November 2, 2022

“The Federal Reserve is due to raise its benchmark policy rate by 0.75 percentage points today, as it continues its long-running battle to bring down persistently high US inflation. Nevertheless, economists warn that the implementation of the fourth 0.75 percentage means a more severe downturn on the economy.”

Tim Hallinan – Trading Director

Main Headlines

Katherine Tai, the Biden administration’s most senior trade official, has called on the EU to introduce subsidies as she offered a trenchant defence of the US’s bumper green energy package that critics say unfairly supports its own manufacturers. The White House’s Inflation Reduction Act offered subsidies and tax credits for US-manufactured products ranging from solar panels to electric vehicles. Tai’s counterparts in the EU and other US allies have hit out at the act, claiming it contravenes World Trade Organization rules and risks robbing them of investment in green technologies.

UK government emissions data are so poorly reported that parliament cannot assess whether the public sector is on track to meet its decarbonisation targets, a high-profile group of MPs warned on Wednesday. In a highly critical report just days before the COP27 climate summit, the House of Commons public accounts committee said the reporting of greenhouse gas emissions by Whitehall departments was substandard and “inconsistent.” It added that the government’s promise to “lead by example” on achieving net zero greenhouse gas emissions by 2050 was not being met.

GBP

Sterling is stronger against the dollar and weaker against euro this morning. Rishi Sunak on Tuesday delayed a showdown with the Bank of England, as the government postponed the publication of plans to allow ministers to over-rule City regulators. The UK government has acted unlawfully in implementing its post-Brexit settlement scheme, putting the residency rights of millions of Europeans living in the UK at risk. Britishvolt has secured a lifeline deal that will give the battery start-up enough money to last until early December, pulling the business back from the brink of bankruptcy.

EUR

Euro is well bid against most major currencies overnight. Russia is concerned about its security and the obstacles it faces exporting fertiliser and grains, Turkish Foreign Minister Mevlu Cavusoglu said this morning, days after Moscow suspended its participation in an UN-brokered export deal. Polish deep-tech company Nevomo has received investment from the EU to accelerate the roll-out of its hyperloop-inspired railway technology in Europe. Denmark’s centre-left PM, Mette Frederiksen, has secured the slimmest of majorities in the country’s parliamentary election but will struggle to form a viable government coalition.

USD

The dollar is weaker than most major currencies in the early morning trade. US markets are in line to deliver their worst performance since 1937 in terms of the return on a 60/40 equity/bond portfolio, yet US-listed ETFs are on track for the second-highest full-year inflows on record. A growing number of economists have warned that the Federal Reserve’s fight against inflation, which remains at the highest level in decades, could lead to a severe recession in the US. Oil prices rose on Wednesday after industry data showed a surprise drop in US crude stocks, suggesting demand is holding up despite steep interest rate hikes dampening global growth.

Markets

Stocks finished lower as data showing a solid US labour market bolstered speculation that Federal Reserve policy could remain aggressively tight even with the threat of a recession. At a time when good news is considered bad news when it comes to policy conjectures, the S&P 500 wiped out a rally as the figures highlighted an unexpected rebound in US job openings, which may keep the pressure on the Fed. It was the 26th time in 2022 that the equity gauge erased a gain or loss of at least 1% in one session, the most for any year since the financial crisis. Two-year US yields topped 4.5% after sliding as much as eight basis points earlier in the day.

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

8:00 a.m.: Germany Sept. trade balance
9:00 a.m.: Poland Oct. manufacturing PMI
9:15 a.m.: Spain Oct. manufacturing PMI
9:45 a.m.: Italy Oct. manufacturing PMI
9:50 a.m.: France Oct. manufacturing PMI
9:55 a.m.: Germany Oct. manufacturing PMI, unemployment
10:00 a.m.: Euro-Area Oct. Manufacturing PMI
10:00 a.m.: ECB’s Makhlouf speaks
1:15 p.m.: US Oct. ADP employment change
3:00 p.m.: ECB’s Villeroy speaks
5:00 p.m.: Russia Sept. retail sales, unemployment
7:00 p.m.: US Fed rate decision
7:00 p.m.: ECB’s Nagel speaks
Bank of Ireland’s Financial System Conference

Corporate Events

Earnings include Qualcomm, CVS, Novo Nordisk, GSK, Booking Holdings, Estee Lauder, Humana, Ferrari, Equinix, Fortinet, Maersk, Apollo, eBay, Trane Technologies, Yum! Brands,
Boeing 2022 investor conference
Singapore Fintech Festival opens
World Business Forum opens in New York

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