Global Markets Relatively Quiet amid Holiday Conditions due to Labor Day

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Global markets were relatively quiet amid holiday conditions due to Labor Day in North America – Newsquawk Asia-Pac Market Open

MONDAY, SEP 05, 2022 – 05:45 PM

  • US stock markets were closed for Labor Day.
  • PBoC announced to cut Forex RRR by 200bps for financial institutions to 6% from 8%. There were also comments from the PBoC Deputy Governor that international recognition of the CNY will increase and said to not bet on CNY’s one-way moves, while the Deputy Governor added that China has relatively ample room for monetary policy.
  • Liz Truss won the contest to become the next UK Prime Minister, as expected, while Truss said she will deliver tax cuts, economic growth and will deal with issues regarding long-term energy supply.
  • OPEC+ agreed to cut output by 100k BPD in October, according to a delegate. This follows reports the OPEC+ panel was discussing a 100k BPD cut as its main proposal and that the OPEC+ JMMC supported a 100k BPD oil output cut for October.
  • Looking ahead, highlights include Australian Current Account, Net Exports Contribution to GDP & RBA Rate Decision, Japanese Household Spending, Cash Earnings & 30yr JGB Auction, UK Construction PMI & US ISM Non-Manufacturing PMI.

LOOKING AHEAD

  • Australian Current Account, Net Exports Contribution to GDP & RBA Rate Decision, Japanese Household Spending, Cash Earnings & 30yr JGB Auction, UK Construction PMI & US ISM Non-Manufacturing PMI.
  • Click here for the Week Ahead preview

US TRADE

EQUITIES

  • US stocks markets were closed for Labor Day

COMMODITIES

  • OPEC+ agreed to cut output by 100k BPD in October, according to a delegate. This follows reports the OPEC+ panel was discussing a 100k BPD cut as its main proposal and that the OPEC+ JMMC supported a 100k BPD oil output cut for October.
  • OPEC+ decision was ‘symbolic’ and sends the message that the group will intervene whenever necessary to bring stability to the market, according to a Gulf source.
  • Russian Deputy PM Novak said the OPEC+ deal is being fulfilled at a high level and that the group decided to revise quotas given the expectation of a slide in GDP.
  • Russian Energy Minister said Russia will reduce its output of gas by around 7% this year and will most likely cut oil output by around 2% this year, according to TASS.
  • Ukraine gas transit chief said Ukraine could substitute full capacity of NS1 via its Sudhza entry point and that Russia has booked 77mln cubic metres of daily natgas via Sudhza, but is only pumping 41mln cubic metres.
  • Germany is unlikely to meet its target for filling natural gas storage sites to 95% by the start of November following the latest Russian supply cut, according to Bloomberg citing sources.
  • Russia’s Kremlin reiterated that Nord Stream maintenance cannot be carried out due to western sanctions and said there can only be retaliatory measures on the oil price cap.
  • Gazprom said it received a warning from Russian authorities related to an oil leak at the Portovaya Compressor Station pumping gas through the Nord Stream pipeline and that it has become a hazardous production facility, while it added that Siemens Energy said that the oil leak can only be fixed by a special repair company, according to Reuters.
  • White House said the US and Europe are collaborating to ensure sufficient gas supplies, while it also stated that President Biden is determined to take every step necessary to shore up energy supplies and lower energy prices.
  • Iran’s petroleum minister said current market conditions require careful considerations and global energy markets need an increase in supply of oil and gas from Iran, while the minister added that the stability and continuity of OPEC+ cooperation greatly help world consumers in the current energy crisis, according to SHANA.
  • Omani oil company OQ said teams in Mina Al-Fahal, Sohar industrial complex are dealing with unplanned power outages, which resulted in an increase in flaring.
  • Libya’s oil production fell to 1.163mln BPD (prev. 1.211mln) due to power issues in Sarir and Mesla oilfields, according to the NOC.
  • Uniper (UN01 GY) signed an agreement with Woodside (WDS AT) for energy supply to Europe in which the agreement covers 1 BCM of natgas per year with Woodside to supply LNG from January 2023 to 2039.

