Oil rallied after a report Russia will push OPEC+ to cut production.

• The pound and gilts recovered some ground Tuesday

• The continuing rout on Wall Street, with bonds sliding alongside equities, left investors increasingly convinced a recession is inevitable

• Chinese industrial profits slumped year-to-August at a faster pace than in the previous month

• 'Bond vigilantes' are back after a long break, says the economist who coined the term in the 1980s 

• The UK selloff abates but (almost) nobody's reassured

• Germany suspects sabotage on the Nord Stream pipeline

• All hail coffee. Apparently it's the secret to a longer life

• London's share of European IPO proceeds shrank to a 12-year low

• Goldman raised its forecast for ECB rate hikes. It now expects increases of 75 basis points at both of its next two meetings

• Oil rallied after a report Russia will push OPEC+ to cut production

• India won't bend. It's ruled out changing tax policies to make it easier for the nation's bonds to be added to global indexes

• Florida battens down the hatches as Hurricane Ian looms

• US housing prices are falling for the first time in ten years as the pandemic frenzy calms

• Gun violence costs the US $557 billion a year, a new study shows

• Hunger is on the rise in the US as benefits run out

• The IMF admonishes the UK over its fiscal plans

• Russia claims victory in Ukrainian "referendums

My View

Putin’s decision to call up 300k men to fight the war in Ukraine is adding to pressures on the economy. Many are trying to leave the country rather than fight (air tickets have reached a huge premium) , and those that are going are leaving industries with a bare minimum workforce.

Although damage to the NS pipeline should be a concern; is it really when Europe is moving away from Russian gas and they have turned supply off anyway? Russia has almost completed its new pipeline into China and once finished by the end of this year, I doubt they will need Europe to buy their gas.

You should not expect these to bottom any time soon! As much as central bankers suggest recessions are avoidable, they are not. My view is these are acceptable to central banks as by destroying demand inflation will drop. The key point is that central banks will rates higher for longer to ensure they have inflation under control again, and will be cautious when it comes to lowering rates late next year or 2024.

Global News

US President Joe Biden criticized air carriers for “hidden fees” and pledged efforts to ensure consumers see some relief in red-hot inflation, as rising costs threaten his party’s prospects for midterm votes in November.BB

Senate Democrats released a short-term funding bill to avert a government shutdown, but it includes a measure to speed up energy project permits opposed by most Republicans and some Democrats. BB

Fed officials warn of higher rates. "We are moving very aggressively," Neel Kashkari told the WSJ, calling the current pace appropriate. James Bullard warned the central bank's credibility is threatened by price pressures and urged further hikes. Charles Evans said rates could peak in March. All three suggested the US may avoid a recession.BB

The S&P 500 dropped for the sixth straight session on Tuesday, its longest losing streak since February 2020, sparked by central bank tightening programs and exacerbated by the energy crisis in EuropeBB

The chaotic UK selloff is a test for fearful investors, writes John Authers. This isn't, at its core, a currency crisis but a crisis of confidence within the bond market, which is much more dangerous. What happens next may set precedent for the confidence game playing out in markets.BB

The UK's tax-cutting blitz is still ruffling feathers even as the pound stabilized.

·  At least $500 billion has been lost from Britain's stock and bond markets since Liz Truss took over as Prime Minister earlier this month. Analysts said confidence had been "sideswiped", with one describing it as "like the wild west." BB

Germany suspects damage to the Nord Stream gas pipeline was sabotage, in what would be a major escalation in the standoff with Russia. A security official said evidence points to a violent act, rather than a technical issue, causing three simultaneous gas leaks in the Baltic Sea that were so big they were seen on the radars of nearby vessels.BB

Australian researchers say they've found evidence that drinking coffee may be linked to a longer lifespan. Two to three cups of ground coffee a day is associated with a 27% lower likelihood of death than abstaining. And you don't even have to be a bean snob—even decaf and instant brews had a positive effect.BB

China is now facing rising deflation risks as local demand crumbles amid an ongoing property crisis and continued Covid restrictions, the China Beige Book said.

