Dubai's prime real estate prices jumped 89% over the past 12 months.

• Several gauges show ship congestion continues to clear up even as shortages persist.

• Chinese residents are experiencing the worst job prospects on record amid a slowdown in the economy.

• Russia hits Kyiv after a bridge attack.

• The BOE steps up its bond-market support.

• Investors brace for a brutal earnings season. 

• Dubai's prime real estate prices jumped 89% over the past 12 months.

• Japan reopens for mass tourism.

• Everyone's sounding gloomy about the world economy.

• Jamie Dimon predicts a US recession by mid-2023.

• Big banks are predicting a rocky earnings season, with many companies already reducing their forecasts.

• Ukraine receives pledges over air defense systems.

• Russian companies seek shelter in Hong Kong.

• Lockdown fears return to Shanghai.

• Coinbase won a license to provide services in Singapore.

The BoE doubled it Gilt buying to £10 bn per day to support the market and drive down yields that were almost at 5%. This could be due to lack of trust in the government and its spending, and/or expectations the BoE may have to become more aggressive with their rate increases to prevent the pound going into meltdown and to attempt to stem inflation.

Shipping costs that rose significantly have returned the levels of two years ago, again reducing costs to companies importing/exporting. Microchip demand continues to drop.

I am not sure earnings will be that bad in Q3 in the U.S. I expect the impact to be in Q4 and this will vary per sector. Costs have dropped in many areas and companies are holding to the extra savings thereby boosting their profit margin short-term. Longer-term as job losses begin and consumers cut back, companies will have to reduce prices to attract sales, thus reducing their profit margin and bottom line. Everyone watches Apple results; however, I think the tech sector may be weaker with other sectors performing better. (Just my view!)

I suspect investors have backed away from buying treasuries/bonds as they know the rise in rates has not finished yet and therefore, they are holding out for higher yields. Plus, as rates will remain higher for longer, there is no rush as the rates will be available for some time.

Global News

The Fed is closing ranks around a goal of quickly raising its benchmark rate to around 4.5% then holding it there. But more than half of professional forecasters worry the Fed poses the greatest risk to the economy, according to a National Association for Business Economics survey released Monday.BB

The annual meetings of the IMF and World Bank are kicking off in Washington, with the warning of a possible $4 trillion loss in the world’s economic output ringing in the ears of policy markers. BB

Hedge funds tumble. Tiger Global fell 4.4%, extending its decline for the year to 52%. Whale Rock dropped 6%, widening its YTD loss to 41%. Coatue Management dipped 1.5% last month, extending its drop for the year to 18.7%.BB

Russia hit Kyiv and other Ukrainian cities early Monday, a day after President Vladimir Putin blamed Ukraine for an attack on a bridge connecting Crimea to Russia. Russia fired 75 missiles, more than half of which were intercepted by Ukrainian air defenses, according to Ukraine’s Commander-in-Chief of the Armed Forces Valeriy Zaluzhnyi. “They are trying to destroy us and wipe us off the face of the Earth,” Ukrainian President Volodymyr Zelenskiy said on his Telegram channel, urging people to stay in bomb shelters. BB

· Russian troops will return to Belarus in large numbers, months after most departed. President Alexander Lukashenko didn’t specify exact numbers or explain why the forces would be heading back. But he said the influx would be significant.

· Supply-chain issues: Allies that have funneled weapons to Kyiv are now running low, and with defense spending a lower priority for years, it could take time for contractors to meet the shortfall.BB

· The EU is in talks to extend Ukraine around €18 billion in funding next year to help cover urgent financing needs.  Meanwhile, President Vladimir Putin threatened more strikes after Russia hit Kyiv and other cities in the most intense barrage of strikes since the first days of its invasion.BB

