Safe as houses? Maybe not as property problems mount.

• Markets rally as the debate over interest rates revs up.

• Meta is scaling back in the Big Apple.

• The UK works to restore calm in markets. 

• Safe as houses? Maybe not as property problems mount.

• Fleeing Russians outnumber those signing up to fight.

• Elon Musk revives his Twitter bid.

• OPEC+ said it's considering an output cut of up to 2 million barrels a day, a million more than previously anticipated.

• India may be gaining traction in its push to be a tech assembly hub, with its iPhone exports topping $1 billion, people familiar said.

• Micron plans to invest up to $100 billion in a new US chip factory.

• The UK wants a 20-year gas deal with Norway to stave off blackouts. 

• The latest thing Americans can’t agree on? Fed rate hikes. 

• Ukraine is said to have made further advances

• Stocks see best two-day run in two years

• RBNZ raises key rate, sending kiwi higher.

Although markets are rebounding as if tightening is almost over, there could be a nasty shock for the buyers returning to the markets. The Fed is not finished yet, and its not just that, they intend to keep rates higher for a while to ensure inflation settles around their desired 2% level rather than just touch it! This means we could rate rises stop at the end of this year or early 2023 but they will stay there for most of next year…at least.

Markets are red this morning with uncertainty still remaining with mixed signals from central bankers. They have come this far, they will not stop until their goal is met.

As I have been mentioning for a while now, the jobs market will contract with less jobs on offer as companies prepare for the downturn. We saw the jobs on offer ratio to those unemployed dip in the U.S from ~2:1 to only 1.65:1. Expect this to continue and be similar in most countries.

Another point I have been making is around house prices, and we are now seeing that in recent reports. Households are squeezed from inflation and having to make larger mortgage repayments too by moving is a step too far for most.

OPEC+ meets to decide a quota cut rumoured to be up to 2 mn bpd. It sounds a lot, however they struggle to meet to their quotas anyway, which means it is more of a gesture to and maintain high oil prices for longer.

Global News

New Zealand's central bank kept up its tightening campaign, and Japan's ruling party is looking to aid companies burdened by debt. The region got fresh updates on inflation rates, and the Hang Seng rallied after a holiday.

·  Higher and higher. The kiwi was stronger after the RBNZ hiked its key policy rate by 50 bps to 3.5% and flagged more increases ahead. The bank considered hiking by 75 bps before opting for the smaller move, which was in line with consensus.BB

Japan's ruling LDP is looking to provide new support for heavily indebted firms amid fears that some of them may go bust after a Covid-related credit program ends, a senior party official said.BB

The jobs market remains tight with 4 million more job vacancies than there are unemployed Americans to fill them. Nonetheless, the 1mn drop in vacancies is an early warning that corporate sentiment is shifting with the uncertain economic outlook prompting fims to instigate hiring freezes. With more pain to come job losses are on the cards for 2023.

The US JOLTS (Job Opening and Labour Turnover Statistics) data shows firms are starting to pull vacancies as a deteriorating global growth outlook prompts caution in corporate boardrooms. The number of job openings falling from 11.2mn in July to 10.053mn in August, the biggest drop since April 2020 when the pandemic resulted in the economy grinding to a halt. The consensus had predicted little change – 11.1mn.

This data echoes the headlines from this morning’s KPMG CEO survey whereby 39% of top CEOs have reportedly instigated hiring freezes. It also means that the ratio of job vacancies to the number of unemployed Americans falls from 1.97 to 1.67. Nonetheless, we have to remember that even after today’s drop there are still 4mn more job vacancies than there are unemployed American while the job opening/unemployed Americans ratio is still more than double the average 0.6 figure seen over the past 20 years. Hence there are still plenty of jobs out there and people are still prepared to move roles for better pay and conditions, with the quit rate staying at 2.7%. ING

Who's to blame for inflation in the US? Joe Biden and congressional Democrats are the main culprits, Karl Smith writes. They've spent too much over the past two years—and continue to spend too much, which will force the Fed to raise rates even higher to curb rising prices. It's an upward spiral that'll only hurt the average American. BB

There are fresh signs of a slowdown over at Amazon. The company has paused hiring for corporate positions in its retail business, a sign the pullback in online spending is starting to bite. In New York, Facebook parent Meta said it would close one its offices as part of cutbacks and white collar workers are increasingly anxious about cutbacks. BB

Elon Musk can't shake Twitter. The billionaire revived his bid for the social media giant at the original offer of $54.20 a share after spending months trying to back out. The deal potentially voids a costly courtroom battle. Shares in Twitter, which intends to complete the deal, jumped.BB

The RBA sprang a dovish surprise, hiking by 25 bps and supercharging debate that central banks are near to rate highs. As for the Fed, RBC's Tom Porcelli said it should curb its "full steam ahead" rhetoric. We'll see if his advice is heeded when Lorie Logan, John Williams, Loretta Mester, Philip Jefferson and Mary Daly speak BB

Markets rallied as investors wagered central banks may slow the pace of tightening. Treasuries advanced, led by rate-sensitive two-year notes. Australian bonds jumped. Futures gained with stocks in Europe and Asia. The dollar weakened against most major peers.BB

Financing fossil fuels is bad for the planet but, it seems, it's equally bad for the financiers. In fact, it poses a growing risk to the world's biggest banks.

·  The 60 top global banks have an estimated $1.35 trillion of credit exposure to fossil-fuel assets, according to nonprofit Finance Watch.

