Biden rallies world leaders to Ukraine's side

Headlines

• German gas bailout.

• Dr. Doom's gloomy prediction for US stocks.

• House flippers are in trouble.

• Canada's hot housing market is suddenly a seller's nightmare

• Today's 75-bp Fed hike will not be the last this year.

• Biden rallies world leaders to Ukraine's side.

• Microsoft won’t label fake news social media posts as false. 

• Understanding the sweeping protests in Iran over the morality police.

• The crypto executive at Kraken is stepping down. 

• The Bank of England rate decision today

• Volodymyr Zelenskiy urges world leaders to maintain pressure on Russia.

• Jamie Dimon slams crypto tokens as “decentralized Ponzi schemes.”

• BOJ stands by its ultralow interest rates.

• Goldman expects steeper Fed hikes.

I have tried warning for a while now that central banks will push our economies into recession. I believe Powell has now reinforced that view. Investors and people in general do not fully appreciate how dire things will become. Despite seeing a lack of workers available, job losses are inevitable with possibly millions losing their jobs as the recession takes hold. Its possible that this will turn many to trading as it did over Covid lockdowns, when more than 22 mn new retail traders entered the markets. All I can say is, please get some training first before risking your hard-earned capital…trading is not as easy as you think, especially in bear markets. If you are going to consider it contact me at [email protected] for some guidance.

It seems to me part of the inflation issue is the greed of corporations and manufacturers. Many of the areas where we saw huge price increases have gone down. This includes transportation such as shipping and road transport, fuel prices, used cars lost their premium, and rent prices are also dropping on the fear of a recession caused by all these rate hikes. We also see this in prices paid by manufacturers, however, because we are told inflation is high and could go higher, we are still accepting these inflated prices instead of refusing to pay them. Of course, the supermarkets can do what they like, they are always winners, as we need to buy food and power prices remain elevated, although even they have been dropping for the last two months. Profit margins increased to 15%, the highest level for decades and I wonder if these have increased yet further as they keep prices higher than they should, and we see that through CPI! I am now being more selective with my purchases as if we cut back for a while, they will have to drop their prices!

The markets hit some great pivot point levels to sell when the FOMC began last night and this morning they are already working well too. The USD pushed many currencies to new lows, including the GBP and Euro. Stocks rose then crashed, although we are seeing some profit taking on many contracts this morning. BTC broke $18k

BoE today will be interesting regarding the size they increase, 50 bps is expected.

Global News

Stock bulls are finally heeding the Federal Reserve’s latest message: The inflation battle will cause real economic pain. After rising as much as 1.3% when the Fed delivered its 75 basis point hike, the S&P 500 plunged  as Powell made it crystal clear that the central bank will keep raising rates sharply. US-listed Chinese stocks slumped almost 6% as sentiment took an additional hit from tensions between Beijing and Taiwan. Treasury two-year yields pierced 4% for the first time since 2007. Asian stocks are poised to follow Wall Street’s slide. Equity futures pointed lower in Japan and Hong Kong. BB

We kind of knew the FOMC would increase rates by 75 bps, but its bleak outlook was worse than expected.

·  The majority of officials favor lifting rates above 4.25% this year, which means a possible fourth straight 75-bp hike in November. Keep your Halloween gloom until then.

·  Growth forecasts were dark. GDP estimations were marked down and unemployment was seen rising to 4.4% next year.

·  The bottom line—we are heading into a recession. The Fed implicitly acknowledged that with its projections as, historically, the US has never avoided a recession with such an increase in unemployment.

·  When will the tightening end? Until rates are "sufficiently restrictive," Jerome Powell said. "We have got to get inflation behind us. I wish there were a painless way to do that. There isn't," he added.

·  The blow took stocks on a wild ride sending the S&P near session lows—pushing its slide from a January record to more than 20%. BB

This is yesterdays dot plot that shows the voting members of the FOMC expectations of future rate moves.