·  Companies reported the weakest rise in sales prices since the last quarter of 2020, the firm said.

·  Earlier, the Ministry of Commerce said demand for Chinese goods is weakening abroad, but trade should still grow this half.BB

Hurricane Ian could be one of the costliest storms in US history—around $45 to $70 billion in economic losses. The hurricane is set to make landfall in Florida Wednesday or early Thursday, potentially as a catastrophic Category 4 storm. It hit Cuba as a Category 3 storm in the early hours of Tuesday with 125 mile per hour winds and life-threatening storm surge. Track Ian’s path here. Vietnam meanwhile is evacuating 400,000 people ahead of Typhoon Noru, which may be the strongest storm facing that country in two decades. BB

US regulators are poised to announce a settlement of about $2 billion with firms across Wall Street for failing to monitor employees using unauthorized messaging apps, including Meta-owned WhatsApp. The penalties are poised to be the largest of their kind.BB

US home prices are falling—the first time that’s happened in a decade.  A national measure of prices in 20 large cities fell 0.44% in July, the first drop since March 2012, with the biggest month-over-month declines in San Francisco (-3.6%), Seattle (-2.5%) and San Diego (-2%). Meanwhile the housing picture in London is looking dire.BB

Prices in British shops hit a fresh record high this month of 5.7%, the British Retail Consortium said. Retailers are increasingly passing their costs on to consumers. Food bills are rising the most, gaining 10.6% in September.BB

Russia declared victory in stage-managed "referendums" in occupied Ukraine. The US will announce another $1 billion in security aid to Ukraine today, people familiar said. Ursula von der Leyen joined those accusing Russia of sabotaging the Nord Stream pipeline and warned of "the strongest possible response" if Moscow's involvement is confirmed BB

France is accelerating its plan to boost the production of nuclear energy, with work starting on its first EPR2 reactor before the end of President Emmanuel Macron’s second term, the minister for energy transition, Agnes Pannier-Runacher, told local radio. BB

Dirty Secret | Blue ammonia is a little-known fuel made from hydrogen that’s billed as a potential clean answer to Europe’s energy woes. Yet it has a dirty secret. The C02 captured in its production has been used by some of the world’s biggest oil producers to extract fossil fuels difficult to reach, raising concerns it will be the latest manifestation of greenwashing.  BB

The EU is set to add the Bahamas to its blacklist of governments its considers uncooperative because it says the archipelago continues to facilitate the operation of offshore firms for tax evasion. The bloc is also expected to include the Caribbean nations of Anguilla and Turks and Caicos next week, we have learned. BB

Russian-installed officials in four occupied regions of Ukraine reported huge majorities of votes in favour of joining Russia as the United States planned a U.N. resolution condemning the referendums as shams and Russia remained defiant. The United States was also preparing a new round of sanctions against Russia should it annex Ukrainian territory and a $1.1 billion arms package for Ukraine that will be announced soon, U.S. officials said.BB

Commodities

European natural gas bubbled up again as a spat between Moscow and Kyiv over fuel transit payments exacerbated an already volatile market. Benchmark futures surged after Gazprom warned of sanctions against Naftogaz.

·  Prices were already under pressure after Nord Stream pipelines were hit in what Germany and the US said looked like sabotage.

Italy has sourced enough alternative gas supplies from Algeria and Egypt to make up for any shortfalls this winter if Russia were to immediately cut off all exports, we were told. The boost will cover the remaining supplies Italy still gets from Russia. The country originally expected to achieve independence from Russian gas by spring 2025. BB

China's oil demand set to recover as COVID restrictions ease - China's economy is recovering from a trough hit in the second quarter, with oil demand expected to rebound next year as Beijing eases COVID-19 restrictions, senior Chinese refining executives said on Wednesday. The recovery will come on the back of an expected contraction in oil demand in the world's biggest energy consumer in 2022, the first in two decades, as China's zero-COVID policy ravaged its economy and restricted movements.

