Tesla shares dropped the most in four months after delivery numbers disappointed.

Headlines

• Stocks gained, while Treasury yields halted a seemingly endless surge as weak US data soothed concern about Fed overtightening. About 95% of the S&P 500's shares rose

•  Tesla shares dropped the most in four months after delivery numbers disappointed

• Micron and Kioxia, two of the world’s top memory chipmakers, are slashing production to cope with a steep plunge in demand

• Apple is backing off plans to boost output of its new iPhones, according to Bloomberg

• Meta is preparing for the first reduction in headcount ever

• Fed officials are starting to publicly split on how fast to raise interest rates even as they agree more tightening of monetary policy is needed.

• Prime Minister Liz Truss dropped a plan to cut taxes for the highest earners just 10 days after announcing it

• Investors warn there's more work to be done in the UK, with the options market now the most bearish on sterling versus the dollar over the next three months since the Brexit vote.

• The RBA may go big one more time.

• The world faces a refinancing problem.

• Home prices in the US are now posting the biggest monthly declines since 2009. Median home prices fell 0.98% in August from a month earlier, following a 1.05% drop in July.

• People in Japan told to seek shelter after missile launch.

• Credit Suisse goes on a rollercoaster ride.

• Elon Musk upsets Ukraine. 

• DXY has dropped nearly 3.0% since last week's highs

• RBA raise by only 25 bps

My View

The markets are starting the day green possibly on expectations that central bankers speaking this week will provide mixed views on how far these rate rises will go, plus manufacturing data is a little weaker as current rates are feeding into the economy and impacting consumer spending.

Part of the reason there is a shortage of workers in the U.S could be Biden administration’s Covid-19 vaccine requirement for workers in facilities that receive federal health-care funds.

Has SEC Char Gary Gensler just confirmed crypto as a security when you read his comments below regarding Kardashian?

It seems to me the signal for markets to rally is a weakening USD, as this indicates the potential for a slowing in U.S rate increases, generally triggered by weaker U.S data! This will be tested Friday with the release of the NFP data.

Apart form dollar weakness traders are getting ahead of themselves buying the pound. The governments backtracking on the higher rate of tax reduction only accounts for £2 bn which is only 5% of the Chancellors give-away, then on top of that is the cost of placing power caps for businesses and households, which I believe is around £130 bn, making a total to finance of nearly £175 bn. This will require cost cutting to pay for it all!

Global News

Stocks kicked off the week with big gains after suffering their worst September in two decades. Weak US manufacturing data soothed concern the Federal Reserve will get more aggressive in tightening monetary policy. BB

The Japanese government broadcast a wide-scale notice that a North Korean missile was launched toward the northern part of the country, in an escalation to the run-of-the mill provocations people have become accustomed to in the area. “A missile has been launched, a missile has been launched,” were among some of the warnings read by broadcasters with televisions showing a black screens with white text. BB

In Ukraine, Kyiv’s forces are reportedly continuing to push back Vladimir Putin’s army in the northeast and the south, despite his claims of annexation and threats of nuclear warfare.

Ukrainian President Volodymyr Zelenskiy said liberating settlements from Russian occupation is now "the trend" as his forces press further into the eastern Donetsk region and seek gains in the south. The Kremlin said it still hasn't finalized the borders of two of the four regions of Ukraine that Vladimir Putin laid claim to last week. More:

·  EU countries edged closer to a deal on a new Russian sanctions package, but details of a price cap on oil sales to third countries still need to be agreed.

·  The US will announce another set of security assistance for Ukraine in a few days. BB

Prime Minister Liz Truss dropped a plan to cut taxes for the UK’s highest earners just 10 days after it formed a key part of the mini-budget that sent markets into a tailspin. Investors initially welcomed the news, with the pound and government bonds climbing, but those moves quickly unwound. The future is looking uncertain too --options markets are still showing bearish bets, and “the market continues to view the government having something of a fiscal credibility deficit,” according to CIBC's Jeremy Stretch BB

