Authored by Dave DeCamp via AntiWar.com,

A Russian official said Saturday that the US is lowering the “nuclear threshold” by sending an upgraded version of its B61 nuclear bomb to NATO bases in Europe.

The B61 is the US’s primary thermonuclear gravity bomb, and it is being modernized into a newer weapon known as the B61-12. Politico reported last week that the US told NATO allies at a recent meeting that it is deploying the B-61-12 to Europe to replace older bombs by this December, a faster timeline than the originally planned spring deployment.

“We cannot ignore the plans to modernize nuclear weapons, those free-fall bombs that are in Europe,” said Russian Deputy Foreign Minister Alexander Grushko, according to Russia’s RIA news agency.

The US has approximately 100 B61s currently stored at air bases in Germany, the Netherlands, Belgium, Italy, and Turkey. According to the Federation of American Scientists, the B61-12s carry a lower yield and are more accurate than older B61s.

“The United States is modernizing them, increasing their accuracy and reducing the power of the nuclear charge, that is, they turn these weapons into ‘battlefield weapons,’ thereby reducing the nuclear threshold,” Grushko said.

The B61s deployed in Europe are part of the US’s nuclear arsenal that are considered tactical weapons, which have smaller yields than strategic ones. The US has an estimated 200 tactical nuclear weapons, while Russia is said to have about 2,000. US tactical nuclear weapons range from between 0.3 and 170 kilotons (the bomb dropped on Hiroshima had a yield of 15 kilotons).

The plans to deploy the B61-12s to Europe by December have puzzled experts as the accelerated timeline does little but raises tensions with Russia. The Pentagon insists its B61-12 plans have nothing to do with the current situation and denies the characterization of the Politico report.

“Modernization of US B61 nuclear weapons has been underway for years, and plans to safely and responsibly swap out older weapons for the upgraded B61-12 versions are part of a long-planned and scheduled modernization effort,” a Pentagon spokesman said, according to Reuters. “It is in no way linked to current events in Ukraine and was not sped up in any way.”

Another part of the B61-12 upgrade is that it will allow the bomb to be carried by all US and allied bombers and fighter jets. The revelation of the planned deployment came as NATO was holding its nuclear Steadfast Noon exercises, which are due to conclude on Sunday. The drills were hosted by Belgium and involved 14 NATO members and about 60 aircraft that simulated dropping nuclear bombs.

Authored by Katabella Roberts via The Epoch Times,

Widespread protests continued across Iran for a 45th consecutive day on Sunday, despite warnings from security officials that they would use tougher measures to crack down on demonstrators.

Protests over the weekend continued despite a warning from the commander-in-chief of the Islamic Revolutionary Guards Corps (IRGC), Maj Gen Hossein Salami, on Saturday that he would use unprecedented force in an effort to quell them.

“Today is the end of the riots. Do not go to the streets anymore!” Salami reportedly said.

 “We are telling our youth, the minority of you who have been deceived, stop the evil acts. This ominous sedition will bring no happy ending to you. Do not ruin your future!”

Elsewhere, Iranian President Ebrahim Raisi was reported as saying by state media: “Security is the red line of the Islamic Republic, and we will not allow the enemy to implement in any way its plans to undermine this valuable national asset.”

Yet demonstrators, increasingly angered by the authorities’ attempts to suppress their protests against the Islamist government, ignored the warnings and took to the streets over the weekend.

Demonstrations across the country were initially sparked by the death of 22-year-old Mahsa Amini, a young woman who died in Tehran on Sept. 16 while in the custody of Iran’s “morality police” after she was arrested over her “inappropriate attire. Police have said she suffered a heart attack while in custody.

Over time, the demonstrations have evolved into calls from Iranians for more freedom and demands to overthrow the Islamic regime and Supreme Leader Ayatollah Ali Khamenei, posing the most serious challenge to the country’s clerical leaders in years.

Exile Iranians of the National Council of Resistance of Iran gather in front of the embassy of Iran in Berlin, Germany, on Sept. 20, 2022, after the death of an Iranian woman held by the country’s morality police. (Michael Sohn/AP Photo)

Authorities ‘Kidnapping Students, Particularly Girls’

Video footage posted on social media showed violent confrontations between students and riot police at universities amid reports of raids on student dormitories that have seen students taken away in buses to state detention or banned from campus indefinitely.

In one video, students at the Islamic Azad University-North branch can be seen throwing rocks at IRGC forces and plainclothes agents. Another video posted to Twitter shows security forces using teargas and gunfire to stop students from demonstrating.

The Epoch Times has not been able to verify the video footage.

Maryam Rajavi, the President-elect of the NCRI for the period to transfer sovereignty to the people of Iran, wrote on Twitter on Sunday that IRGC forces have been using pellet guns and live ammunition to crack down on demonstrations at universities while simultaneously “kidnapping students, particularly girls.”

This, she said, shows the “regime’s desperation in face of Iran protests.”

According to the Human Rights Activists News Agency (HRANA), 283 protesters, including 44 children, have been killed so far since protests broke out across the country. Another 14,052 individuals have been arrested, according to HRANA’s latest update.

Iranian authorities have accused the United States, Israel, Britain, and Saudi Arabia of being behind the anti-government protests that are destabilizing the country, claims leaders of those nations have denied.

In September, the Biden administration announced sanctions on Iran’s morality police “for abuse and violence against Iranian women and the violation of the rights of peaceful Iranian protesters.”

On Friday morning, SpotGamma warned traders to be on the lookout for a “sucker punch” rally over-stimulated by 0DTE flow, and markets were given a full-on “uppercut”.

Heavy 0DTE volume was once again showcased, with the largest volume strike being 100k 10/28 3900 calls. This is incredible given that the SPX opened at 3810! This 0DTE flow is pure leverage which serves to ramp the market higher.

Additionally, as anticipated, we also saw IV get crushed, particularly ultra-short-dated (read: put-fuel for a rally). This very short dated IV crush was supplemented by the idea that the Fed is going to soften its stance on Wednesday. As shown below that short dated IV is quite low now relative to Wednesdays elevated levels.

SPX Vol term structure

All of which Friday saw the options complex higher slide higher, which is something we generally read as an options market acceptance of higher equity prices.

Of course, the elephant in the room is Wednesdays FOMC, which holds the fate of equities, and which Nomura’s Charlie McElligott warns the irony of the central bank “step-down” meme seen around the globe (RBA, BoC, ECB) in recent weeks – which has explosively rallied “financial assets” (both Risk-Assets and Sovy Bonds) – is that for the Fed, downshifting in say Dec from 75bps to 50bps and beyond actually allows them to extend-out the hikes longer…

…and in-fact, avoid the potentially of slamming breaks too hard, which would then elicit the Rate cuts which the STIRS market continues to hold onto for back half next year.

All of which can be seen in the chart below as despite the equity exuberance, STIRS are shifting notably hawkishly…

So said another way, “stepping-down” is, perversely, the Fed’s way of seeking-out an alternate path to actually avoid Rate CUTS next year from a “hard landing” accident…and instead, keeping Rates “high for longer”….hardly “rage bullish”.

