UK retail sales fell more than expected in September after the death of Queen Elizabeth II curtailed activity and cost-of-living pressures hit harder.

• The Biden administration is exploring the possibility of new export controls that would limit China’s access to some of the most powerful emerging computing technologies.

• Japan’s core inflation reached 3% for the first time in over three decades excluding tax-hike impacts, yet the spike is unlikely to move the central bank away from its monetary easing stance. 

• European Central Bank will act much more forcefully than previously anticipated to rein in record inflation, even as the euro zone succumbs to a recession, according to a survey of economists.

• Germany's main borrowing cost rose above 2.5% for the first time in more than a decade as traders lifted bets on ECB rate hikes.

• UK retail sales fell more than expected in September after the death of Queen Elizabeth II curtailed activity and cost-of-living pressures hit harder.

• US equities log their best week since June after bonds U-turn.

• In a day of stunning reversals, stocks staged a furious rally after a selloff in Treasuries dragged yields down from their highest since 2007. 

• The Japanese currency soared against the dollar after authorities there intervened, again, to prop it up. The yen had earlier reached a fresh 32-year low of 151.95.

• US eyes Russia oil price cap above $60 to keep supply flowing.

• US pump prices are falling again, but Exxon is still making a killing. 

• Xi installs only friends, picks Li Qiang for premier.

• Japan spends billions to prop up the yen.

• Say bye-bye to Boris Johnson.

• Boris Johnson won't get his old job back. He pulled out of the race to replace Liz Truss as Conservative leader and PM, saying the party wouldn't be united if he won.

• Yuan, Chinese stocks tumble on Xi overhaul.

• Tesla cuts prices of its cars in China.

• ING sees sterling at $1.05 by year-end and BofA is sticking with its prediction of parity.

• China markets shudder as Xi cements power

• Another big rate-hike looms in Europe 

Bidens plan to control certain computer technology may be further reaching than just China as he tries to prevent those he sees as a threat, both economically and from a military standpoint using American technology against the USA. In Chinas case it may hold them back for a few years but eventually they will still gain the technology or even become more advanced!

Xi Jinping now seems to have all the power and for as long as he wants it!

Sadly, Boris decided not to split the Tory party by standing for a second run as PM. The UK should now be given a General Election as the Tories have made a mockery of politics. I believe any time a PM steps down it should trigger an automatic GE, this would also prevent all this political backstabbing! With political chaos and a weakening economic picture in the UK and the EU also heading for a recession I will not be looking to long their currencies.

Global News

The dollar is a little weaker after seemingly large-scale FX intervention from the Bank of Japan (BoJ) and a WSJ article hinting that the Fed is ready to slow the pace of tightening. But decent US 3Q GDP growth and higher inflation readings this week should keep the dollar bid on dips. This week also sees central bank meetings in the eurozone, Japan and Canada ING

President Joe Biden’s administration is exploring the possibility of new export controls that would limit China’s access to some of the most powerful emerging computing technologies, according to people familiar with the situation. The potential plans are in an early stage and are focused on the still-experimental field of quantum computing, as well as artificial intelligence software. If implemented, the measures would follow separate restrictions announced earlier this month aimed at stunting Beijing’s ability to deploy cutting-edge semiconductors in weapons and surveillance systems. BB

As the US escalates its campaign to undermine the Chinese semiconductor industry, Europe is trying—with some success—to avoid becoming collateral damage. And one of China’s most promising chip designers may have already navigated around the Biden administration’s export restrictions.BB

Twitter shares tumbled as much as 16% in pre-market trading on Friday after reports that Biden administration officials are discussing whether the US should subject some of Elon Musk’s ventures to national security reviews. Twitter is also managing the fallout from a Washington Post report that Musk aims to slash its staff by 75% in a matter of months. Meanwhile, Snap reported its slowest quarterly sales growth ever on Thursday, fueling a  $42 billion slump in social media shares. BB

The US budget deficit fell by a record in the 2022 financial year, a second straight drop that reflects the drying up of pandemic aid spending alongside a surge in revenues propelled by wages and a level of American employment unseen in a half-century. The headline gap between the government’s spending and revenue figures are a perennial hot-button issue in Congress, often wielded as a key metric as Democrats and Republican push competing agendas. President Joe Biden is arguing that, if the GOP takes power in Congress, they will try to leverage the issue of debt to cut Social Security and Medicare. BB

