Morning Report

April 25, 2022

“UK retail sales data has massively undershot expectations, whilst UK consumer confidence has fallen to within a whisker of the all-time lows recorded around the Financial Crisis of 2008. Markets are reacting to indications of a looming significant slowdown in economic activity in the UK – with sterling falling by over a percent against the euro, the US dollar other major currencies.”

Tim Hallinan – Trading Director

Main Headlines

Making the first official US visit to Ukraine since Russia invaded two months ago, Washington’s top diplomat and its defense secretary pledged additional military aid, including advanced weapons, and a return of US envoys to Kyiv. Secretary of State Antony Blinken and Secretary of Defense Lloyd Austin met Ukrainian President Volodomyr Zelensky and other top officials in Kyiv late on Sunday, having travelled overland from Poland, in a visit designed to show Western support. US officials said the cabinet secretaries pledged new assistance worth $713 million for Zelensky’s government and other countries in the region that are fearful of further Russian aggression. The high-level US visit highlighted the shift in the conflict since Ukrainian forces – armed with a massive influx of weapons from the West – fought off a Russian assault on the capital Kyiv. Russia has failed to capture any major city since the invasion started on the 24th of February.

The British embassy in the Ukrainian capital Kyiv will reopen next week, Boris Johnson has announced, with Ambassador Melinda Simmons set to return. The prime minister also said there was a “realistic possibility” the Russian bombardment would continue until the end of next year, adding that the UK was looking at sending tanks to support Poland, as it supplies Ukraine with heavy weaponry. The prime minister made the embassy announcement at a news conference in Delhi, where he has been holding talks with Indian leader Narendra Modi. It comes after Russia withdrew forces from around Kyiv, when it failed to seize the capital, and launched an assault on the eastern Donbas region. Until very recently, NATO countries have been reluctant to supply heavy weaponry to the Ukrainians for fear of antagonising President Putin and risking an all-out European war that puts NATO forces into direct conflict with Russia. But with each reported Russian atrocity that is revealed, these Western inhibitions have melted away.


Sterling is unchanged against the euro and weaker against the dollar this morning. Britain unveiled a new taskforce on Monday to write rules forcing financial firms and listed companies to publish plans from next year for transitioning to a net zero economy by 2050. Last November at the COP26 UN Climate Summit, British finance minister Rishi Sunak said companies would have to publish a plan from 2023 with targets to mitigate climate risk, interim goals between now and 2050 and measures to meet them. The British government said on Friday it planned to legislate to ensure the National Health Service (NHS) does not buy goods or services produced using any kind of slave labour. New legislation would ban the NHS from buying medical supplies made in China’s Xinjiang region, after pressure from rights groups over Beijing’s treatment of the Uyghur people. Rights groups and lawmakers accuse China of widescale abuses against Uyghurs and other minority groups, including the torture, forced labour and detention of one million people in internment camps.


The euro is unchanged against sterling and weaker against the dollar this morning. European Union leaders were quick to congratulate French President Emmanuel Macron for his election victory over his far-right rival on Sunday, reflecting relief at avoiding a political shock in one of the bloc’s most pivotal countries. European Council president Charles Michel and the prime ministers of Belgium and Luxembourg were among the first to congratulate Mr Macron, followed by almost all of the bloc’s 27 leaders, after his win over Ms Marine Le Pen by a comfortable margin. The European Parliament and EU member states reached a deal on the Digital Services Act, a landmark piece of legislation that aims to address illegal and harmful content by getting platforms to rapidly take it down. It will force tech giants like Google and Meta to police illegal content on their platforms more aggressively, or else risk potential multibillion-dollar fines – ranging up to 6% of companies’ global annual revenues.


The dollar is well bid against most major currencies overnight. Twitter is facing increasing pressure from shareholders to seek a deal with Elon Musk – who has offered to buy the social network for $43 billion (£33.5 billion). Both sides met on Sunday to discuss the proposal – and the social network “is more likely than before to seek to negotiate”. Musk has also met privately with several Twitter shareholders to highlight potential benefits of his takeover. In a move which could have huge tax implications for Disney; Florida Governor Ron DeSantis on Friday signed a bill to dissolve Walt Disney World’s private government, following statements from the entertainment giant in opposition to a new state law critics have dubbed “Don’t Say Gay.” On Sunday, US and Israeli officials confirmed that President Joe Biden will accept Prime Minister Naftali Bennet’s invitation to visit Israel in the coming months, though an exact date is yet to be established. The visit will take place amongst a backdrop of increasing tensions in the Israel-Palestine conflict.


Stocks and commodities tumbled as China’s worsening Covid outbreak compounded fears sparked by faster Federal Reserve tightening. The Stoxx 600 Europe Index fell 1.5%, with miners and energy firms at the forefront of losses. US equity futures dipped, with S&P 500 futures about 0.7% lower after the gauge shed 2.8% Friday. West Texas Intermediate futures slid more than 4% to trade below $100 a barrel. Fears of a wider lockdown in Beijing are spooking investors already fretting about the risk of a global slowdown as the Fed raises rates to tame inflation. A broad gauge of Chinese stocks dropped to the lowest in almost two years as policy makers raced to stem an outbreak that’s already hobbled Shanghai amid the government’s steadfast adherence to its Covid-zero policy. Treasuries snapped the rout of the past week that roiled markets while the dollar extended an advance as investors opted for safe havens. The euro erased gains made after Emmanuel Macron’s win on a pro-business, pro-Europe platform in the French election removed a key risk for markets.

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

10:00 a.m.: Germany April IFO business climate
11:00 a.m.: Euro-Area Feb. construction output
11:00 a.m.: Norway sells bills
11:30 a.m.: Germany sells bills
12:00 p.m.: U.K. CBI April business optimism
3:00 p.m.: Belgium April business confidence
5:30 p.m.: U.S. sells bills
7:00 p.m.: ECB’s Panetta speaks


Corporate Events

Earnings include Coca-Cola, Activision Blizzard, Philips, Deutsche Boerse, American Campus, Epiroc, Vivendi


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