The Bank of England started the week with stepped-up measures to support the bond market. It will increase the size of its buying operations for the next five days and launch a longer-term facility designed to ease liquidity pressures faced by liability-driven investment client funds. The BOE's latest effort to bring order to markets following the turmoil caused by the mini-budget was met with little reaction from gilts, which may be welcomed by officials keen to stress that their salvo is designed to bring stability rather than pull down yields. The Treasury also made its own attempt to calm markets, with Chancellor of the Exchequer Kwasi Kwarteng saying he will announce his medium-term fiscal strategy and accompanying economic forecasts on Oct. 31, earlier than initially planned. BB

UK latest. Kwasi Kwarteng needs to find savings of at least £60 billion to stabilize public finances and shore up market confidence before he presents his Oct. 31 fiscal plan, the IFS said. Retail sales grew 2.2% year on year in September, BRC and KPMG data showed. Still to come: Wage growth probably accelerated to 5.3% in August from a year earlier, underlining the BOE's challenge in containing inflation.BB

Investors expect this earnings season to pummel stocks further and will watch Apple in particular as a bellwether of global economic conditions. More than 60% of the 724 respondents to the latest MLIV Pulse survey say this earnings season will push the S&P 500 Index lower. About half of poll participants expect the S&P 500 to decline even further away from average valuations from the past decade. BB

Tech cold war. The US' sweeping new curbs on tech exports to China may wreck the latter's efforts to develop wide swathes of its economy—a sign the two nations are officially at "economic war."

· Chip stocks slipped after the restrictions added to industry woes and stoked concerns the downturn is far from over.

· China faces a big setback, Nomura said, and Citi warned the move will indirectly hit global chipmakers' businesses in the longer term. China called the rules unfair and a blow to global industry.

· Reconciliation isn't possible anymore, said SemiAnalysis' Dylan Patel. He estimates the curbs may reduce global tech and industry trade by billions of dollars.BB

Japan reopens for tourism today, allowing visa-free arrivals for vaccinated visitors from 68 countries and individual travel. An earlier relaxation for tour groups generated little interest. In China, Shanghai tightened testing rules for domestic arrivals. BB

Hunker down, recession imminent. At least according to Jamie Dimon. The JPMorgan CEO said serious headwinds are likely to push the US and global economies into recession by mid-2023. Surging inflation, higher-than-expected interest rates, no more quantitative easing, and Russia’s war in Ukraine are ringing alarms bells, he added. BB

The biggest players in the $23.7 trillion US Treasuries market are in retreat. From Japanese pensions and life insurers to foreign governments and US commercial banks, where once they were lining up to get their hands on US government debt, most have now stepped away. BB

Lockdown fears have returned to Shanghai as China steps up efforts to contain Covid-19 outbreaks ahead of the Party Congress. National cases have climbed to the highest in almost two months, while just 34 in the finance hub have sparked neighborhood lockdowns and the return of green fences that marked the extended citywide shutdown earlier this year. In a sign of tensions within the country, even a city of 400,000 people with zero infections was locked down to prevent cases from getting in. Elsewhere, a fresh study has found that about 1% of people who catch the virus — equivalent to some 670 million worldwide — develop symptoms that last for more than a year.BB

Germany is coming around to backing the idea of joint EU debt issuance to help cushion the blow of the energy crisis, as long as the freshly raised money is disbursed to struggling member states as loans, not grants. The change in the position follows criticism from other leaders that Germany’s €200 billion national aid plan could trigger economic imbalances in the bloc. The EU’s pandemic-era SURE program — which offers employment support of as much as €100 billion in the form of loans — could provide a blueprint for a new debt-backed instrument, we’ve been told. While details haven’t been ironed out yet, the big-ticket debt issuance item will likely come up in the discussions as EU leaders meet in Brussels next week.BB

As the Federal Reserve tightens into a recession and yield curves invert further, expect the dollar to stay bid. We could easily see further gains of 5-7% across the board. In Europe, heightened scrutiny on policy choices could see GBP/USD nearing parity later this year. ING (not my comment)