Ukrainians are facing rolling blackouts after Russian attacks destroyed about one third of their power stations, Kyiv authorities said. Launched against infrastructure and civilians as Kremlin forces lose ground to Ukraine’s soldiers, some of the destruction has been perpetrated by Iranian drones. At home, Russia’s longstanding demographic decline is worsening, first from Covid-19 and now from Vladimir Putin’s war. But the Russian leader, with his repeated nuclear threats, is focused on a broader agenda, writes Andreas Kluth in Bloomberg Opinion. He has “kicked off a new and global arms race,” Kluth says. BB

Xi Jinping used his widely watched speech at the Communist Party Congress to assert the “wheels of history” are rolling toward “China’s reunification” with Taiwan. US Secretary of State Antony Blinken said the comments indicate China is on a faster timeline to attempt a forcible seizure of the island democracy. Xi, with an unprecedented third term in the offing, is raising concerns of a Mao Zedong-style personality cult. But not all Chinese are happy with his authoritarian government, given the slogans posted in Beijing and other cities calling for elections. BB

Xi Jinping filled China's paramount bodies with close allies while securing a third term. The six appointees to the Politburo Standing Committee include probable next premier Li Qiang, the Shanghai party chief. Absent from top jobs: Members of rival factions, senior economic officials, and women. Li Keqiang, Liu He, the PBOC's Yi Gang and banking regulator Guo Shuqing were dropped from the Central Committee. BB

China saw GDP grow 3.9% year-on-year in the third quarter of 2022, faster than the consensus forecast of 3.3% YoY and 0.4% YoY in the second quarter. This is mainly a result of more flexible Covid measures after the long lockdown in Shanghai during March to May.

Among all the industries, information and software technology grew the fastest at 7.9% YoY and the financial services industry which grew 5.5% YoY, while real estate contracted 4.2% YoY due to uncompleted projects that almost paused activities from land bidding to housing starts in the industry. ING

Japan probably spent over $30 billion to prop up the yen last week, the FT reported. The currency soared the most against the dollar since March 2020 on Friday in the US as Nikkei reported the intervention. PM Fumio Kishida declined to confirm the action, but said the country wouldn't shy away from "appropriate" steps. He spoke from Australia, where he signed a bilateral security pact with counterpart Anthony Albanese. BB

Giorgia Meloni plans to uphold Italy's pro-Ukraine and pro-NATO stance, but her government is set to make a shift on domestic policy to give more help to local companies and industry. Italy's new PM is expected to provide more details of her policies tomorrow. BB

The European Central Bank is set to enter territory last visited in the run-up to the global financial crisis as it raises interest rates during what looks likely to be a recession. It was July of 2008, just as the euro area began four quarters of contraction, when the Governing Council raised borrowing costs for the first time in more than a year, only to reverse course soon after the collapse of Lehman Brothers. Attention is increasingly switching to how high the bank will eventually go. Analysts polled by Bloomberg see the deposit rate peaking at 2.5% in March, though expect the pace of hikes to diminish after this month. BB

The European Central Bank is priming another hefty hike in interest rates this week as the attention increasingly switches to how high it will eventually push. A second straight three-quarter-point increase — an increment that appeared almost inconceivable earlier this year but is becoming the norm after three such moves by the Federal Reserve — is all but a done deal on Thursday, bringing the deposit rate to 1.5%. Few reckon it will settle there. But investors and economists wonder how far it can be lifted as an energy-driven recession threatens to engulf the euro zone and households grapple with surging heating and mortgage bills. BB

French President Emmanuel Macron last week slammed US trade and energy policies for creating “a double standard,” with lower energy prices domestically while selling natural gas to Europe at record levels. Macron will be hitting these points hard when he visits Washington for a state visit in early December. BB

China Controversy | German Chancellor Olaf Scholz denied reports that he has already reached a decision over the disputed sale of a stake in a Hamburg container terminal to China’s state-owned shipping conglomerate Cosco Shipping Holdings. He said last week that the Chinese company didn’t intend to buy the whole Hamburg port, but only a minority stake in one of Hamburg’s four container terminals. BB

Low Confidence | Euro-area consumer confidence stayed close to a record low in October, highlighting the continued risk of a recession this winter as households struggle with surging inflation and an acute cost-of-living crisis. A monthly gauge from the Commission inched up to -27.6 from -28.8 in September, according to preliminary data released last week. BB

