Awaiting US jobs report for hints of Fed tightening pace

Notes/Observations

- European markets are mixed to lower ahead of highly anticipated US non-farm payrolls and unemployment metrics. Data likely to dictate direction of risk sentiment after multiple hawkish Fed speakers overnight ruled out cutting rates in 2023 in a headstrong focus on battling inflation, despite lingering recessionary fears.

- Various countries seeing declines in FX reserves as interventions used to halt sell-offs (China, Japan, Indonesia, Thailand, Swiss, Czech).

- Inflationary risks remain key driver of bond yields.

- Nuclear war tensions continued to boil overnight after US Pres Biden said Putin's nuclear threat is biggest risk since Cuban Missile Crisis and warned Putin is 'not joking' about Russia's nuclear threat. Continued to warn of 'Armageddon' if nuclear weapons are used. Estonia PM Kallas echoed remarks that nuclear threats should be taken seriously.

- Economic data shed light on a trend of foreign reserves dropping amid a strong US dollar.

- Asia closed lower with Hang Seng underperforming at -1.5%. EU indices are mostly higher between +0.1-0.3%, with bond yields higher. US futures -0.3%. Gold +0.1%, DXY -0.2%; Commodity: Brent +0.5%, WTI +0.6%, UK Nat Gas -7.4%; Crypto: BTC -0.8%, ETH -0.3%.

Asia

- China Sept Foreign Reserves $3.03T v $3.06T prior (vs $2.998Te) [lowest since 2017].

- Japan Sept FX Reserves: $1.24T v $1.29T prior (Largest m/m fall; at lowest amount since Dec 2015).

- Japan Fin Min Suzuki stated that decline in FX reserves was related to currency intervention.

- Japan Aug Labor Cash Earnings Y/Y: 1.7% v 1.4%e; Real Cash Earnings Y/Y: -1.7% v -1.8%e.

- Japan PM Kishida confirmed would take additional measures on gas price increases and review burden on households and businesses.

Europe

- UK PM Truss said to refuse to rule out the possibility of widespread blackouts if unable to import enough energy through the winter.

- Ireland Dep PM Varadkar said note of further flexibility in post-Brexit trading rules.

Americas

- Fed Mester (FOMC voter) stated that would not cut rates in 2023. Saw more persistence in inflation and need for rates to rise higher than median of Fed policy makers.

- Fed's Waller (voter) stated that inflation was much too high, not likely to fall quickly; Anticipated additional rate hikes into early next year.

- Fed's Evans (non-voter) stated that inflation was very high right now, that was the issue that is top of mind for Fed.

- Fed's Cook (voter) stated that restoring price stability to require ongoing rate hikes. ): Focusing on lag between policy actions and effects.

- BOC Gov Macklem stated that more was to be done to douse inflation. Domestic inflationary pressures yet to ease. Pretty clear that interest rates needed to continue to move up.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 -0.19% at 395.60, FTSE -0.12% at 6,989.06, DAX -0.28% at 12,435.61, CAC-40 -0.18% at 5,925.44, IBEX-35 -0.54% at 7,470.68, FTSE MIB +0.07% at 21,156.00, SMI -0.20% at 10,370.80, S&P 500 Futures -0.23%].

Market Focal Points/Key Themes: European indices open lower across the board but pared some of the losses through the early part of the session; market generally in sideways trend ahead of US jobs data; better performing sectors include energy and financials; sectors tending downward include technology and consumer discretionary; chipmakers under pressure following outlook cut by Samsung; Telenor sells stake in its new fiber unit to KKR; SolGold to acquire Cornerstone Capital; Semcom takeover by Etteplan lapses; PureTech and Nektar in preliminary merger talks; no major earnings expected in the upcoming US session.

Equities

- Consumer discretionary: Adidas [ADS.DE] -3% (Kanye West partnership review), JD Wetherspoon [JDW.UK] +10% (earnings), Superdry [SDRY.UK] +10% (earnings), Marshalls [MSLH.UK] -20% (trading update).

- Financials: Credit Suisse [CSGN.CH] +3% (buys back debt).

- Industrials: Renault [RNO.FR] +4% (analyst action).

- Technology: ASML {ASML.NL] -2.5%, STMicroelectronics [STM.FR] -2.5%, Infineon [IFX.DE] -1.5% (AMD outlook cut; TSMC monthly sales; Samsung prelim results).

- Telecom: Telenor [TEL.NO] +3.5% (divestment), SolGold [SOLG.UK] +12% (merger).

Speakers

- ECB said have told some banks recently that it expects pay and dividend restraint; ECB concerned about potential wave of defaults on banks.

- EU Commission President Von der Leyen stated that needed to discuss how and where to install price caps; To discuss how to limit peaks on energy market.