GEOPOLITICS

RUSSIA-UKRAINE

  • Russian-installed official said Ukraine’s Kherson region is prepared for a referendum on joining Russia but “a pause has been taken” due to the security situation, according to Tass.
  • Ukraine’s Energoatom said a sixth reactor block at Zaporizhzhia was disconnected from Ukraine’s grid after shelling on Monday.
  • IAEA said Ukraine informed it that a backup power line between Zaporizhzhia nuclear power plant and a nearby power station was deliberately disconnected to extinguish a fire but the line was not damaged and the nuclear plant continues to receive the electricity it needs for safety from its sole operating reactor. IAEA said that four of its experts left the plant on Monday as planned after several days of safety work and two other experts are staying to maintain a continuing presence at Zaporizhzhia, while the IAEA will issue a report about the nuclear safety, security and safeguards situation in Ukraine on Tuesday.
  • Ukrainian President Zelensky said he hopes IAEA findings on the Zaporizhzhia plant will be objective and said new Russian shelling of the plant shows Moscow doesn’t care about IAEA opinion, while he added the new power cut from the station to grid means for a second time that the plant was a step away from radiation catastrophe, according to Reuters.
  • EU Commission Spokesperson said Russia could send more gas to Europe via other pipelines, but it is choosing not to and this demonstrates the weaponisation of energy by Russia.
  • White House claimed that Russia is using energy as a weapon and said that sanctions do not stand in the way of NS1 operating.

OTHER

  • EU Foreign Policy Chief Borrell said Iran nuclear talks are diverging, not converging and he is less confident about the closing of the Iran deal, while he will continue consultations with JCPOA members, especially the US.
  • WSJ reporter said that while Iran is seeking a change to the safeguards text the EU offered, that’s mainly on the intended date to close the probe by Confirmation Day and it is not explicitly seeking an upfront guarantee that the probe will be closed.
  • Islamic State claimed responsibility for a suicide bombing near the Russian Embassy in Kabul which killed six people including two Russian Embassy staff, according to Reuters.

ASIA

NOTABLE HEADLINES

  • PBoC announced to cut Forex RRR by 200bps for financial institutions to 6% from 8%.
  • PBoC Deputy Governor said international recognition of the CNY will increase and said to not bet on CNY’s one-way moves, while the Deputy Governor added that China has relatively ample room for monetary policy.
  • ING suggested that the latest RRR reduction from the PBoC will not change the current weakening trend of the CNY given the strength of the USD and it forecast USD/CNY at 7.05 by the end of Q3 2022.
  • Chinese Assistant Commerce Minister said the nation’s foreign trade faces unfavourable factors such as weakening external demand, while they will support new energy firms setting up operations overseas and will help foreign trade firms hedge exchange rate risk.
  • Chinese state planner official said they will speed up infrastructure investment and attract social capital into key projects, while the official added that policy measures to support economic growth are gaining traction.
  • China will respond to the US arms sales to Taiwan, according to China’s Foreign Ministry.
  • RBI Governor Das said forward guidance is difficult in tightening cycles and that the current account is to remain well within comfortable levels, while he added that FX reserves provide a cushion against a foreign shock and that the INR has moved in an orderly manner.

EUROPEAN TRADE

  • European stock markets traded lower and the STOXX Europe 600 finished with losses of 0.6%.

NOTABLE HEADLINES

  • BoE’s Mann said a fast and forceful approach to tightening, potentially followed by a hold or reversal is better than a gradualist approach, while she added that a 75bps rate hike by the BoE is an important question and that they must ensure inflation expectations do not drift further from the target.
  • Liz Truss won the contest to become the next UK Prime Minister, as expected, while Truss said she will deliver tax cuts, economic growth and will deal with issues regarding long-term energy supply.
  • German economy minister wants to keep two nuclear power stations as an emergency reserve, according to Spiegel.
  • Portugal’s government announced a new EUR 2.4bln anti-inflation package for families which includes a reduction on VAT on electricity to 6% from 13%, one-off subsidies for low-income families and an extra payment of half a monthly pension for all pensioners, according to Reuters.

DATA RECAP

  • UK S&P Global/CIPS Services PMI (Aug F) 50.9 vs. Exp. 52.5 (Prev. 52.5)
  • UK Composite PMI (Aug F) 49.6 vs. Exp. 50.9 (Prev. 50.9)
  • German S&P Global Services PMI (Aug F) 47.7 vs. Exp. 48.2 (Prev. 48.2)
  • German S&P Global Composite PMI (Aug F) 46.9 vs. Exp. 47.6 (Prev. 47.6)
  • EU S&P Global Services PMI (Aug F) 49.8 vs. Exp. 50.2 (Prev. 50.2)
  • EU S&P Global Composite PMI (Aug F) 48.9 vs. Exp. 49.2 (Prev. 49.2)
  • EU Retail Sales MM* (Jul) 0.3% vs. Exp. 0.4% (Prev. -1.2%, Rev. -1.0%)
  • EU Retail Sales YY* (Jul) -0.9% vs. Exp. -0.7% (Prev. -3.7%, Rev. -3.2%)

Source: Zero Hedge

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