US CPI set to take one step closer to Fed 's target, ECB talk on PEPP reinvestments grows

Notes/observations

- Unsurprising UK GDP and production data puts morning macro focus on ECB speak pivoting from rate path timing to debate over PEPP reinvestments, with mixed opinions across members.

- Eyes turn toward US CPI at 08:30 ET (12:30 GMT). Although market sees policy timing on evolution of growth at this stage, CPI still seen as a concern if rising wages or oil prices are seen to be filtering through.

- Earnings Recap: VAT Group Q3 heavily missed in orders but affirmed guidance and sees improving conditions into Q4 and 2024; Publicis Q3 beat estimates and raised guidance again; CHR Hansen Q4 highlighted by strength in organic rev; EasyJet trading update provided comprehensive guidance for Q4 and Q1, with new medium-term targets to deliver >£1.0B, plans to reinstate div with FY results; Japan’s Fast Retailing FY22/23 results saw increased Net, Op and Rev YoY and provided initial FY23/24 guidance.

- Asia closed higher with Nikkei225 out-performing at +1.2%. EU indices are +0.1-0.8%. US futures are +0.3%. Gold +0.3%, DXY -0.1%; Commodity: Brent +1.1%, WTI +0.8%, TTF +5.4%; Crypto: BTC -1.1%, ETH -0.4%.

Asia

- Japan Sept PPI registered its lowest annualized pace since Mar 2021 (Y/Y: 2.0% v 2.4%e).

- Japan Aug Core Machine Orders M/M: -0.5% v +0.6%e; Y/Y: -7.7% v -6.7%e.

- Australia Oct Consumer Inflation Expectations: 4.8% v 4.6% prior.

- China sovereign wealth fund (CIC) raised stakes in the largest domestic banks [first time since 2015]; move fuels rescue hopes (China govt had refrained from direct intervention into stock market since the 2015 market crash].

- China Securities Regulator (CSRC) issued a notice prohibiting domestic brokerages and their overseas units from taking on new mainland clients for offshore trading.

- BOJ's Noguchi noted that the biggest focus was whether wage hike momentum would be maintained or not.

- RBNZ Gov Orr noted that the OCR needed to stay restrictive for the foreseeable future. Effects of tightening were flowing through as anticipated.

Mid-East

- Israel call ups 360K reservists as it prepares for Gaza invasion.

- More press reports that US believed Iran knew of the Hamas attack plan, but not the time and scale.

- White House's Kirby stated that US to send additional arms, air defense aid to Israel in coming days.

Europe

- ECB’s Holzmann (Austria, hawk) cautioned that inflation might well turn out stronger than thought. ECB should consider only paying interest on 90% of the money banks keep in their deposit accounts. This would allow faster return to the corridor.

- ECB's Kazaks (Latvia, hawk) noted that interest rates were appropriate to get inflation to 2% in H2 2025 but door on rate hikes could not be closed. Noted that an early end to reinvestments in pandemic bond purchase scheme (PEPP) should be discussed.

- ECB's Stournaras (Greece, dove) noted that ECB should not stop its bond purchases early because they might still need to calm jittery markets.

- ECB's Vujcic (Croatia, hawk) cautioned that ECB won't be able to declare victory on inflation before Spring 2024.

- BOE's Dhingra noted that MPC believed only ~20-25% of the impact of the interest rate hikes have been fed through to the economy. .If growth fell by much more than expected from here, a cut might happen sooner.

- UK Sept RICS House Price Balance: -69% v -60%e (weakest since Feb 2009).

Americas

- FOMC Sept Minutes noted that officials saw risks as more two-sided. uture path of economy was highly uncertain. UAW strike posed new risk to economic outlook. Officials noted needed more data indicating abating inflation pressures.

- Fed's Collins (non-voter) noted that FOMC was now in gradual, patient policy making phase; Likely close to, or possibly at peak rate.

Energy

- Weekly API Crude Oil Inventories: +12.9M v -4.2M prior.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 +0.35% at 454.76, FTSE +0.65% at 7,669.93, DAX +0.56% at 15,545.95, CAC-40 +0.47% at 7,164.97, IBEX-35 +0.49% at 9,406.15, FTSE MIB +0.83% at 28,654.00, SMI -0.01% at 11,037.60, S&P 500 Futures +0.27%].

Market focal points/Key themes: European indices open higher across the board; better performing sectors include real estate and communication services; among lagging sectors are telecom and consumer discretionary; Apollo to acquire Restaurant Group; focus on release of ECB minutes later in the day; earnings expected during the upcoming US session include Walgreens Boots Alliance, Delta Airlines and Fastenal.

Equities

- Consumer discretionary: Restaurant Group [RTN.UK] +37.5% (Apollo agrees to buy the co. at 65p/share in cash), easyJet [EZJ.UK] -4.0% (trading update - notes demand is strong, provides new mid-term targets, plans to reinstate dividends and purchases new Airbus jets).

- Consumer staples: Suedzucker [SZU.DE] +4.5% (H1 results, cuts FY rev, raises op and EBITDA), Mobico [MCG.UK] -27.0% (Q3 trading update).

