November 7, 2022

“The dollar plunged last Friday after data showed a higher US unemployment rate in October, warning that jobs growth may slow in coming months. Positive shift in risk sentiment and worries over the Fed reducing the size of interest rate hikes is further restricting any upside attempts by the greenback. Looking ahead, US CPI inflation for September and UK Q3 GDP will be the main data releases of the week.”

Sam Cornford, Partner – Head of Trading

Main Headlines

Investors who poured money into funds aimed at protecting them from the sell-off in shares are finding many of the strategies have backfired, offering little or no safeguard from a drawdown that has sliced $13tn off the US stock market. Funds that focused on buying equity put options, which are often used as insurance against stock declines, have struggled to make gains even as the S&P 500 suffers its worst drawdown since the 2008 financial crisis. Those who prepared for violent swings by buying call options on the Cboe’s Vix index have also been left wanting.

Britain will struggle to create an industry producing sustainable aviation fuel unless the government provides regular subsidies to manufacturers. The government has set a 2050 “Jet Zero” target for the airline industry to eliminate net carbon emissions, mainly through the use of green fuel produced by household waste such as cooking oil, known as “SAF”. The government has promised £165mn as seed capital to encourage manufacturers to open at least five plants producing the new fuel and hopes they will be under construction by 2025.

GBP

Sterling is well bid against most major currencies overnight. FTSE 100 chief executives’ pay soared by an average of 23 per cent this year, according to research from PwC that comes during tense negotiations with rank-and-file staff. The rise to £3.9mn was driven by record bonus pay-outs, partly the effect of lower targets set during the pandemic. Stamp duty receipts on residential properties hit £3.59bn in the third quarter, beating the last quarterly record, set in the second quarter, by 21 per cent, according to government figures.

EUR

Euro is stronger against the dollar and weaker against sterling this morning. France’s central bank chief said the European Central Bank must not stop raising interest rates until underlying inflation has clearly peaked, but it may slow the pace of hikes once rates hit a level that starts to restrict growth. Ukraine’s President Volodymyr Zelenskiy warned against more potential Russian attacks on energy infrastructure, while the mayor of Kyiv urged residents to consider preparing to leave temporarily if the capital lost water and power supplies.

USD

The dollar is weaker than most major currencies in the early morning trade. The US is working on a plan to harness cash from the world’s largest companies to help developing countries cut their use of fossil fuels, an idea it aims to unveil at the UN climate summit this week. Alibaba and start-up Biren Technology are tweaking their most advanced chip designs to reduce processing speeds and avoid US-imposed sanctions aimed at suppressing Chinese computing power. Joe Biden is fighting a rear-guard action to stave off defeat in Tuesday’s midterm elections as Republicans look poised to make sweeping gains in the US Congress.

Markets

European markets opened lower this morning with the pan-European Stoxx 600 down 0.45% before paring losses to trade 0.2% lower as investors gear up for a busy week in US politics, with the Congressional midterm elections, as well as the latest consumer inflation report. Banks, retail, household goods and healthcare were among the sectors trading in negative territory. US stock futures fell yesterday as investors looked ahead to Tuesday’s midterm election, which will determine which party will control Congress and affect the direction of future spending. Elsewhere overnight, Hong Kong stocks led gains in the Asia-Pacific early morning time as China’s trade data fell far short of expectations, marking the first annual decline in exports since May 2020.

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

8:00 a.m.: Germany Sept. industrial production
9:00 a.m.: Czech Sept. industrial production
9:40 a.m.: ECB’s Lagarde speaks
10:30 a.m.: Euro-Area Nov. Sentix investor confidence
10:30 a.m.: ECB’s Panetta speaks
COP27 in Egypt through Nov. 18

Corporate Events

Earnings include BioNTech, Activision Blizzard, Coloplast, Ryanair, Diamondback Energy, Welltower, Palantir Technology, Mosaic, Viatris, Lyft

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