Russia seen suggesting OPEC+ cuts oil output by 1 mln bpd - Russia is likely to propose that OPEC+ reduces oil output by around 1 million barrels per day at its next meeting in October, a source familiar with the Russian viewpoint said on Tuesday. The meeting will take place on October 5 against the backdrop of falling oil prices and months of severe market volatility which prompted another top OPEC+ producer, Saudi Arabia, to say the group could cut production.

Ukraine 2023 winter wheat sowing 16% complete - Farms in regions controlled by the Ukrainian government have sown 622,000 hectares to winter wheat for the 2023 harvest, or 16% of the expected area, the agriculture ministry said on Tuesday. The ministry did not provide a forecast, although Agriculture Minister Mykola Solsky told Reuters last month that the area could fall to 3.8 million hectares from 4.6 million a year earlier because of Russia's invasion. 

Argentine weekly soy sales slow after FX crackdown -government - Argentina's grain producers have sold 65.2% of the 2021/22 soybean harvest so far, the country's agriculture ministry said on Tuesday, lagging behind the sales rate reported at the same time in the previous season. Argentina is the world's leading exporter of oil and meal derived from soybean. Its production of the grain in the 2021/22 cycle was 44 million tonnes.

MMG to invest $2 bln at its troubled Peruvian Las Bambas mine - Chinese miner MMG Ltd expects to invest $2 billion in the next five years to expand its troubled Las Bambas copper mine in Peru and is eyeing potential acquisitions to further increase production, an executive said on Tuesday. Las Bambas General Manager Edgardo Orderique said at the Perumin mining conference that the company is hoping to double copper production by 2025 and double it again by 2030.

Norway's Norsk Hydro cuts aluminium output as demand falls - Norwegian aluminium producer Norsk Hydro will cut output at two of its Norway plants due to falling European demand, the company said in a statement on Tuesday. "The extraordinary situation in the European economy and energy market is causing market uncertainty and a decline in demand for our aluminium products," Hydro said.

Europe investigates 'attacks' on Russian gas pipelines to Europe - Europe was investigating on Tuesday what Germany, Denmark and Sweden said were attacks which had caused major leaks into the Baltic Sea from two Russian gas pipelines at the centre of an energy standoff. But it remained far from clear who might be behind the leaks that were first reported on Monday or any foul play, if proven, on the Nord Stream pipelines that Russia and European partners spent billions of dollars building.

Germany plans to extend lifespan of two nuclear power plants - Germany expects to extend the lifespan of two of its last nuclear power plants Isar 2 and Neckarwestheim beyond their planned phase-out as declines in France's nuclear power supply have worsened, Economy Minister Robert Habeck said on Tuesday. Germany had planned to complete a phase-out of nuclear power by the end of this year but a collapse in energy supplies from Russia because of the war in Ukraine has prompted the government to keep two plants on standby until April.

Senegal to seek talks with India over rice export ban - Senegal plans to hold talks with India to secure a much-needed rice supply after India banned exports of broken rice globally and imposed tariffs on some other types, the West African nation's president told business leaders late on Monday. India and Pakistan are Senegal's two top sources of rice, a major food staple in the country. Senegal grows only about half the rice it consumes.

South Korea’s MFG buys estimated 137,000 tonnes corn in tender - South Korea's Major Feedmill Group (MFG) has purchased an estimated 137,000 tonnes of animal feed corn expected to be sourced from South America or South Africa in an international tender which closed on Tuesday, European traders said. One consignment of 69,000 tonnes was bought for shipment by Nov. 10 and arrival in South Korea around Dec. 20 at an estimated $333.38 a tonne c&f plus a $1.25 a tonne surcharge for additional port unloading. 

Crypto/Digital

The “Great Resignation” from the C-suites of the crypto world continued apace this week, with Alex Mashinsky resigning as head of bankrupt lender Celsius Network and Brett Harrison announcing plans to step down as president of the FTX US exchange.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