Goldman Sachs is embarking on its biggest round of jobs cuts since the start of the pandemic.

Headlines

• Travel restrictions to Japan may ease soon.

• New Zealand relaxes indoor masks rule.

• Nine million customers visited Spain in July, near pre-Covid levels

• Spanish tourism is reaching pre-pandemic levels thanks to domestic tourism compensating for the drop in the number of foreign visitors

• Investors plan to increase their exposure to energy stocks and bonds. 

• Tens of thousands of US railroad workers could be on strike by the end of this week

• Housing markets face a painful reset.

• Ukraine’s counteroffensive gains momentum in east.

• Biden to formalize curbs on chip exports to China. 

• Odds of a UK technical recession increase after GDP miss.

• French power distributor makes €60 million trading mistake.

• Goldman Sachs is embarking on its biggest round of jobs cuts since the start of the pandemic. 

• US inflation expectations dropped in August, New York Fed says.

• Inflation data from the US will be keenly watched.

• Ukraine has a "tough fight" ahead even after some big gains.

• Top universities in the U.S now cost more than $55,000 a year.

• OPEC's monthly report today will feed into the debate over oil demand

The housing market is beginning to feel the pressure of higher interest rates, which is making mortgages too expensive for first time buyers. Not sure it will become another MBS crisis; however, it will impact household wealth.

Although the USD has slipped in the past few days on expectations that inflation pressures are easing, I would be cautious as the FED will still raise rates. There is a long way to go to get to 2% inflation!

Global News

US inflation probably slowed to 8.1% in August but that probably won't deter the Fed from hiking by 75 bps this month. The "totality" of recent data shows few signs of cooling, and perhaps even some acceleration, according to Bloomberg Economics. One example: Falling gasoline prices help to moderate inflation trends while boosting  consumer spending and activity.BB

More data due: Germany's ZEW survey may show sentiment is continuing to worsen this month. September's current situation gauge is seen sliding to minus 52.1. The UK unemployment rate probably held steady at 3.8% in July, while regular wage growth may have picked up to 5.1% in the three months to July.BB

The dollar declined ahead of data on Tuesday that is forecast to show headline inflation in the US slowed to 8% in August from 8.5% a month earlier. Meanwhile, Treasury Secretary Janet Yellen remarked that the US economy can avoid recession, though that will require "some good luck." She told CNN that while the economy's growth rate was slowing, the labor market remained "exceptionally strong" with almost two vacancies for every worker looking for a job.BB

German inflation will only peak in the first quarter next year, according to the Ifo Institute. A national gauge of price growth will average 9.3% next year after 8.1% in 2022—more than double what was assumed just three months ago—and a recession is expected over the winter.BB

Japanese tourism shares including ANA, Oriental Land and West Japan Railway were buoyed by reports Tokyo may decide to ease curbs on inbound travelers as soon as this week. With the yen near the lowest in 24 years, it's an opportune time to appeal to tourists.BB

Beijing dug in against another outbreak. The outbreak—at China Communication University—should be stamped out in the "shortest period of time," government officials said. This came after the capital reported 15 new infections. Meanwhile, China confirmed Xi will visit Kazakhstan and Uzbekistan from Wednesday to Friday.BB

The Biden administration plans to formalize curbs on US shipments of semiconductors for AI and chipmaking tools to China, Reuters reported. The Commerce Department is likely to publish new regulations based on restrictions communicated to US chip companies.BB

Typhoon Muifa is expected to hit Shanghai and Ningbo on China's eastern coast on Wednesday, a week after a super typhoon swept through the area and shut the Yangshan container port. Muifa is currently located east of Taiwan, headed northward with maximum wind gusts of 193 kilometers per hour, according to the US Joint Typhoon Warning Center.BB

Russia hit power plants deep behind Ukrainian lines, causing blackouts across the northeast of the country as Kyiv's forces pressed a lightning offensive, reversing months of Russian advances. More than 30 settlements suffered missile and air strikes over the past day, Ukraine said.BB

The US should act as if the nuclear deal with Iran is already dead, Bloomberg Opinion's editors write. Washington should work harder to close sanctions loopholes that have allowed Tehran to export oil, mainly to China. It also needs to counter "malign" Iranian activities across the Middle East, lay down red lines with enforcement options, and prepare for a conflict.BB

Diverging central bank policies have caused China-US bond-yield differentials to collapse, with spreads pushing into "uncharted territory," Bloomberg Intelligence wrote. This may prompt the PBOC to limit stimulus, even as the economy weakens. The central bank is expected to keep its one-year MLF rate at 2.75% this week.BB

Commission President Ursula von der Leyen will present a slimmer version of her five-point plan to tackle the energy crisis when she addresses the European Parliament tomorrow. She will propose a mandatory target to cut power use and windfall taxes on energy companies. A proposal to facilitate liquidity to energy companies under strain requires further work, although it’s broadly supported, we’re told. Meanwhile, a cap on gas imports remains elusive with member states divided over its design. The demand-reduction plan will step up the Commission’s say in the matter as the current crisis “requires a rapid and coordinated EU-wide response,” according to the draft proposal we’ve seen. But some countries aren’t on board yet with Von der Leyen’s interference in the sensitive realm of national energy markets.BB

Germany faces growing risks of stagflation, Deputy Finance Minister Florian Toncar warned. “We are experiencing supply-chain problems, production bottlenecks and price increases the likes of which we haven’t seen in decades,” he told a German news organization. While inflation may reach double digits in the country, some analysts expect that the German economy could fall into recession.BB

The top US colleges now cost more than $55,000 a year. Princeton earned the No. 1 spot in the US News & World Report rankings, followed by MIT. Both cost about $57,000 in tuition and fees. Harvard, Stanford and Yale tied for third place. Yale is the most expensive with tuition at $62,250. Only two of the top 20 schools came in at under $50,000—University of California, Berkeley and UCLA. BB

Commodities

Natural gas prices fell as details of the Commission’s energy proposals started to see the light of day. Gas futures declined as much as 9.3% to the lowest in a month. Power prices also slumped. Still, prices remain almost eight times higher than in normal times. Goldman Sachs expects they will halve from current levels sometime in the first quarter of 2023.BB

it's worth noting that there's been a big plunge in European energy prices over the last few weeks.

Here's a chart:

Biden should bail out Big Oil, Matthew Yglesias writes. By making clear he'll refill the Strategic Petroleum Reserve if oil prices start to fall substantially at a price point still profitable for US producers, he'd shore up the industry's bottom line and show the Democrats aren't trying to bankrupt the sector.BB

French power distributor Electricite de Strasbourg oversold large quantities of electricity due to trading errors earlier this week. It could cost the company €60 million.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