Twitter faces only bad outcomes if Elon Musk’s $44 billion deal closes.

• Shanghai is quietly shutting schools, bars as Covid returns.

• Twitter faces only bad outcomes if Elon Musk’s $44 billion deal closes.

• China's top leaders reaffirmed Xi Jinping's status as the Communist Party's core ahead of a key congress that will give him a third term.

• The US said Beijing is its sole competitor with the "capability to reshape the international order."

• China may start importing Brazilian corn as early as December, reducing its dependence on the US.

• ByteDance is offering to buy back employees' shares at $155 each. It also plans to expand music streaming, the WSJ reported.

• Indian inflation picked up to a five-month high, driven by food prices. Meantime, free-trade talks with the UK are said to have stalled.

• Russian aluminum may be on the chopping block.

• The S&P 500 slipped into the red in the final minutes of trading, capping six days of losses.

• Fed minutes suggest more hikes are coming

Watch the core CPI today! Once again the headline may drop, however, the core is expected to rise to 6.5%, and pro traders are more focussed on the core as it removes energy, food, alcohol and tobacco and therefore a more consistent number!

Global News

US core inflation is expected to return to a 40-year high today, serving as yet another push toward rate hikes. CPI excluding food and energy is expected to rise 6.5% from a year earlier, matching the rate seen in March that was the highest since 1982. A JPMorgan economist said “we’re probably near a peak,” but added “I don’t think we’re going to have a speedy return to lower numbers.”BB

While the Fed raises rates and the economy slows, President Joe Biden played down recession risks in a CNN interview on Tuesday. He said that if it does happen, he believed it would be "very slight." Meanwhile, Treasury Secretary Janet Yellen appeared relaxed about the relentless strength of the dollar this year, remarking it was the "logical outcome" of different global monetary policy stances. The Fed's position has been the most pronounced, but there are few signs it plans easing back. Cleveland Federal Reserve President Loretta Mester said in a Bloomberg TV interview on Tuesday that she saw "no reason" to alter the Fed's plans to reduce the size of its balance sheet. BB

Confusion reigned in bond markets as investors struggled to keep up with the Bank of England and the UK government’s policies. Governor Andrew Bailey issued a rare public ultimatum at the IMF meeting on Tuesday, saying the central bank will end its emergency gilt purchases as planned at the end of this week. Hours later, the Financial Times reported the BOE briefed bankers that it might keep the program going, citing comments before Bailey spoke. That prompted the central bank to reiterate that bond purchases will end on Friday. Gilt yields whipsawed as a result, before ultimately climbing toward multi-year highs seen at the end of September.  Separately, the BOE warned in its quarterly Financial Policy Summary report that some UK households may face a strain over debt repayments similar to that seen before the 2008 financial crisis. BB

Chipmakers take center stage as the earnings season rolls closer. Intel is planning a major reduction in headcount to cut costs and cope with a sputtering personal-computer market, according to people with knowledge of the matter. The company’s planning to make the move around the same time as its third-quarter earnings report on Oct. 27. Meanwhile, luxury brand LVMH’s sales jumped as the owner of Louis Vuitton and Christian Dior benefited from wealthy American tourists splurging on luxury goods in Europe.BB

The yen weakened to a fresh two-decade low after Haruhiko Kuroda reaffirmed his commitment to easing. The BOJ will keep policy loose to get inflation up to its 2% goal, the governor said, adding the total effect of the currency's slide may have been positive. The yen quickly fell past the 145.9 per dollar level that prompted earlier intervention.BB

Fed officials committed to raising rates to a restrictive level, but several stressed the need "to calibrate the pace" of hikes to mitigate risks. Policy makers "emphasized that the cost of taking too little action to bring down inflation likely outweighed the cost of taking too much action," FOMC minutes showed. US stocks fell; Asian equity futures are slightly lower.BB

UK policy mayhem, continued. Liz Truss faced calls from Conservatives to backtrack on key pieces of her economic plan, even as her government tried to downplay its part in recent financial-market turmoil. The PM sought to allay concerns that she'd cut public spending to pay for her massive tax cuts, shrugging off warnings of a £60 billion black hole in public finances.BB

In the latest tit for tat, the US may ban Russian aluminum over its military escalation in Ukraine, a commodity that had been long shielded by previous sanctions.

· Three options are on the table: An outright ban, brutally punitive tariffs amounting to an effective ban, or sanctions on the company that produces Russia's aluminum, people familiar said.

