Investors place their bets ahead of US midterm elections.

• Global inflation may start to slow, but bringing it down could prove difficult, the IMF head said.

• Japan's second extra budget will only increase bond issuance by about ¥5 trillion ($34 billion) this fiscal year, people familiar said.

• Beijing will improve rules for people entering or leaving the city.

• Musk asks some fired employees to please come back.

• More tech woe as Apple is said to trim iPhone output and Meta may cut staff.

• Goldman cuts S&P 500 earnings views

• Investors place their bets ahead of US midterm elections.

• Rising recession risk could weaken the UK currency further as the policy shift focuses away from inflation and toward a darkening economic outlook. Some economists are saying the Bank of England’s outlook was misleading.

• Elon Musk urges his Twitter followers to vote Republican.

• Mastodon, a social network that markets itself as an alternative to Twitter, has seen a surge in new sign-ups, overwhelming the site.

• Mark Zuckerberg’s Meta is planning to begin firing potentially thousands of workers starting this week, according to a report.

• COP27 latest: Sunak says UK to triple funding for adaptation.

• Twitter fires 90% of India staff.

• China deflation fears rise.

• Macquarie launches global battery storage business.

• The US wants banks to keep doing some business with Russia.

• The EU is trying to dispel criticism about its aid to Ukraine 

• EU electricity and gas prices climbed in October

• Nvidia to sell chip in China that meets US rules.

• Australia's consumer sentiment tumbled to the lowest in 2-1/2 years and business confidence also weakened 

• Japanese household spending rose for the first time in three months in September, advancing 1.8% from the prior month on demand for furniture, household items and clothing

It seems markets are expecting Republicans to take control of at least one of the Houses in the midterm elections…possibly both! With inflation still high voters may abandon the Democrats. If so then we could see Treasuries rally, if the Democrats hold to both (I put that at about a 10% chance) then the USD will rally again. We will find out soon.

The EU continues to offer aid to Ukraine, however, saying and doing seem worlds apart with the EU. Ukraine is yet to receive most of the already committed aid promised by the Bloc and its likely to be next year before funds are sent!

There was negative news for crypto (see article in crypto) that tanked crypto with BTC dropping around $1k to $19735.

Global News

US midterms: Joe Biden and the Democrats face an uphill climb to retain control of both chambers of Congress in today's elections. Republicans are favored to take the House and have at least a 50-50 shot at the Senate. Meanwhile, recent polling suggests voters are splitting their state ballot, helping Democratic Senate candidates. BB

Apple expects to make at least 3 million fewer iPhone 14s than anticipated this year, people familiar said, because of softer demand and supply problems amid lockdowns in China. The country said on Saturday it'll "unswervingly" stick to Covid curbs. Daily cases hit a six-month high.BB

Meta may start job cuts affecting thousands of employees as early as Wednesday, the WSJ reported. Shares rose premarket in response to the reported layoffs, which come as Meta struggles with growing losses. BB

Goldman Sachs strategists lowered earnings estimates for the S&P 500 Index for each year till 2024. The team noted that margins contraction in the third quarter is the first since the pandemic, which signals more pain ahead, particularly for next year. “We believe S&P 500 margins have inflected downwards and lower our estimates to incorporate greater margin contraction,” strategists including David J Kostin wrote in a note dated Nov. 4.  BB

More than 100 world leaders kicked off the UN's annual climate change summit in Sharm el-Sheikh, trying to maintain momentum to curb planet-warming emissions even as tensions became evident.

• Optimism mounted when the issue of compensating poorer countries made it on to the agenda for the first time. But delegates are downbeat on prospects for big new commitments.

• The UN unveiled a plan to install early warning systems around the world within five years to mitigate the human impact of extreme weather disasters like the recent floods in Pakistan. The initiative calls for an initial investment of $3.1 billion by 2027.

• "The fight of our lives" is how UN chief António Guterres described the environmental challenge in a dramatic speech. "We are on a highway to climate hell with our foot on the accelerator."

