Morning Report

July 4, 2023

“Global stocks held steady this morning as investors balanced rising oil prices’ inflationary pressure with hopes of cautious central bank policies. Meanwhile, the MSCI’s world stock index, which had a significant 6% surge last month following the US Federal Reserve’s decision to pause rate hikes, experienced a subdued trading session, with Wall Street closed for the July 4 holiday.”

Sam Cornford, Partner – Head of Trading

Main Headlines

The Biden administration is encountering an unexpected challenge in Corpus Christi, Texas, which is prone to droughts. The challenge comes from a proposed clean hydrogen hub that would require the installation of energy-intensive, costly, and potentially environmentally damaging seawater desalination plants. Corpus Christi, a Gulf Coast port, is in contention for up to $1 billion in funding from President Joe Biden’s 2021 Infrastructure Investment and Jobs Act to establish a regional hydrogen production hub. This hydrogen hub is aimed at producing low-emissions fuel through water electrolysis, which can contribute to reducing carbon emissions in heavy-industry and transportation sectors.

In response to the energy crisis last year, Britain’s energy regulator has cautioned suppliers against paying dividends unless they are financially stable. Jonathan Brearley urged company executives to act responsibly as the price pressures in the wholesale energy markets ease. Following Russia’s invasion of Ukraine in February, wholesale prices experienced a surge, leading to the government subsidizing rising energy bills in October. This crisis resulted in the collapse of 30 suppliers, with households bearing the cost of transferring affected customers to other companies, leading to an additional £94 on domestic energy bills last year, amounting to an estimated £27 billion.


Sterling is well bid against most major currencies this morning. According to retail group J Sainsbury, food price inflation in the UK is starting to slow down, signalling early indications that the cost-of-living crisis may soon alleviate. Local authorities across England and Wales face a funding gap of £2 billion or more next year, as inflation erodes their ability to provide basic services without dipping into reserves. The UK witnessed its hottest June on record, with confirmation from the Met Office coinciding with mounting criticism of the Sunak government’s response to climate change.


Euro is weaker than most major currencies in the early morning trade. A competition between European and Chinese energy companies to secure shipments of liquefied natural gas (LNG) from the US is driving investments in various export projects. This surge in investments will enhance the LNG market, which is currently facing a potential supply shortage. French authorities have maintained a significant police presence overnight due to a decline in unrest. Emmanuel Macron will meet with the mayors of approximately 220 towns affected by violence, while opposition parties from different ends of the political spectrum are seizing on the crisis as evidence of government failures.


The dollar is stronger against euro and weaker against sterling this morning. Morgan Stanley strategists are questioning Bill Dudley’s prediction that bond market losses will deepen. They believe Dudley’s estimates for key drivers of 10-year yields are too high. Instead of reaching the 4.5% predicted by Dudley, Morgan Stanley projects a range of 2% to 3% for the yield. US manufacturing experienced a further decline in June, reaching levels last observed during the initial wave of the COVID-19 pandemic. However, price pressures at the factory gate continued to decrease, providing a silver lining for the economy.


The rally in global shares paused Tuesday as investors turned their attention to risks for the economy and the prospects of further restrictive central bank policy moves. In corporate news, J Sainsbury Plc fell after the UK grocer retained its pretax profit forecast following a strong first quarter in a sign of sustained cost pressures. Real estate stocks were the best performers as Europe’s benchmark Stoxx 600 index inched higher. With no cash trading in US equities Tuesday due to the Independence Day holiday, futures contracts on the S&P 500 and the Nasdaq 100 were little changed.

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

8:00 a.m.: Germany May Trade
9:00 a.m.: Spain June Unemployment
Xi Jinping and Narendra Modi to speak at Shanghai Cooperation Organization virtual summit
US markets closed for Independence Day


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