If you’re looking for a source of good news in the UK right now, the jobs market is not a bad place to look. The unemployment rate fell to another post-1970s low of 3.5%, while wage growth accelerated. And despite all the concerns about recession – which indeed is our base case for this winter – there are few signs of it in the jobs market just yet. Redundancies are low and stable, even if vacancy levels have begun to gradually tail off. ING

Commodities

Putin's attempt to stoke fears of a winter freeze are at the point of backfiring, Yale’s Jeffrey Sonnenfeld writes for the FT. More than 100 billion cubic meters of new gas supply should be brought online this year, more than enough to replace Europe's dependence on Russia. Demand is shrinking elsewhere, particularly in China. So much for Putin's “supply crunch.” BB

Australian wheat crop quality at risk due heavy rains - Widespread rains in Australia's eastern grain producing states is likely to hit the quality of the wheat crop which is scheduled to be harvested at the end of the year, traders and analysts said. Wheat quality downgrades in Australia are set to deepen concerns over global food supplies, with the world heading towards the tightest grain inventories in years as Russia-Ukraine war curbs exports and adverse weather reduces production. 

Bean harvest wrapping up; Illinois corn disappoints - Just three of the 11 U.S. Crop Watch soybean fields still await harvest, but those should be finished early this week as most producers’ harvest paces are ahead of normal. The western Illinois corn last week became the second completed Crop Watch corn field, and the final yield score ended at 4.5, a quarter-point below expectations. 

UK court says Elliott, Jane Street can sue LME for cancelled nickel trades - A British court has granted permission for U.S.-based hedge fund Elliot Associates and Jane Street Global Trading to sue the London Metal Exchange (LME) for cancelling nickel trades in March, a court document showed. Elliott and Jane Street are demanding damages of $456.4 million and $15.34 million respectively, after the nickel price topped a record $100,000 per tonne on March 8, prompting the LME's suspension of nickel trading and voiding of trades.

Supply hits catch up with lead as LME stocks shrink - The lead market has sparked back into life after a raid on already low London Metal Exchange (LME) stocks. The LME three-month lead price jumped 12% over the course of last week, hitting a near two-month high of $2,093.50 per tonne. 

Germany girds for gas supply pain, targets $93 billion price relief plan - Germany on Monday said it plans to urgently implement a 96 billion euro ($93 billion) plan to ease pressure on consumers from surging gas prices as it was warned that the supply situation heading into winter remained tense even with full reserves. Berlin said it supported the commission's proposals to give households and small and medium-sized businesses a one-off payment worth one month's gas bill this year and a mechanism to limit prices from March, and it was working to implement them.

Thermal coal prices retreat as winter supply fears ease - The prices of key thermal seaborne coal grades are retreating amid signs that supplies will be sufficient to meet winter demand in both Europe and Asia. In some cases, the price of coal used mainly in power plants has fallen back to levels close to those that prevailed before Russia's Feb. 24 invasion of Ukraine, which caused a sharp spike as buyers feared a loss of exports from both countries.

Brazil unusually re-exports fertilizer amid storage shortage - port authority - Brazil, which normally relies on fertilizer imports to boost crop yields, is re-exporting cargoes as there is nowhere to store them following a surge in inbound shipments earlier this year, according to the port authority of Antonina on Monday. In an unexpected turn of events, an importer will re-route 24,700 tonnes of DAP fertilizer that had arrived from Jordan but will now be shipped to Turkey over the next few days, the authority said. 

China sets 2023 import quota for corn, wheat same as previous year - state planner  - China on Monday set its low tariff rate quota for wheat, corn and rice imports in 2023 at the same volumes as the previous year. The Tariff Rate Quota (TRQ) for wheat imports in 2023 was set at 9.636 million tonnes, according to a notice published on the website of the National Development and Reform Commission.

Crypto/Digital

Portugal currently doesn’t tax crypto gains unless they come from professional or business activities. But that’s about to change. The government plans to start imposing levies on digital-currency gains on purchases held for less than a year in a major policy shift for one of Europe’s most crypto-friendly nations. 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