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[Quick Facts]

1. The U.S. House will elect a new speaker nominee this week.

2. Traders scrap bets on November Fed move as historic short cracks.

3. Russia is considering extra gas tax to finance subsidies for oil refiners.

4. Fed's Harker says a resolute and patient policy stance will allow for a soft landing.

5. Traders snap up crude oil call options on worries about Middle East conflict escalation.

6. Canada's retail sales decline is proof that the central bank is likely done raising rates.

[News Details]

The U.S. House will elect a new speaker nominee this week

Jim Jordan's nomination for the U.S. House speaker was revoked by the Republican Party in a closed-door meeting on Friday. Republicans will hold a candidate forum on Oct. 23 at 6:30 p.m. local time to elect a new nominee for speaker. House Republicans running for the speaker nominee include Kevin Hern, Jack Bergman, and Austin Scott.

Traders scrap bets on November Fed move as historic short cracks

A record amount of risk had accumulated in CME Group Inc.'s federal funds futures contract for November in recent weeks, driven by the interest in short positions that would benefit from a rate hike by the central bank on Nov. 1. The contract is used to wager on monthly average levels of the interest rate the US central bank sets a target range for. Open interest reached 771,500 on Oct. 17, equivalent to $32 million per basis-point move in its price. That figure slumped by 63,000, about 8%, over the past two days to 708,000, including a decline of 46,000 on Thursday. The unwind went into apparent hyper-drive in U.S. trading Friday, as more than 100,000 November contracts were bought in the span of a minute. Fed swaps priced in just 2 basis points of rate-hike premium for the November policy meeting, down from 4 basis points at the start of last week.

Russia considers extra gas tax to finance subsidies for oil refiners

Russian authorities are considering raising the tax burden on the country's natural gas industry to help finance full subsidies for oil refiners. Currently, the Russian government is seeking to support its domestic fuel market without creating budgetary constraints. It has not yet been decided whether the move would apply only to gas giant Gazprom or also to other Russian gas producers.

Fed's Harker says a resolute and patient policy stance will allow for a soft landing

Philadelphia Fed President Patrick Harker spoke again that the Fed could leave interest rates unchanged. He believed that a resolute and patient monetary policy stance would allow for a soft landing. September's data were mostly stronger than he expected; moreover, consumer spending momentum was a bit of a head-scratcher. Another acceleration in prices would not be tolerated. He would be ready to change his view and act accordingly if he sees signs of inflation picking up again, but he would not overreact to normal month-to-month changes in data.

Harker talked about three risks he was concerned about. 1. The resumption of student loan payments may have an impact on consumer spending and savings, but the extent of the impact is not known at this time; 2. Geopolitical issues have brought a lot of uncertainty to the U.S. economy; 3. Commercial real estate's vacancy rates are much higher than pre-pandemic levels.

Traders snap up crude oil call options on worries about Middle East conflict escalation

Oil traders continue to snap up oil call options as the risk of an escalation in the Israeli-Palestinian conflict intensifies and threatens to push up crude oil prices. According to aggregated ICE Futures Europe data, call option volume has outpaced put options every day for nearly a month, the longest period since February. While crude oil futures have risen more than 10% since this Middle East crisis erupted, the options market has been more volatile. The premium of call options over puts has been the largest since last April.

Canada's retail sales decline is proof that the central bank is likely done raising rates

Canada's retail sales fell for the first time in five months in August, which would be further proof that the Bank of Canada is done raising interest rates. Nominal sales fell 0.1% in August from the previous month, while the sales volume was even worse, falling by 0.7%. These numbers would have been even weaker were it not for Canada's rapid population growth. Thanks to these retail sales data and forecasts for flat sales in September, Canada's third-quarter GDP will grow at an annualized rate of just 0.2%, well below the Bank of Canada's forecast of 1.5% growth.

[Focus of the Day]

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