Netflix to launch $7-a-month plan with advertising.

• US consumers are in "good shape" and may prevent the worst.

• Janet Yellen is worried about the potential for a breakdown in trading of Treasuries.

• The wipeout in chip stocks continues. 

• Seven Senate races that will make or break Biden's agenda

• It's a good time for Americans to hop across the pond

• Hot US core inflation print cements another jumbo Fed hike.

• Goldman warned UK commercial property values may plummet by 20%.

• Italian lawmakers elected an ally of Giorgia Meloni as Senate president.

• France started sending gas directly to Germany for the first time.

• Beijing has a rare anti-Xi protest.

• UK PM Liz Truss's government is preparing to abandon a key part of its tax-cutting agenda.

• The US said its restrictions on chip exports to China are designed to help maintain as large a lead in technology as possible.

• World faces new threats from fast-mutating omicron variants.

• Crypto hackers set for a record year after looting $3 billion.

• Forget firepower, America is unleashing its economic arsenal.

• Apple teams with Goldman Sachs to offer savings accounts.

• Netflix to launch $7-a-month plan with advertising.

• Chinese consumer spending subdued by lockdowns.

U.S core inflation surprised to the upside at 6.6% which excludes energy, food, tobacco, and alcohol. I expect this to leave little doubt the next Fed meeting will produce another 75 bps rise with more to come in December. Americans are sitting on too much wealth to make any meaningful cutbacks…except for the low-paid of course. If I were the Fed, I would increase the speed in reducing their balance sheet to $150 bn per month to help drain more from the system. Mortgage rates are almost at 7% and house prices will be under pressure, not just in the U.S but also the UK and probably most countries!

Covid is starting to appear more in headlines as cases increase again. Any major action will depend on if there are further mutations and if they are become more lethal. Check your stock portfolio for any vulnerable stocks!!

Stocks rallied then sold off on CPI, only to then bounce again, with the USD weakening too after hitting further record highs against the Yen and Swiss franc. Today we have CPI from a couple of European countries and retail sales in the U.S. and China posted higher CPI at 2.8%.

Global News

It was a stock reversal for the ages: A near-uniform plunge followed by an everything rally made for a dizzying day on Wall Street. The S&P 500 wiped out a 2.4% loss, marking the first time since July that it reversed a decline of 2%, and closed a whopping 2.6% higher. Never before has the market experienced such extreme readings in both directions in one day, according to Bloomberg data going back to 1990. Whatever the reason, it’s pain for bears who found their stance validated by a stronger print on the US consumer price index, with core inflation at 40-year high, only to see their profits evaporate in a matter of hours. BB

US consumer price inflation surprised on the upside once again as rapid increases in housing costs, medical care, food and airline fares offset signs of moderation elsewhere. The Fed has admitted it is prepared to inflict economic pain to get a grip on inflation and today's report will ensure at least another 75bp rate hike in November and 50bp in December

Sticky inflation means the Fed has more work to do

Once again US consumer price inflation has come in higher than expected with headline prices up 0.4% month-on-month in September (consensus 0.2%) and core – ex food and energy – up 0.6% MoM (consensus 0.4%). This means the annual headline rate slows to 8.2% from 8.3% while core rises to 6.6% from 6.3%, having been down at "just" 5.9% in July. With core inflation heading in the wrong direction (and at its highest rate since August 1982) and yesterdays’ Fed minutes to the September FOMC meeting warning that doing too little to tame inflation is worse than too much, it confirms that a 75bp interest rate increase on November 2nd is the minimum expectation with markets now pricing in the slight possibility of a 100bp hike. ING

U.S consumers are in good shape and spending more this month than a year ago due to pay rises and high-quality credit, said BofA's chief. But Amazon's latest Prime Day sales imply a little less cheer: Shoppers are shunning pricier items and sticking to essentials. Amazon said everyone is "feeling the pinch."BB

A clutch of key Senate races will determine the fate of the Joe Biden's agenda. If Democrats win big, the president has the chance to be the first of his party to gain Senate seats in a midterm since John F. Kennedy. BB

The cost of a "slight" slide. Biden conceded there's a risk of a small economic downturn, but even a mild one will be painful for American households—especially the White House.

· If history's any guide, even modest contractions lead to markedly higher joblessness. In the dozen recessions since WWII, the economy contracted by 2.5% on average and unemployment rose about 3.8 percentage points.

· Warnings abound. A US recession, expected in 2023, would push the unemployment rate to 4.9% from 3.5% now, said Bloomberg Economics. That's bad news for Biden.