- Healthcare: Ultimovacs [ULTIMO.NO] +14.0% (trial data).

- Industrials: Airbus [AIR.FR] +0.5% (easyJet order).

- Technology: Wise Group [WISE.UK] -1.5% (earnings; raises outlook), Darktrace [DARK.UK] -5.5% (trading update).

- Telecom: Telefonaktiebolaget LM Ericsson [ERICB.SE] +0.5% (earnings), Publicis [PUB.FR] +2.5% (Q3 results, beats estimates, raises guidance).

Speakers

- ECB’s Makhlouf (Ireland) stated that ECB to have better feel on rates after Dec. Stressed that if needed to raise rates again it would.

- ECB's Centeno (Portugal, dove) stated that the current stance will get inflation back to target.

- ECB's Wunsch (Netherlands, hawk) stated that he backed the reopening discussion on PEPP timetable.

- ECB’s Villeroy (France): See encouraging signs of inflation in the region.

- BoE’s Pill (Chief Economist) reiterated that inflation remained too high> MPC was finely balanced issue on whether BOE still had more to do.

- Bank of England (BoE) Quarterly Bank Liabilities/Credit Conditions Surveys noted that lenders expected defaults to increase. Demand for mortgages expected to decline in Q4.

- France Fin Min Le Maire stated that could not be satisfied with the low growth and productivity in the region.

- EU Economic Commissioner Gentiloni (Italy) noted that the EU economy was weak but not in recession.

- IMF Managing Dir Georgieva noted that inflation was down but still above target in many countries, so rates would have to stay higher for longer.

- Russia Dep PM Novak noted that it would react quickly to situation on oil market where there were many uncertainties; Market was sensitive but balanced.

- IEA Monthly Oil Report (OMR) raised its 2023 global oil demand growth from 2.2M to 2.3M bpd while trimming 2024 global oil demand growth from 1.0M to 0.9M bpd.

Currencies/fixed income

- USD was steady ahead of the US Sept CPI reading. Dealers noted that the recent FOMC minutes highlighted case for the Fed proceeding carefully on rates. Numerous Fed officials have noted that higher bond yields might allow them to end the rate hike cycle. Greenback weakened earlier in the week after Fed officials softer their stance on future rate hikes.

- EUR/USD holding above the 1.06 level.

- GBP/USD holding above the 1.23 handle following some disappoint production and trade data. Monthly GDP did manage to register some small growth.

- USD/JPY steady at 149.15.

Economic data

- (SE) Sweden Sept PES Unemployment Rate: 3.2% v 3.2% prior.

- (NL) Netherlands Aug Trade Balance: €10.9B v €8.4B prior.

- (FI) Finland Aug Current Account Balance: +€0.4B v -€0.2B prior.

- (UK) Aug Monthly GDP M/M: 0.2% v 0.2%e; GDP 3M/3M: 0.3% v 0.3%e.

- (UK) Aug Industrial Production M/M: -0.7% v -0.1%e; Y/Y: 1.3% v 1.7%e.

- (UK) Aug Manufacturing Production M/M:-0.8 % v -0.3%e; Y/Y: 2.8% v 3.5%e.

- (UK) Aug Construction Output M/M: -0.5% v 0.0%e; Y/Y: 2.3% v 2.4%e.

- (UK) Aug Index of Services M/M: 0.4% v 0.3%e; 3M/3M: 0.1% v 0.1%e.

- (UK) Aug Visible Trade Balance: -£16.0B v -£15.0Be; Overall Trade Balance: -£3.4B v -£3.7Be.

- (NO) Norway Q3 House Price Index Q/Q: -1.1% v +1.2% prior.

- (RO) Romania Q2 Final GDP Q/Q: 1.7% v 0.9% advance; Y/Y: 1.0% v 1.1% advance.

- (RO) Romania Sept CPI M/M: 0.8% v 0.4%e; Y/Y: 8.8% v 8.7%e.

- (TH) Thailand Oct Foreign Reserves w/e Oct 6th: $210.5BB v $211.8B prior.

Fixed income issuance

- (IT) Italy Debt Agency (Tesoro) sold total €8.0BB vs. €6.25-8.0B indicated range in 3-year, 7-year and 20-year BTP bonds (4 tranches).

- Sold €2.75B vs. €2.25-2.75B indicated range in 3.85% Sept 2026 BTP; Avg Yield: 3.93% v 3.86% prior; bid-to-cover: 1.58x v 1.51x prior (Sept 13th 2023).

- Sold €2.75B vs. €2.25-2.75B indicated range in 4.00% Nov 2030 BTP; Avg Yield: 4.37% (record high) v 4.21% prior; bid-to-cover: 1.48x v 1.41x prior.

- Sold €1.5B vs. €1.0-1.5B indicated in 4.00% Apr 2035 BTP; Avg Yield: 4.74% v 4.40% prior; Bid-to-cover: 1.52x v 1.41x prior (Mar 14th 2023).

- Sold €1.0B vs. €0.75-1.0B indicated in 4.45% Sept 2043 BTP; Avg Yield: 5.03% v 4.67% prior , bid-to-cover: 1.65x v 1.64x prior.

