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Oct 10, 20223 min read

EZ NatGas <150mwh / UKR-RU / Bonds, duration flipped post NFP, USD higher again ahead of FOMC minute

  • NFP was on highs but close to expectations, bond sold-off hard, equity markets responded and gave back nearly all of the big short-covering rally we saw earlier last week, rates were already moving higher with ‘ease’ in the middle of the week, Fed speakers stuck to their guns, US CPI, FOMC minutes and much more this week (see below)

  • Fed minutes "May provide more insight into the central bank’s aggressive efforts to fight inflation. And there’s a key measure of US producer prices is due Wednesday, followed by the University of Michigan’s monthly consumer inflation expectations on Friday."-BBG, on U.S "CPI is forecast to have risen 8.1% in Sep from a year earlier vs. 8.3% in Aug, according to economists surveyed by Bloomberg. Core CPI is projected to rise 6.5% on a year-over-year basis and fall to 0.4% month over month."-BBG >>>> The FED is rising rates at the fastest pace ever into a bubble, on top of it all, they still saying that they want the housing market to crash, having failed to stop QE early enough, and failed to start to hike in 2021 when inflation started to pop its head

  • Global margin call hits European debt markets - Hedges blow up after risk gauges in Germany’s government debt market exceeded those of the 2008 world crash

  • EU gas drops below €150/MWh to a three-month low. Driven by strong LNG arrivals, mild autumn weather and demand destruction. Russia's ability to shock much reduced with flows down 78% YoY., welcome news!

  • UK : The central bank announced on Monday that it would introduce further measures to ensure an “orderly end” to its purchase scheme on Oct. 14.

  • China's services activity falls for first time since May (from 55 to 49.3)

  • PayPal pulls plan to fine customers $2.5K for promoting ‘misinformation’

  • UKR-RU : The embassies of the EU countries received an evacuation order from Kiev

 

Markets :


  • BUND/BTP spread at 2022 widest levels 257bp, German ‘Pfandbrief’ highest since 2011 too at 3.255, 10y mortgage rate now around 4%

  • Bonds hit hard again last week, 8th negative week in a row for FI..

  • Gold ‘failed’ to break higher post NFP last Friday

  • USD higher again post NFP, now UKR/RU situation clearly not helping ‘euro’ per say, could eurjpy come under pressure with the added risk of BoJ doing something in USDJPY ? (chart below just to put things in perspective)

  • Crude steadily higher since OPEC+ cut

  • Equity markets hit hard again post NFP with higher rates, duration particularly hit hard, weak start to the week, ahead of FOMC minutes and U.S CPI later on

 

This week we are to going to get :

  • At least 5 Fed speakers lined up already

  • U.S PPI tomorrow

  • FED meeting minutes on Wed

  • Sep U.S CPI on Thursday

  • Retail sales and consumer sentiment survey on Friday

  • Volatile we will have – either way


The current situation in markets

  • Higher rates forcing fastest pace of falling prices in housing for 10years

  • Equity markets down, duration hit hardest with higher rates and risk of recession in 2023

  • Commodities down on ‘risk’ of deflation

  • UST yields almost making/made their move to natural level of 4 to 4.5%?..


Today we look at an ugly close to last week for equity markets after the market read a mostly uneventful September jobs report as negative for risk sentiment because the unemployment rate dropped back to the cycle low of 3.5%, driving treasury yields back toward the cycle highs and sending the US dollar higher again. Sentiment failed to improve in Asia as the week gets under way, with higher oil prices weighing and amplified by the stronger US dollar, while geopolitical jitters are more uncomfortable than ever. Precious metals, wheat, pondering peak tightness, the important event risks on the economic calendar and more are also on today's pod, which features Ole Hansen on commodities and John J. Hardy hosting an on FX.



https://twitter.com/Ole_S_Hansen/status/1579370314105966592 EU NatGas drops below €150/MWh to a three-month low. Driven by strong LNG arrivals, mild autumn weather and demand destruction. Russia's ability to shock much reduced with flows down 78% YoY.



https://news.bitcoin.com/visa-partners-with-ftx-to-roll-out-crypto-debit-cards-in-40-countries/ Visa Partners with FTX to Roll Out Crypto Debit Cards in 40 Countries


https://nypost.com/2022/10/09/paypal-pulls-plan-to-fine-customers-2-5k-for-promoting-misinformation/ PayPal pulls plan to fine customers $2.5K for promoting ‘misinformation’


Western investors are dumping gold in response to rising rates.


Hedges blow up after risk gauges in Germany’s government debt market exceeded those of the 2008 world crash


The Government is still "thinking about" an energy-saving campaign, the Work and Pensions minister suggested this morning.








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