However, equities are holding near this 3905 strike of the monthly Put Spread Collar which trades later today, where the Dealer is short 14k of said 3905 Puts, which meant a lot of $Delta bot on the Friday melt-up to said strike…BUT for today, if the market remains below strike (as we are again currently), the option will bleed from a 52 Delta to 100 Delta – leading to an incremental  ~$2.6B of Delta to sell

But As McElligott notes, as we’ve seen in other short-squeezes and bear-mkt rallies this year, perhaps the largest reason we could keep rallying in Stocks this week is a somewhat counter-intuitve psychological / behavioral catalyst which is paired with exceedingly illiquid markets, meaning investors risk being “trapped in their under-positioning” into year-end, with less Dealer balance-sheet as they begin to protect PNL:

The idea is that as we have seen big “upside reversals” on seemingly “hawkish / bad news” days of late (e.g. the last CPI upside surprise day), is that IF you don’t begin to cover shorts and / or or buy-the-dip and “net up” exposure again into an actual “hawkish” Fed catalyst….then you are almost certainly going to be covering or “netting-up” exposures up another +6% to +10% from here on a (God-forbid) “DOVISH” Fed message

This is what could surprise – and hurt – the most this week, which could see us overshoot into that 4000 + SPX level which goes beyond the current “Valuation” rationalization of 17x’s $230 = 3910

However, the Nomura strategist warns to be careful what you wish for…

Frighteningly, EVERYBODY who is an Equities “bear” has now “built-in” my recent observation regarding the market’s recent reflexive “FCI easing” surge (US Dollar and Real Yields cratering lower, Credit Spreads tighter, Equities Vol and Skew smashed) as their justification for expecting a move LOWER in Stocks this week, following the recent central bank “step-down” trend—where Chair Powell and the Fed are forced to “push-back” on the recent easing in FCI, and instead, slam the door on premature pivot talk, as inflation / labor / wages continues to run hot

This gained further steam over the weekend with WSJ’ Timiraos tweet storming like crazy—and even appearing on “Face the Nation” Sunday—hammering a similar message: that financial conditions have actually EASED further both since last hike…but into stronger inflation, labor and wage data, and all as the US consumer holds excess household savings to continue and “cushion” against higher rates / higher inflation—“For the Fed, a more resilient private sector means that when it comes to rate hikes, the peak or “terminal” policy rate may be higher than expected”

Accordingly, the “right” outcome this week would be Fed / Powell HAMMERING a hawkish message to reverse this recent “impulse easing” in FCI, stocks trade lower and bonds selloff again, as there is no basis for “pivot / step-down” relief until the data softens meaningfully… because a reacceleration in “wealth creation” and “animal spirits” within US markets and economy would be extremely counter-productive to the “demand-side” inflation-killing needs of the FOMC.

It happened in June/July and Powell curb-stomped it…

Will it happened again?

Authored by Mike Shedlock via MishTalk.com,

The US thinks it can block microchip technology from China. It won’t and blowbacks are everywhere…

Turning the Screws 

• Financial Times: How the US chip export controls have turned the screws on China

• The Conversation: Clampdown on chip exports is the most consequential US move against China yet

• The Atlantic: Why Biden’s Block on Chips to China Is a Big Deal

How Companies Are Dealing with US Restrictions on Chip Exports to China

Please consider How Companies Are Dealing with US Restrictions on Chip Exports to China

The U.S. Commerce Department announced a series of new trade restrictions earlier this month that banned the export of some computer processing chips to China.

The restrictions affect not only U.S. businesses selling to China, but also any company whose products contain American chip technology. The U.S. government action has many companies considering how to move forward under the new rules.

Numerous American technology companies doing major business with China are facing possible severe damage to their profits. Other companies that manufacture technology products in China are having to withdraw U.S. employees because the ban also bars “U.S. persons” from supporting technology covered by the ban.

James Lewis is a senior vice president and director of the Strategic Technologies Program at the Center for Strategic and International Studies in Washington D.C. He told VOA the new restrictions seem to be “reshaping the market.”

“The Koreans, the Taiwanese and some American companies are really nervous about it,” Lewis said. “I mean, everyone’s asking, ‘What can I still sell to China?’ And in some cases, the answer is ‘nothing,'” he added.

In Britain’s Financial Times newspaper, U.S. national editor and columnist Edward Luce wrote that “Joe Biden this month launched a full-blown economic war on China.”

So far, chip companies have reacted carefully to the ban. While recognizing the government’s concerns, they have noted they were not given a chance to discuss the policy with U.S. officials before it was announced.

Call Them the Biden-Trump Tariffs Now

The Wall Street Journal comments Call Them the Biden-Trump Tariffs Now

President Biden has rolled back some of Donald Trump’s destructive tariffs, but not enough, and they’re still doing economic harm. New analyses of Mr. Trump’s Section 232 steel and aluminum tariffs show how consumers and manufacturers are still paying for the border taxes that benefit only a few companies.

A study by Harbor Aluminum for the Beer Institute finds that the 10% tariff on imported aluminum cost U.S. beverage manufacturers $1.7 billion from March 2018 through August 2022. About 93% of the $1.7 billion has been pocketed by domestic aluminum producers and smelters in the U.S. and Canada. Only $120 million has gone to the U.S. government.

While Biden relaxed some tariffs on China, the chip export ban is a sharp escalation in an economic war with China. 

According to the Financial Times, China accounts for 33 per cent of sales at Applied Materials, 27 per cent at Intel and 31 per cent at Lam Research.

President Biden unequivocally blocked China’s access to high-end computer chips but how long can that last?

Blowbacks Everywhere

It does not matter at all whether Putin sells energy for dollars, euros, or yen.

What matters is where reserves are held.

Currencies are usually fungible. But the US has weaponized reserves. China concerned too.

This will backfire on the US IMO https://t.co/vHfeY0cl1x

— Mike “Mish” Shedlock (@MishGEA) October 28, 2022

Blowbacks everywhere. Biden escalated Trump’s China policy to include chips.

It’s nuts to believe we can prevent China from getting technology. They will get stronger eventually from this

WSJ has interesting article on prisoner swap blowbacks-Free Link:https://t.co/AOD7ezAh4u

— Mike “Mish” Shedlock (@MishGEA) October 28, 2022

Inside the Secret Prisoner Swap That Splintered the U.S. and China

Detention of a Chinese executive to stand trial in the U.S. provoked a standoff between global rivals and opened an acrimonious new era. 

The US arrest of Meng Wanzhou, chief financial officer of China’s Huawei Technologies Co. was based on an irrelevant 6-year old power-point. She was arrested in Canada in 2018.

That’s quite the story. Bolton did this on his own accord and got Canada tangled up in it too. 

It’s a long but interesting read. Here is a free link: Inside the Secret Prisoner Swap That Splintered the U.S. and China

Inflationary Headwinds

De-globalization and decarbonization are both very inflationary. 

Both parties seem OK with the former. Decarbonization by the US and EU Left greatly adds to the mess. 

No Man’s Land 

Weaponizing currency reserves and diplomats on top of this is madness. But that’s where we are.

For further discussion, please see What Does China Do With a Dollar That’s No Longer Risk Free? Buy Gold?

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Elon Musk says that a claim by the NY Times that he plans to fire Twitter employees before Nov. 1 to avoid paying stock grants is “false.”

On Oct. 29, the Times – citing “four people with knowledge of the matter” – reported that Musk had planned to start laying people off as soon as Saturday, depriving them of scheduled stock grants.

“Such grants typically represent a significant portion of employees’ pay. By laying off workers before that date, Mr. Musk may avoid paying the grants, though he is supposed to pay the employees cash in place of their stock under the terms of the merger agreement,” wrote the Times.

