June 9, 2022

“The European Central Bank will later today announce the end of its QE program and its decision on monetary policy. Meanwhile, there is growing certainty among investors that a weakening economy will curb the ECB’s ability to raise rates over the next 18 months.”

Tim Hallinan – Trading Director

Main Headlines

The chair of the Securities and Exchange Commission has outlined plans for an overhaul of what he described as an “uneven” and unfair US equity market, drawing fire from traders that have flourished under the system. Gary Gensler said on Wednesday that he had asked agency staff to consider a series of significant changes, including a possible auction process to increase competition between services for retail investors. His push comes after a gradual fracturing of the stock market, with a rising share of trading taking place outside traditional exchanges. Retail investors’ participation in markets has also grown over the past two years, with wholesale trading groups in some cases paying brokers for batches of retail orders in what is known as “payment for order flow.”

Tensions flared in Boris Johnson’s cabinet yesterday as the prime minister prepared to publish legislation that would enable the UK government to rip up parts of its 2020 Brexit treaty with the EU. Johnson snapped at Liz Truss, foreign secretary, accusing her of toughening up draft legislation to rewrite parts of the Northern Ireland protocol after pressure from Eurosceptic Tory MPs, according to people briefed on the meeting of cabinet ministers. The protocol governs Northern Ireland’s trading arrangements, and Johnson is pressing Brussels to agree to changes because of concerns it has unleashed political tensions in the region as well as unacceptable border friction. Meanwhile several cabinet ministers demanded assurances that the legislation, due to be published next week, did not break international law.

GBP

Sterling is weaker than most major currencies in the early morning trade. UK estate agents reported a sudden drop-off in inquiries for new homes last month. A survey indicated that the heat could be coming out of the housing market after a frenzied two years. Citibank has been given the go-ahead for a court bid to shut down three UK companies in Sanjeev Gupta’s GFG Alliance, a move that would hit large swaths of the metals magnate’s British operations and put hundreds of jobs at risk. The UK’s pensions regulator has conceded that not all gig economy employers have done “the right thing” and offered pensions to staff following a landmark court ruling involving Uber drivers. The UK government has given the go-ahead for drilling to start to establish the size of a gas field on the edge of the scenic Surrey Hills countryside just south of London.

EUR

Euro is stronger against sterling and weaker against the dollar this morning. The European Union statistics office said the euro zone economy grew much faster in the first quarter of the year than in the previous three months despite the impact of the war in Ukraine. European Central bank measures to counter euro area fragmentation are gaining importance amid growing worries about the clouded political future of Italian Prime Minister Mario Draghi. Spain is set to push for the inclusion of “hybrid threats” such as irregular migration, food insecurity and terrorism in the alliance’s new policy roadmap, Foreign Minister Jose Manuel Albares said in an interview. Consumer inflation in Russia slowed to 17.10% in year-on-year terms in May from 17.83% in April, which was its highest level since January 2002, days before the central bank’s rate-setting meeting.

USD

The dollar is well bid against most major currencies overnight. President Joe Biden is due today to lay out a pitch to leaders from the Americas for an environmentally friendly economic partnership as he gears up for a first formal encounter with his Brazilian counterpart. One of the biggest US liquefied natural gas plants will be closed for at least three weeks after an explosion, dealing a blow to exports at a time when the industry is trying to boost supplies to Europe. A group led by billionaire Walmart heir Rob Walton has agreed to purchase the Denver Broncos for $4.65 billion, a person familiar with the matter said, in a record-breaking transaction that brings one of the world’s wealthiest people into the NFL and ends years of drama surrounding one of the sport’s most iconic franchises.

Markets

European equities slipped ahead of a European Central Bank decision that will put the region’s monetary policy on a path of tightening after eight years of negative rates that’s made it an outlier among major central banks. The Stoxx Europe 600 opened 0.8% lower, with the consumer-products and basic resources sectors leading declines. S&P 500 and Nasdaq 100 contracts traded flat after Wall Street snapped a two-day climb. Some investors see policy makers beyond the official line as they succumb to huge pressure to rein in record inflation at more than four times their target of 2%. Peers at the Federal Reserve, Bank of Canada and Reserve Bank of Australia have hiked in 50-basis point increments this year. Benchmark Treasury yields held above 3%, while New Zealand’s 10-year yield touched the highest level in seven years. Oil hovered near $122 a barrel, stoking worries about rising costs.

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

8:00 a.m.: Sweden April industrial orders, GDP indicator
10:30 a.m.: IMF presents Article IV report on Norwegian Economy
11:00 a.m.: Greece May CPI
12:00 p.m.: Ireland May CPI
1:45 p.m.: ECB monetary policy
2:30 p.m.: US initial jobless claims
3:00 p.m.: Russia gold and forex reserves
3:00 p.m.: Polish Central Bank Governor Glapinski’s media conference
Sohn Investment Conference
UN FAO’s Food Outlook

Corporate Events

Earnings include Nio

To learn more about Ballinger & Co., please visit our website or our LinkedIn page.