- Austria WIFO Think Tank Quarterly Economic Forecasts raised its v2022 GDP growth from 4.3% to 4.8% while cutting the 2023 GDP growth outlook from 1.6% to 0.2%. It raised 2022 CPI from 7.8% to 8.4% and raised 2023 CPI from 5.3% to 6.6%.

- Czech Central Bank Sept Minutes noted that rate setters agreed that inflation was near a peak.

- Romania Central Bank official Popa stated that to continue with rate hike due to inflation outlook and stressed that its current tightening cycle was not over.

- OPEC Sec Gen al-Ghais stated that oil production capacity was freed up by latest output cuts could allow countries to intervene in case of any crises in oil markets.

Currencies/fixed income

- USD was on firmer footing for the 3rd straight session with focus on US jobs report with participants looking for more signs on the direction of global monetary policy. Inflationary risks remain a key driver of bond yields and recent Fed speak highlighted the point. Fed officials and recent data also suggest that the labor market remained resilient.

- EUR/USD hovering around 0.98 area in quiet trade ahead of US payroll report. Any hints from weak US data that the Fed might soon pause raising rates would likely aid the pair back towards parity.

Economic data

- (SE) Sweden Aug Maklarstatistik Housing Prices Y/Y: -3% v -1% prior; Apartment Prices Y/Y: -6% v -4% prior.

- (CH) Swiss Sept Unemployment Rate: 1.9% v 2.0%e; Unemployment Rate (seasonally adj): 2.1% v 2.1%e.

- (DE) Germany Aug Industrial Production M/M: -0.8% v -0.5%e; Y/Y: 2.1% v 2.3%e.

- (DE) Germany Aug Retail Sales M/M: -1.3% v -1.2%e; Y/Y: -1.7% v -4.1%e.

- DE) Germany Import Price Index M/M: 4.3% v 2.2%e; Y/Y: 32.7% v 30.1%e.

- *(UK) Sept Halifax House Price Index M/M: -0.1% v +0.4% prior; Y/Y: 9.9% v 11.5% prior.

- (NO) Norway Aug Overall GDP M/M: 1.4% v 0.7% prior; GDP Mainland M/M: 0.4% v 0.4%e.

- (NO) Norway Aug Industrial Production M/M: 3.1% v 2.1% prior; Y/Y: 4.7% v 1.8% prior.

- (NO) Norway Aug Manufacturing Production M/M: -1.0% v +1.4% prior; Y/Y: -1.1% v 1.2% prior.

- (SE) Sweden Sept Budget Balance (SEK): -5.9B v +44.5B prior.

- (DK) Denmark Aug Industrial Production M/M: +2.6% v -2.6% prior.

- (ZA) South Africa Sept Gross Reserves: $58.9B v $59.2Be; Net Reserves: $52.2B v $52.6Be.

- (FR) France Aug Trade Balance: -€15.3B v -€14.4Be (record deficit); Current Account Balance: -€5.1B v -€5.3B prior.

- (CH) Swiss Sept Foreign Currency Reserves (CHF): 807.1B v 859.3B prior.

- (CZ) Czech Aug National Trade Balance (CZK): -28.2B v -24.6Be.

- (CZ) Czech Aug Industrial Output Y/Y: 10.3% v 5.4%e; Construction Output Y/Y: -0.4% v -2.7% prior.

- (MY) Malaysia end Sept Foreign Reserves: $106.1B v $106.3B prior.

- (TH) Thailand end-Sept Foreign Reserves: $199.4B v $213.5B prior.

- (TW) Taiwan Sept Trade Balance: $5.0B v $4.3Be prior; Exports Y/Y: -5.3% v +2.4%e prior; Imports Y/Y: -2.4% v +9.8%e.

- (IT) Italy Aug Retail Sales M/M: -0.4% v 0.0%e; Y/Y: 4.3% v 4.1% prior.

- (RU) Russia Narrow Money Supply w/e Sept 30th (RUB): 15.27T v 14.90T prior.

- (CZ) Czech Sept International Reserves: $135.9B v $141.5B prior.

- (UN) FAO World Food Price Index: 136.3 v 137.9 prior.

- (UK) Q2 Final Output Per Hour Y/Y: +0.2% v -1.0% prelim.

Fixed income issuance

- (IN) India sold total INR280B vs. INR280B indicated in 2027, 2032 and 2052 bonds.

Looking ahead

- (IT) Bank of Italy Report on Balance-Sheet Aggregates: Target2 Liabilities: No est v €658.8B prior.

- 05:25 (EU) Daily ECB Liquidity Stats.

