MNI EUROPEAN OPEN: Oil Spikes On US Russian Sanctions
EXECUTIVE SUMMARY
- US HITS TOP RUSSIAN OIL COMPANIES WITH SANCTIONS, EU BANS RUSSIAN LNG - RTRS
- RUSSIAN OIL SUPPLY TO INDIA SET TO FALL TO NEAR ZERO: SOURCES - BBG
- FED SOON TO END QT ON FUNDING STRAINS - WRIGHT - MNI INTERVIEW
- BOK KEEPS POLICY RATE AT 2.50%: PRESS - MNI BRIEF
- FORMER RBNZ STAFFERS SHARE THEIR OCR OUTLOOK - MNI
Fig 1: Oil Benchmarks Higher
Source: MNI - Market News/Bloomberg/Refinitiv.
UK
GILTS (MNI BRIEF): Taking higher-rated sovereign bonds out of banks' leverage ratio would bring "real risk," Bank of England Deputy Governor Sam Woods said Wednesday. "My view is that this would be a profound – and highly risky – change," he said in the annual Lord Mayor's Mansion House speech.
POLITICS (POLITICO): “Former Conservative Prime Minister Liz Truss thinks the Green Party might end up becoming the official opposition after the next election.”
EU
US/RUSSIA (RTRS): “U.S. President Donald Trump on Wednesday imposed Ukraine-related sanctions on Russia for the first time in his second term, targeting oil companies Lukoil and Rosneft as his frustration grows with Russian President Vladimir Putin over the war.”
EU/RUSSIA (POLITICO): “A weeks-long stalemate holding up the latest package of sanctions against Russia was ended Wednesday night after Slovakia lifted its veto, the Danish presidency of the Council of the EU confirmed. The bulk of the package — the 19th to be imposed on Moscow since the start of its full-scale invasion of Ukraine more than three years ago — focuses on sapping the Kremlin’s war chest by imposing restrictions on energy traders and financial institutions.”
UKRAINE (BBC): “At least seven people have been killed including two children during intense Russian drone and missile strikes on Ukraine, officials say. Hours earlier, US President Donald Trump said his plans for an imminent summit in Budapest with Russia's Vladimir Putin had been shelved as he did not want a "wasted meeting". President Zelensky said the attacks proved Moscow had not come under enough pressure.
UKRAINE (POLITICO): “Donald Trump should allow Ukraine to use America’s long-range Tomahawk cruise missiles to strike targets deep inside Russia, Finnish Prime Minister Petteri Orpo said. In an interview with POLITICO, Orpo warned that Russia represents a “permanent threat” to European security and urged the U.S. president to grant Ukraine the weapons it needs to defend itself.”
UKRAINE (POLITICO): “European countries haven't yet agreed whether to give Ukraine a €140 billion loan to buy weapons to fight Russia — but that's not stopping them from debating what strings to attach to it.”
RUSSIA (POLITICO): “France's newly appointed chief of defense is preparing the nation's armed forces to be ready for a "shock, that would be a kind of test" from Russia. "Russia is a country that may be tempted to continue the war on our continent," Gen. Fabien Mandon told lawmakers on the National Assembly's defense committee on Wednesday.”
HUNGARY (POLITICO): “The European Commission will speak to the Hungarian government about reports of alleged historic spying conducted from its embassy in Brussels, the EU’s anti-fraud Commissioner Piotr Serafin told MEPs on Wednesday.”
US
FED (MNI INTERVIEW): Renewed money market strains will prompt the Federal Reserve to end quantitative tightening soon and resume asset purchases within six to 12 months after that, former Fed Board economist Jonathan Wright told MNI.
UKRAINE (BBC): “The US has announced new sanctions targeting Russia's two largest oil companies - Rosneft and Lukoil - in an effort to pressure Moscow to negotiate a peace deal in Ukraine. "I just felt it was time. We waited a long time," Trump said in the Oval Office, after a meeting with Nato Secretary-General Mark Rutte.”
