December 6, 2022

“The US dollar gained approximately 1 per cent against sterling and euro as market’s risk appetite faded. A hawkish Fed tightening view after stronger-than-expected ISM services data in the US, rising from 54.4 in October to 56.5 in November, further supported the USD. Later today, ECB’s Vice-President de Guindos speech will be closely watched.”

Sam Cornford, Partner – Head of Trading

Main Headlines

Meta has threatened to remove news content from Facebook in the US. It objects to a new law that would give news organisations greater power to negotiate fees for content shared on Facebook. A similar law, passed in Australia, led to news on Facebook being briefly suspended last year. Meta claims their platform, in fact, provides increased traffic to struggling news outlets. It says publishers put their content on Facebook because “it benefits their bottom line.” The legislation, known as the Journalism Competition and Preservation Act (JCPA) was introduced in Congress by Minnesota Senator Amy Klobuchar and has bipartisan support.

Workers at the UK’s biggest rail union RMT will walk out from 6pm on 24 December until 27 December as the row over pay and conditions escalates. The move comes after the union urged workers to reject the latest pay offer. The new strikes could affect many people travelling for Christmas, as well as restaurants and bars. The new walkouts are in addition to strikes by rail workers that have already been announced and begin next week. Tim Shoveller, Network Rail’s chief negotiator, said the RMT was “playing fast and loose with people’s Christmas plans and the new strike dates announced deliberately target vital engineering work designed to improve the railway”.

GBP

Sterling is weaker than most major currencies in the early morning trade. UK consumers are tightening their belts as the holiday season approaches, according to new data which shows retail sales growth lagged far behind inflation in November and underscores the impact of the housing cost crisis. The value of retail sales rose 4.2% year-on-year in November, according to a report released today by the British Retail Consortium. As Black Friday deals kicked off this winter’s shopping season, November’s figure was an improvement on the 1.6% annual growth rate recorded the previous month. However, the figures are not adjusted for consumer price inflation, which hit a 41-year high of 11.1% in October, so the annual rise in the value of sales masks a much larger drop.

EUR

Euro is stronger against sterling and weaker against the dollar this morning. Violent protests broke out in the Greek city of Thessaloniki yesterday after a police shooting of a 16-year-old boy who allegedly filled his vehicle at a petrol station and drove off without paying. The teenager remains in critical condition in hospital. The officer who allegedly shot him in the head was arrested and suspended from duty. Authorities say an internal investigation is underway. The officer is due to appear before a public prosecutor today on charges of attempted manslaughter. Around 1,500 people took part in the protest and six were arrested.

USD

The dollar is well bid against most major currencies overnight. US services industry activity unexpectedly picked up in November, with employment rebounding, offering more evidence of underlying momentum in the economy as it braces for an anticipated recession next year. The survey from the institute for Supply Management (ISM) yesterday followed on the heels on news last Friday that the economy continued to create jobs at a solid clip in November, with wage growth accelerating. Consumer spending also rose strongly in October.

Markets

European markets were flat this morning, with global sentiment subdued this week. The pan-European Stoxx 600 slipped 0.2% in early trade, with oil and gas stocks shedding 1% while utilities added 0.3%. The muted trade in Europe comes after markets in the Asia-Pacific region were mixed overnight after Wall Street sold off yesterday on fears that the US Federal Reserve will keep increasing interest rates. The Dow Jones Industrial Average fell 482.78 points, or 1.4%, to finish at 33,947.10. The S&P 500 slumped 1.79% to settle at 3,998.84. The Nasdaq Composite slid 1.93% to end the session at 11,239.94.

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

8:00 a.m.: Germany Oct. Factory Orders
9:00 a.m.: Austria Nov. Wholesale Price Index
9:00 a.m.: Czech Oct. Retail Sales
9:30 a.m.: Germany Nov. S&P Global Construction PMI
10:30 a.m.: UK Nov. S&P Global/CIPS Construction PMI
11:30 a.m.: Germany sells bonds
12:00 p.m.: Turkey sells bonds (also at 1 p.m.)
12:30 p.m.: UK sells bonds

Corporate Events

Earnings include Ashtead, Ferguson, AutoZone, HealthEquity, Toll Brothers

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