October 20, 2022

“ECB is expected to hike rates by 75bps once again on Oct. 27 as the final reading showed inflation had risen to 9.9% in September from 9.1% in August. Meanwhile, a slight improvement in the risk sentiment prompted some selling around the greenback, however, Fed rate hike bets droved the US bond yields to a multi-year high and helped limit the dollar’s losses.”

Sam Cornford, Partner – Head of Trading

Main Headlines

Seven administrators have resigned from company boards after the US Department of Justice warned they have been violating antitrust legal guidelines as authorities toughen enforcement in opposition to anti-competitive conduct in US enterprise. Private fairness executives are among the many administrators who have stepped down, marking the primary fallout within the trade since Jonathan Kanter, head of the DoJ’s antitrust unit, pledged to crack down on the sector’s competitors violations. The seven executives left 5 boards in response to considerations raised by the DoJ about breaches of part 8 within the 1914 Clayton Antitrust Act, which prohibits “interlocking directorates”, the place administrators sit on boards of a number of, competing corporations.

Liz Truss’s ill-fated tenure as British Prime Minister was engulfed in yet more chaos yesterday when her Home Secretary resigned seven weeks into her role, and as claims emerged of pandemonium and “bullying” during a vote the same day. A crunch Commons vote on the future of fracking has descended into mayhem after more than 40 Conservative MPs failed to back Liz Truss’s government, with MPs alleging ministers physically pulled some wavering Tories into the voting lobbies. Former transport secretary Grant Shapps was appointed to replace her, in the latest response by the prime minister to intense backbench pressure to broaden political representation in her cabinet, which initially excluded all supporters of her leadership rival Rishi Sunak. The prime minister now risks the sort of mass exodus of ministers that forced Boris Johnson to quit.

GBP

Sterling is stronger against the dollar and weaker against euro this morning. A survey by BBC shows that three in five people polled in the UK said their Christmas and festive spending plans will be smaller than usual. Adults with a household income under £40,000 are more likely to say their plans will be much smaller this year. Prices rose at their fastest rate for 40 years again in September, rose by 10.1%, with UK inflation expected to keep rising. The price of food went up along with energy bills and transport costs. People’s plans for Christmas have already been impacted for two years in a row due to the pandemic. For many retail and hospitality firms, this is their main money-making period of the year, and they will have been hoping for a return to normality.

EUR

Euro is well bid against most major currencies overnight. Eurozone inflation is continuing to soar to record highs, with the latest estimate from the EU’s statistics body predicting annual eurozone inflation of 10 per cent. The September estimate sees prices for food, alcohol and tobacco, non-energy industrial goods, and services all up on the numbers in July and August when annual eurozone inflation was forecasted at 8.9 per cent and 9.1 per cent respectively. The September estimate from Eurostat has energy inflation at 40.8 per cent, up over two percentage points compared with 38.6 per cent in August. Europe and much of the wider world were already being hit with soaring energy prices, which contribute to inflation, before Russia’s invasion of Ukraine in late February.

USD

The dollar is weaker than most major currencies in the early morning trade. Amazon founder Jeff Bezos has added his voice to the chorus of voices warning of hardship ahead for the US economy. On social media, the billionaire wrote that the economy was sending a signal to “batten down the hatches”. Growth in the US has already contracted for two quarters in a row, a milestone that in many countries, though not the US, is considered a recession. As the US central bank raises interest rates to fight rising prices, many economists expect further slowdown. Jamie Dimon at JP Morgan, who has previously warned of a “hurricane” ahead, said consumers would likely run through the cushion in their bank accounts by the middle of next year.

Markets

European markets were lower this morning as investors assessed new German economic data, a sharp rise in bond yields, and political chaos in the UK. The Stoxx 600 index was down 0.4% with most sectors and major bourses in negative territory. Telecoms led the losses, down 1.2%. Oil and gas flipped into the green, with gains of 1.2%. Political uncertainty continues in the UK this week. Prime Minister Liz Truss said she is “a fighter not a quitter” while addressing fellow lawmakers in the House of Commons yesterday but she is facing growing pressure to resign. On Wall Street, the S&P 500 rebounded heading into close, finishing the day up by 0.7%, following some above consensus Q3 earnings reports.

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

6:30 a.m.: Netherlands Sept. Unemployment
8:00 a.m.: Norway 3Q Industrial Confidence
8:00 a.m.: Switzerland Sept. Exports
8:00 a.m.: Germany Sept. PPI
8:45 a.m.: France Oct. Manufacturing Confidence, Business Survey
10:00 a.m.: Euro-area Aug. Current Account
10:00 a.m.: Norges Bank survey of Bank Lending 3Q
10:00 a.m.: Poland Sept. PPI
10:30 a.m.: Spain to sell bonds
10:30 a.m.: BOE’s Broadbent speaks
10:50 a.m.: France to sell bonds
1:00 p.m.: Turkey rate decision
1:00 p.m.: Ukraine rate decision
3:00 p.m.: Norges Bank Governor Wolden Bache speaks
3:00 p.m.: Russia Oct. 14 FX/gold reserves
6:10 p.m.: ECB’s de Cos speaks
EU leaders summit in Brussels
UK Royal Mail workers strike for 24 hours

Corporate Events

Earnings include Danaher, Philip Morris, Union Pacific, AT&T, Blackstone, Marsh & McLennan, ABB, Nordea, Volvo AB, Nokia

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