After the hawkish 75bp hike from the Fed, today sees close to 10 central bank policy meetings around the world. As the dollar breaks new ground to the upside, most central banks will respond with large hikes. Recession fears are building and with the Fed set to hike a further 100-125bp this year, this all points to an even stronger dollar ING

Russian President Vladimir Putin escalated the conflict in Ukraine further in a televised nation address on Wednesday, declaring a “partial mobilization” of 300,000 reservists and vowing to use all means necessary to defend the “territorial integrity of Russia.” “Those who are trying to blackmail us with nuclear weapons should know that the wind patterns can also turn in their direction,” Putin said, in comments that sparked a rush to haven assets.BB

Joe Biden condemned Vladimir Putin's Ukraine invasion as a violation of UN principles and urged the world to rally to Kyiv's side. The US president spoke to the General Assembly hours after Putin called up 300,000 reservists for a "partial mobilization" effort and threatened to use atomic weapons. Biden denounced such rhetoric while expressing concern about elevated nuclear risks posed by Russia, China and Iran.BB

The British government unveiled a multibillion-pound bailout to help companies with their energy bills this winter amid soaring prices that threaten to put many out of business. Under the estimated £40 billion ($45 billion) plan the government will cap the wholesale energy prices that feed into gas and power contracts for businesses for six months. The UK and Europe face soaring energy costs as Russia tightens its supply to the continent over the war in Ukraine. BB

The BOE will probably hike by 50 basis points, though some analysts predict a 75-bp move—which would be the biggest since 1989. The central bank may announce the sale of more bonds bought during the quantitative easing days. But politics may complicate things: Liz Truss's plan to borrow huge sums has cast some doubt over whether quantitative tightening will proceed.BB

Just a day after Biden reiterated the US commitment to send troops to Taiwan in the event of an invasion, China said it has the patience to someday bring the island democracy under its control, partly because “compatriots” there want it to happen. It’s a view that deeply contrasts with a poll that shows two-thirds of the island’s residents believe Beijing is unfriendly. BB

The EU Commission will outline next week further actions to contain an unprecedented energy crunch by reducing markets swings, boosting liquidity and lowering natural gas prices. It comes as the clamor for a cap grows. Energy ministers are already set to meet at the end of the month in the hope of signing off on the latest package of windfall taxes and electricity demand reduction goals.BB

The EU aims to push Hungary to strengthen the independence of the country’s judges as a condition for obtaining 5.8 billion euros in grants from pandemic-recovery funds. It comes as the Commission discusses the final details of its plan with Budapest.BB

The tab for Europe’s energy crisis is nearing 500 billion euros as governments rush to soften the blow of soaring prices, according to the Bruegel think-tank. The growing fiscal burden comes as European nations grapple with accelerating inflation and a bleak economic outlook.BB

China is leading the race to make the technology that’s vital for producing green hydrogen. Chinese factories can produce electrolyzers — which run an electric current through water, separating it into oxygen and hydrogen — at a fraction of the cost of US and European competitors. When powered by renewable energy, they can produce hydrogen gas to fuel everything from cars to steel mills without any carbon emissions. Orders for the systems are soaring as more industries seek to decarbonize and analysts see costs falling 30% by 2025 as manufacturers build up economies of scale. BB

A 5,000-strong protest in Slovakia this week was just the tip of the iceberg of rising anger across the EU over the widening economic impact of Russia’s invasion of Ukraine. Across the bloc, there are alarming echoes of the aftermath of the global financial crisis, a period that ultimately ushered in populist upsets like the election of Donald Trump and Britain’s decision to leave the EU. This time round, Italy’s election on Sunday is expected to see victory for far-right Georgia Meloni — following a similar result in Sweden this month — while discontentment is particularly strong in parts of Europe’s former communist East, where many still feel a stronger sympathy for Russia than the US. The question is whether leaders can keep resentment over the rising cost of living at bay through this winter at least.CBB

Commodities

Germany will nationalize the country’s largest gas importer in an attempt to avert a collapse of the energy sector in Europe’s biggest economy. Uniper is at the epicenter of the energy crisis in Germany. Its massive gas contracts with Russia exposed the company to the Kremlin’s moves to slash supplies in retaliation for sanctions stemming from its invasion of Ukraine. The bailout is unlikely to be Europe’s last energy-sector rescue.BB

The great copper squeeze is coming, hitting everything from housing to computer chips to air conditioners. Prices have fallen by almost a third since March on fears a global recession will stunt demand. But the world's biggest miners and metals traders are warning of a massive shortfall in a couple of years' time. BB

China's crude oil demand rebounds as refiners prepare to ramp up output - At least three Chinese state oil refineries and a privately run mega refiner are considering increasing runs by up to 10% in October from September, eyeing stronger demand and a possible surge in fourth-quarter fuel exports, people with knowledge of the matter said. Chinese refiners are expecting Beijing to release up to 15 million tonnes worth of oil products export quotas for the rest of the year to support the no. 2 economy's sagging exports.