· Drawbacks are inevitable, and may force consumers in the US and other countries to a rush to find replacement metal. Aluminum on the LME rose as much as 7.3%.

· Oil, too, is in question—not for any potential sanctions, but for demand worries. OPEC slashed its outlook to 900,000 barrels per day, making the case for its supply cut last week.BB

Elon Musk's Twitter buyout gets costlier by the day. If the deal goes through, the social media giant will have to pay annual interest of almost $1.2 billion—a burden that's only likely to worsen. About half of the $13 billion debt Musk is loading on Twitter is floating rate, so it will get pricier as the Fed tightens.BB

NATO defense chiefs gather for a second day of meetings in Brussels today, and will discuss how to increase security of critical infrastructure in the aftermath of last month’s sabotage attacks on the Nord Stream gas pipelines. Russian President Vladimir Putin warned yesterday that any energy infrastructure in the world is at risk. Meanwhile, US Defense Secretary Lloyd Austin said he expects NATO allies to come forward with more air-defense capabilities for Ukraine, especially following recent strikes on major cities. The alliance is also set to agree on new targets for stockpiling weapons, as they encourage manufacturers to boost production given depleted reserves.BB

Households in Europe could still freeze during a severe cold snap this winter, despite the continent having almost filled its gas storage facilities, Gazprom’s head Alexey Miller warned. EU governments are in talks to hire giant floating power plants, which could dock off the bloc’s ports in December, according to Istanbul-based Karpowership, which owns a fleet of the vessels. BB

Europe’s energy crunch will likely trigger a contraction in the German economy next year for the third time since the financial crisis, the Economy Ministry predicted in updated projections. Germany is especially vulnerable to an energy shock having built up a heavy reliance on imports of Russian fossil fuels in recent decades.BB

Bank Strategy | The ECB should pursue forceful increases in borrowing costs at its October and December meetings, Governing Council member Klaas Knot told Bloomberg Television. The Dutch central bank chief said that euro-area interest rates are “still way below neutral” — referring to the level at which policy is neither stimulative nor restrictive.BB

Punishing Tehran | The EU agreed on the need to impose new sanctions on Iran over its treatment of women and a deadly crackdown on recent protests, according to diplomats. A package of specific sanctions on at least 15 people and entities could be approved as early as next week, they said.BB

Fed officials committed to raising rates to a restrictive level, but several noted the need "to calibrate the pace" of hikes. Policymakers emphasized that the cost of taking too little action probably outweighed the cost of taking too much, minutes from last month's meeting showed. Governor Michelle Bowman said sizable rate hikes are needed unless inflation slows sufficiently. CPI growth is seen easing a tad in September to 8.1%. BB

Ukraine will need at least $3 billion a month in 2023, IMF chief Kristalina Georgieva said. Volodymyr Zelenskiy said his country is seeking an IMF loan of as much as $20 billion. The UN General Assembly voted 143-5 to condemn Russia's annexation of parts of eastern Ukraine. US Defense Secretary Lloyd Austin expects allies who met in Brussels to come forward with more air defense capabilities for Kyiv.BB

Emmanuel Macron wants to see 45 of France's nuclear plants operating by January, compared with 30 currently. "Everything indicates that we'll meet this target," the president told France 2 TV. He also said France wouldn't respond with nuclear weapons should Russia resort to deploying them tactically against Ukraine.BB

Brian Moynihan says US consumers are in good shape: They're earning more and their credit quality is as high as it's ever been. Maybe so, but shoppers are shunning pricier items in Amazon's latest Prime Day sale. The average order size yesterday was $46.44, down 23% from the sale in July, according to Numerator.BB

The fate of the Democrats' agenda comes down to a handful of key US Senate races. If they win big, Joe Biden could accomplish something no president has in decades. Our Big Take maps out three plausible outcomes from the midterms.BB

Europe's right-wing is taking on the left's look, Ian Buruma writes. From Italy to the UK, conservative parties are attracting more women and minorities to their top ranks, and that should be a warning to their rivals. The left can no longer take the "rainbow coalition" of race and gender for granted.BB

Commodities

The European Commission will propose a new package of measures next week as it grapples with the energy crisis. They’ll include joint purchasing of gas and setting up a new gas-market benchmark to calm volatility. But the key question is whether officials believe they have enough support to put on the table a measure to cap gas prices in the electricity market, which some fear could spur energy demand.BB

Oil Cap | Some Biden administration officials are growing concerned that their plan to cap the price of oil purchased from Russia may backfire after the OPEC+ alliance’s surprise production cut last week, people familiar with the matter told us. The plan seeks to keep enough Russian supplies on the global market to stave off a spike in prices, but the proposal has been complicated since its inception and the subject of intense diplomacy with European allies. BB

Saudi Arabia says OPEC+ oil cut 'purely economic' - Saudi Arabia rejected as "not based on facts" statements criticising the kingdom after an OPEC+ decision last week to cut its oil production target despite U.S. objections, saying it serves the interests of both consumers and producers. The OPEC+ decision was adopted through consensus, took into account the balance of supply and demand and was aimed at curbing market volatility, the Saudi foreign ministry said in a statement on Thursday. 