US/CHINA (BBG): "The Trump administration is weighing export restrictions against China that would bar the purchase of a wide swath of critical software, a White House official said Wednesday."
OTHER
INDIA (BBG): “Flows of Russian oil to major Indian processors are expected to fall to near zero after US sanctions on crude giants Rosneft PJSC and Lukoil PJSC, according to senior refinery executives.”
SOUTH KOREA (MNI BRIEF): The Bank of Korea on Thursday kept its base interest rate unchanged at 2.50% for a third consecutive meeting, as expected, adopting a wait-and-see stance amid concerns over an overheated real-estate market, according to Yonhap News Agency.
SOUTH KOREA (BBG): "South Korea and the US are focusing on the structure of a $350 billion investment pledge by Seoul, rather than a currency swap, according to Finance Minister Koo Yun Cheol."
TAIWAN (CNA/BBG): "Taiwan and US are “very close” to reaching a trade agreement, says Alexander Yui, Taiwan’s de facto ambassador to the US, according to Central News Agency report."
NEW ZEALAND (MNI): Former RBNZ staffers share their OCR outlook. On MNI Policy MainWire now, for more details please contact sales@marketnews.com
CHINA
CONSUMPTION (SHANGHAI SECURITIES NEWS): "China’s consumer market is poised for continued stable expansion in the fourth quarter, driven partly by traditional peak season activity and intensive promotional events, according to a report in the Shanghai Securities News."
EQUITIES (CSJ): "Chinese banks’ wealth management funds are poised for a “dual breakthrough” during the upcoming 15th Five-Year Plan period, marked by both growth in scale and greater product diversity in the equity market, according to a report by the China Securities Journal."
MNI: PBOC Net Drains CNY23.5 Bln via OMO Thursday
MNI (BEIJING) - The People's Bank of China (PBOC) conducted CNY212.5 billion via 7-day reverse repos, with the rate unchanged at 1.40%. The operation led to a net drain of CNY23.5 billion after offsetting maturities of CNY236 billion today, according to Wind Information.
- The seven-day weighted average interbank repo rate for depository institutions (DR007) fell to 1.4030% at 09:29 am local time from the close of 1.4327% on Wednesday.
- The CFETS-NEX money-market sentiment index, measuring interbank money-market liquidity, closed at 50 on Wednesday, the same as the close on Tuesday. A higher reading points to tighter liquidity condition, with 50 representing an equilibrium.
MNI: PBOC Sets Yuan Parity Lower At 7.0918 Thurs; -0.03% Y/Y
MNI (BEIJING) - The People's Bank of China (PBOC) set the dollar-yuan central parity rate lower at 7.0918 on Thursday, compared with 7.0954 set on Wednesday. The fixing was estimated at 7.1226 by Bloomberg survey today.
MARKET DATA
CHINA SEPT. SHARE OF GLOBAL PAYMENTS BY SWIFT CNY +3.17%; AUG. +2.93%
MARKETS
US TSYS: Yield Rally Grinds to a Halt, US 10-Yr Consolidates Below 4.00%
The US 10-Yr bond future TYZ5 has done very little in the trading session in Asia, down -01 at 113-24+ as the grind lower in yields appears to take a breather.
Cash bonds had opened with a modest bid tone, which fell away leaving yields largely unchanged from the open.
- The US 2-Yr is unchanged at the open at 3.44%
- The US 5-Yr also fell by -1bp to 3.55%
- The US 10-Yr is at 3.94% with the sub 4.00% range now seemingly in place, as the government shut down drags on. We look now to near term lows of 3Q '24 as potential targets for the 10-Yr of 3.60 - 3.70%
- The US 30-Yr continues to perform down at 4.53%.
Tonight the market will focus on Initial Jobless Claims and Continuing Claims as key data releases, with other data impacted by the government shutdown. Issuance highlights are a 5-Yr US$26bn TIPS auction, upsized by $3bn from the last issue.