U.S. crude, fuel stocks rise, refining activity picks up - EIA - U.S. crude and fuel stocks rose in the most recent week, as refiners increased processing to rebuild low product inventories, the Energy Information Administration said on Wednesday. Crude inventories rose by 1.1 million barrels in the week to Sept. 16 to 430.8 million barrels, compared with analysts' expectations in a Reuters poll for a 2.2 million-barrel rise.

Brazil's wheat crop estimate revised to 10.9 mln T, a record - Brazilian wheat production should total 10.935 million tonnes in 2022 as four states are likely to increase output in what will be a record season for local farmers, according to agribusiness consultancy Safras & Mercado on Wednesday.  The new estimate represents an increase from the 10.5 million tonnes previously expected.

Malaysia's palm oil stocks could hit 3-1/2-year high as Indonesia boosts exports - Malaysia's palm oil stocks could rise to a 3-1/2-year high by the end of 2022 as exports are likely to take a hit from rival Indonesia waiving export levies to bring down stockpiles, a senior government official told Reuters. Indonesian producers are moving to lighten their stocks at cheaper prices after Jakarta recently extended its export levy waiver to Oct. 31 in a reversal of course from an export ban in May that had shut them out of global trade.

LME says no sign of metal offloading after report about Rusal - The London Metal Exchange said on Wednesday it does not see evidence of metal moving into its warehouses on a long-term basis after Bloomberg News reported that Russia's Rusal was working on a plan to deliver its aluminium to LME facilities. Neither Rusal, nor its metal, is under sanctions imposed on other Russian companies after Moscow's invasion of Ukraine in February, which it calls a "special military operation". 

Portugal awaits assessment of two lithium mines before launching auction  - Portugal will not commit to setting a new date for a long-awaited auction of lithium mining licences as it awaits the conclusion of ongoing environmental impact studies at two sites, Energy Secretary Joao Galamba said on Wednesday. The southern European nation, which has 60,000 tonnes of known lithium reserves, is central to Europe's bid to secure more of the battery value chain and cut reliance on imports.

UK eases pressure on business by halving energy bills this winter - The British government on Wednesday said it would cap wholesale electricity and gas costs for businesses at less than half the market rate from next month, helping relieve the pressure of soaring energy costs but adding to the government's fast-rising spending. Wholesale prices for electricity will be capped at about 211 pounds ($239) per megawatt hour (MWh) and for gas at 75 pounds per MWh, compared to forecast market rates of 600 pounds and 180 pounds respectively. 

European governments spend half a trillion euros on energy crisis  - Governments in Europe have earmarked nearly 500 billion euros in the last year to cushion citizens and companies from soaring gas and power prices, according to research published by think-tank Bruegel on Wednesday. Months of surging prices have seen governments roll out measures to curb retail power prices, slash energy taxes and give subsidies to bill-payers.

India considering exporting some stuck rice cargoes - India is considering allowing the overseas shipment of some rice cargoes stuck at ports after the world's biggest exporter of the grain imposed restrictions earlier this month, a government official said on Wednesday on the condition of anonymity. India's move to curb rice exports trapped around one million tonnes of grain at ports. 

Ukraine's grain exports down 43% so far in 2022/23 -ministry - Ukraine's grain exports are down 43.2% year on year in the 2022/23 season so far at 6.88 million tonnes, the agriculture ministry said on Wednesday. Ministry data showed that exports so far in the July 2022 to June 2023 season included 3.95 million tonnes of corn, 2.30 million tonnes of wheat and 598,000 tonnes of barley.

Crypto/Digital

Crypto: FTX is in talks with investors to raise $1 billion at a $32-billion valuation, CNBC reported, unchanged from its January valuation. Kraken co-founder Jesse Powell will step down as CEO, to be replaced by COO David Ripley—the latest in a broad changing of the guard at crypto's biggest companies. Jamie Dimon reiterated his skeptical views on Bitcoin, telling Congress that cryptocurrencies "are decentralized Ponzi schemes." BB

Market levels (all analysis is based on CME futures contracts)

 
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The content of this daily newsletter should only be considered a guide and views, opinions or content contained in this email is provided solely for information purposes and does not constitute investment advice or a solicitation to trade or invest.

Chris Tubby

Senior Director Trading and Education

Symax Fintech