Breathlessly believing the Times was ProPublica deputy managing editor Eric Umansky, who tweeted “@elonmusk is making sure to fire people at Twitter before part of their year-end compensation *kicks in on Tuesday.*“

To which Musk replied: “This is false.“

This is false

— Elon Musk (@elonmusk) October 30, 2022

That said, the Times also reported that top executives may not receive golden parachutes.

Mr. Musk also appears unlikely to pay the golden parachutes that the fired top executives of Twitter were set to receive. Under the merger agreement, those executives — including Parag Agrawal, the chief executive — had been set to receive compensation of $20 million to $60 million if they were fired. But Mr. Musk terminated the executives “for cause,” meaning he did it because he alleged he had justification, which may void that agreement, two people with knowledge of the matter said. –NYT

And on Sunday, Musk tweeted what he claims is evidence which was ‘hidden from the court’ – which appears to be a conversation about “fraudulent metrics.”

can a closed deal be unclosed? https://t.co/CPyupqDD3i

— zerohedge (@zerohedge) October 31, 2022

As the Epoch Times further notes;

Musk officially acquired the social media platform on Thursday following months of legal back-and-forth between himself and Twitter executives over his $44 billion acquisition.

The businessman marked the occasion by sharing a video of himself on Twitter walking into Twitter headquarters while carrying a sink, tweeting, “let that sink in.”

He has also changed his Twitter bio to read “Chief Twit,” with a location tag stating “Twitter HQ.”

According to a Reuters report, Musk also fired Twitter Chief Executive Officer, Parag Agrawal, and Chief Financial Officer Ned Segal, as well as legal affairs and policy chief Vijaya Gadde after sealing the deal, having accused them of misleading him and Twitter investors over the number of automated bots on the platform.

The New York Times, citing anonymous sources, said that the top executives allegedly fired by Musk had been set to receive compensation of $20 million to $60 million if their positions were terminated but that they will no longer receive the payouts because Musk instead terminated them “for cause,” which the publication said meant that he “alleged he had justification, which may void that agreement.”

The Epoch Times has contacted Twitter for comment.

Musk has stressed that he believes Twitter, which has repeatedly come under fire for censoring some minority and politically conservative viewpoints, should be a platform that allows a wide range of beliefs to be debated in a healthy manner.

On Friday, the billionaire businessman revealed plans to lift bans on accounts that were suspended for “minor and dubious reasons” but did not say when exactly the accounts would be reinstated.

Authored by Steve Watson via Summit News,

A new CBS News Battleground Tracker/YouGov poll has found that a whopping 79 percent of Americans believe the country is “out of control” ahead of the mid term elections.

Just 21 percent responded to the say that they feel things are “under control,” and when that 79 percent were asked which party they will vote for a majority of 58 percent said Republican, with only 34 percent saying they will vote Democrat.

That doesn’t bode well for the party in power: Reps are winning those who say “out of control” right now. pic.twitter.com/5UKOA0VviP

— CBS News Poll (@CBSNewsPoll) October 30, 2022

The poll also found that 73 percent believe things are “going badly” with 42 percent saying “very badly,” and just 26 percent saying things are “going well,” with 6 percent saying “very well,” (what are they smoking?)

The state of the Economy is favouring Republicans:

This comes as more than half of voters blame Biden and the Dems for the economy and gas prices. pic.twitter.com/SKVXH4GwqQ

— CBS News Poll (@CBSNewsPoll) October 30, 2022

The poll also found that a huge swing by independents to the GOP is underway:

CBS News /YouGov: Generic Congressional Ballot Polling Trends Among 𝐈𝐧𝐝𝐞𝐩𝐞𝐧𝐝𝐞𝐧𝐭𝐬

October 14:
Democrats 40% (D+2)
Republicans 38%

October 28:
Republicans 49% (R+16)
Democrats 33%

✅ That’s 𝟭𝟴-𝗣𝗢𝗜𝗡𝗧 Swing among Independents towards the GOP pic.twitter.com/lQzxSS752e

— InteractivePolls (@IAPolls2022) October 30, 2022

INDEPENDENTS: CBS/YouGov Poll

2022 Generic Congressional Ballot
GOP — 49% (+16)
Dem — 33%

Biden Job Approval
Approve 32%
Disapprove 68%

Biden Job Approval: Intensity
Strongly Approve 12%
Strongly Disapprove 52%

⛽ Prices with Democrats in Control
Go Up — 57%
Go Down — 8% pic.twitter.com/ZEXlPdjZnK

— InteractivePolls (@IAPolls2022) October 30, 2022

More hispanic voters are going Republican too, according to the poll:

🚨POLL🚨

With just over a week to go before the midterm elections, the latest CBS Battleground tracker poll finds Republicans within single digits among Hispanics.

Context: The same poll gave Democrats a 24-point lead with Hispanics at this point in 2018. pic.twitter.com/53zXSf4wca

— Giancarlo Sopo (@GiancarloSopo) October 30, 2022

Appearing on Fox News, GOP Senator Tom Cotton charged that Democrats are intentionally subjecting America to institutional decline:

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It’s been two days since Russia suspended its participation in the Ukraine grain export deal after a swarm of drones targeted at least one Russian warship from the Black Sea navy. Wheat futures soared Monday as traders eye tightening world supplies following Russia’s exit. 

Moscow immediately suspended its compliance with the grain deal, known as the Black Sea Grain Initiative, which was formed and launched in July and ended a five-month Russian blockade of Ukraine’s ports. The United Nations and Turkey brokered the deal, allowing safe passage for cargo ships in and out of Ukraine’s ports to haul farm goods worldwide.

The deal was successful, as Bloomberg data shows Ukrainian exports via the Black Sea ramped after the agreement was signed in late summer. 

But what the Russian Defense Ministry describes as a “massive” drone attack on the Black Sea Fleet in the Crimean port city of Sevastopol derailed all hopes of a continuation of the deal as Moscow pulled out. 

Charlie Sernatinger, global head of grain futures at ED&F Man Capital Markets Inc. in Chicago, told Bloomberg on Sunday that grain prices are headed higher. 

Sernatinger is right. Wheat in Chicago jumped nearly 8% to $8.9325 a bushel Monday morning. 

Andrey Sizov, a Russian grains analyst at SovEcon, told WSJ that many funds would have to buy into grain markets Monday to cover their positions. 

Corn, soybean oil, and soybean prices were also higher.

Meanwhile, a UN spokesman said Secretary-General António Guterres was attempting to reverse the Russian suspension. Also, the Turkish defense ministry was trying to rescue the deal, according to WSJ.

No grain shipments transited the Black Sea safety corridor for Sunday, though Turkey, Ukraine, and the UN agreed for 14 grain vessels to transit the Black Sea on Monday. 

What’s difficult to forecast is just how much higher grain prices are headed if the safe-passage deal Russia guaranteed is suspended, with no plans by Moscow (thus far) to extend it. This may deepen the global food crisis and push tens of millions of people closer to starvation. 

According to Joe Davis, director of commodity sales at Chicago-based brokerage Futures International LLC., he expects “the UN, with Ukraine and Turkey, will continue the grain deal despite Russia pulling out,” adding the wheat market will be volatile as traders closely watch Black Sea developments. 

“You are going to be missing some grain on the world market from Ukraine … and no one is going to rely on getting it out of there if it’s not on the water already,” said Commonwealth Bank of Australia strategist Tobin Gorey. This means supplies will have to be sourced elsewhere. 

All this comes as countries from Europe to the Middle East are short of food, fuel, and fertilizer. 