• And the UK's climate crown is slipping as its drive to lead the Green Industrial Revolution has hit a wall of faltering finances and policy chaos. BB

Mastodon, an open-source social network that markets itself as an alternative to Twitter, has seen a surge in new sign-ups in recent days, overwhelming the site and its founder as the tiny operation struggles to keep up. Since Musk took over Twitter on Oct. 27, Mastodon has drawn close to half a million new users, bringing total monthly active users to more than 1 million. But that’s a tiny fraction compared to Twitter’s 238 million daily active users. BB

It’s the question on the lips of many investors. Is China about to end Covid Zero? After President Xi Jinping defended the strategy in his Communist Party congress address, investors were left wondering what comes next as lockdowns and blanket testing continued. In the absence of a clear outlook on when it will all end, traders have seized on what they see as signs of progress. With markets continuing to be whipsawed, and decoding China’s intentions key to everything from the fortunes of beaten-down stocks to the global economic outlook, BB

China is facing increasing deflation pressure as Covid outbreaks and controls cut demand and the falling prices of some commodities put pressure on companies to lower prices. The producer price index likely fell into deflation in October for the first time in nearly two years, according to a Bloomberg survey of economists. Data suggests China’s domestic demand has weakened further as movement restrictions to control Covid outbreaks damage spending, export demand falls and home construction continues to shrink. BB

Macquarie Group has launched a battery storage business to take advantage of opportunities in electrification and grid investment around the world. Eku Energy, created by the infrastructure giant’s Green Investment Group, has a three gigawatt-hour pipeline of capital expenditure worth $2 billion, and is set to complete its first project in Japan in the next few months. The intermittency of renewable generation means grids need flexible, on-demand power from cleaner assets like batteries. The new business has projects across the UK, Australia, Japan and Taiwan. BB

The dollar extended its slide Monday despite fresh increased in Treasury yields, which were partly driven by companies rushing to issue new debt before an inflation print that could send borrowing costs even higher. While relative yields are supposed to be a key fundamental for currencies, it sure isn’t doing much to help the greenback just now. BB

The premium offered by US notes relative to the rest of the Group of Seven nations just touched a three-year high, but Bloomberg’s dollar gauge is down 2% in the space of two days. That could be wariness among investors about piling in to US assets before the twin event risks of midterm elections on Tuesday and the October CPI print due Thursday. Or the growing anticipation that the pivot is imminent despite hawkish words from the Federal Reserve, seasoned with some concerns that policymakers’ hawkish stance will make for fresh bursts of volatility. BB

Jeremy Hunt is considering raising more money from inheritance taxes as he seeks to fill a £35 billion fiscal black hole when he announces the UK government's spending plans on Nov. 17. BB

Member states are expected to agree today on a watered-down version of new capital rules for banks (Basel III). The compromise text includes several changes in key elements to the Commission’s proposal, according to the draft we’ve seen. The text states the need to avoid a “significant increase in overall capital requirements” for Europe’s banking system. BB

Germany said the US shouldn’t underestimate Europe’s concerns about President Joe Biden’s green stimulus ahead of today’s Ecofin discussion on this issue. “I’m not certain the US side has realized how big our concern is,” German Finance minister Christian Lindner said yesterday. His French colleague, Bruno Le Maire, added that the EU should provide a “fast” and “strong” response BB

The EU’s economy will suffer a technical recession this coming winter, Commissioner Paolo Gentiloni said yesterday. “We know that the economy is slowing down, and a contraction is coming at least for the winter months,” he said ahead of the latest Commission forecast coming on Friday.  BB

European households are paying more than ever for their electricity and natural gas, even as governments spend billions to shield consumers from the energy crisis. The average retail gas price across the EU and Britain was almost double what it was in the same month last year, according to energy consultancy VaasaETT. Household electricity costs have soared 67% to 36 euro cents per kilowatt-hour. The biggest monthly gains were in Dublin, where power rates climbed 44%, while the average gas price in Rome soared by 97%. BB

Nvidia began producing a graphics processing unit for China that conforms to new US rules aimed at limiting that country's access to AI computing. The A800 GPU meets the "clear test for reduced export control and cannot be programmed to exceed it," the chipmaker said. BB

A slump in the pound has seen US investors put almost $1bn into London commercial property in recent months even as other international investors take flight. American investors spent $929m (£809m) on commercial property such as offices, shops and warehouses in the capital between July and September, according to data compiled by Savills. That was almost double the $479m invested by US businesses in the second quarter. - Telegraph

