Iran vowed to arrest people involved in 'illegal' protests to halt spiraling unrest

• Gloom avalanches across markets as investors flock to cash.

• The dollar is surging relentlessly against counterparts big and small by the most in decades

• Japan stepped in to support the yen

• Hong Kong will scrap hotel quarantine from today.

• Liz Truss’s UK government set out the biggest tax cuts since 1972

• US Treasury Secretary Janet Yellen still holds faith that inflation will ease without a surge in joblessness

• Economists are becoming increasingly pessimistic about China’s economic outlook for next year

• The UK's tax-slashing plan triggers a massive selloff.

• Italy prepares for its most right-wing government since World War II.

• Euro-area private-sector activity shrank for a third month as inflation eroded demand and forced some firms to limit production.

• Russia is ramping up military spending as it prepares for an even longer war.

• Iran vowed to arrest people involved in 'illegal' protests to halt spiraling unrest.

• UK-based banks are dusting off lockdown plans to guard against blackouts.

• VW warned it may shift production from Germany if gas shortages persist.

• Risk assets hammered amid fears of a global recession.

• Singapore is officially Asia’s new top financial center.

• Wall Street’s “fear gauge” soared toward a three-month high, with the Cboe Volatility Index briefly topping 30.

• Federal Reserve Chair Jerome Powell said the US economy may be entering a “new normal” following pandemic disruptions.

• UK Chancellor of the Exchequer Kwasi Kwarteng’s £220 billion policy blitz sent the pound below $1.10, the first time since 1985

• EU nations demand tougher Russia sanctions in the next package.

• Japan pulls back on Covid precautions to restore visa-free travel.

• Pakistan’s premier warns of dire consequences without IMF aid.

• Egypt is turning to China and Japan as its own IMF talks drag on.

• Chinese power providers in Myanmar want Russian oil.

• Authorities are battling to prop up China’s yuan.

• North Korea launches a ballistic missile. 

• Solar outshines wind in China. 

My View

After last weeks deluge of rate hikes from central banks, we now have many of them giving speeches this week! Prepare for more market activity. Plus, plenty of data and Friday marks the end of Q3.

The USD strength helps the U.S reduce inflation with cheaper imports and also erodes their debt against the economy. Whats good news for the U.S, however, is bad news for the rest as most goods are priced in USD, especially commodities. The GBP was crushed overnight, trading a new record low below $1.04 in Asia which will add to UK inflation.

Putin’s decision to call up a further 300k troops may work against him as many are trying to leave the country rather than join the army. This will also destroy his claims of winning the war!

Global News

The pound plunged almost 5% to a record low after Kwasi Kwarteng vowed to press on with more tax cuts, even as markets delivered a damning verdict on the new Chancellor of the Exchequer’s fiscal policies. The bulk of the currency’s slide in Asian trading took place in a frantic 20-minute selloff, evoking cries of a flash crash by traders.BB

Germany’s most prominent leading indicator just sent more recession signals. In September, the Ifo index dropped to 84.3, from 88.5 in August. This is the fourth consecutive drop. Both the current assessment component and expectations dropped significantly. Expectations are now at their lowest level since the financial crisis. The main reason for a further weakening in economic sentiment is clear: high inflation and its implications on corporate costs and consumer demand.BB

Investors became gloomier, and flocked to cash. They've turned the most pessimistic since the financial crisis, BofA said. Cash had inflows of $30.3 billion as global equity funds saw outflows in the week through Sept. 21, the bank said, citing EPFR Global data. Bond funds were also depleted.BB

Apple Music will become the title sponsor of the Super Bowl halftime show, taking over from PepsiCo, which has had its name on the star-studded intermission program since 2013. Apple may have paid as much as $50 million a year for the five-year deal, Sportico reported.BB

With recession risks growing ever greater as central banks around the world mount a monetary tightening campaign far more aggressive than expected just months ago, focus will shift toward the nature of the economic downturn to come.

In the US, one hope that the next recession might be milder than the past few lies in the argument that employers will be more likely to hold on to workers as demand slows, given how hard it was to recruit and keep them during the pandemic.

nother source of potential insulation is the supplementary income from gigs — temporary and part-time positions such as delivering food or packages.

