China's markets reopen today after a weeklong holiday—just as Covid cases rebound.

• Joe Biden wants a way out for Vladimir Putin to avoid Armageddon

• Amazon abandons its robot

• The state of the semiconductor industry

• Higher rates are crashing Europe's property party.

• Jobs rise, unemployment drops, and stocks go into a tailspin.

• Japan opens visa-free travel to vaccinated tourists.

• Global central banks aren't stopping anytime soon.

• China's markets reopen today after a weeklong holiday—just as Covid cases rebound

• Vladimir Putin accuses Ukraine of terrorism.

• Physical gold is headed east from Western vaults.

Jobs data was strong sending stocks down as the U.S economy seems invincible at the moment despite the Feds rate hikes. Unemployment dropped back to its 5 decade record low of 3.5%.

With U.S inflation data out this week, I expect data to continue to support another 75 bp hike at the Feds next meeting. Core inflation is likely to have increased yet again despite all the rate hikes and may hit 6.5%...remember last months was a surprise beat to the upside too so demand is remains strong. That’s one of the consequences of pumping trillions of dollars into the system during Covid.

I expect house prices to drop over the next year and in the UK that could be at least 10 to 15%. Mortgage repayments on a standard home have risen considerably by more than £500 per month. Sweden has already seen prices drop by 6%.

Be ready for earnings data from Q3. JPMorgan, Citi and Morgan Stanley the first among major lenders reporting.

With oil rallying it may be tempting to sell into the rally. This may not be wise as there is a chance Putin may take revenge on further sanctions by cutting Russian oil supply to the markets…except to his friends!

The demand for self-drive seems to be reversing (yes, I meant it!) as investors and car companies back away.

The severing of cables that disrupted train travel in Germany was highly "professional," and illustrates how infrastructure is vulnerable to sabotage, However, we saw similar events in the UK years ago and it was thieves taking the cables to sell due to the high metal value.

Global News

US employers continued to hire at a solid pace last month and the jobless rate unexpectedly returned to a historic low, solidifying the prospect for another jumbo rate hike from the Fed.BB

The US added 263,000 jobs in September while the unemployment rate dropped back to just 3.5%. A lack of suitable workers continues to constrain the economy with job vacancies exceeding the number of unemployed Americans by more than 4mn and with core inflation set to rise further next week a 75 basis point Fed hike on 2 November is virtually assured

The payrolls data shows solid gains in most areas with manufacturing rising 22k despite the ISM employment index moving into contraction territory. Construction rose 19k while private service providing firms increased payrolls by 244k. Within services it was a little more mixed with retail (-1k), financial (-8k) and trade/transport (+3k) well down on recent months job gains while leisure and hospitality (+83k) and education/health (+90k) look strong. Government is a drag once again, losing 25k jobs. This leaves total payrolls at 153.0mn, a new record high and half a million above the February 2020 pre-pandemic high.

Wages were in line with consensus at 5% year-on-year, down from 5.2% in August and the average work week remained at 34.5 hours. ING

The US is trying to find an "off-ramp" for Vladimir Putin, Joe Biden said, because it worries his threats to use tactical nuclear weapons are real and raise the prospect of "Armageddon." Russia's military under-performance has put him in a bind without a way out, Biden said.BB

Chipmakers are signaling on a weekly basis that the tech downturn may be deeper and longer than feared as demand dwindles.

· Weak. Samsung's quarterly operating profit dived 32%, its first decline since 2019. AMD sales missed forecasts by more than $1 billion. Analysts' reactions ranged from "breathtaking" to "Uff-da!"