Renewed money market strains will prompt the Federal Reserve to end quantitative tightening soon and resume asset purchases within six to 12 months after that, former Fed Board economist Jonathan Wright told MNI. Key short-term borrowing rates spiked about 10 basis points last Wednesday, the same day as a large Treasury coupon settlement, and stayed elevated Thursday as banks tapped the Fed’s standing repo facility, a backstop that provides cash in exchange for U.S. Treasuries and agency bonds. "It looks to me like we’re at about the same place as early 2019, where there are signs of trouble on the horizon but nothing you can call turmoil in money markets yet. But continuing to reduce the amount of bank reserves will at some point get us to a steep part of the demand curve – at least on some days – and run a risk of a repeat of what happened in September 2019," Wright, an economist at Johns Hopkins University, said in an interview.
JGBS: 2/30s Curve Flattest Since Early July, Sep CPI Due Tomorrow
JGB futures sit at 136.17, +.01 versus settlement levels in latest dealings, after a 136.11-136.32 range so far today. For JGB futures we are maintaining familiar ranges for now, with US Tsy futures generally biased higher, whilst fiscal concerns in Japan may be limiting the upside (albeit with such fears dissipating somewhat so far this week). The other focus point today has been the oil price spike. We are coming from low levels, but it may slow some of the bullish upside seen in futures.
- Back end JGB yields have softened as the session has progressed today, with the 20-40yr tenors down around 2bps. Steadier trends are evident across other parts of the curve. The 10yr JGB yield unable to sustain +1.66% levels.
- The 2/30s JGB curve is to fresh flats of +216bps, levels last seen in early July, see the chart below. As we noted earlier, markets, at this stage, are taking the prospects of fresh fiscal stimulus from the new Takaichi regime relatively well. Comments from officials that fiscal discipline will still be eyed likely calming market sentiment to a degree. We still await exact details of the fiscal package, which could be launched next month.
- On the BoJ, headlines crossed earlier, "EX-BOJ EXECUTIVE MAEDA: BOJ LIKELY TO RAISE INTEREST RATES EITHER IN DECEMBER THIS YEAR OR JANUARY NEXT YEAR, MAEDA: BOJ MAY ALREADY BE SOMEWHAT BEHIND THE CURVE IN ADDRESSING INFLATION RISK" RTRS.
- Market pricing doesn't have a full hike priced until around March next year.
- Note tomorrow we get Nationwide CPI. The market expects headline measures to tick up, but core core to ease to 3.1%y/y from 3.3%.
Fig 1: JGB 2/30s Curve - Flattening Trend Continues
Source: Bloomberg Finance L.P./MNI
AUSSIE BONDS: 10yr Futures Still Threatening Recent Highs, RBA's Bullock Friday
Aussie bond futures have had relatively tight ranges so far today, with 3yr underperforming relative to the 10yr. The 10yr got highs of 95.895, but sits slightly lower now, the 95.90 resistance level intact. The 3yr was last at 96.645. The bias for US Tsy futures is for dips to be supported, with the oil price bounce (post US sanctions news on Russia) not enough to shift sentiment lower so far today.
- Cash ACGB yields are a touch higher, but gains are less than 1bps at this stage, 3yr around 3.35%, while the 10yr is tracking at 4.11%. The 3/10s curve is little changed at +76bps.
- The AU-US 10yr spread is slightly firmer to +16.5bps, but remains well short of recent highs above +30bps.
- The BBG economist survey sees the consensus for the RBA cash rate at 3.35% to end Q1 next year, against a current rate of 3.60%. Market pricing has a cash rate around 3.20% for the March 2026 RBA meeting.
- Note tomorrow we get RBA Bullock speak, while preliminary Oct PMIs are due on the data front.