Via SchiffGold.com,

A lot of people seem to think that if the Fed had just started fighting inflation a little earlier, we wouldn’t have seen the rapidly rising prices that continue today. The mistake, they say, was thinking inflation was transitory. But as Peter Schiff has pointed out, this problem didn’t start last year, or even with the pandemic. This problem was decades in the making.

And at the root of the problem was year after year of easy money. Wall Street was drunk on cheap money for a decade and it is ultimately going to end in another financial crisis.

The severity of malinvestments, of the misallocations of resources, of the monumental mistakes that have been made throughout this economy by the government, the private sector, corporations, individuals — everybody has made mistakes because of this cheap money.”

Just look at the federal government. It has added trillions of dollars to the national debt over the last decade. It recently eclipsed $31 trillion. A year ago, Janet Yellen was saying the big debt wasn’t a problem because interest rates were low. Well, they’re not low anymore. This is a perfect example of how cheap money incentivized bad decision-making.

After the 2008 financial crisis, George Bush pointed out that Wall Street got drunk. Peter said Bush was correct.

Why was everybody on Wall Street drunk? Where did they get the alcohol? Who liquored them up? That was the Federal Reserve. That was Alan Greenspan. He was the bartender. He kept serving the drinks. That’s why Wall Street was drunk.”

But Wall Street wasn’t drinking alone. Main Street was also three sheets to the wind.

The whole nation was drunk on cheap money, and while they were drunk, they did a lot of stupid things, just like a lot of people do when they’re drunk.”

Peter compared it to a favorite Warren Buffet quote: when the tide goes out, we see who’s swimming naked. Peter said, “Basically, everybody has been naked.”

And everybody is going to be exposed when the tide goes out, which is what’s happening right now.”

As Peter said in a prior podcast, it goes back even further than the last decade. You can trace the Fed’s inflationary monetary policy all the way back to 1998 and the Long-Term Capital Management bailout.

That’s when the Fed really started printing money. And then it printed even more money in advance of Y2K. And then even more money after the NASDAQ bubble popped in 2000. And even more money after the real estate bubble popped in 2008. So, it’s not just one year of excess money printing. The Fed has been too loose for almost 25 years, flooding the economy with cheap money.”

Peter said he knew 2008 wasn’t the real crash. The reckless monetary policy in the response to the Great Recession simply papered things over and kicked the looming crisis down the road.

Well, the real crash is the one we’re headed for right now. And we were going to have that crash regardless of the mistakes the Fed made in 2021. We were going to have it because of all the mistakes it made — not just going back to 2008 — but going all the way back to 1998.”

US futures were mixed at the start of another busy week of earnings and key central bank decisions, after posting their best two-week rally since November 2020, with investors bracing for the Federal Reserve’s meeting and another busy earnings week. S&P 500 futures were down 0.4 as of 7:30 a.m. in New York, having dipped as much as 0.7% earlier, after the index closed 2.4% higher on Friday, while Nasdaq 100 futures fell 0.7%. Both gauges are set to pare gains for October, which has been the best month since July. The market drop was led by chipmakers and Chinese stocks. The 10-year Treasury yield hovered around 4.04% after surging by nine basis points on Friday, but has receded from about 4.25% in the past week; yields on UK gilts were steady ahead of what could be the Bank of England’s biggest interest-rate hike in more than 30 years. The dollar rose as the yen and pounds reversed much of last week’s gains. Crypto unexpectedly spiked.

Wheat soared after Russia pulled out of a grain-export deal even as vessels continued to depart from Ukraine.

Brazilian assets are set to weaken on Monday after Luiz Inacio Lula da Silva won the presidential election. The extent of the market drop will depend on whether President Jair Bolsonaro will concede as a contested election would likely trigger larger losses.

In premarket trading, U.S-listed shares of Brazilian oil firm Petrobras tumbled as much as 11% after Luiz Inacio Lula da Silva won the presidential election, amid concerns about how the left-wing politician will impact the firm. In other premarket moves, Chinese stocks listed in the US declined after Covid cases spiked across the country while factory and services activity weakened more than expected. US chipmakers fell after Foxconn Technology Group, the world’s largest maker of iPhones, said it may boost capacity at alternative sites to mitigate potential disruption at its main Covid-stricken plant in China. Other notable premarket movers:

• Y-mAbs Therapeutics (YMAB US) shares slumped as much as 38% in US premarket trading, as the stock was downgraded by Kempen and JPMorgan analysts after the drug developer’s cancer drug omburtamab failed to win a nod from an FDA panel, with Kempen not expecting the treatment to win FDA approval and Cowen calling the vote outcome “unfortunate.”
• Chinese stocks listed in the US decline in premarket trading after Covid cases spiked across the country while factory and services activity weakened more than expected.
• Alibaba (BABA US) falls 1.9%, Baidu (BIDU US) -2.8%, Pinduoduo (PDD US) -1.5%, Li Auto (LI US) -4.2%, Nio (NIO US) -1.4%
• Selina Hospitality (SLNA US) rises 36% in US premarket trading. Shares have been volatile since they debuted on Thursday following merger with BOA Acquisition Corp. Stock closed down 63% on Friday after a first session ended with the stock rising 348% from the price BOA closed at.
• Hanesbrands (HBI US) falls 3.6% in premarket trading after Wells Fargo double- downgrades to underweight based on rising risks from the macro outlook and the company’s balance sheet.
• Keep an eye on Ceridian (CDAY US) as Barclays raised the recommendation on the stock to equal-weight from underweight, citing the company’s international expansion strategy, shift to more cloud and product investments.
• Watch Gilead Sciences (GILD US) stock as it was raised to equal-weight from underweight at Barclays, which sees strong commercial execution justifying higher estimates. Meanwhile, the brokerage cut its rating on Amgen (AMGN US) to underweight from equal-weight.

Sparking debate about another split between fundamentals and technicals, US stocks ended last week with sizeable gains despite very disappointing earnings from tech giants including Meta, Amazon and Microsoft. That said, overall earnings season has been quite positive (thanks to sharp estimate cuts in recent weeks), with a majority of companies beating estimates, although fewer than in the past few seasons. Meanwhile, some economic data, including plunging home sales, indicated the Federal Reserve’s fight against inflation is working, fueling hopes of a sooner than expected pivot in rate policy.

“The market is pricing in by next spring a 5% Fed fund rate — this is a massive tightening cycle, one of the fastest in history, and I think essentially, it’s in the price right now,” said Yves Bonzon, Julius Baer Group CIO on Bloomberg TV, warning that even if the Fed pauses, the quantitative tightening actually continues.

Hopes for a Fed pivot rose after a lower-than-expected rate hike from the Bank of Canada last week and a perceived change of tone from the European Central Bank. Tweets from Nick Timiraos last Friday also sparked a dovish sentiment reversal. The WSJ’s Fed mouthpiece sought to reverse some of the euphoria over the weekend, however, as we discussed here.

“This week’s Fed meeting is critical for the rally to continue, pause or even end completely,” Morgan Stanley strategists led by Michael Wilson wrote in a note on Monday, noting macro-economic indicators “support a Fed pivot sooner rather than later.”
In Europe, the Stoxx 600 was little changed, with travel and financials outperforming, while consumer and commodities sectors fell. In Asia, stocks advanced, boosted by Hong Kong technology shares, with gains also seen from Japan to Australia.

