US home sales fell 10.9% in September after August's unexpected gain.

• Big Tech misses the mark

• Banks enjoy a trading windfall

• The new Covid boosters aren’t better than the old ones, one study finds 

• Earth is set to heat up by more than 2 degrees Celsius 

• Too much gas: the surprise turn in Europe’s energy crisis

• Sunak buys himself time with fiscal plan delay.

• Meta adds to the tech sector's woes. 

• Canada seems to be slowing the pace of hikes. The BOC raised rates by 50 bps, less than anticipated

• US home sales fell 10.9% in September after August's unexpected gain.

• Pfizer is being investigated in Italy for allegedly hiding at least €1.2 billion in profit by transferring money to units in other countries.

• Japan's upcoming economic stimulus package will total ¥67.1 trillion ($458 billion), Kyodo reported.

• Tesla is under a US criminal investigation over the claims that its EVs can drive themselves, Reuters reported.

• Musk visits Twitter’s office and gets ready to address staff.

• New visa lets tourists with $130,000 live in Bali for 10 years.

• The ECB is set to hike today

• Sunak refuses general election as Starmer mocks PM for losing to Truss and reinstates fracking ban.

There is plenty going on in the world. Geopolitically we have a growing US-China economic and industrial rift, Russia invading Ukraine and the risk of China attacking Taiwan soon. Then we have pandemic-induced supply-chain issues still impacting and the war-generated energy crisis plus a shortage of workers caused by demographic aging or a lack of the right skills for jobs available. Finally, we have central banks aggressively hiking rates to try and bring down high inflation. 

Data in the U.S is suggesting the rate hikes are starting to impact the economy with lower demand, or possibly its just consumers becoming more thrift with their spending! Later we have PCE data which is one of the Feds preferred metrics for inflation and any miss demonstrating lower inflation will probably see the USD weaken further and stocks rally more, with higher than expected firming the USD and sending stocks lower again.

Today we have the ECB which should be another 75-bps increase and next week we have the Fed and BoE meeting which will produce further rate increases. The Fed will have to decide on rates without the NFP data this time, although they will have the ADP to use for their assessment of employment conditions. As I keep posting, the central banks determination to beat inflation means rates will stay higher for much longer than expected and I still believe there must be a recession, although the depth will differ between economies.

Global News

The quarterly updates from Microsoft, Alphabet and Texas Instruments underscored growing pressure on everything from corporate IT budgets to digital ad spending and chips for industrial machinery. Microsoft posted its weakest quarterly sales growth in five years, while sales at Alphabet’s most important financial engine — the search and related businesses — fell shy of estimates. BB

Meta shares fell more than 20% in late trading. That comes on the back of a bad day for big tech overall, with post-earnings drops from Alphabet and Microsoft. Alphabet closed 9.1% lower—the biggest decline since March 2020. BB

Strong trading revenues were the common theme in earnings from Deutsche Bank, Barclays and Standard Chartered. A highly volatile third quarter for currency and bond markets proved to be a boon for Deutsche’s fixed-income trading books, as it was for StanChart’s macro trading income. That said, they also acknowledged a challenging macroeconomic environment ahead, with all three lenders increasing their provisions to prepare for potential credit losses. BB

China’s stock rally fizzled as the city of Wuhan locked down one of its central districts following the discovery of Covid cases. Photos posted on Chinese social media appeared to show barriers erected in the Hanyang district, where some 900,000 residents were told to stay in their homes from Wednesday BB

Xi Jinping has put himself in a position to rule China for at least another decade—and possibly for life. The question now is what he’ll do with all that power. By 2049, the 100th anniversary of the People’s Republic of China, Xi said he wants to ensure the nation “leads the world in terms of composite national strength and international influence.” It’s how he plans to get there that’s unsettling markets. BB

Rishi's not ready—so he's delaying his UK fiscal plan to Nov. 17 from Oct. 31.

· The new PM wants more time to make what he calls the " right decisions." The government is definitely looking to plug a £35 billion fiscal shortfall. He declined to say if benefits will rise with inflation. 

· The delay means the BOE will now make its next rate decision on Nov. 3 without the benefit of knowing the full direction of travel the government is setting for the economy. BB

Barclays's traders beat estimates, offsetting steep declines for its investment bankers. The firm aims to hire more than 1,000 staff to help consumers manage their finances in the looming downturn, its CEO said.

Mercedes raised its profit goal as robust sales, especially for high-end models, and healthy pricing offset energy costs and supply-chain problems. It also reported a jump in Ebit to €5.2 billion.

The offshore yuan jumped the most on record—by as much as 1.8% to 7.1917—as state banks were said to sell dollars and the greenback retreated on bets the Fed may moderate hikes.

· The move caught out proprietary desks with stop-loss levels triggered, traders familiar said.

· Bearish sentiment faded as the onshore yuan's value briefly advanced past the PBOC's fixing for the first time this month.