· Bright spot. The world's largest contract chipmaker, TSMC, bucked the trend, topping estimates as it benefited from its market share. Revenue rose 48%.BB

The UK woke up this morning to front pages warning about the risk of winter power cuts, as the country heads into the season with the smallest margin of back-up power supplies in seven years. That's not the only alarm bell being sounded, with firms suggesting their hiring plans are grinding to a halt and Halifax suggesting the housing market is also showing signs of weakness.BB

Putin is giving himself little room to maneuver, effectively ruling out talks with his annexation of occupied Ukrainian lands and redoubling commitment to fight despite rising consternation at home. One official likened his situation to a cornered animal that’s only getting more dangerous as he drives himself further into the trap.BB

As Ukrainian forces reclaim more of their territory in the northeast, Vladimir Putin’s weaponization of energy continues to be felt worldwide. With winter approaching, Italy scrambled to restore cut-off gas deliveries. Blackouts in the UK and the rest of Europe may be unavoidable. And in Poland, people are burning trash to stay warm. This week’s move by OPEC may exacerbate the crisis. It definitely left the White House seething and showed that Putin has a friend in Saudi Arabia. Together, Javier Blas writes in Bloomberg Opinion, they form a “dangerous” axis when it comes to the future of energy security. BB

While Elon Musk restored his original offer to buy Twitter, he did so only after seeking a discount on the $44 billion deal. Talks between the Tesla CEO and the social media company are stuck on Musk’s statement that his offer is now contingent on receiving $13 billion in debt financing. Even with the revived discussions, the stock market isn’t entirely sold on the doneness of the deal. BB

The world's biggest food companies are bracing for the next threat in Europe: a winter with inadequate amounts of expensive gas to power their factories.

· Nestle and its rivals are pleading their case to policymakers, cutting back on energy use and converting gas-fired plants to oil to keep Europe's shelves filled with staples like cereal, bread and yogurt.

· Gas remains more than twice as expensive as it was before Russia's February invasion. Nestle, which expects the cost of goods sold may surge 14% in 2022, is also adding stock and lining up suppliers outside Europe.

· Higher energy costs may squeeze profit margins and reduce how much consumers have to spend. And while governments will probably prioritize foodmakers above most other industries, producers of ancillary goods such as packaging could face shortages.BB

A Social Democratic victory for Olaf Scholz in the state of Lower Saxony has given the chancellor a brief respite from an onslaught of political and economic challenges. The normally deadpan Scholz is starting to lash out against his critics, angrily pointing his finger at the conservative opposition and blaming Angela Merkel’s bloc for Germany’s energy crisis. He’s on the defensive after multiple EU leaders blasted his debt-financed €200 billion plan to rein in energy costs through next winter. The opposition Christian Democrats are opening up a 10-point lead over Scholz’s party in some national polls, and the far-right Alternative for Germany is also gaining strength, exploiting fears of voters worried over the fallout of sanctions against Russia.  BB

The EU commission is frantically working to deliver several options for caps on gas prices, but several diplomats told us the timetable was extremely ambitious. Leaders hope to make some decisions when they meet again in Brussels next week, but it’ll be very tough for countries to coalesce around any specifics by then.

Charm Offensive | French Prime Minister Elisabeth Borne and more than a dozen government ministers visited Algeria, the latest drive to rebuild ties with the North African nation that’s a major gas supplier. The trip comes less than two months after President Emmanuel Macron visited the former French colony in a bid to reset relations after years of tensions.  BB

French gas stations, particularly around Paris, continued to suffer shortages due to ongoing strikes at refineries, hitting motorists and consumers. TotalEnergies offered to move its annual salary talks forward to this month as the government urged consumers not to panic. BB

Luxury Tax | The French government backs efforts to raise taxes on private jets, Ecological Transition Minister Christophe Béchu said. “It makes sense that pollutants are taxed, and that the more you pollute, the more you’re taxed,” Béchu told French radio. BB

China ‘s President Xi Jinping is set to trumpet his strict measures to control the virus at China’s once-in-five-year party congress. The question now is how long they can last. Since Covid’s initial outbreak in Wuhan, many people in China have been more or less supportive of mass testing, citywide lockdowns and hotel quarantine that has restricted overseas travel. But signs are emerging that patience is wearing thin, even though any easing carries big risks. China’s official Xinhua News Agency last month cited a study saying that an uncontrolled omicron wave could overwhelm the hospital system and lead to nearly 1.6 million deaths.BB

Commodities

Democrats urged retaliation against Saudi Arabia after OPEC+ cut oil production. Joe Biden said he's considering alternatives and Chuck Schumer said legislation that would allow the US to sue OPEC nations is being considered.BB