Fed Chairman Jerome Powell “should be a bit less hawkish”at his press conference on Wednesday compared to after the last meeting, according to Yardeni Research. With the expectation that another 75 basis points is penciled in this week, “Powell will have to acknowledge that the federal funds rate is now further into restrictive territory and will be even more so come the FOMC’s December meeting,” it said in a note.

In Europe, the Stoxx 600 was little changed, with travel and financials outperforming, while consumer and commodities sectors fell. Mining and energy stocks underperformed in Europe, where the benchmark fluctuated.Here are some of the biggest European movers:

• International Distributions Services rises as much as 8.7%, the most intraday in almost a year, after the UK government said it won’t take any further action under a national security law in relation to a potential stake increase by Czech billionaire Daniel Kretinsky’s Vesa Equity Investment.
• Credit Suisse shares climb as much as 5% after it announced expected terms for its capital increase and after the Saudi National Bank ruled out raising its stake further for the time being.
• UK bank stocks including NatWest and Lloyds rise after the Sunday Times reported that the UK government is unlikely to seek more windfall taxes on bank profits.
• Know IT gains as much as 7.8%, extending gains into a third day, after Swedish business daily Dagens Industri labeled the IT consultancy’s shares a “bargain,” saying the company will benefit greatly from “megatrends” such as the shift to digitalization.
• Loomis falls as much as 6.7%, before paring the drop, after Carnegie cut its recommendation for the Swedish cash handling firm to hold from buy after strong year-to-date performance, saying the shares are approaching fair value.
• Pandora falls as much as 2.7% after the Danish jeweler on Oct. 30 said a fire has affected its European distribution center in Hamburg, Germany.
• Exmar shares drop as much as 11%, erasing a post-earnings gain on Friday, after an analyst at ING writes that the total potential book gain on a divestment by the gas transporter may be lower than expected.
• Verbund falls as much as 5.3% after Credit Suisse says it expects the power firm to be negatively impacted by rising interest rates, as well as the risk of adverse political intervention and falling power prices.
• Fresenius SE gains as much as 4.6% after the German health care company published a better-than-feared quarterly figure.
• EMS-Chemie fell as much as 4.8% after Berenberg cut the stock to hold from buy, saying the chemicals firm’s valuation is “too expensive.”

Euro-area inflation surged to a fresh all-time high, while the bloc’s economy lost momentum — reinforcing fears that a recession is now all-but unavoidable. That’s after a core gauge of US inflation accelerated in September, bolstering the case for more tightening.

In Asia, stocks advanced, boosted by Hong Kong technology shares, with gains also seen from Japan to Australia, as optimism on corporate earnings and a lift from Apple offset disappointment with Chinese economic data. The MSCI Asia Pacific Index climbed as much as 1.1% before halving the advance in afternoon trading. Tech-heavy markets of South Korea and Taiwan saw indexes rise more than 1%, while key gauges in China and Hong Kong extended last week’s rout.  Samsung, TSMC and other Apple suppliers in Asia staged a rally after the iPhone maker jumped nearly 8% Friday, fueling gains on Wall Street. Apple’s results were seen as positive in contrast with disappointing recent announcements from other tech giants.

“Asian countries, especially Taiwan and South Korea, have a high portion of companies that supply to Apple so Asia can’t be left out of the Apple-led rally in the US,” said Lee Jae-Mahn, a strategist at Hana Financial Investment. Investors have already priced in a likely 75 basis point rate hike by the Federal Reserve this week, he added. Equities in mainland China and Hong Kong ended down after seeing big swings Monday, with the Hang Seng China Enterprises Index closing at its lowest since late 2005. Sentiment slumped as factory and services activity in Asia’s largest economy contracted in October amid tight Covid rules and an ongoing property slump, while China continued to impose lockdowns. Even with Monday’s gain, the key MSCI Asian stock gauge is poised for a loss of nearly 2% in October, its third-straight monthly decline. The index is trading near its lowest level since April 2020

The dollar rose and the yen fell as traders positioned for another large interest-rate hike by the Federal Reserve this week, widening the policy divergence with the Bank of Japan. The euro and the pound also declined

In rates, US Treasuries fell, pushing the two-year yield 6 basis points higher although off worst levels of the day leading into the US session; yields remain cheaper from front-end out to intermediates, flattening the curve. US 10-year yields cheaper by 3.5bp on the day at around 4.03% with bunds underperforming by additional basis point over early European session; losses have been pared into early US session after 10-year peaked at 4.075%. Long-end outperforms, flattening 5s30s by 4.2bp on the day with 30-year yields little changed from Friday’s close. Wider losses seen across the German curve while gilts outperform. The Dollar issuance slate empty so far; this week’s estimates are for $15b to $20b, front-loaded before Wednesday’s Fed rate decision. German bunds fell, lifting the 10-year bund yield 3.9 basis points higher and steepening the yield curve. UK gilts were mixed.

In FX, the Bloomberg Dollar Spot Index rose as much as 0.5%, extending gains from late last week as speculation cools that the Fed may signal a slower pace of monetary tightening. Such speculation earlier in October had prompted selling in the greenback, putting the index on track for its first month of decline since May.

Commodities are under pressure as the USD picks up and following weak Chinese PMIs and ongoing COVID concerns. WTI and Brent are lower by just shy of 1% amid the above factors and as focus increasingly turns to next week’s US midterms and remarks from US officials, including President Biden. US President Biden said that oil companies who complain he is picking on them ‘ain’t seen nothing yet’, according to Reuters. QatarEnergy CEO said discussions are ongoing with several Asian buyers as value-added partners on the North Field expansion and that western international oil company partners have all been announced, while the CEO said several supply agreements are being discussed related to the expansion and announcement will be made in due course, according to Reuters. US Energy Envoy Hochstein says the US has called on oil producers to increase output, speaking at ADIPEC; need more investment in the oil and gas sector right now and tomorrow. Both precious and base metals are lower given the USD’s upside and softer China trade

European natural gas fell after two days of gains as unseasonably warm weather reduces demand and eases concerns about shortages for the winter and oil edged lower as weak economic data from China fanned concerns about energy demand, but it was still set for the first monthly advance since May on OPEC+’s planned supply cuts.

Bitcoin is pressured on the session but resides within a narrow range circa. USD 400 above the USD 20k handle and as such is well within recent parameters.

It’s a quiet start to the week, with just the October Chicago PMI, and Dallas Fed manufacturing activity on the calendar. Central bank speakers include ECB’s Visco and Lane speak with the Fed still in blackout period ahead of Wednesday’s FOMC. We get earnings from Stryker, NXP Semiconductors

Market Snapshot

• S&P 500 futures down 0.7% to 3,885.50
• STOXX Europe 600 down 0.2% to 410.02
• MXAP up 0.5% to 136.23
• MXAPJ up 0.1% to 433.17
• Nikkei up 1.8% to 27,587.46
• Topix up 1.6% to 1,929.43
• Hang Seng Index down 1.2% to 14,687.02
• Shanghai Composite down 0.8% to 2,893.48
• Sensex up 1.0% to 60,575.58
• Australia S&P/ASX 200 up 1.1% to 6,863.46
• Kospi up 1.1% to 2,293.61
• German 10Y yield up 1.7% to 2.14%
• Euro down 0.4% to $0.9924
• Brent Futures down 0.5% to $95.34/bbl
• Gold spot down 0.5% to $1,637.02
• U.S. Dollar Index up 0.40% to 111.20

Top Overnight News from Bloomberg

• Luiz Inacio Lula da Silva won Brazil’s presidential election in a dramatic comeback for the left-wing politician who was languishing in a jail cell for corruption just three years ago.
• Euro-area inflation surged to a fresh all-time high, while the bloc’s economy lost momentum — reinforcing fears that a recession is now all-but unavoidable.
• Wheat worries and weak China PMIs reminded Monday’s markets that not all is well. However, with Fed Chairman Powell likely to confirm hopes of a December step-down in the pace of rate hikes, the mood could be sanguine until the US jobs data on Friday.
• For months, investors have been eagerly awaiting a Federal Reserve policy pivot. But now, at least for some, it might come too soon.
• European stocks fluctuated and US equity futures fell at the start of another busy week of earnings and key central bank decisions.
• Asian stocks tracked Friday’s gains in the US amid optimism over corporate earnings in the region. The dollar climbed as traders positioned for another large interest rate hike by the Federal Reserve this week.

