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Oct 18, 20224 min read

IMF to Fed / EZ Natgas lower / CS / U.S Empire softer / Eq trying to +ve, MS's Wilson / JPY, Kuroda


  • EZ NatGas prices pushed lower still/again ahead of EU measures to be presented today, it's down over 65% from the highs in the summer...this should help eventually

  • Germany extends lifetime of all -3- remaining nuclear plant, France's EFD delays maintenance on France's nuclear reactors

  • UK Chancellor reserved half of tax cuts in mini-budget and says energy bills support scheme to be scaled back, added ''I'm not against the principle of taxing profits that are genuine windfalls, nothing is off the table''

  • BoE set to further delay QT until Gilt markets calm down-FT, although 'denied' by a BoE source this morning

  • U.S October Empire state factory index falls to -9.1 (estimates -4,3).....first of the October numbers is weaker

  • IMF meetings point to increased risks of possible serious financial stability, accompanying the recession created by the FED hawkishness!.. that is putting pressure on world asset markets, pressure mounting! (thread below)

  • Macro too, sends message to ECB, same as IMF above, WH to Fed yesterday...

  • Morgan Stanley's Mike Wilson turns tactically bullish. Sees another oversold relief rally similar to the one in the summer

  • Credit Suisse : full 'global' re-organisation, asset sales finally happening, should be 'welcome'

  •   JPY : FM Susuki warned on Tue that JPN would take appropriate & decisive action against excessive, speculator driven currency moves, keeping alive possibility of more market interventions (they need FOMC to peak-BoJ hike!), Kurodo similar

  • Kyiv : kamikase drones killing civilians

 
Markets :

  • SPX500 - 3500/3600 area of support is clearly huge, hence many calling for more downside risk towards 3200 area (huge PUTS buyers lately).. (see chart below) and on top side 3950/4000 resistance still

  • GBP 'anything' has been selling off since mid to late August in anticipation of Truss Govt coming in...Room to correct higher in UK anything, 1.15 area Cable big resistance for now though. UK long-end yields down about 30-40bps

  • Bond market liquidity remains a huge issue going forward and must be monitored (incl. U.S), can be measured via 'average yield errors at highest since GFC', essentially QT in UK and U.S increasing volatility, main driver

  • USDJPY remains near 32year highs, GBP needs to go 1.15+ to get exiting for the bulls (let's not forget the road ahead in UK won't be straight forward). EURO probably remains a sell on rallies for now (strikes, energy bills etc)

  • Equity markets in recovery mode, UK steadying the ship helped, remember there has been a HUGE amount of equity Put buyers in recent 2-3weeks, pretty consensus view! ..Vols softening/markets short-covering..

  • GOLD positioning (managed-money net long-futures) lowest since 2019 >>> if/when U.S data shows signs of weakness and signs of 'peak FOMC' starts to materialize, UST2y, USD and Gold should the first to move-correct

  • Buybacks : peak blackout was last Friday, by late October they should/can be back in full force

  • Big picture we continue to look for signs of weaker U.S data and possible softer turn from FOMC thereafter, market should/could react quickly, peak USD (interventions elsewhere),peak UST2y yields', particularly given what's priced in already

 


Massive fiscal U-turn leaves UK in political funk – Breakingviews markets should calm down, but quite hard to see where the government is going to cut on spending to balance the books..



Credit Suisse's Investment Bank Chief Poised To Depart: Report (yahoo.com) re-org and pretty much shut down IB globally...is (still) what is required to give it a chance!

4 October 2022 | Minutes of the Monetary Policy Meeting of the Board | RBA pretty 'balanced' - they've done what was required and probably 'watching' economic impact now for a while

Japan repeats warnings on yen as market watches for intervention | Reuters doing QE in Japan still, FED hiking is hard to see how they could possibly get stronger JPY.. Japan should hike and/or also hopes FOMC peaks soon

Kuroda actually added '''few of the people I met in Washington were thinking that USD strength would last long''


Ark's Cathie Wood Continues to Stumble - TheStreet though, as stated yesterday, it's 80pct down, which is about the same than the Nasdaq did between 2000/2002

SPX500



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