MNI US OPEN: BOE Reiterate Targeted Gilt Purchases To Cease Friday

NEWS

UK (BBG): BOE Spokesperson Says Bond-Buying Program Still to End Friday

A Bank of England spokesperson reiterated Governor Andrew Bailey’s warning that the central bank will end its program of emergency bond purchases on Friday. The spokesperson said Bailey’s deadline remained in place in an emailed response to a request for comment on Wednesday.

UK (MNI): Truss Faces Bumpy 2nd PMQs As Market Turbulence & Backbench Unease Continues

Prime Minister Liz Truss faces her second session of prime minister's questions at 1200BST (0700ET, 1300CET), and it is likely to be a tough session. Since the last PMQs on 7 September, the 'fiscal event' of late-September has seen UK assets rattled in global markets, the opposition centre-left Labour Party open a huge lead over her centre-right Conservatives in opinion polling, and stories of plotting from backbenchers (and even ministers) to have her or her Chancellor Kwasi Kwarteng removed from office.

S. KOREA (MNI): BOK Hikes 50bp, Split Views on Next Hike

The Bank of Korea said there were "very high" uncertainties regarding the size of rate hikes to be considered at its November meeting after two members voted against the decision to raise its Base Rate by 50bp to 3% on Wednesday.

The Bank abandoned August's guidance for "gradual" 25bp hikes, saying its response needed to be "strengthened" given elevated inflation and the risk that the weak Korean won could stoke inflationary pressures. The 50bp hike was expected to stabilise the currency, which last month fell to its lowest point against the U.S. dollar since 2009, by "alleviating" concerns about the widening yield gap between the U.S and South Korea.

NATO (MNI): Defence Ministers Meet As Ukraine Calls For More Weapons

Summit of NATO defence ministers gets underway in Brussels this morning. Secretary-General Jens Stoltenberg delivers doorstep comments from 1100CET (0500ET, 1000BST, 1800JST). The main focus of the meeting is the extent to which additional military hardware is provided to Ukraine in the wake of Kyiv's successful offensives into Russian-held oblasts and Moscow's barrage of long-range missiles into central and western Ukraine this week.

US (MNI): Biden Vows Consequences For Saudi Arabia After OPEC+ Cut, Downplays Recession Risk

U.S. President Joe Biden gave an exclusive interview to CNN's Jake Tapper hours after meeting G7 leaders. Biden voiced his disappointment with Saudi Arabia over its decision to join OPEC+ oil output cuts. He accused Riyadh for teaming up with Russia and warned that "there's going to be some consequences" for the kingdom. It seems that the touted consequences won't be imminent, as the White House is "in the process" of evaluating needed measures and won't implement them before lawmakers return from their recess.

NEW ZEALAND (MNI): RBNZ Sets Sights on Maintaining Inflation Targeting

The Reserve Bank of New Zealand has called on the Government to retain its 1-3% inflation target but advocated the removal of house price stability from its remit after the first round of its monetary policy remit review. The RBNZ advised Finance Minister Grant Robertson that its preliminary position was that there was “not a strong enough case” for changing the inflation target from 1-2% after receiving public submissions as part of the five-yearly review.

CHINA (MNI): PBOC Reactivates Policy Bank Lending Tool as Demand Lags

The People’s Bank of China is set to further expand its low-interest Pledged Supplementary Lending facility to help the three state policy banks fund over CNY1.6 trillion in infrastructure investment and property bailout announced by the State Council earlier this year, analysts said.

RUSSIA (MNI): Spox - No New Mobilisation; Russia Doesn't Want Part In Nuclear Rhetoric

Comments from Kremlin spox Dmitri Peskov hitting wires. Asked on whether regional governors have received new mobilisation instructions: "There is no new wave of mobilisation ... Western leaders play with nuclear rhetoric every day, Russia does not want to and will not take part in this".

RUSSIA (MNI): Putin Said to Have Accepted Invitation to APEC Summit

Russian President Vladimir Putin has accepted Thailand's invitation to the Asia-Pacific Economic Cooperation (APEC) summit to be held between November18-19, the Bangkok Post reports citing an unnamed security source.

DATA

EUROZONE AUG IP +1.5% M/M, +2.5% Y/Y (MNI)

UK (MNI): GDP Falls in August As Growth Stalls

• UK AUG GDP -0.3% M/M, -0.3% 3MM, +2.7% 3M Y/Y

UK GDP fell in August, defying analyst expectations of a modest increase, as both production and services indicators declined, the Office for National Statistics said Wednesday.

This is in line with Bank of England estimates for a quarter of contraction in Q3. However, barring any surprise downward revisions to Q2, there will be no early technical recession for the new UK government to explain away. With inflation still the main concern for the BOE, lower growth will be a concern, but not the policy driver into the November meeting

UK AUG IND PROD -1.8% M/M, -5.2% Y/Y (MNI)
UK AUG MANUF OUTPUT -1.6% M/M, -6.7% Y/Y (MNI)
UK AUG SERVICES INDEX -0.1% M/M, -0.1% 3MM (MNI)
UK AUG CONSTRUCTION OUTPUT +0.4% MM, +0% 3M3M, +6% YY (MNI)
UK AUG TRADE BALANCE GBP -7.08BN (MNI)
UK AUG VISIBLE TRADE BALANCE GBP -19.26BN (MNI)
UK AUG NON-EU TRADE BALANCE GBP -11.08BN (MNI)