The incessant rise in the dollar has increased speculation that there will be a global coordinated effort to weaken it. Almost half of respondents in the MLIV Pulse survey believe central banks around the world will conjoin to curtail a rally that has taken the dollar 13.9% higher this year. Meanwhile, two-thirds of respondents believe the Bloomberg Dollar Spot Index will climb to yet new highs over the next month. Japan has already intervened to try to stem the fall in its currency versus the dollar, with 42% of survey respondents expecting the country to intensify its unilateral intervention efforts. The dollar's ascent is also expected to squeeze US earnings, with almost 90% expecting this to become apparent in third quarter results.BB

The dollar has remained in correction mode at the start of this week, with DXY now trading nearly 3.0% off its 28 September peak. In our view, this has not been accompanied by a radical change in the medium-term narrative that has backed the dollar rally so far: despite somewhat weaker-than-expected ISM manufacturing figures yesterday, the US domestic story remains rather solid, leaving the Fed tightening prospects alive even if markets have recently revised the expected terminal rate to sub 4.50% levels. We see Friday’s payrolls report as a potential trigger for a fresh hawkish re-pricing, and a positive event for the dollar.

Indeed, the fiscal developments in the UK (more in the GBP section below) appear to be having a rather widespread impact on global risk sentiment and have likely favoured a rebound in risk assets and bonds. There is still, however, a long way to go for European assets to regain the market’s favour given the energy crisis and concerning geopolitical developments, so we continue to see any dollar contraction driven by a recovery in European sentiment as likely short-lived. ING

NFP could come in around 259k, still time for that number to change.

Forget Nike Town. It’s more Nike down, these days. Shares of the sportswear giant plunged the most in two decades last week. The main reason was a 65% surge in inventories during the fiscal first quarter through August. But the retailer also cited higher freight costs, a byproduct of ongoing supply chain strains, and foreign-exchange effects, the result of a surging dollar. BB

Mounting nerves across global markets can already be seen in the Bank of America Merrill Lynch GFSI Market Risk indicator, a measure of future price swings implied by options trading on equities, interest rates, currencies and commodities. The gauge has jumped to the highest since March 2020, when markets were in full-blown pandemic panic.

As Reserve Bank of India Governor Shaktikanta Das said Friday after lifting rates again: “The global economy is in the eye of a new storm.” BB

The RBA may go jumbo one last time before shifting to slower tightening, economists said. Consensus is for a 50 bp-hike to 2.85% today, then to 25-bp increments—as Philip Lowe has signaled he wants. With a majority of Aussie mortgages floating-rate, policymakers must balance inflation control and currency support against a very fast hit to growth. BB

Governments and companies around the world are facing unprecedented costs to refinance bonds.

·  New-note issuers now face paying interest about 156 bps higher on average than coupons on existing securities.

·  That adds up to about $1.01 trillion in added costs if all securities were refinanced, according to Bloomberg calculations. BB

EU countries are worried that Germany’s €200 billion borrowing plan will reopen economic divisions the bloc had managed to bridge during the Covid crisis. “While Germany can afford to borrow 200 billion euros on financial markets, some other EU member states cannot,” Internal Market Commissioner Thierry Breton told finance ministers yesterday. Germany’s Christian Lindner countered that the aid is spread over several years and won’t be fully used if not needed: “We’re showing Putin that we’re using our economic strength to protect ourselves.” With no meeting of the minds on the issue, any emerging divergence within Europe could further hobble an economy that is already at risk of falling into recession over the winter.BB

The Biden administration plans to announce new restrictions on China’s access to US semiconductor technology, in an escalation of Washington’s efforts to stifle Beijing’s industrial ambitions. The Commerce Department will roll out a package of rules this week to govern which of the technologies can be exported to China, sources say. The US has been increasingly focused on limiting access to high-end semiconductor technology, and boosting its own domestic production capacity.  BB

North Korea fired a missile over Japan for the first time since 2017, prompting a rare public safety warning to Japanese residents. The missile splashed down in the Pacific Ocean, according to Japanese officials, who said there were no reports of damage. Japan's Defense Minister Yasukazu Hamada said it was likely a Hwasong-12, an intermediate-range missile with a range of about 4,500 kms. BB

A prototype nuclear fusion power station will be built at the site of one of the UK's last coal-burning stations, Jacob Rees-Mogg has announced. In a speech to the Tory party conference, the Business Secretary said the pioneering facility in Nottinghamshire will be "a beacon of bountiful, green energy" and prove the technology's commercial viability. – Telegraph