There’s not a whole lot of data on gig jobs, but Bank of America, one of the largest US commercial banks, looked through its customer base to unearth some interesting figures:

·  As of August, the share of BofA customers receiving income from gig platforms was 3.3%, triple the figure of 2017

·  Gig workers tend to be younger, with 4.7% of Millennials garnering some such income last month and 3.9% of Gen Z’ers

·  There’s no evidence that gig jobs are displacing traditional ones BB

Price action in UK gilts is going from bad to worse. A daunting list of challenges has arisen for sterling-denominated bond investors, and the Treasury’s mini-budget has done little to shore up confidence. Widening rate differentials are no consolation for the pound, with FX remaining the main vehicle to price UK country risk.

It was largely expected that the bill for the government’s energy price guarantee would run in the 12-digits (over £100bn) over its life and that most of this would be financed with extra issuance from the Debt Management Office (DMO). And yet, the mini-budget unveiled by the new chancellor added fuel to the fire already burning on the gilt market. The updated DMO remit for FY2022-23 includes an extra £72bn of borrowing, £10bn in T-bills and the balance in gilts. In our view, this is well within expectations but the current environment isn’t favourable to gilt sales.

Alongside the confirmation of additional borrowing this year, the raft of tax cuts unveiled clearly implies that it will not be contained to just this fiscal year. The cost of the newly-announced measures is reported to be £160bn over five years but, with the cost of the energy price guarantee highly dependent on wholesale energy prices, investors are worried the Treasury has effectively committed to open-ended borrowing. ING

Four Russian-occupied territories in Ukraine began voting on a referendum whether to join Russia on the eve of the war’s seven-month mark. It’s awfully similar to a ballot in Crimea ahead of annexation in 2014.BB

Singapore overtook Hong Kong as Asia's top financial center—and third in the world—according to the Global Financial Centres Index. New York ranked first, followed by London. Hong Kong slipped to fourth, battered by strict Covid restrictions and an exodus of talent. San Francisco moved up two spots to round out the top five. Paris made a return to the top 10, while Tokyo tumbled to 16th.BB

The pandemic home-buying boom in America has come to an abrupt end, replaced by a sense of market paralysis. Buyers and sellers are trapped in place amid mortgage rates that have topped 6%. Rent prices are at a record high, though they may have peaked. “Economic inequality this decade will largely be defined by those who bought homes before 2022 and those who didn’t,” Conor Sen writes in Bloomberg Opinion.BB

Hurricane Fiona left a trail of destruction across the Caribbean, knocking out Puerto Rico’s beleaguered electrical grid while underscoring the growing, global warming-fueled intensity of the world’s weather disasters. Though catastrophic floods have devastated Pakistan and record drought and heat has spread across Europe, China and Africa, such is the gravity of other crises facing the United Nations that climate change didn’t top the agenda at the General Assembly this week.BB

North Korea fired a short-range ballistic missile yesterday, its first such test since early June, marking a return to provocations ahead of Kamala Harris's planned attendance at Shinzo Abe's funeral this week. The US VP will also visit South Korea. Additionally, a US aircraft-carrier group arrived for the first combined naval exercises in about five years.BB

Sunny power is in fashion. Solar panels have overtaken wind turbines in China as photovoltaic manufacturers ramp up output to lead the clean-energy transition.

·  The country will have more capacity from panels than turbines for the first time by year-end, according to BloombergNEF.

·  Solar is now cheaper than wind globally, with the cost in China about $44 per megawatt-hour, down from $183 in early 2014. BB

Europe is set to get an early test of its ability to navigate a potential winter energy crisis, with an Arctic chill forecast to blow across the western part of the continent in coming days. Temperatures in London will be almost 5 degrees Celsius below average, falling as low as 6.5 overnight on Tuesday, according to one prediction. Germany, France and Spain are also facing temperatures lower than the seasonal norm. Governments will be hoping it’s just a blip ahead of a much-needed mild winter; a sustained cold snap raises the prospect of blackouts and crippled industry. The EU will propose more measures to deal with the crisis this week, and energy ministers assemble in Brussels on Friday in a bid to seal a political agreement on the latest package in double-quick time. BB