Druzhba pipeline leak reduces Russian oil flows to Germany - Germany said on Wednesday it was receiving less oil but still had adequate supplies, after Poland found a leak in the Druzhba pipeline that delivers crude from Russia to Europe that Warsaw said showed no sign of being caused by sabotage. The discovery of the leak in the main route carrying oil to Germany, which operator PERN said it found on Tuesday evening, comes as Europe is on high alert over its energy security in the aftermath of Moscow's invasion of Ukraine which has cut supplies of gas.

India allows broken rice exports backed by already issued LCs - India will allow overseas broken rice shipments of 397,267 tonnes backed by letters of credit (LCs) issued before Sept. 8, the government said in a notification on Wednesday, as a sudden ban on exports of the grain prevented the loading of cargoes. On Sept. 8, India banned exports of broken rice as the world's biggest exporter of the grain tries to augment supplies and calm local prices after below-average monsoon rainfall curtailed planting. 

Sinking demand combats shrinking U.S. soy crop as trade nails corn yield - The often surprising nature of the U.S. Department of Agriculture’s crop reports delivered on Wednesday as U.S. soybean yield fell below most industry estimates, though cuts to export demand and increased international competition minimized the impact of a smaller crop on the U.S. balance sheet. U.S. corn yield is now nearly 10 bushels per acre lower than the earliest projections, though the trade has anticipated that decline very well. 

U.S. may block Russian aluminium imports - The Biden administration is weighing restricting imports of Russian aluminium as it charts possible responses to Moscow's military escalation in Ukraine, a person briefed on the conversations told Reuters. Such a move, which has not been finalized, would likely boost global prices for the metal used in a wide range of consumer products and could reverse a previous White House stance that such sanctions could wreak havoc on global markets.

Russian copper builds up in LME warehouses - Significant volumes of unwanted Russian-origin copper have been deposited in London Metal Exchange approved warehouses in Germany, the Netherlands and Taiwan since the middle of September, two sources familiar with the matter said. Western countries imposed sanctions on Russian banks and wealthy individuals connected to President Vladimir Putin after Russia invaded Ukraine, in what Moscow calls a "special military operation", but so far there are no restrictions on its metals.

China to slash winter gas purchases easing Europe's supply pressures - China's liquefied natural gas (LNG) importers will stay out of the spot market this winter as demand growth has skidded to the slowest since 2002, meaning the world's top importer of the fuel will likely avoid competing with crisis-hit Europe for supplies. That reduced demand means China should yield its top importer title back to Japan this year, easing pressure on the global market and offering much-needed relief to Europe, which is scrounging for cargoes after top supplier Russia cut pipeline gas flows amid the Ukraine crisis.

Gas price cap deal eludes EU countries, for now - The European Union will unveil proposals next week to launch joint gas buying within months and develop an alternative gas price benchmark, but a meeting of EU countries on Wednesday left it unresolved whether the package would include a gas price cap. The 27-country EU is plotting its next move to tame soaring energy prices and shield consumers from surging bills, as Europe heads into a winter of scarce Russian gas, a cost of living crisis and the looming threat of recession. 

French wheat export forecast raised amid Ukraine corridor uncertainty - Farm office FranceAgriMer on Wednesday raised its forecast for French soft wheat exports outside the European Union, now seen 15% above last season, but said sales would depend on whether a Ukrainian grain export corridor was extended. Soft wheat shipments outside the 27-member bloc are now seen at 10.1 million tonnes, up from 10.0 million in July, FranceAgriMer said in a cereal supply and demand outlook.

Taiwan’s MFIG buys about 65,000 tonnes corn from Brazil -traders - Taiwan's MFIG purchasing group bought about 65,000 tonnes of animal feed corn, expected to be sourced from Brazil, in an international tender which closed on Wednesday, European traders said. It was believed to have been sold by trading house Pan Ocean

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