October 5, 2022

“The dollar continues to be vulnerable as the positive tone to risk appetite appears to be weighing on the currency. Markets are now anticipating a less aggressive tightening policy by Fed after job openings data showed vacancies fell by 1m in August. Later today, the US non-manufacturing ISM for September figures will be noted”

Sam Cornford, Partner – Head of Trading

Main Headlines

Elon Musk revived his offer to buy social networking site Twitter for $44bn, after previously attempting to back out of the high-profile deal. The Tesla billionaire proposed the price, which equals the original valuation of $54.20 a share, in a letter to Twitter filed on Monday with the Securities and Exchange Commission. In July, Twitter sued Mr Musk for what it said was his “wrongful” attempt to cancel his offer, a case that may force the entrepreneur into acquiring the company. Without an agreement, proceedings in the case are set to begin within days, with Mr Musk scheduled to be deposed in Texas later this week.

Liz Truss is set to try and convince the British people that she will support them through the current cost-of-living crisis when she addresses the Conservative Party. “The scale of the challenge is immense,” she will say. Today, in her first conference speech as leader of the party, the prime minister will insist that there can be no more “drift and delay” in her attempt to “break us out of this high-tax, low-growth cycle”. Ms Truss’s speech will follow former minister Nadine Dorries’s warning that the Tories could “absolutely lose” an early general election after a new poll shows Labour with a 38-point lead in “red wall” constituencies.

GBP

Sterling is well bid against most major currencies overnight. UK investors pulled a record 2.4 billion pounds ($2.74 billion) from equity funds in September, funds network Calastone said today. The net outflows make September the worst month in what is already the worst year on record for equity funds, with 694 million pounds’ worth of selling making for the sixteenth consecutive month of outflows. The outflows underline investors’ lack of confidence in Britain this year, a trend exacerbated in recent weeks by the UK’s “mini-budget” on Sept. 23. In the third quarter, overall equity fund outflows hit 4.7 billion pounds, more than the amount withdrawn in the whole of 2016. Meanwhile, sterling has risen sharply over recent days with much focus being on the domestic fiscal policy shifts of the UK government.

EUR

Euro is stronger against the dollar and weaker against sterling this morning. The European Commission has outlined possible strategies to cap gas prices as the bloc faces a looming energy crisis this winter. Member states are divided over the emergency measures designed to pull down soaring inflation amid Russia’s war in Ukraine. One proposal is a temporary “flexible” limit on gas prices to ensure that Europe can continue to secure enough gas, EU energy commissioner Kadri Simson said yesterday. Another option could be an EU-wide “framework” for a price cap on gas used to generate electricity, which would be combined with measures to ensure gas demand does not rise as a result, she said. EU leaders are meeting on Friday to debate gas price cap strategies.

USD

The dollar is weaker than most major currencies in the early morning trade. US employers cut more than a million job vacancies in August, a sign that the Fed’s aggressive efforts to cool the economy are beginning to hit the labour market. The monthly drop was the second largest in two decades of data, and was only surpassed by April 2020, when widespread shutdowns led to a hiring freeze at the start of the coronavirus pandemic. The numbers come ahead of the release of official jobs data on Friday, which investors will be watching closely for its impact on how the US central bank continues its campaign to stamp out inflation that is near four-decade highs.

Markets

The pan-European Stoxx 600 was down 1% in early trade. Autos dropped 2.9% to lead losses as all sectors and major bourses slid into the red after September’s euro zone PMI reading cemented fears of a recession across the 19-member currency bloc. The declines this morning came after European markets rallied during the previous session, with the European blue-chip index closing 3% higher. Travel and leisure stocks jumped 6.1% to lead gains as all sectors and major bourses closed in positive territory. The Dow Jones Industrial Average rose 825.43 points, or 2.8%, to 30,316.32. The S&P 500 added nearly 3.1% to close at 3,790.93, and the Nasdaq Composite was up 3.3% to end at 11,176.41. Yesterday’s gains also put the S&P 500 up 5.7% for the week and marked its biggest two-day rally since March 2020.

Main Economic Data/Central Banks/Government (All Times CET)

8:00 a.m.: Germany Aug. trade balance
8:00 a.m.: Russia Sept. S&P Global Services PMI
8:45 a.m.: France Aug. industrial production
9:15 a.m.: Spain Sept. S&P Global Services PMI
9:45 a.m.: Italy Sept. S&P Global Services PMI
9:50 a.m.: France Sept. S&P Global Services PMI
9:55 a.m.: Germany Sept. S&P Global Services PMI
10:00 a.m.: Eurozone Sept. S&P Global Eurozone Services
10:30 a.m.: UK Sept. S&P Global/CIPS Services PMI
6:00 p.m.: Russia 2Q F GDP
Poland Rate Decision
Romania Rate Decision
UK Conservative Party annual conference
OPEC+ meets to decide on output
The Nobel Prize for Chemistry is awarded

Corporate Events

Earnings include Tesco

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