BONDS: NZGBS: NZ-US 10yr Back Closer To Fair Value Estimate, As Local Yields Up
NZGB yields have firmed as Thursday's Asia Pac session unfolded, outperforming a still soft US Tsy yield backdrop. The NZ-US 10yr spread is back to +3bps, up from flat levels and getting back closer to our fair value estimate around +6bps. The 2yr NZGB yield is near 2.52%, little changed today, with more shifts in the back end, the 10yr back to 3.96%, up almost 2bps. The NZ 2/10s curve is a touch steeper at +144.5bps, but off earlier Oct highs (+154bps).
- Spillover from the oil price bounce may a factor for higher NZGB yields today, although there isn't impacting US or Aust markets as much. As we noted the NZ-US spread widening is consistent with our fair value analysis.
- As we noted in our earlier update, since Monday's Q3 CPI update, NZ yields have struggled for further downside, as we await a fresh catalyst (technicals still point to lower yield levels). The 2yr swap rate is little changed today, last at 2.30%, just up from recent lows.
- BBG noted, as part of its consensus survey for NZ: "Economists expected New Zealand 3Q 2025 GDP at +1.0% y/y, the lowest forecast since survey’s inception;", although arguably this is already in the price from a rates perspective. The same survey noted economists cash rate to trough at 2.25% into 2026.
- Current market pricing has a tough around 2.09% for the Sep meeting next year (per OIS pricing).
FOREX: USD Index To Fresh Weekly Highs As Oil Spikes On Sanction News
The USD BBDXY index has climbed to fresh highs for the week (last 1214.3), reversing Wednesday's modest pull back. Earlier Oct highs around 1220 are still intact. The main macro focus point today has been higher oil prices, with crude benchmarks up around 3%, following US sanctions news on Russian producers. Insofar as the US terms of trade are positively correlated with energy prices, this has arguably lent USD support today. Yen has been the weakest performer. Cross asset trends elsewhere have been steadier, US equity futures are higher, but only marginally, while Tsy yields are close to flat (albeit up from earlier lows).
- USD/JPY is looking to consolidate its break above 152.00 (session highs rest at 152.57, last near 152.45/50). Citi's Japan terms of trade proxy is weaker, but still close to recent highs (-21.1 so remaining in negative territory). We haven't heard from the Japanese authorities following this recent round of FX weakness.
- Technically, USD/JPY is close to Oct 14 highs (152.61), while beyond that lies the 153.27 level, highs from Oct 10 and also the bull trigger level.
- Elsewhere AUD and NZD are drifting lower, but remain within recent ranges. AUD/USD is near 0.6480, while NZD/USD is under 0.5730, with this pair still finding selling interest on moves to 0.5760.
- There is weakness in tech related equities today, with nervousness around potential further US curbs on software exports to China. Only the NKY 225 has seen losses beyond 1% though.
- The AUD and NZD are still up against yen as well, with AUD/JPY closing in near 99.00.
- Later US September existing home sales and October Kansas Fed manufacturing print as well as August Canadian retail sales and euro area preliminary October consumer confidence. The Euro summit takes place and ECB’s Lane speaks.
ASIA STOCKS: White House Rumours Roil Tech, Shenzhen Bounces of Key Tech Level
News that the White House is considering export restrictions on critical software to China was enough to push on a tech sector already reaching new highs and investors seemingly willing to take profit (as per Reuters). Samsung lead the KOSPI down just as TSMC did in Taiwan, whilst Softbank was key contributor to the NIKKEI's decline. The news adds to the already heightened level of concern around US China tensions and with many bourses in the region at new highs, profit taking appears a key driver of risk appetite at present.
- The NIKKEI has retreated off its new highs, down -1.4% today with a -690pt decline. The NIKKEI maintains its position above all major moving averages, all of which remain upward sloping, an indication that the positive momentum could continue.
- The KOSPI is lower by -0.55% after closing Wednesday at new highs of 3,883 yet remains up over 3% for the week.