- 05:30 (ZA) South Africa to sell combined ZAR1.2B in I/L 2029, 2033 and 2046 Bonds.

- 06:00 (IE) Ireland Aug Industrial Production M/M: No est v -18.9%prior; Y/Y: No est v -22.1% prior.

- 06:00 (IE) Ireland Sept Live Register Monthly Change: No est v +1.9K prior; Live Register Level: No est v 186.1K prior.

- 06:00 (UK) DMO to sell £4.0B in 1-month, 3-month and 6-month bills (£0.5B, £1.5B and £2.0B respectively).

- 06:45 (US) Daily Libor Fixing.

- 07:00 (CL) Chile Sept CPI M/M: 0.9%e v 1.2% prior; Y/Y: 13.8%e v 14.1% prior.

- 07:00 (MX) Mexico Sept CPI M/M: 0.7%e v 0.7% prior; Y/Y: 8.8%e v 8.7% prior.

- 07:00 (MX) Mexico Sept CPI Core M/M: 0.7%e v 0.8% prior; Y/Y: 8.3%e v 8.1% prior.

- 07:30 (CL) Chile Sept Trade Balance: -$0.5Be v -$1.0B prior; Total Exports: No est v $7.8B prior; Total Imports: No est v $8.8B prior; Copper Exports: No est v $3.3B prior.

- 07:30 (CL) Chile Sept International Reserves: No est v $41.5B prior.

- 07:30 (IN) India Weekly Forex Reserve w/e Sept 30th: No est v $537.5B prior.

- 07:30 (IN) India announces upcoming bill issuance (held on Wed).

- 07:30 (IS) Iceland to sell 2024 and 2042 RIKB Bonds.

- 08:00 (PL) Poland Sept Official Reserves: No est v $154.8B prior.

- 08:00 (PL) Poland Central Bank Sept Minutes (2 decisions ago).

- 08:00 (BR) Brazil Aug Retail Sales M/M: -0.3%e v -0.8% prior; Y/Y: 0.0%e v -5.2% prior.

- 08:00 (BR) Brazil Aug Broad Retail Sales M/M: -0.2%e v -0.7% prior; Y/Y: -0.8%e v -6.8% prior.

- 08:00 (UK) Daily Baltic Dry Bulk Index.

- 08:30 (US) Sept Change in Nonfarm Payrolls: +255Ke v +315K prior; Change in Private Payrolls: +275Ke v +308K prior; Change in Manufacturing Payrolls: +20Ke v +22K prior.

- 08:30 (US) Sept Unemployment Rate: 3.7%e v 3.7% prior; Underemployment Rate: No est v 7.0% prior; Labor Force Participation Rate: 62.4%e v 62.4% prior.

- 08:30 (US) Sept Average Hourly Earnings M/M: 0.3%e v 0.3% prior; Y/Y: 5.0%e v 5.2% prior; Average Weekly Hours: 34.5e v 34.5 prior.

- 08:30 (CA) Canada Sept Net Change in Employment: +20.0Ke v -39.7K prior; Unemployment Rate: 5.4%e v 5.4% prior; Full Time Employment Change: No est v -77.2K prior; Part Time Employment Change: No est v +37.5K prior; Participation Rate: No est v 64.8% prior; Hourly Wage Rate Y/Y: 5.6%e v 5.6% prior.

- 09:00 (RU) Russia Sept Official Reserve Assets: No est v $565.7B prior.

- 09:00 (BR) Brazil Sept Vehicle Production: No est v 238.0K prior; Vehicle Sales: No est v 208.6K prior; Vehicle Exports: No est v 46.8K prior.

- 09:45 (UK) BOE Gilt buyback operation.

- 10:00 (US) Aug Final Wholesale Inventories M/M: 1.3%e v 1.3% prelim; Wholesale Trade Sales M/M: +0.5%e v -1.4% prior.

- 10:00 (US) Fed’s Williams participates on panel.

- 10:30 (TR) Turkey Sept Cash Budget Balance (TRY): No est v 28.7B prior.

- 11:00 (EU) Potential sovereign ratings after European close (Fitch on Austria and Greece sovereign ratings).

- 12:00 (RU) Russia Sept CPI M/M: 0.0%e v -0.5% prior; Y/Y: 13.6%e v 14.3% prior.

- 12:00 (RU) Russia Sept CPI Core M/M: 0.3%e v 0.0% prior; Y/Y: 17.1%e v 17.1% prior.

- 13:00 (US) Weekly Baker Hughes Rig Count.

- 15:00 (US) Aug Consumer Credit: $25.0Be v $23.8B prior.

- 21:45 (CN) China Sept Caixin PMI Services: 54.4e v 55.0 prior; PMI Composite: No est v 53.0 prior.