFS

UK debt interest costs are set to be double next year from the level previously assumed by official forecaster the Office for Budget Responsibility and it would require very hefty spending cuts to get the debt/GDP ratio declining, the Institute for Fiscal Studies found in its Green Budget report. The IFS foreshadow the OBR's forecasts, which are set to be published on Oct 31, giving the Bank of England Monetary Policy Committee time to digest them at its November policy meeting.

GLOBAL (MNI): Gloomier Global Growth Outlook Positive For USD

Global growth and trade projections are being revised down, especially for 2023. The IMF is expected to do the same when it publishes the World Economic Outlook on October 11. Concerns remain centered around tightening global monetary policy, the European energy crisis and a weaker China.

AUSTRALIA (MNI): First Aussie Spending Intentions Dip Post RBA Hikes

Further evidence that the Reserve Bank of Australia's six consecutive interest rate hikes since May are finally beginning to bite, as the Commonwealth Bank's Household Spending Intentions Index falling for the first time since April.

DATA

UK AUG ILO UNEMPLOYMENT RATE +3.5%

UK SEP CLAIMANT RATE +3.9%

UK SEP CLAIMANT CHG +25500

UK AUG-SEP PAYROLLS +69,000 TO 29.7 MILIION - HMRC/ONS

UK AUG AVE WEEKLY EARNINGS +6% YY

UK AUG AVE WEEKLY EARNINGS EX-BONUS +5.4% YY

UK BRC SEP BY VALUE SHOP SALES LFL +1.8% YY, TOTAL +2.2% YY

ITALY AUG IP +2.3% M/M, +2.9% Y/Y

JAPAN (MNI): Sept Sentiment Rises but Outlook Falls

An index that measures sentiment towards the current state of Japan's economy posted a second straight rise in September, prompting the government to upgrade its assessment even as the outlook index fell, according to the Economy Watchers survey released by the Cabinet Office on Tuesday.

The Economy Watchers sentiment index based on current economic conditions rose a seasonally adjusted 2.9 points to 48.4 in September, up from 45.5 in August.

FOREX: Plenty to look at in FX

• Although the USD has turned more mixed in G10 during the morning European session, there's a few cross/pairs to look at.
• USDJPY continues to trade at levels, the BoJ last intervened.
• USDCHF continues to test the 1.0000 handle, still short of the May/June 1.0065 double top and highest print since May 2019.
• The latter is still the initial area to watch.
• AUD is still the worst performer against the Greenback but off the session low at the time of typing.
• Still, overall, the AUDUSD printed its lowest level since 09/04/20 overnight, on the divergence between the RBA and the Fed, Risk off and Commodity prices.
• Support in AUDUSD is seen further out towards 0.6200.
• Cable rejected the 1.1000 figure, did print a 1.0998 low, despite the better employment data on the cash Govies open.
• Cable has recovered and trades circa flat for the session at the time of typing.
• Looking ahead, there's no data of note, today's speakers, include ECB Lane Villeroy, BoE Bailey, Cunliffe, SNB Jordan, and Fed Mester.

BOND SUMMARY: More volatility and tweaks to UK emergency operations

• Gilts have again traded in wide ranges today as the Bank of England announced that it would pause its corporate bond sales this week and that it would start to buy 3+ year linkers for this week only. This marks the first time that the Bank of England will buy linkers.
• Gilts opened higher and cheapened up going into the 10:00BST linker auction (and the aftermath) but have since moved off their lows of the day (which also remain some way off of yesterday's lows across the curve).
• USTs have reversed some of the late weakness from yesterday and trade a little higher this morning, while Bunds remain largely unchanged. Peripheral spreads have reversed yesterday's widening, however.
• It's been a big day for supply in Europe with the highlights a German 30y syndication, an EU 7/20-year syndication as well as Schatz and Dutch auctions.
• Looking ahead we will hear from ECB's Lane, Fed's Mester and BOE's Cunliffe and Governor Bailey.
• TY1 futures are up 0-2 today at 111-02+ with 10y UST yields up 6.8bp at 3.951% and 2y yields up 1.6bp at 4.327%.
• Bund futures are down -0.03 today at 136.05 with 10y Bund yields down -0.2bp at 2.335% and Schatz yields up 3.4bp at 1.920%.
• Gilt futures are up 0.24 today at 925.53 with 10y yields down -0.8bp at 4.458% and 2y yields down -1.9bp at 4.298%.

EQUITIES: Index Futures Continue Decline From Last Week's Highs

EUROSTOXX 50 futures faced resistance last week at 3492.00 on Oct 6. This also highlights the fact that the 50-day EMA, at 3493.90, remains intact and continues to provide resistance. The broader trend direction remains down and a continuation lower would open the key support and bear trigger at 3236.00, the Oct 3 low. For bulls, a break above the 50-day EMA is required to highlight a stronger trend reversal. S&P E-Minis remains below last week’s high of 3820.00 on Oct 5. The broader trend remains down and attention is on the bear trigger at 3571.75, the Oct 3 low. A break of this level would confirm a resumption of the broader downtrend and open 3558.97, a Fibonacci projection.

• Japan's NIKKEI closed lower by 714.86 pts or -2.64% at 26401.25 and the TOPIX ended 35.56 pts lower or -1.86% at 1871.24.
• Elsewhere, in China the SHANGHAI closed higher by 5.646 pts or +0.19% at 2979.792 and the HANG SENG ended 415.42 pts lower or -2.41% at 16801.24.
• Across Europe, Germany's DAX trades lower by 72.82 pts or -0.59% at 12196.36, FTSE 100 lower by 48.23 pts or -0.69% at 6909.65, CAC 40 down 26.86 pts or -0.46% at 5812.01 and Euro Stoxx 50 down 19.41 pts or -0.58% at 3336.12.
• Dow Jones mini down 146 pts or -0.5% at 29114, S&P 500 mini down 17.75 pts or -0.49% at 3607.5, NASDAQ mini down 42 pts or -0.38% at 10944.25.

COMMODITIES: WTI Momentum Fades After Reaching Six-Week High

WTI futures traded higher last week and in the process, cleared both the 20- and 50 EMAs. This has strengthened the bullish theme and signals scope for a continuation higher. Attention is on the next key resistance at 96.82, the Aug 30 high. A break would further strengthen a bullish outlook. Initial firm support lies at $87.53, the 50-day EMA. Key support is still far off at $76.25, the Sep 26 low. The recent recovery in Gold stalled last week at $1729.5, the Oct 4 high. The strong reversal signals the end of the recovery between Sep 28 - Oct 4. A continuation lower would expose the key support and bear trigger at $1615.0, the Sep 28 low. On the upside, a break of $1729.5 is required to reinstate a bullish theme.

• WTI Crude down $1.28 or -1.4% at $89.75
• Natural Gas up $0.08 or +1.2% at $6.51
• Gold spot down $0.28 or -0.02% at $1667.56
• Copper down $1.45 or -0.42% at $341
• Silver down $0.18 or -0.92% at $19.4158
• Platinum down $6.6 or -0.73% at $895.32