Looking ahead

- (DE) Germany Aug Current Account Balance: No est v €18.7B prior.

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

- 05:30 (ZA) South Africa Aug Total Mining Production M/M: +0.7%e v -1.7% prior; Y/Y: -2.0%e v -3.6% prior; Gold Production Y/Y: No est v 12.9% prior; Platinum Production Y/Y: No est v -10.4% prior.

- 05:30 (HU) Hungary Debt Agency (AKK) to sell 12-month bills.

- 06:00 (IL) Israel Sept Consumer Confidence: No est v 72 prior.

- 06:00 (IE) Ireland Sept CPI M/M: No est v 0.7% prior; Y/Y: No est v 6.3% prior.

- 06:00 (IE) Ireland Sept CPI EU Harmonized M/M: No est v 0.5% prior; Y/Y (final): No est v 5.0% prelim.

- 06:00 (PT) Portugal Sept Final CPI M/M: No est v1.1 % prelim; Y/Y: No est v 3.6% prelim.

- 06:00 (PT) Portugal Sept Final CPI EU Harmonized M/M: No est v 0.8% prelim; Y/Y: 2.3%e v 2.3% prelim.

- 06:00 (NL) ECB’s Knot (hawk, Netherlands).

- 06:50 (EU) ECB’s Vujcic (hawk, Croatia).

- 07:00 (ZA) South Africa Aug Manufacturing Production M/M: +0.8%e v -1.6% prior; Y/Y: 2.3%e v 2.3% prior.

- 07:00 (IT) ECB’s Outgoing Panetta (dove, Italy).

- 07:15 OPEC Monthly Oil Report (MOMR).

- 07:45 (RO) Romania to sell RON600M in 7.20% 2033 bonds.

- 08:00 (MX) Mexico Aug Industrial Production M/M: 0.3%e v 0.5% prior; Y/Y: 4.5%e v 4.8% prior; Manufacturing Production (unadj) Y/Y: 0.3%e v 0.8% prior.

- 08:00 (IN) India Sept CPI Y/Y: 5.4%e v 6.8% prior; Consumer Food Price Inflation Y/Y: No est v 9.9% prior.

- 08:00 (IN) India Aug Industrial Production Y/Y: 9.0%e v 5.7% prior.

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

- 08:30 (US) Sept CPI M/M: 0.3%e v 0.6% prior; Y/Y: 3.6%e v 3.7% prior.

- 08:30 (US) Sept CPI (ex-food/energy) M/M: 0.3%e v 0.3% prior; Y/Y: 4.1%e v 4.3% prior.

- 08:30 (US) Sept CPI Index NSA: 307.427e v 307.026 prior; CPI Core (seasonally adj): 310.641e v 309.661 prior.

- 08:30 (US) Sept Real Avg Hourly Earning Y/Y: No est v 0.5% prior; Avg Weekly Earnings Y/Y: No est v 0.3% prior.

- 08:30 (US) Initial Jobless Claims: 210Ke v 207K prior; Continuing Claims: 1.676Me v 1.664M prior.

- 09:00 (RU) Russia Aug Trade Balance: $9.1Be v $5.7B prior.

- 09:00 (RU) Russia Gold and Forex Reserve w/e Oct 6th: No est v $568.4B prior.

- 10:30 (US) Weekly EIA Natural Gas Inventories.

- 11:00 (US) Weekly DOE Oil Inventories.

- 11:00 (MX) Mexico Central Bank (Banxico) Sept Minutes.

- 11:30 (US) Treasury to sell 4-Week and 8-Week Bills.

- 12:00 (US) USDA World Agricultural Supply and Demand Estimates (WASDE).

- 13:00 (US) Fed’s Bostic (non-voter, dove).

- 13:00 (US) Treasury to sell 30-Year Notes.

- 14:00 (US) Sept Monthly Budget Statement: -$141.5Be v $89.3B prior.

- 15:00 (AR) Argentina Sept National CPI M/M: 11.3%e v 12.4% prior; Y/Y: 135.0%e v 124.4% prior.

- 16:00 (US) Fed’s Collins (non-voter).

- 17:30 (NZ) New Zealand Sept Manufacturing PMI: No est v 46.1 prior.

- 19:00 (KR) South Korea Sept Unemployment Rate: No est v 2.4% prior.

- 19:50 (JP) Japan Sept M2 Money Supply Y/Y: No est v 2.5% prior; M3 Money Supply Y/Y: No est v No est v 1.9% prior.

- 20:00 (SG) Singapore Q3 Advance GDP Q/Q: 0.6%e v 0.1% prior; Y/Y: 0.4%e v 0.5% prior.

- 20:00 Singapore Monetary Authority (MAS): Semiannual monetary policy statement.

- 21:30 (CN) China Sept CPI M/M: No est v 0.3% prior; Y/Y: 0.2%e v 0.1% prior; PPI Y/Y: -2.4%e v -3.0% prior.

- 22:30 (JP) Japan to sell 3-Month Bills.