A more detailed look at global markets courtesy of Newsquawk

Asia-Pacific stocks traded mostly positive with momentum from last Friday’s rally on Wall St although some of the gains were capped by disappointing Chinese PMI data and lingering COVID-19 woes, while participants are also bracing for a week laden with risk events including the latest FOMC meeting and NFP jobs data. ASX 200 traded positively with advances led by outperformance in tech but with further upside limited by weakness in the commodity-related sectors and as participants await tomorrow’s RBA policy meeting. Nikkei 225 was boosted after Japan’s Cabinet formally approved a JPY 71.6tln economic stimulus package on Friday and with the index shrugging off mixed Industrial Production and Retail Sales data. Hang Seng and Shanghai Comp were mixed with the mainland pressured after Chinese PMI data showed surprise contractions in both factory and services activity, while Hong Kong was somewhat choppy amid a plethora of earnings releases including the big 4 banks and with casino names hit after Macau imposed three days of rapid COVID testing and locked down the MGM Cotai resort.

Top Asian News

• PBoC Governor Yi reiterated that China will continue with its prudent monetary policy to keep the value of the yuan stable and said that China has the conditions to maintain conventional monetary policy for as long as possible, while Yi also reaffirmed to step up support for the real economy, according to Caixin and Reuters.
• China’s State Council reiterated support for China’s digital economy and proposed an eight-pronged approach, according to SCMP.
• China named Chen Yixin, who is a long-time confidant of President Xi, as the new state security minister in the latest leadership shake-up, according to SCMP.
• US Secretary of State Blinken spoke with China’s Foreign Minister Wang Yi today and discussed the need to maintain open lines of communication and responsibly manage the US-China relationship, while Blinken raised the subject of Russia’s war in Ukraine and the threat it poses to global security and economic stability, according to the State Department.
• Shanghai Disney Resort suspended operations today due to COVID controls, according to Global Times.
• Macau required residents to undergo three days of rapid Covid tests and locked down MGM China’s (2282 HK) Cotai casino resort although it was also reported that residents from mainland China will be able to travel to Macau from November 1st via the smart visa process, according to Reuters.
• Macau is to commence mass COVID nucleic acid testing on November 1st, via Bloomberg.
• Foxconn’s (2354 TT) Zhengzhou plant may see up to 30% of the factory’s November shipments of Apple (AAPL) iPhones impacted by the COVID-19 situation and it is working to increase iPhone production at its Shenzhen factory, according to a source
• Japan is to establish a new joint command to manage operations of land, sea and air self-defence forces with the government aiming to establish the new self-defence forces joint command in 2024, according to Nikkei. It was also separately reported that Japan is mulling extending its high-speed missile range to defend the Senkaku/Diaoyu Islands, according to SCMP.
• At least 153 people died and 150 others were injured during a stampede after large crowds surged into a narrow street in Seoul’s Itaewon nightlife district, according to a fire official cited by YTN. South Korean President Yoon declared a national day of mourning and said he would come up with measures to prevent a recurrence of similar incidents, according to Yonhap.
• At least 132 people died and many are still missing after a suspension bridge collapsed in India’s Gujarat state, according to BBC.
• RBNZ said bank solvency stress test shows resilience to a stagflation scenario and although capital buffers would be reduced in a stagflation scenario, they would still remain above the regulatory minimum, according to Reuters.

European bourses began the week modestly firmer, though this proved shortlived and the complex has pivoted to being mixed overall in-fitting with the APAC handover amid PMIs, COVID, month-end and ahead of a busy week. Specifically, Euro Stoxx 50 +0.10% while sectors are similarly mixed and feature some outperformance in defensives while Energy & Basic Resources lag amid COVID concerns and pressure in Glencore. Stateside, futures are under more pressure, ES -0.5% as yields pickup a touch, NQ -0.7% lags slightly, ahead of Wednesday’s FOMC where a 75bp hike is expected and as corporate updates continue.

Top European News

• UK PM Sunak is reportedly considering freezing foreign aid for two additional years to help balance UK government finances, according to The Telegraph.
• UK government quashed suggestions that it is considering a windfall tax on banks as one of the measures to plug a hole in its finances at next month’s budget, according to The Sunday Times.
• UK Home Secretary Braverman is under increasing pressure regarding security breaches after it emerged she took several hours to alert the UK’s top civil servant of an “error of judgement” regarding sensitive documents, according to FT.
• UK housing developers warned that new rules and taxes will add GBP 4.5bln to annual costs, according to FT citing a report by the Home Builders Federation.
• UK rail companies and unions are to hold talks to prevent more strikes, according to FT.
• UK’s ONS has concluded the classification review of the Energy Price guarantee. Payments will be classified as subsidies on products, paid by gov’t to suppliers. Reduced energy unit prices will push inflation lower than if the scheme did not exist.
• Irish PM Martin said political deadlock in Northern Ireland which led London to announce that it will call fresh elections in Northern Ireland, demonstrates that the governance system for the system is not fit for purpose and should be reformed, according to FT.
• ECB’s Knot said the ECB is not done with normalising monetary policy and that the ECB will significantly increase rates again in December which could be by 75bps but noted the next interest step will probably be between 50bps-75bps. Knot added the following interest rate steps will probably be smaller from early 2023, while he added that the ECB is not even at half-time of its fight against inflation and that the prospect of a recession in the Eurozone has become increasingly likely, according to Reuters.
• EU officials have proposed a far-reaching ban on the sale of goods made with forced labor, the plan is in early days and could take years to come into force, WSJ reports.

FX

• USD is bolstered by the general risk tone, Yuan pressure post-PMIs and the latest piece from WSJ’s Timiraos; DXY to a 111.20+ peak, though it has eased slightly and holds just above the figure.
• USD/JPY lifted beyond 148.00 amid USD strength with little impetus from its own data inputs, though upside has seemingly been capped ahead of 148.50.
• EUR is pressured given the above action, though saw little reaction to hotter-than-expected EZ CPI for October, with market pricing steady at around a 90% chance of 50bp in December; single currency between 0.9915-0.9965.
• After the JPY, GBP has borne the brunt of the USD’s advances with EUR/GBP modestly bid as such with UK politics very much in focus as we count down to the BoE; currently, Cable holds around the session’s 1.1550 trough.
• Petro-FX dented on softer benchmark pricing while the antipodeans are sensitivity to APAC pressure particularly in China though the Kiwi is deriving some support from domestic stress tests.
• Brazil’s former President Lula has won the Brazilian presidential election run-off with 50.9% of votes vs Bolsonaro at 49.1% of votes, according to BBC.