Biden should hit Saudi Arabia where it hurts in response to OPEC+ cuts, writes Bobby Ghosh. Instead of blocking military sales, the smart course would be to cast OPEC+ as stunting global recovery—hurting especially the poor. As for Saudi, treating the country less like a friend and more like any other will sting the prideful prince.BB

There's a global migration underway in the gold market. As rising interest rates make gold less attractive as an investment, large volumes are being drawn from vaults in Western financial centers—more than 527 tons from New York and London since the end of April—and heading east to meet retail demand. Shipments are rising into big Asian gold consumers like China, whose imports hit a four-year high in August.BB

TotalEnergies accelerates refinery wage talks as fuel supply shrinks - TotalEnergies on Sunday offered to bring forward wage talks, in response to union demands, as it sought to end a strike that has disrupted supplies to almost a third of French petrol stations and led the government to tap strategic reserves. "Provided the blockades will end and all labour representatives agree, the company proposes to advance to October the start of mandatory annual wage talks," it said in a statement.

Asia's crude oil imports recover on European winter demand hopes - Asia's imports of crude oil recovered in September, but the increase is likely more a reflection of expectations of improved product demand from Europe over the coming winter rather than a sign of economic strength. The world's top-importing region brought in 26.58 million barrels per day (bpd) of crude in September, up from 24.90 million bpd in August, according to data compiled by Refinitiv Oil Research.

Europe's farmers bring in drought-scarred maize crop - The European Union's maize harvest is in full swing and field work is confirming widespread drought damage that analysts expect to push the feed grain crop to a 15-year low. A historic drought and successive heatwaves in Europe affected maize, or corn, during crucial summer growth stages, and showers in the past month appeared too late.

Funds shed CBOT soy bets but keep corn as supply narratives diverge - Soybean fundamentals have not been particularly friendly to market bulls as of late, but speculators are still not ready to pull the trigger on short bets, as Chicago futures hover near two-month lows. Investors remain satisfied with a sizable bullish stance in Chicago corn, which has been trading at the second-highest levels for the time of year, just below $7 per bushel.

Peru won't cancel Quellaveco copper mine permits, says prime minister - Peru will maintain licenses for the Quellaveco copper mine owned by Anglo American and Mitsubishi Corp companies, Prime Minister Anibal Torres said on Sunday on social media. The remarks come two days after global miner Anglo American expressed concern that the Peruvian government might be reconsidering the company's license to use water for its copper mine in southern Peru.

Chile permanently closes mining areas connected to giant sinkhole - Chile's mining minister announced on Friday the permanent closure of mining stopes directly related to a giant sinkhole that appeared in the northern part of the country in July. Mining minister Marcela Hernando made the announcement after meeting with union members, mine workers and technical experts studying the sinkhole.

Putin orders seizure of Exxon-led Sakhalin 1 oil and gas project - Russian President Vladimir Putin signed a decree on Friday that establishes a new operator for the Exxon Mobil Corp-led Sakhalin-1 oil and gas project in Russia's Far East. Putin's move affecting Exxon's largest investment in Russia mimics a strategy he used to seize control of other energy properties in the country.

U.N. working to expand, extend for a year Ukraine Black Sea grain export deal - U.N. Secretary-General Antonio Guterres and his team are working to expand and extend for a year a U.N.-brokered deal allowing Ukrainian Black Sea grain exports, which could expire in late November. "We're trying to remove the uncertainty to ensure that people are publicly saying that 'yes, this will be extended a further year,' but we're not there yet," said U.N. spokesman Stephane Dujarric, adding that U.N. officials are also working to facilitate Russian grain and fertilizer exports.

Algeria tenders to buy nominal 50,000 tonnes soft milling wheat -traders  - Algeria's state grains agency OAIC has issued an international tender to buy soft milling wheat to be sourced from optional origins, European traders said on Sunday. The tender sought a nominal 50,000 tonnes but Algeria often buys considerably more in its tenders than the nominal volume sought.

Crypto/Digital

Crypto hacked again. This time, $568 million of Binance Coin was affected when an exploit occurred on a bridge between blockchains, its CEO said. About $87 million was moved out of the Binance ecosystem but the rest was frozen. About $2 billion has been lost in crypto thefts this year.BB

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

 
DISCLAIMER.

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