JAPAN AUG CORE MACHINE ORDERS -5.8% M/M; JULY +5.3% (MNI)

FOREX: GBP Trades In Volatile Manner Amid BOE Headlines, Markets Await US CPI

• Volatility in GBP was the clear focus for currency markets in early Wednesday trade as headlines from the Bank of England prompted significant two-way price action.
• Approaching the London open, there was a significant spike in sterling crosses as the Financial Times reported that “the Bank of England has signalled privately to bankers that it could extend its emergency bond-buying programme past this Friday’s deadline." Cable popped aggressively to 1.1057 from around 1.0950.
• However, the pair drifted lower as the European session commenced and came under further pressure as the following headline was run: BOE Spokesperson Says Bond-Buying Scheme Still To End Friday.
• Cable fell to a low of 1.0955 on the news but was unable to gather any downside momentum. Failing to bridge the gap with the lows of the day, GBP once again reversed aggressively as short-term positioning continues to be frustrated, eventually printing another fresh high for the day at 1.1062. Overall, we note that technically, the recent move lower still appears to be a correction of the rally between Sep 26 - Oct 5.
• Elsewhere, currency markets remain subdued with the USD index unchanged and major pairs holding relatively narrow ranges. USDJPY continues to consolidate above 146 after breaking to fresh cycle highs (146.39) overnight.
• Plenty of speeches are scheduled from Fed, ECB & BoE policymakers, with the minutes from the most recent FOMC meeting also due. The clear focus for global markets remains on tomorrow’s release of US CPI.

BOND SUMMARY: Gilt Volatility In Focus Early, FOMC Minutes And PPI Eyed Later

UK Gilt markets remained the focus in early Wednesday trade, with attention set to turn to FOMC minutes later in the session, and US CPI tomorrow.

• Gilts have calmed after a sharp 150 tick drop at the open for 1st future (and almost 200 ticks lower at one point on a knee-jerk move). Overnight comments by BoE's Bailey affirming the end of emergency purchases this week were offset by an FT report this morning that the Bank was eyeing extending buys; but the BoE has officially reaffirmed Friday's end-date.
• Multiple European central bank speakers today: BoE's Pill and Mann (Haskel earlier didn't comment on mon pol), with ECB's Lagarde, Knot, and de Cos as well.
• USTs easily outperforming with yields down across the curve, taking a breather after late Tuesday's BoE induced sell-off.
• Sept PPI (0830ET/1330UK) and September FOMC minutes (1400ET/1900UK) eyed later, but much more focus on CPI Thursday. Fed's Kashkari, Barr, and Bowman appear as well.
• The German curve has modestly twist steepened; periphery EGB spreads are slightly tighter.

Latest levels:

• US: 2-Yr yld down 2.5bps at 4.2806%, 5Y down 3bps at 4.1405%, 10Y down 2.6bps at 3.9207%, 30Y down 1.4bps at 3.9083%.UK: 2-Yr yld down 7.2bps at 4.219%, 5-Yr up 1.2bps at 4.572%, 10-Yr up 5.3bps at 4.496%, 30-Yr up 11.2bps at 4.911%.
• DE: 2-Yr yield down 0.3bps at 1.838%, 5-Yr up 1.1bps at 2.069%, 10-Yr up 3.1bps at 2.329%, 30-Yr up 7bps at 2.371%.
• Italy / German 10-Yr spread 0.1bps tighter at 238bps

EQUITIES: Eurostoxx Futures Trend Direction Remains Bearish, Bear Trigger 3236.00

EUROSTOXX 50 futures remain below last week's high of 3492.00 on Oct 6. The 50-day EMA, at 3487.60, remains intact and continues to provide resistance. The broader trend direction is down and a continuation lower would open the key support and bear trigger at 3236.00, the Oct 3 low. 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 4.42 pts or -0.02% at 26401.25 and the TOPIX ended 2.24 pts lower or -0.12% at 1871.24.
• Elsewhere, in China the SHANGHAI closed higher by 45.714 pts or +1.53% at 2979.792 and the HANG SENG ended 150.29 pts lower or -0.89% at 16801.24.
• Across Europe, Germany's DAX trades lower by 64.28 pts or -0.53% at 12196.36, FTSE 100 lower by 12.84 pts or -0.19% at 6909.65, CAC 40 down 19.88 pts or -0.34% at 5812.01 and Euro Stoxx 50 down 12.96 pts or -0.39% at 3336.12.
• Dow Jones mini up 81 pts or +0.28% at 29114, S&P 500 mini up 13.75 pts or +0.38% at 3607.5, NASDAQ mini up 62.75 pts or +0.58% at 10944.25.

COMMODITIES: Gold Trades Below Trendline Resistance

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. Initial firm support lies at $87.61, the 50-day EMA. Key support is still far off at $76.25, the Sep 26 low. Gold maintains a softer tone. The recent recovery stalled last week at $1729.5, the Oct 4 high. 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 $0.05 or -0.06% at $89.75
• Natural Gas up $0.01 or +0.12% at $6.51
• Gold spot up $5.53 or +0.33% at $1667.56
• Copper down $2.7 or -0.78% at $341
• Silver up $0.09 or +0.45% at $19.4158
• Platinum up $3.8 or +0.43% at $895.32