Fixed Income

• Core benchmarks are pressured as we enter a week dominated by numerous Central Bank updates.
• USTs are lower by 13 ticks with the 10yr yield surpassing Friday’s 4.05% best and nearing Thursday’s 4.08 peak before 4.10%; action that occurs ahead of the Wednesday FOMC and following the latest WSJ piece.
• Bunds lag amid the above factors and following better-than-expected domestic retail data before another hot EZ CPI print, though reaction to the latter was limited after last week’s German release; currently, holding around 20 ticks above the 138.20 trough.

Commodities

• Commodities are under pressure as the USD picks up and following weak Chinese PMIs and ongoing COVID concerns.
• Specifically, WTI and Brent are lower by just shy of 1% amid the above factors and as focus increasingly turns to next week’s US midterms and remarks from US officials, including President Biden.
• US President Biden said that oil companies who complain he is picking on them ‘ain’t seen nothing yet’, according to Reuters.
• QatarEnergy CEO said discussions are ongoing with several Asian buyers as value-added partners on the North Field expansion and that western international oil company partners have all been announced, while the CEO said several supply agreements are being discussed related to the expansion and announcement will be made in due course, according to Reuters.
• US Energy Envoy Hochstein says the US has called on oil producers to increase output, speaking at ADIPEC; need more investment in the oil and gas sector right now and tomorrow.
• Both precious and base metals are lower given the USD’s upside and softer China trade; spot gold remains below the USD 1650/oz handle while LME copper has slipped beneath USD 7.5k/T.

Geopolitics

• Ukrainian official sources says three missiles fired from Belarus were shot down on the Volyn province, in the west of the country, via Al Jazeera.
• Russia announced it is suspending the UN-brokered grain agreement with Ukraine after accusing Ukraine of a massive drone attack on the Black Sea Fleet in Sevastopol, Crimea. Russia’s Defence Ministry stated that the drones used to attack Russia’s Black Sea Fleet were recovered and analysed, while it alleged that the drones used Canadian-made navigation modules and were launched by Ukraine near Odesa, according to Reuters.
• Ukrainian President Zelensky said Russia’s suspension of the grain export deal needs a strong international response from the UN and the G20, while he suggested that Russia doesn’t belong in the G20 as it is deliberately trying to provoke starvation. Furthermore, Zelensky separately commented that Ukrainian forces repelled a fierce offensive by Russian forces in the Donetsk region.
• Ukrainian President’s Chief of Staff accused Russia of blackmail and faking terror attacks on its own facilities in response to Russian accusations that Ukraine was behind explosions in Crimea on Saturday, according to Reuters.
• US President Biden said Russia’s decision to suspend participation in the grain deal is outrageous, according to Reuters.
• NATO called on Russia to reconsider its decision and renew the grain deal urgently, while it said that Russian President Putin must stop weaponising food and end the illegal war on Ukraine, according to Reuters.
• UN Secretary-General Guterres delayed his departure for the Arab League Summit in Algiers by a day to focus on the Black Sea grain deal and continues to engage in intense contacts aimed at ending Russia’s suspension of participation in the deal, according to a spokesperson cited by Reuters.
• UN said Ukrainian, Turkish and UN delegations agreed on Sunday for a movement plan for 16 vessels on October 31st under the Black Sea grain initiative and agreed for inspections to be provided on Monday to 40 outbound vessels, while the UN added that the Russian delegation has been informed of both plans, according to Reuters.
• Turkey’s Defence Minister is in talks with counterparts in Kyiv and Moscow to resume the grains deal and reminded the parties of the importance of continuing the grain deal for all humanity, while Turkey will continue to do its part for the restoration of peace in the region, according to the Defence Ministry cited by Reuters.
• Russian Foreign Minister Lavrov said the Russian leadership, including President Putin, remains ready to negotiate on Ukraine, according to Anadolu Agency.
• Russia will reportedly take into account the modernisation of US nuclear bombs in Europe in its military planning, according to RIA citing Deputy Foreign Minister Grushko.
• Russian Defence Ministry alleged that representatives of a UK navy unit blew up the Nord Stream gas pipelines although didn’t provide any evidence for its claims, while the UK Defence Ministry said that these were ‘false claims of an epic scale’ and that Russia is making false claims to detract from its disastrous handling of the illegal invasion of Ukraine. Furthermore, the French Foreign Ministry also stated that Russian accusations against Britain have no basis and are part of a strategy to turn attention away from Moscow’s sole responsibility for the war in Ukraine, according to Reuters.
• US government was urged to open an investigation regarding allegations of a hacking of former PM Truss’s phone while she was Foreign Secretary, while The Mail on Sunday reported that agents suspected of working for Russia were responsible for the alleged hacking, citing unnamed sources.

US Event Calendar

• 09:45: Oct. MNI Chicago PMI, est. 47.0, prior 45.7
• 10:30: Oct. Dallas Fed Manf. Activity, est. -18.5, prior -17.2

DB’s Jim Reid concludes the overnight wrap

The most unoriginal intro I can use this morning given today’s date is to speculate as to whether the Fed will offers tricks or treats this week. Indeed a week with the latest FOMC and payrolls is unlikely to be dull, and could “spook” the market, especially after a 10-day period that was mostly made of up dovish pivot talks. However this momentum stalled a bit after runaway European inflation on Friday tempered some of the enthusiasm for the trade. So all to play for. We also have a BoE meeting (Thursday) that although less pivotal than it could have been a few weeks back is still something that can influence global markets. Remember that the following week sees US mid-terms (Tuesday) and CPI (Thursday). So quite a run of big events coming up as we hit the last day of the month.

Other key data releases include the ISM indices in the US (tomorrow and Thursday). Industrial activity and labour market indicators will be also released in Europe. Corporate earnings will feature Saudi Aramco, BP, Pfizer, Starbucks, Toyota and Qualcomm after last week’s disappointing results from Big Tech firms.

Over the weekend, Russia announced that it is exiting from the internationally brokered arrangement that allowed grain ships to leave Ukrainian Black Sea ports, in response to what it called a major Ukrainian drone attack near the port of Sevastopol in Crimea. The abrupt move by Russia has caused international outcry as the decision undermines efforts to ease a global food crisis. Moscow has requested a meeting with the UN’s security council today to discuss the issue. Grain markets have reacted to this development with Chicago wheat futures rising +5.47% to $8.75 a bushel after hitting a high of $8.93 a bushel in early trade. Additionally, Corn (+2.2%) and soybeans (+0.75%) have also moved higher. So one to watch.

Moving on to political news, Brazilian left wing leader Lula narrowly defeated the far-right incumbent Bolsonaro in an extremely tight election to become the next president with 50.9% of votes against 49.1% for Bolsonaro. Lula will be sworn in on 1 January 2023.

Back to this coming week and with regards to the Fed, a fourth successive 75bps has long been pretty much nailed on but the subsequent path of hikes is now up for grabs and will be the key focus from this week’s meeting. It feels inconceivable to us, given how spectacularly forward guidance has broken down across the global markets over the last 12 months, that Powell will try to guide too aggressively for December, especially with two payrolls (one this week) and two CPIs to come before they meet again. Our economists currently believe that 75bps is still likely in December (see “Denying the Fed its December downshift”), but that January could mark a downshift whilst still seeing upside risks to their terminal rate expectation of 5% given the recent inflation data and evidence that r-star has risen (see “(R-)Star gazing: Macro drivers suggest real neutral rate may have risen”). Even WSJ Timiraos tweeted at the weekend “Consumers have a big cushion of savings. Corporations have lowered their debt-service costs. For the Fed, a more resilient private sector means that when it comes to rate rises, the peak or “terminal” policy rate may be higher than expected.” To be fair in his WSJ article that went viral 10 days ago he did mention that 2023 Fed forecasts could be upgraded. However the market mostly focused on the near-term downshift possibilities.