German Fund | Germany’s lower house of parliament approved the ruling coalition’s plan to borrow as much as €200 billion to tackle the energy crisis as well as the required suspension this year of a constitutional limit on net debt. Scholz said the new off-budget mechanism would allow measures to put a “large protective umbrella” over Europe’s biggest economy. BB

Commodities

China's Sept crude oil imports fall, fuel exports hit 15-mth high - China's crude oil imports in September were 2% below their level a year earlier, data showed on Monday, as independent refiners curbed throughput amid thin margins and lacklustre demand. However, state-run refiners lifted fuel exports to the highest monthly volume since June 2021 to cash in on robust export margins, according to data from the General Administration of Customs that was released a week behind schedule. BB

Russia poised to largely skirt new G7 oil price cap - Russia can access enough tankers to ship most of its oil beyond the reach of a new G7 price cap, industry players and a U.S. official told Reuters, underscoring the limits of the most ambitious plan yet to curb Moscow's wartime revenue. The Group of Seven countries agreed last month to cap Russian oil sales at an enforced low price by Dec. 5 but faced consternation from main players in the global oil industry who feared the move could paralyse the trade worldwide.

Ukraine accuses Russia of blocking full implementation of grain deal - Ukraine said seven vessels sailed off from its ports on Sunday carrying grain bound for Asia and Europe, but accused Russia of blocking the full implementation of Black Sea grain deal. "Russia is deliberately blocking the full realisation of the Grain Initiative. As a result, these (Ukrainian) ports in the last few days are working only at 25-30 percent of their capacity," Ukraine's Infrastructure Ministry said in a statement via the Telegram messaging app.

China Sept soybean imports jump 12% from a year earlier -  China's soybean imports in September rose 12% from a year earlier to 7.72 million tonnes, customs data showed on Monday, reversing a months-long trend of low arrivals. The world's top buyer of soybeans curbed purchases in prior months because of high global prices and poor profits from crushing beans to make animal feed.

China's September copper imports up more than 25% on year ago - China imported 25.6% more copper in September than in the same month a year earlier, with demand expected to benefit from more planned state spending on infrastructure to offset the slowing economy of the world's top metal consumer. Unwrought copper and copper product imports into China - including anode, refined, alloy and semi-finished copper products - totalled 509,954.1 tonnes in September, data from the General Administration of Customs showed on Monday.

Rio Tinto board needs mining skills, geographical diversity - chairman - The board of directors of global miner Rio Tinto needs more mining and renewable energy experience and a more diverse geographical background, its chairman Dominic Barton said on Friday. "I think there's a lot of changes that need to occur. On the board we need the mining experience," Barton said in a pre-recorded interview at the FT Mining Summit in London.

Germany evaluating if consumer gas price brake can be brought forward - German finance minister Christian Lindner said on Sunday it was not yet clear whether a gas price brake for consumers and small businesses planned from March could be brought forward, pointing to technical and legal difficulties in accelerating the move. Some state ministers have called for the price brake to come into force in January, as will be the case for larger industrial firms, in order to support smaller businesses and households through the winter.

China's Sept coal output jumps 12.3% on year, hits record daily levels - China's September coal production jumped 12.3% from a year earlier to 390 million tonnes, official data showed on Monday, reaching record average daily levels as mines resumed operation after heavy rainfall in the summer months. The average daily output was equivalent to 13 million tonnes, according to data from the National Bureau of Statistics, which compares to 11.95 million tonnes per day in August and 11.14 million tonnes per day a year earlier.

India rice export curbs to end a decade of price stability - India's recent curbs on rice exports could trigger a rally in global prices after more than a decade of stability, traders said, as New Delhi's protectionist move coincides with falling output in other major producers and rising global demand. Uneven monsoon rains hit rice planting in India, prompting the export restrictions in September, and floods have cut output in Pakistan even as consumption has grown in top importers such as Bangladesh and the Philippines. 

Turkey buys 470,000 tonnes milling wheat in tender - Turkey's state grain board TMO has provisionally purchased about 470,000 tonnes of wheat in a large international tender which closed on Friday, traders said. This is a little below the tender volume of 495,000 tonnes but no more purchases are expected on Friday. The TMO can buy slightly more or less than the tender volume.

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