·  Potential climate-related losses associated with these assets aren't covered by the companies' existing capital. It's estimated the banks will need up to an extra $210 billion to plug the shortfall.

·  Banks need to beef up their capital, not only to help address the climate crisis, but also to avoid the next financial crisis. BB

EU nations reached a compromise on a new package of sanctions against Russia. It's said to include support for a price cap on oil sales to third countries and a formal agreement is expected today.BB

Ukrainian forces made substantial gains around Lyman and in the northern Kherson region in the past day or so, according to the US-based Institute for the Study of War. The conflict will probably be over in months, rather than years, said one adviser to Volodymyr Zelenskiy's chief of staff. Central bank Governor Kyrylo Shevchenko unexpectedly resigned, citing health reasons.BB

A warmer tone has emerged suddenly in talks between the EU and the UK over the Northern Ireland protocol and the new British government sees the possibility of a deal to solve the ongoing dispute within months, we’re told. While some hope for a resolution by April, others said a deal could come earlier. Liz Truss has softened the UK’s approach, while the EU notes it’s long been ready to find solutions. London’s shift comes as Truss’ standing in her party has been damaged by her fiscal plan, which complicates her prospects of implementing key parts of her program. Truss is heading to Prague tomorrow to meet with EU leaders and discuss migration, security and other challenges.BB

The ECB warned that banks are not taking seriously the looming risks amid the increasing benefits of higher interests rates. Entities aren’t properly engaging in discussions about risk, said the bank’s supervisory board chief, Andrea Enria. He said Russia’s war in Ukraine is developing into “a persistent and fully-fledged macroeconomic shock.”BB

Pfizer emerged from the pandemic as the world's most visible drugmaker and investors are impatient for an encore. The company believes the mRNA technology behind its vaccine will kick-start a lucrative new era, but rivals are circling and its stock is under pressure.BB

The Reserve Bank of Australia sparked speculation that central banks may be on the threshold of tapering their hiking cycles, raising rates by a quarter point instead of the expected half-point move. Governor Phillip Lowe noted that the cash rate has been "raised substantially in a short period of time." Markets have been trying to gauge a similar pivot from the Federal Reserve, but it has so far stuck to its hawkish tone. New York Fed President John Williams noted on Monday that while tighter monetary policy has begun to cool demand and reduce inflationary pressures, the central bank’s job “is not yet done.” BB

Bonds, European stocks and US futures rallied as money markets broadly pared their bets on expected rate hikes from monetary authorities including the Fed, the Bank of England and the European Central Bank. A fall in US real yields has also helped boost risk sentiment on improved outlook for corporates. S&P 500 futures rose 1.8% and the tech-heavy Nasdaq 100 climbed 2.2% as of 6:20 a.m. New York time. In Europe, the Stoxx 600 gained 2.5%, the most since late June. The dollar eased for a second day, while oil, gold and bitcoin rose. BB

A global index of purchasing managers’ sentiment compiled by JPMorgan Chase slipped into contractionary territory in September, for the first time since the first year of the pandemic. BB

Thousands of UK homeowners face a squeeze on their finances after last week's mini-budget, but the real estate woes don't stop there.

·  That screeching U-turn on Chancellor Kwasi Kwarteng's top-rate tax policy hasn't done anything to help mortgage borrowers. The average two-year fixed-rate mortgage loan climbed again today to 5.97%, according to Moneyfacts.

·  It's getting pricier to buy property across the channel as well. The first full month of euro-area mortgage data after the ECB started its rate-hiking cycle show that banks are continuing to pass some of that move on to consumers, sending costs to a seven-year high.

• The decade-long party in Europe's corporate real estate market is also coming to an end. A looming funding gap may turn landlords into distressed sellers. Alarms have been sounding for months, with the Stoxx 600 Real Estate Index plunging more than 40% this year.

• Institutional investors are feeling the pain. BlackRock and Schroders are among asset managers limiting withdrawals from some UK property funds after a wave of requests to move money.BB

Much like a reputation, it only takes five minutes to ruin your credibility and for the UK government that means sterling looks set to stay under pressure well into 2023. One-year risk-reversals for the pound — an option market gauge of its expected direction over that time frame — are trading around a record low. Citigroup's pain gauge for sterling — a measure of overall trader positioning — has slumped to the lowest since 2020. And hedge funds have nearly erased their residual net long bets on the currency, according to the latest CFTC data. BB

The pound has rebounded after its late September collapse, with Chancellor Kwasi Kwarteng's u-turn on tax cuts the latest patch job to give some support. But sentiment remains incredibly fragile and the government's reversal is really just a small part of its overall fiscal package. As my colleague Kitty Donaldson reported this week, Liz Truss will struggle to drive through key parts of her economic plan because her standing in the ruling party is already so damaged, according to members of her Cabinet. Her standing in financial markets has been equally hit. That suggests the pound's recovery from last month's lows will be short lived.BB

Crypto/Digital

Feds seized more than $300 million of bitcoin, until a hacker stole it back 😊.

The Kardashian affair carries the implication that the SEC considers EMAX a security. Indeed, in a speech Monday, SEC Chair Gary Gensler said: “Of the nearly 10,000 tokens in the crypto market, I believe the vast majority are securities.” BB

Did the SEC overreach? Is EMAX a security? Does it pass the Howey Test? What does this mean for crypto regulation writ large? How does slapping Kim Kardashian on the wrist help anyone?

A lot of questions the SEC should answer. To be fair, the agency said its investigation is continuing, so perhaps it will provide those answers when all is said and done. 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