Italian Election | Giorgia Meloni’s alliance won a clear majority in yesterday’s Italian election, setting her up to become the country’s first female prime minister at the head of the most right-wing government since World War II. The leader of the far-right Brothers of Italy party will have to deal with a series of overlapping crises, with energy shortages triggered by Russia’s invasion of Ukraine fueling rampant inflation and undermining growth.BB

The French government will present a budget today that aims to renew Emmanuel Macron’s fiscal credibility despite extra spending to cushion energy price shocks and the challenge of emboldened opposition in parliament. Budget Minister Gabriel Attal said the country plans to raise the retirement age as part of a second attempt to reform the pension system.BB

Russian men and their families flooded to the border over the weekend as speculation grew that the Kremlin may bar mobilization-eligible men from leaving the country. Witnesses reported hours-long lines at the main airport in Moscow and at land crossings as reports spread that those subject to the call-up may be banned from leaving as soon as this week. More than 2,300 people have been detained at nationwide demonstrations since Putin’s announced the mobilization of 300,000 troops, according to reports. Meanwhile, President Joe Biden’s administration told the Kremlin that any use of atomic weapons in Ukraine would have “catastrophic consequences” for Russia, after Putin renewed his atomic threat.BB

Commodities

German Chancellor Olaf Scholz secured just one shipment of liquefied natural gas from the United Arab Emirates on his weekend swing through the Middle East, with a non-binding agreement for more.  There was no new deal with Qatar, though the country’s energy minister said that talks with RWE and Uniper on long-term LNG contracts are ongoing.BB

Singapore Exchange is set to launch its first lithium and cobalt contracts, adding to efforts by commodity exchanges to get battery materials companies and investors interested in using futures. The London Metal Exchange and CME Group already offer futures for both metals, although trading liquidity is still far below established commodities contracts. Demand for battery minerals is expanding rapidly as the global auto industry accelerates a push toward electric vehicles, triggering big price swings. A global index of lithium prices has more than quadrupled in the past year.BB

Britain's energy bills freeze could prove much less costly than feared by early next year, as City forecasters predict that gas prices will plunge this winter following a successful scramble across Europe to fill reserves. A halving in gas prices in the coming months would push average household bills below the £2,500 limit set by the Government's Energy Price Guarantee, slashing the cost of the intervention, according to estimates by Deutsche Bank. – Telegraph

Vitol expects Russian oil to flow to Asia and Mideast  - Russian oil is expected to come to Asia and the Middle East, while refined fuel produced in these regions will flow to the West as the global oil trade is disrupted by sanctions, Vitol's Chief Executive Officer Russell Hardy said on Monday. 

Brazil govt admits to problems with coffee crop views, plans revision - Brazil's government admitted that its estimates for coffee crops over recent years have problems and need improvements to better reflect the reality, since the numbers for production have been smaller than the sum of local consumption plus exports.

Judge rules in favour of U.S. Sugar purchase of Imperial, rejects antitrust concerns - A U.S. judge on Friday ruled in favour of U.S. Sugar Corp's plans to buy rival Imperial Sugar Co, rejecting a Justice Department argument that the proposed deal would drive up the price of sugar for households as well as for food and soda makers.

Chinese copper trader Maike will sell assets and restructure - FT - Maike Metals International, one of China's biggest copper traders, is selling assets and studying a broader restructuring pattern as it battles to survive a liquidity crisis, the Financial Times reported on Monday, citing chair He Jinbi.

EU's green shift depends on mammoth investment in energy grid - Investments of more than half a trillion euros will be needed to modernise Europe's energy grid this decade, if countries are to succeed in ramping up wind and solar power to break free from Russian gas, a draft EU document showed. 

Countries try to dodge EU's carbon market fundraising plan  - European Union countries are hunting for alternatives to an EU plan to use a carbon market reserve to help finance their exit from Russian gas, as some fear the proposal would undermine the bloc's main climate change policy.

Seven more crop-laden ships leave Ukrainian ports on Sunday - Seven more ships laden with agricultural produce left Ukrainian ports on Sunday, the country's infrastructure ministry said, bringing the total to 218 since a U.N.-brokered corridor through the Black Sea came into force at the start of August.

Philippines bought about 45,000 tonnes Australian feed wheat - traders - An importer group in the Philippines is believed to have bought around 45,000 tonnes of animal feed wheat to be sourced from Australia in an international tender which closed on Thursday, European traders said in assessments on Friday.

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