The downshift debate will still carry on right up to the meeting though with a few bits of important data for the Fed to throw into the mix prior to their final statement and subsequent tone in the press conference. The Chicago PMI (47.6 forecast vs. 45.7 previously) today will tweak estimates for tomorrow’s manufacturing ISM (DB at 49.8 vs. 50.9 last). The latter could drop below 50 for the first time since May 2020. Our economists note that the employment series of both will be important, especially in payrolls week. Last month the employment component of the Chicago PMI plunged 14.4 points to 40.2 – the largest month-over-month decline on record, while the equivalent in the manufacturing ISM fell by 5.5 points to 48.7 last month. Staying with jobs, tomorrow’s JOLTS is always a key indicator of the tightness of the labour market, albeit a month behind other releases. After the FOMC, the services ISM (DB at 55.3 vs. 56.7 last) could also tweak payrolls estimates. The employment component bounced from 50.2 to 53 last month but the flash services PMI indicates that the risks to the employment outlook are to the downside.

In terms of payrolls, the headline consensus is at +190k (DB at +225k vs. +263k previously) with private at +195k (DB at +225k vs. +288k previously). DB expect the unemployment rate to stay at 3.5% but the consensus expects it to tick up to 3.6%. Average hourly earnings is expected by the street to dip from 5% to 4.7% (DB at 4.6%)

Back here in Europe, the BoE’s decision on Thursday will be in the spotlight after a tumultuous month since its latest rate hike on September 22. Our UK economists preview the meeting here and expect the central bank to hike by +75bps, taking the Bank Rate to 3%. Beyond Thursday’s meeting, the team sees a terminal rate of 4.5% amidst growing fiscal consolidation. Their expected sequence of hikes beyond Thursday has +50bps in December and February and +25bps in March and May. For the ECB Lagarde speaks twice (Thursday and Friday) and she can firm up or row back on the slightly more dovish meeting last week than expected. Will she be influenced by Friday’s shocking European inflation numbers that saw German inflation at 11.6% YoY against 10.9% expectations, Italy at 12.8% vs. 9.9% expected and France 7.1% vs. 6.5% expected? Italy’s PPI was at 53.0% YoY vs. 50.5% expected. It wasn’t just energy related and core estimates for the full EA reading will likely have been upgraded given Friday’s numbers. Chief Economist Lane speaks today as well.

Turning to earnings now, with 255 of S&P 500 members now reported and after Big Tech’s disappointing releases, this week’s busy line-up of results include key numbers from key oil & gas, healthcare and consumer firms. It’s been an interesting season so far as our equity strategists reviewed over the weekend here. They comment that the breadth and size of Q3 earnings beats are near historical averages but these are off estimates that have continued to be cut. The blended estimate for Q3 earnings (combining actuals plus consensus for those yet to report) as a result has barely ticked higher and is significantly below the typical upward trajectory at this stage of the earnings season. In addition, consensus estimates for Q4 have fallen over -2% since the beginning of this earnings season, much larger than the typical -1%, and follow cuts of -6% in the prior three months. 2023 estimates have fallen by -2% this earnings season bringing the cuts since April to -7%. 2023 EPS consensus is now at $234, still significantly higher than our team’s forecast of $195 which incorporates a recession forecast next year. The consensus forecast on the other hand looks to embody a soft landing.

In terms of this week, for oil and gas, we will hear from Saudi Aramco and BP tomorrow, followed by ConocoPhillips, Cheniere, Enel and EOG on Thursday. In healthcare, results will be due from Eli Lilly, Pfizer (tomorrow), Novo Nordisk (Wednesday) and Moderna (Thursday), among others. After some strong performance from staples this week, earnings from Mondelez (tomorrow) and Starbucks (Thursday) will be in focus. Automakers outside the US will announce too, including Toyota (tomorrow), Ferrari (Wednesday) and BMW (Thursday). Tech firms reporting will include AMD, Sony and Uber tomorrow, Qualcomm and eBay on Wednesday and PayPal on Thursday. Other notable earnings releases will include Booking, Maersk (Wednesday) and Marriott (Thursday). See the full day by day week ahead at the end for all the key data and earnings releases.

Asian equity markets are trading mostly higher this morning extending Friday’s rally on Wall Street. Across the region, the Nikkei (+1.67%) is leading gains with the KOSPI (+1.10%) and the Hang Seng (+0.89%) also creeping higher. Elsewhere, stocks in mainland China are trading in negative territory with the CSI (-0.15%) and the Shanghai Composite (-0.27%) both edging lower following the release of weak PMI data (more below). In overnight trading, US equity futures are indicating a slightly negative start with contracts on the S&P 500 (-0.14%) and NASDAQ 100 (-0.20%) slightly lower ahead of the final day of October. Meanwhile, yields on 10yr USTs (+1.65 bps) are slightly higher, trading at 4.03% as I type.

Early morning data showed that China’s official manufacturing PMI fell to 49.2 in October from 50.1 in September, as softening global demand and strict domestic COVID-19 curbs hit the world’s second biggest economy. Separately, the non-manufacturing PMI unexpectedly contracted to 48.7 from 50.6 in September. Moving on to Japan, we have seen mixed data with the September industrial production (-1.6% m/m) falling for the first time in four months (v/s +3.4% in August, -0.8% market consensus). In contrast, retail sales extended its gain for the seventh consecutive month after it advanced +1.1% m/m in September (v/s +0.8% expected) raising expectations for a sustainable boost in consumption as the increase in tourist activity coincided with the relaxing of Covid-19-related restrictions. It followed August’s downwardly revised increase of +1.3%.

Looking back to last week now. 10yr Treasury and Bund yields fell -20.4bps (+9.4bp Friday) and -31.4bps (+14.1bps Friday) over the week, as markets seized on hopes for a coordinated central bank pivot. Friday’s inflation data out of Europe discussed above and the fact that US core PCE still above 5% on a YoY basis, and thus not enabling a true pivot, took some steam out of the rally. We’ll see what the Fed’s comms this week do to it. 10yr yields in the UK (-57.6bps, +7.5bps Friday) and Italy (-57.2bps, +16.7bps Friday) outperformed. The former can be attributed to the appointment of Rishi Sunak as Prime Minister, which not only resolves some political risk, but marks someone with markets experience who warned about the impact of former Prime Minister Truss’s economic plan which drove such a large selloff. Italy outperformed following less progress on QT discussions out of the ECB meeting than was anticipated, leading to a rollout farther in the future.

Risk assets enjoyed a boost from the perceived policy pivot, with the S&P 500 (+3.95%, +2.46% Friday) and STOXX 600 (+3.65%, +0.14% Friday), both gaining. The S&P 500 also saw strong earnings results from a number of bellwethers including Coca Cola, General Motors, Universal Health, Hess, Visa, Caterpillar, Honeywell, McDonald’s, and UPS beat estimates. However, big tech earnings were not nearly as strong, with even the companies beating estimates for the quarter gone revising guidance lower for the quarter ahead. That saw the FANG+ index severely underperform, falling -4.12% (+1.25% Friday), marking the largest weekly outperformance of the S&P 500 above the FANG+ index since Bloomberg started publishing data on the latter in late 2014.