- The Hang Seng has done very little all day as it trends around the 50-day EMA of 25,851 as the fall of -0.5% by the CSI 300 sees it near to the 20-day EMA of 4,561. The Shanghai Comp is down -0.6% and Shenzhen the largest faller, down -0.8%, bouncing off the 20-day EMA of 2,457 it trended below this week. Below the 50-day EMA is at 2,400.
- The NIFTY 50 is trending higher again on suggestions that a US trade deal is closer, and is up +0.50% in morning trade to reach a new high of 26,002 pushing further above all major moving averages.
OIL: Crude Continues Rally, US Russia Sanctions Make Indian Refining Difficult
The news flow continues to be supportive for oil prices with the US Treasury announcing sanctions on large Russian oil producers and reports they will mean Indian imports of Russian crude will trend towards zero. As a result, it will compete for supplies from other producers supporting global prices. WTI is up 3.2% to $60.38/bbl, close to the intraday high of $60.42 but below the 50-day EMA at $61.76. Brent is 3.0% higher at $64.46/bbl, close to today’s peak but below resistance at $65.19, and up 5% this week.
- Following the UK, US restrictions will be imposed against Lukoil and state-run Rosneft, two of the largest producers, aimed at reducing revenues for Russia’s war. They may have more impact than previous sanctions. Lukoil and Rosneft accounted for 2.2mbd in H1, according to Bloomberg.
- Indian refiners have said that the US measures against Rosneft and Lukoil will make it extremely difficult for them to continue using Russian crude. India is the second largest importer of Russian oil after China. President Trump said he would probably discuss China’s consumption at next week’s meeting with President Xi.
- The EU is meeting today to discuss and probably agree to another package of sanctions on Russia including export bans on items its military uses, blacklisting another 100 tankers, restrictions on Russian/Central Asian banks and trade limitations on India and China, according to Bloomberg.
- Later US September existing home sales and October Kansas Fed manufacturing print as well as August Canadian retail sales and euro area preliminary October consumer confidence. The Euro summit takes place and ECB’s Lane speaks.
Gold Holding Onto Losses, Remains Overbought
Gold prices are little changed ahead of Friday’s US September CPI data but they have held onto this week’s losses of around 3.7%. They fell to $4066.30/oz but have recovered to be down 0.2% to $4091.0. Bullion is being pressured by a stronger US dollar (BBDXY +0.2%) and the prospect of a US-China trade deal with Presidents Trump and Xi due to meet next week. Bloomberg is also reporting large ETF outflows.
- Gold should continue to receive medium-term support from central bank and ETF buying as well as concern over large G7 government deficits, global uncertainty especially around tariffs and their impact which could include monetary easing. Lower rates benefit non-yield bearing gold. Also there seems little progress towards ending the US government shutdown, anyway publicly.
- Silver is little changed at around $48.50 but still below the 20-day EMA at $49.053. It fell to $47.925 early in the session and then recovered to $48.715. It remains pressured by profit taking given it also continues to be overbought.
- Equities are mixed with the S&P e-mini up 0.1%, Hang Seng down 0.1% and Nikkei -1.4%. Oil prices are higher with WTI +3.0% to $60.24/bbl. Copper is up 0.2%.
- Later US September existing home sales and October Kansas Fed manufacturing print as well as August Canadian retail sales and euro area preliminary October consumer confidence. The Euro summit takes place and ECB’s Lane speaks.