· Still, further depreciation is likely in the medium-term, given China's economic headwinds, RBC's Alvin Tan said. BB

Vladimir Putin added his voice to the chorus of lower Kremlin officials claiming without providing evidence that Ukraine is planning to detonate a radioactive “dirty bomb,” a non-nuclear device that uses conventional explosives to spread radioactive material, on its own soil. That the Russian leader has chimed in with what’s been called a fabrication, pretext and false-flag has NATO and Kyiv even more worried that Moscow, as has been alleged in the past, is considering doing that which it accuses others of planning. US Secretary of State Antony Blinken, in an interview with Bloomberg News, called the claims “irresponsible.” He also echoed President Joe Biden in saying Putin has been warned of the consequences his country would face for using a nuclear weapon. “We’ve communicated that very clearly and directly,” Blinken said. India, which along with China has been friendly with Russia and provided it economic support despite its eight-month war, also warned Putin against using nuclear weapons. BB

The TreasuryDirect website is facing long delays as Americans race to buy US Series I savings bonds before rates reset at the end of the month. One of this year’s best-performing investments, I bonds currently offer a 9.62% interest rate, as they’re designed to help protect Americans’ savings from inflation. That rate is expected to drop to 6.47% beginning Nov. 1. BB

Pfizer is the target of an Italian probe alleging the company hid at least 1.2 billion euros ($1.2 billion) in profit by transferring money to units in other countries. Italy’s Guardia di Finanza is alleging that Pfizer’s unit based just outside Rome, Pfizer Italia Srl, transferred excess capital to affiliates in the US and the Netherlands to avoid taxes on profits. BB

Germany is preparing for a worst-case scenario in which it needs to double financial aid to Uniper, its biggest gas supplier, to €60 billion. Uniper urgently needs money to fund replacements for its supply contracts with hundreds of local German utilities, with the bailout resulting in the full nationalization of the utility by year’s end.  BB

Commodities

US officials have been forced to scale back a plan to impose a cap on Russian oil prices, following skepticism by investors and growing risk in financial markets brought on by crude volatility and central bank efforts to tame inflation.BB

Gas prices in America may have fallen from their summer highs, but there’s a diesel shortage spreading from the Northeast to the Southeast, prompting at least one supplier to initiate emergency protocols. BB

Western officials finalizing plans for Russia oil-price cap - U.S. and Western officials are finalizing plans to impose a cap on Russian oil prices amid a warning from the World Bank that any plan will need active participation of emerging market economies to be effective. Officials said no price range has been decided yet, however one person familiar with the process said the cap will be determined in line with the historical average of $63-64 a barrel - a level that could form a natural upper limit.

U.S. crude exports surge to record, stocks up again - EIA - U.S. crude oil stockpiles rose in the most recent week, even as the volume of exports hit an all-time record, the Energy Information Administration said on Wednesday. Crude inventories rose by 2.6 million barrels in the week to Oct. 21 to 439.9 million barrels, nearly triple h analysts' forecasts in a Reuters poll for a 1 million-barrel rise.

Bunge lifts 2022 outlook after quarterly earnings beat, shares rally - Agricultural commodities trader Bunge Ltd on Wednesday raised its full-year earnings outlook after adjusted third-quarter profit topped expectations, sending its shares up more than 5%. Tight global crop supplies and strong demand have benefited supply chain middlemen including Bunge, which buys and sells crops like soybeans and corn and processes them into food, feed and biofuel.

Argentine wheat harvest forecast slashed again amid drought - Argentina's 2022/23 wheat harvest will come in at 13.7 million tonnes, the Rosario grain exchange said on Wednesday, a sharp cut from its previous forecast of 15 million tonnes amid a protracted drought that has hammered farmers in the country. Argentina is a major international supplier of wheat, a role that has come into greater focus amid Russia's invasion of Ukraine that has dented global grains supply.

Chile's government, miners still clashing over mining royalty bill - Chile's government and mining industry continued to disagree over a proposed mining royalty bill on Wednesday despite recent adjustments. The government had on Tuesday announced modifications to a proposed mining royalty bill, lowering a variable "ad valorem" rate to a flat 1% for large producers and tying another rate to operating margins, instead of the price of copper as was originally proposed.

Australia's Fortescue quarterly iron ore shipments, costs rise - Australia's Fortescue Metals Group reported a 4.2% rise in first-quarter iron ore shipments on Thursday, boosted by higher production at its key operations in Western Australia, and said rising prices of diesel and labour bumped up costs. The production report from the world's No.4 iron ore miner came against the backdrop of sliding prices of the steel-making commodity as top consumer China's strict COVID-19 curbs and under-pressure property sector have slammed its economy.

EU energy chief says gas price cap possible this winter if countries agree - The European Union could introduce a gas price cap this winter to limit excessive price spikes, but only if countries give Brussels a mandate to propose the measure, the bloc's energy chief said on Wednesday. After months of high gas prices driven by Russia slashing supplies, the 27-country EU is considering whether to cap prices - although with countries still split over the idea after weeks of talks, Brussels has not yet made a formal proposal to make it happen.

TotalEnergies secures temporary control of Lebanese offshore gas project - TotalEnergies TTEF.PA and the Lebanese government have reached a deal handing the French oil major temporary majority control of an offshore exploration block and paving the way for negotiations with Qatar over a stake in the gas project, two sources said. TotalEnergies and the Lebanese government have been tussling over the fate of Russian group Novatek's 20% stake after Beirut announced in September that Novatek would exit.

U.N. aid chief 'relatively optimistic' on Black Sea grain deal - United Nations aid chief Martin Griffiths said on Wednesday that he was "relatively optimistic" that a U.N.-brokered deal that allowed a resumption of Ukraine Black Sea grain exports would be extended beyond mid-November. Griffiths traveled to Moscow with senior U.N. trade official Rebeca Grynspan earlier this month for discussions with Russian officials on the deal, which also aims to facilitate exports of Russian grain and fertilizer to global markets.

Bolivia to temporarily suspend exports of food products amid protests - Bolivia's government said on Wednesday it will temporarily suspend exports of food products including soy and beef amid protests in the key farming region of Santa Cruz. The move is aimed at safeguarding food security in Bolivia, said the minister of Productive Development and Plural Economy, Nestor Huanca, adding that the export suspension will include soybean grain, soybean flour, soybean meal, sugar, oil and beef.

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