· The odds of a crunch in the next 12-18 months are about even, said Moody's Analytics. But it should be "short and less than severe than typical" due to buoyant household finances.BB

After three weeks of political and economic mayhem, UK officials are discussing how to reverse Liz Truss's massive package of tax cuts. Pressure has been mounting within her own party for a climbdown and the financial markets have been merciless.BB

· No final decision has been taken on any U-turn, a person familiar said, but Truss is said to be considering raising corporation tax next year instead of freezing it, the Sun reported.

· Tick tock. The government may finally have heeded calls from the markets to take action ahead of the BOE's bond-buying deadline tomorrow, said Simon Harvey at Monex Europe. Chancellor Kwasi Kwarteng was vague but said he's focused on delivering his plan.

· UK bonds surged and the pound jumped before paring gains as a hotter-than-expected US inflation print battered global markets. European stocks plunged with US futures and Treasuries.BB

Vladimir Putin's failing ground game is pushing him to seek asymmetrical responses that will also fail, James Stavridis writes. He's making a bad bet by turning to what is essentially an air-terror bombing campaign. The Kremlin will soon learn that you can't win a war without controlling the ground.BB

In the latest warning for the chipmaking industry, Taiwan Semiconductor Manufacturing Co. slashed its 2022 capital spending target by roughly 10% and Applied Materials Inc. cut its earnings forecast for the fourth quarter. Meanwhile, Intel Corp. is said to be preparing to fire thousands. Semiconductor companies are grappling with the Biden administration ‘s sweeping restrictions on doing business with China. The actions, which have incensed Beijing, threaten to disrupt a global economy already dealing with a potential global recession, soaring inflation and lingering supply snarls.BB

European Central Bank officials began discussions last week on how to shrink their €5.1 trillion ($4.9 trillion) portfolio as they look to widen the scope of their monetary tightening in due course.BB

The yen saga: The currency fell to its lowest level in more than 30 years, though quickly reversed the move in a whiplash trade that raised market chatter of potential intervention. It's still trading weaker than the 145.90 low reached last month that prompted Japan to intervene. Traders will be looking at the April 1990 level of 160.20 as the next key target.BB

Police patrolled a busy intersection in China's capital after photos and videos circulated of a rare protest aimed at Xi Jinping. Images on social media showed two unfurled banners across the Sitong Bridge, along with smoke rising from a fire. They took aim directly at Xi, bashing his Covid policies of lockdowns and mass testing. The criticism comes just days before a crucial Communist Party meeting.BB

Hawkish European Central Bank officials aim to start unwinding the institution’s €5.1 trillion ($4.9 trillion) asset hoard by early 2023 while retaining interest rates as their primary monetary-policy tool, according to people familiar with the matter. A consensus is emerging among some Governing Council members that the process of shrinking should run in the background while the ECB focuses on setting borrowing costs. ECB hawks have effectively dictated the momentum of monetary policy since early June, a dominance over decision-making that suggests their opinions might well continue to hold sway.  BB

Germany reached a natural-gas storage target more than two weeks ahead of a Nov. 1 schedule, a rare spot of good news for Europe’s largest economy with winter looming and Russian pipeline deliveries cut. While the progress in filling up reserves lessens the risk of rationing, the outcome depends on how much households and companies reduce consumption and how cold the winter will be. BB

Mild Winter | There was additional positive news from a weather outlook which suggested that Europeans are more likely to experience mild temperatures than a deep freeze this winter. Scientists at the Copernicus Climate Change Service said temperatures probably will be significantly above normal during the peak heating season between December and February, potentially slackening gas demand.BB

European Shield | At least 15 countries, mainly NATO members, have signed a letter to join a German project to create a European anti-missile shield. The system will have several layers to intercept various kinds of missiles from different heights, and would be fully deployable through the NATO territory.BB

U.S Banks earned more than $1 billion in revenue from fossil lending during the first three quarters, in line with 2021. Why quit a booming business over a distant climate goal? BB

Major Wall Street banks kick off earnings season today with JPMorgan, Citi, Wells Fargo and Morgan Stanley reporting. The focus is less on last quarter and more about what's brewing as the Fed hikes. Bad debt provisions will be in focus too. Post earnings, the banks are seen deluging the bond markets with new issuance.BB

China's CPI accelerated to 2.8% last month, the fastest since April 2020 but slower than the 2.9% seen by consensus. Covid Zero will smother demand going forward, saving policymakers from long term inflation headaches, Bloomberg Economics said.BB

Commodities

The OPEC+ decision to sharply curtail oil production threatens to push prices to levels that tip the global economy into recession, the International Energy Agency warned.BB