UP TODAY (TIMES GMT/LOCAL)
| Date | GMT/Local | Impact | Country | Event |
| 23/10/2025 | 0645/0845 | ** |  FR | Manufacturing Sentiment |
| 23/10/2025 | 0730/0930 |  CH | SNB Minutes | |
| 23/10/2025 | 0900/1000 | ** |  GB | Gilt Outright Auction Result |
| 23/10/2025 | 1000/1100 | ** | GB | CBI Industrial Trends |
| 23/10/2025 | 1100/0700 | *** |  TR | Turkey Benchmark Rate |
| 23/10/2025 | - |  EU | ECB Lagarde at Euro Summit in Brussels | |
| 23/10/2025 | 1230/0830 | *** |  US | Jobless Claims |
| 23/10/2025 | 1230/0830 | ** | US | WASDE Weekly Import/Export |
| 23/10/2025 | 1230/0830 | ** |  CA | Retail Trade |
| 23/10/2025 | 1230/0830 | ** | CA | Retail Trade |
| 23/10/2025 | 1330/1530 | EU | ECB Lane Award Acceptance Speech | |
| 23/10/2025 | 1400/1000 | *** | US | NAR existing home sales |
| 23/10/2025 | 1400/1600 | ** | EU | Consumer Confidence Indicator (p) |
| 23/10/2025 | 1400/1000 | US | Fed Vice Chair Michelle Bowman | |
| 23/10/2025 | 1425/1025 | US | Fed Governor Michael Barr | |
| 23/10/2025 | 1430/1030 | ** | US | Natural Gas Stocks |
| 23/10/2025 | 1500/1100 | ** | US | Kansas City Fed Manufacturing Index |
| 23/10/2025 | 1530/1130 | * | US | US Bill 08 Week Treasury Auction Result |
| 23/10/2025 | 1530/1130 | ** | US | US Bill 04 Week Treasury Auction Result |
| 23/10/2025 | 1700/1300 | ** | US | US Treasury Auction Result for TIPS 5 Year Note |
| 24/10/2025 | 2200/0900 | *** |  AU | Judo Bank Flash Australia PMI |
| 24/10/2025 | 2301/0001 | ** | GB | Gfk Monthly Consumer Confidence |
| 24/10/2025 | 2330/0830 | *** |  JP | CPI |
| 24/10/2025 | 0030/0930 | ** | JP | Jibun Bank Flash Japan PMI |
| 24/10/2025 | 0600/0800 | ** |  SE | PPI |
| 24/10/2025 | 0600/0700 | *** | GB | Retail Sales |
| 24/10/2025 | 0645/0845 | ** | FR | Consumer Sentiment |
| 24/10/2025 | 0700/0900 | ** |  ES | PPI |
| 24/10/2025 | 0715/0915 | ** | FR | S&P Global Services PMI (p) |
| 24/10/2025 | 0715/0915 | ** | FR | S&P Global Manufacturing PMI (p) |
| 24/10/2025 | 0730/0930 | ** |  DE | S&P Global Services PMI (p) |
| 24/10/2025 | 0730/0930 | ** | DE | S&P Global Manufacturing PMI (p) |
| 24/10/2025 | 0800/1000 | ** | EU | S&P Global Services PMI (p) |
| 24/10/2025 | 0800/1000 | ** | EU | S&P Global Manufacturing PMI (p) |
| 24/10/2025 | 0800/1000 | ** | EU | S&P Global Composite PMI (p) |
| 24/10/2025 | 0800/1000 | EU | ECB Cipollone Fireside Chat on International Finance | |
| 24/10/2025 | 0830/0930 | *** | GB | S&P Global Manufacturing PMI flash |
| 24/10/2025 | 0830/0930 | *** | GB | S&P Global Services PMI flash |
| 24/10/2025 | 0830/0930 | *** | GB | S&P Global Composite PMI flash |
| 24/10/2025 | 1200/0800 | ** |  BR | Brazil Preliminary CPI |
| 24/10/2025 | 1230/0830 | *** | US | CPI |
| 24/10/2025 | 1230/0830 | *** | US | CPI |
| 24/10/2025 | 1230/0830 | *** | US | CPI |
| 24/10/2025 | 1300/1500 | ** |  BE | BNB Business Confidence |
| 24/10/2025 | 1345/0945 | *** | US | S&P Global Manufacturing Index (Flash) |
| 24/10/2025 | 1345/0945 | *** | US | S&P Global Services Index (flash) |