Commodities

 Natural gas prices in Europe fell amid signs the continent will be able to navigate this winter with sufficient inventories, an influx of LNG and steps taken by the EU to contain the crisis. Meanwhile, Gazprom told European customers that part of the Nord Stream network could still transport fuel — but only on the new pipeline that Germany ditched in February in protest over Russia’s invasion. BB

Goldman says reported OPEC+ output cuts reinforce its bullish oil view - Goldman Sachs said a production cut under consideration by the Organization of the Petroleum Exporting Countries (OPEC) and its allies was justified by the sharp decline in oil prices from recent highs and supported its bullish view. OPEC+ is discussing output cuts of more than 1 million barrels per day (bpd), sources told Reuters, and voluntary cuts by individual members could come on top of that, making the reduction the largest since the start of the COVID-19 pandemic. 

Rains slow Brazil's new soy crop planting, consultancy says - Excess rains in some areas of Brazil have slowed sowing of the country's 2022/2023 soybean crop, according to agribusiness consultancy AgRural on Monday. As of last Thursday, the total area planted with the oilseed reached 3.8% in the world's largest producer of soybeans. This compares with 4.1% a year ago, according to AgRural.

India's Sept palm oil imports jump to 1-yr high of 1.2 mln T-dealers  - India's imports of palm oil jumped in September to their highest in a year, boosted by strong demand for the tropical oil ahead of the festival season and a steep discount to rival oils, six dealers told Reuters on Tuesday. Greater buying could help top producer Indonesia cut swelling inventories and support benchmark Malaysian palm oil prices, which have nearly halved from this year's record highs.

Global metals volumes slide on recession fears, volatile markets - Industrial metal trading volumes have fallen across the world and may slide further as economic threats from higher interest rates to the war in Ukraine send buyers, especially in leading consumer China, to the sidelines. Aggressive interest rate hikes have fuelled real concern about impending recession, while confidence is also still reeling after wild price swings during the first quarter following Russia's invasion of Ukraine. 

India's platinum imports jump to record high as refiners take advantage of tax change - India's platinum imports in September jumped to a record high as refiners imported a large amount of gold containing small amounts of platinum but registered the purchases with customs as platinum alloy to avoid paying higher duties, government and industry officials told Reuters. Such masking was possible due to what a tax official said was a loophole created by a change in policy in July whereby differential import duties were levied on gold, silver and platinum, distinct from previous policy of having the same taxes for all the three precious metals.

Sweden sends diving vessel to probe leaking Nord Stream pipelines - Sweden sent a diving vessel on Monday to the site of Russian gas pipelines in the Baltic Sea that ruptured last week following blasts in the area, to probe an incident that has added new tension to Europe's energy crisis. Europe is investigating what caused three pipelines in the Nord Stream network to burst in an act of suspected sabotage near Swedish and Danish waters that Moscow quickly sought to pin on the West, suggesting the United States stood to gain.

U.S. takes step to advance use of Cold War-era law for clean energy - The U.S. Department of Energy on Monday took a step to advance use of a Cold War-era defense law for boosting the reliability of the electric power grid, deploying clean energy, and speeding domestic production of grid technologies such as transformers. The department issued a request for information, asking the public to determine how best to use the Defence Production Act, or DPA, to boost manufacturing and lower energy costs for consumers.

Hungary imports maize from Ukraine as drought hits local crop - Hungary has imported about 1 million tonnes of maize, nearly a quarter of its annual needs in the past 12 months mostly from Ukraine as a severe drought destroyed a large part of its domestic crop, industry representatives said on Monday.  "Under normal circumstances, Hungary is a maize exporter, but this year's crop will be the lowest since the 1970s," said Andras Mahr, deputy secretary general of the National Alliance of Agricultural Producers and Cooperatives (MOSZ).

Costa Rican coffee exports slump 60% in September as season ends - Costa Rican coffee growers exported 60.1% fewer beans in September compared with a year earlier, as stocks ran out in the last month of the season after a smaller harvest, the country's coffee institute ICAFE said on Monday. Costa Rica exported 28,144 60-kilo bags in September, the last month of Central America's coffee season, or 42,403 bags fewer than it had a year earlier. 

Crypto/Digital

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