Yorkshire Water has become the latest regional monopoly supplier to be forced by the industry regulator into a £1 billion bailout by its shareholders. After a year investigating the weak "financial resilience" of the lossmaking utility, which supplies 2.3 million homes in parts of Derbyshire and Lincolnshire as well as Yorkshire, Ofwat has called on its foreign investors to pump in £940 million to pay down loans and demanded they stump up £100 million to tackle the company's poor record on sewer foul-flooding and river and beach pollution. - The Times

Saudi Arabia, United States clash over reason for OPEC+ oil cut - Saudi Arabia rejected as "not based on facts" criticism of an OPEC+ decision last week to cut its oil production target despite U.S. objections, and said on Thursday that Washington's request to delay the cut by a month would have had negative economic consequences. The White House pushed back against that on Thursday, saying it presented the Saudis with an analysis that showed the cuts could hurt the world economy, and alleging the Saudis pressured other OPEC members on a vote. 

U.S. crude stockpiles surge on reserve releases; distillates draw down - EIA - U.S. crude stocks rose by nearly 10 million barrels last week after another big release from government reserves, while distillate inventories fell sharply, the Energy Information Administration said on Thursday. Crude inventories USOILC=ECI rose by 9.9 million barrels in the week to Oct. 7 to 439.1 million barrels, data showed, compared with analysts' expectations in a Reuters poll for a 1.8 million-barrel rise.

Argentina wheat crop forecasts cut again as drought hardens - Argentina's two major grains exchanges cut their forecasts for the upcoming wheat harvest on Thursday as drought and low temperatures hit the crop, with little relief in sight for key farming regions and scant rains forecast in weeks ahead. A senior analyst at the key Rosario grains exchange, Cristian Russo, told Reuters that the 2022/23 wheat harvest would likely come in at 16 million tonnes, a 500,000-tonne cut from the entity's previous formal forecast. 

Record EU sugar prices leave sweet-makers with bitter taste - Record-high sugar prices in the European Union, nearly three times levels seen a year ago following extreme weather and a surge in energy costs, are forcing confectioners to consider production cuts. The record price of a widely-used food staple is another headwind for EU policymakers as they try to control inflation and curb a cost of living crisis.

Iron ore outlook clouded by global demand woes, supply risks - Iron ore prices are on track to end 2022 at their lowest in the last three or four years and will probably languish next year as well, with China and Europe cutting steel output, while pressure mounts from additional supply. Price forecasts for the key steelmaking ingredient range from about $90 a tonne to a high of $115 by the end of the year, a Reuters survey of five analysts and researchers shows.

Alcoa asks White House to block U.S. imports of Russian aluminium - U.S.-based aluminium producer Alcoa Inc on Thursday said it is lobbying the White House to block American imports of the metal from Russia following Moscow's latest military escalation in Ukraine. Reuters reported this week that President Joe Biden's administration was considering a range of options related to imports of Russian aluminium, including possibly blocking Rusal, the world's largest aluminium producer outside China, from selling its products in the United States. 

EU leaders may back new gas price benchmark, document shows - European Union country leaders may support plans to launch a new gas price benchmark at a meeting next week, as they seek to curb energy prices for consumers and industries, a draft document showed. The leaders are set to meet on Oct. 20-21, days after the European Commission intends to propose measures to tackle an energy crisis that is driving inflation and damaging economies across the bloc.

Europe's gas prices retreat as storage almost full - Europe's gas futures prices have started to soften as storage facilities become full, signalling the need to slow the pace of inventory growth, even though rationing could still be needed later this winter. Futures for deliveries in January 2023, likely to be the coldest part of winter 2022/23, have fallen by almost 30 euros per megawatt-hour (MWh) since Sept. 13.

Russia is prepared to quit Black Sea grains deal, writes to UN with demands - Moscow has submitted concerns to the United Nations about an agreement on Black Sea grain exports, and is prepared to reject renewing the deal next month unless its demands are addressed, Russia's Geneva U.N. ambassador told Reuters on Thursday. The agreement, brokered by the United Nations and Turkey in July, paved the way for Ukraine to resume grain exports from Black Sea ports that had been shut since Russia invaded. 

Turkey can help select countries for Russian grain, fertiliser exports -Erdogan - Turkish President Tayyip Erdogan said on Thursday that Ankara could work with Moscow on determining low-income countries to which Russian grains and fertilisers can be exported. Erdogan met with Russian President Vladimir Putin in Kazakhstan's Astana on Thursday on the side lines of a summit.

Crypto/Digital

BTC stages a recovery along with most markets almost back to $20k after dropping below $18k.

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