Dangerous Game

Dip buyers wagering that the era of central-bank hawkishness has peaked got a reminder Wednesday that they are playing a dangerous game. The S&P 500 sank as much as 1.8% after the biggest two-day surge since April 2020 drew in traders tanked up on newly dovish monetary bets. While the index clawed back most of the losses, would-be bulls were put on notice as Federal Reserve Bank of San Francisco President Mary Daly disabused notions that a policy pivot is in the offing. Federal Reserve Bank of Atlanta President Raphael Bostic echoed Daly’s comments, saying he was not advocating a quick turn toward accommodation.

Oil Price Cap

Russia could cut its oil production by as much as 3 million barrels per day if the European Union and US proceed with a plan to cap prices, market experts have warned. The comments come as EU countries on Wednesday reached a compromise on a new package of Russian sanctions and as OPEC+ nations including Russia agreed separately on a production cut to support global prices. The EU pact includes support for the price cap on oil sales to third countries. Speaking after the OPEC+ announcement, Russian Deputy Prime Minister Alexander Novak reiterated that his country won’t sell oil to any countries that adopt such a cap.

Attacking Truss

UK Prime Minister Liz Truss is facing a fight to survive. She had arrived in Birmingham for a Tory conference, determined to mark the end of a difficult first month in office by stamping her authority on the ruling party. Instead, she was often hidden away in desperate private meetings as her opponents worked openly against the government and her cabinet squabbled in public. Truss herself asked the party to judge her a year from now when her growth plan has had time to work, but she may not get that long. Adding to the grim future is Fitch, which lowered the UK’s credit outlook to negative from stable. 

Musk-Twitter

Elon Musk won’t be showing up Thursday for a long-awaited deposition in Twitter’s lawsuit aimed at forcing him to go through with a $44 billion buyout of the company, according to people familiar with the matter. The billionaire reversed course earlier this week and committed himself to consummating the $54.20-per-share offer for the popular social-media platform on its original terms. Even though the deal still may take months to close, a trial set for Oct. 17 is almost certain to be put on hold. That means there’s no pressure for Musk to submit for pre-trial questioning about his complaints that Twitter executives hid the number of robot and spam accounts. 

Another One Leaving

Credit Suisse’s Christopher Chua is joining a wave of departure from the embattled firm. Chua, who was a Hong Kong-based managing director and deputy head of M&A for Asia-Pacific, left the bank to help oversee the Asia mergers and acquisitions business at HSBC, people with knowledge of the matter said. Credit Suisse has become a poaching ground for rivals in recent times, with the lender struggling to contain the fallout of a series of scandals and flagging performance. It earlier lost its Asia deputy wealth head. The bank is due to unveil a strategic review this month that’s expected to include a large-scale investment-banking retreat. 

Coming Up…

European shares are set to follow their Asian peers higher as investors keep the faith in stocks, even as traders weigh the impact of rising oil prices on inflation. The ECB publishes an account of its September policy meeting. Fed speakers Charles Evans, Lisa Cook and Loretta Mester participate in separate events. Expected data include Eurozone retail sales, Netherlands CPI inflation, Spain industrial production and Germany factory orders. Industrivarden and Volution Group are on deck for earnings.

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(Source: Bloomberg, Oct. 6-2022)