Commodities

As the London Metal Exchange wades through the fallout of this year’s nickel crisis, its American rival is gaining ground. Chicago-based CME Group Inc. has successful copper and precious-metals contracts but has never managed to challenge the LME’s dominance in other industrial metals. This year, it has seen strong growth in both its aluminum and cobalt contracts -- aggregate open interest in CME’s Comex aluminum futures contract is up more than 400% since the start of 2022, while open interest in the Comex cobalt contract has risen more than 500%. CME has been working to capitalize on the LME’s stumbles. At LME Week in London last month, it hosted a drinks party at the same time as the LME chairman’s reception and unveiled a tie-up with LME broker Marex Group to promote its aluminum contract. CME has also hinted at its plans to launch a nickel contract. BB

Rebound in China crude oil imports less impressive than it looks - China's imports of crude oil rebounded in October, but the details aren't as strong as the headline number suggests. The world's largest crude buyer imported 10.16 million barrels per day (bpd) in October, the highest since May and a 14% leap from the same month in 2021, according to data released on Monday by China customs. 

U.S. wheat ratings improve a bit; corn, soy harvests advance -USDA - The U.S. Department of Agriculture on Monday rated 30% of the U.S. winter wheat crop in good to excellent condition, up 2 percentage points from the previous week but still the lowest for this time of year in records dating to the late 1980s. The ratings also fell short of estimates from analysts surveyed by Reuters who on average had expected an improvement of 3 percentage points.

Crop Watch: Final corn fields disappoint, producers look to 2023 - The final three U.S. Crop Watch fields were harvested within the last week, all corn, and two of them fell short of expectations, consistent with this year’s trend. In 2022, six of the 11 Crop Watch corn yield scores came in below their last pre-harvest prediction, three came in above and the remaining two hit expectations. 

Gold Fields sticks to its Yamana Gold offer after counter-bid - The board of South Africa's Gold Fields will not change its offer for Yamana Gold after a surprise rival bid from Agnico Eagle and Pan American, it said on Monday. Gold Fields' decision reflects "commitment to capital discipline" and to fairness for shareholders in Gold Fields and Yamana, the South Africa-listed miner said on Monday. 

Petra Diamonds suspends operations at Tanzania mine after dam breach - Petra Diamonds has suspended operations at its Williamson mine in Tanzania after a wall of the tailings storage facility was breached, causing flooding in nearby areas, it said on Monday. The company, which operates three mines in South Africa as well as Tanzania's biggest diamond mine, said no injuries or fatalities had been confirmed and that government and mine emergency response teams had been mobilised. 

Santos flags gas output drop in 2023, modest long term production growth - Santos Ltd, Australia's No.2 independent gas producer, flagged on Tuesday that its gas and oil output is set to fall by around 10% in 2023, a bigger decline than analysts had expected, sending its shares down nearly 6%. The weaker near-term outlook came as Chief Executive Officer Kevin Gallagher outlined a new strategy, following nearly seven years at the helm during which he slashed costs and roughly doubled Santos' output through acquisitions.

EIA sees 23% of U.S. coal generated power capacity retired by end of 2029 - Competition from natural gas and renewable power could retire almost a quarter of the U.S. coal power capacity by end-2029, along with higher operating costs associated with aging units, the U.S. Energy Information Administration (EIA) said on Monday. According to the EIA's preliminary monthly electric generator inventory, 23% of the 200,568 megawatts (MW) of coal-fired electric generation capacity currently operating in the United States is set to go offline. 

Ukraine grain exports down 30.7% so far in 2022/23 – Ukraine has exported almost 14.3 million tonnes of grain so far in the 2022/23 season, down 30.7% from the 20.6 million tonnes exported by the same stage of the previous season, agriculture ministry data showed on Monday. Grain exports have slumped since Russia invaded Ukraine in February and closed off its neighbour's Black Sea ports, driving up global food prices and prompting fears of shortages in Africa and the Middle East.

Russian wheat lowest C&F offer at Egypt tender – The lowest cost & freight offer presented at an Egyptian state purchasing tender on Monday is believed to be for Russian wheat at $369.95 per tonne for 40,000 tonnes, traders said. Romanian wheat was offered lowest on a free-on-board basis at $356.45 per tonne for 60,000 tonnes, they added.

Crypto/Digital

Market levels (all analysis is based on CME futures contracts)

 DISCLAIMER.

The content of this daily newsletter should only be considered a guide and views, opinions or content contained in this email is provided solely for information purposes and does not constitute investment advice or a solicitation to trade or invest.

Chris Tubby

Senior Director Trading and Education

Symax Fintech