April 8, 2022

“Stocks plunged as investors fear central banks will be hiking aggressively to tame inflation just as the war in Ukraine strikes on global economic confidence – warning signals for a potential recession in the euro zone are flashing red.”

Tim Hallinan – Trading Director

Main Headlines

The US Senate has confirmed Ketanji Brown Jackson to a seat on the Supreme Court, making her the first black female justice to join America’s highest court in a big win for President Joe Biden, who championed her nomination. The final vote in the upper chamber of Congress to seal Jackson’s confirmation occurred yesterday afternoon, with 53 senators — including all 50 Democrats and three Republicans — backing her lifetime appointment to the court, and 47 voting against it. Jackson, currently a judge on the powerful US Court of Appeals for the DC Circuit, will replace outgoing justice Stephen Breyer, who was nominated to the Supreme Court by former president Bill Clinton and will officially retire at the end of the court’s term this year.

There is a growing push at the top of government for the UK to trigger Article 16 of the Northern Ireland Protocol soon after the 5th of May elections. Within Cabinet there is now a feeling that the government should have suspended some parts of the post-Brexit treaty last autumn, when negotiations with the European Union were leading to little progress, and the UK team, then led by Sir David Frost, repeatedly threatened to do so. A senior Whitehall source said the UK’s failure to fulfil its threat to trigger Article 16 had led to a “boy who cried wolf” situation in which the government’s warnings had lost credibility. Northern Ireland Secretary Brandon Lewis has argued for some time that the UK should trigger Article 16. Attorney General Suella Braverman and Jacob Rees Mogg, the Brexit opportunities minister, have also recently urged the Prime Minister to do so.

GBP

Sterling is weaker than most major currencies in the early morning trade. Industry groups and academics have branded Boris Johnson’s long-awaited energy security strategy a “missed opportunity” that would not reduce the UK’s reliance on expensive imports in the short term and fail to alleviate the financial pressure on households from soaring fuel bills. The staff shortage chaos at Britain’s airports could spread to other areas of the economy amid continuing chronic labour issues caused by hundreds of thousands of people leaving the UK workforce during lockdowns. More than half of all new cars sold in the UK must be fully electric by 2028, under detailed government proposals unveiled yesterday, to pave the way for phasing out the sale of traditional petrol and diesel vehicles by the end of the decade.

EUR

Euro is stronger against sterling and weaker against the dollar this morning. NATO member states have agreed to supply new types of advanced weaponry to Ukraine, alliance representatives said, as Kyiv prepares for an offensive by Russia in the country’s east. The ECB probably won’t be deterred by the war in Ukraine from moving ahead with policy normalization. The bank is seen ending net bond-buying in July and setting the stage for its first interest-rate hike in more than a decade in December, according to a survey of economists. The deposit rate is expected to reach zero in March — nearly nine years after it first turned negative. Yesterday, the chairman of Russian aluminium giant Rusal called for an impartial investigation into the killing of civilians in the Ukrainian town of Bucha, which he described as a war crime, and urged an end to the “fratricidal” conflict.

USD

The dollar is well bid against most major currencies overnight. US federal agencies are taking the unusual step of sharing intelligence with foreign banks to bolster defences against potential cyber-attacks in retaliation for the unprecedented economic sanctions imposed on Russia, according to people familiar with the briefings. Mississippi governor Tate Reeves has spent the past few weeks touting the state’s lowest unemployment rate in its history. He also has been open about Mississippi’s shrinking workforce, blaming the federal government for the problem. The number of Americans filing first-time claims for unemployment benefits fell to 166,000 last week – the best reading in more than 50 years, and one that shows a labour market that has essentially recovered from the two-year shock of the coronavirus pandemic.

Markets

Stocks are ending the week on a positive note, with European equities snapping two days of declines sparked by the Federal Reserve’s plan for aggressive monetary-policy tightening. The Stoxx Europe 600 index climbed more than 1%, with all industry sectors in the green and energy and basic resources leading the advance. Swedish truck maker Volvo AB declined after saying it will take a $423 million hit from Russia’s war in Ukraine, the latest indication of how the conflict may affect corporate profits. US equity futures gained, and an Asia-Pacific share index eked out a small climb. A dollar gauge extended its rally to a seventh day, hitting the highest level since July 2020. Oil was steady after three days of losses stoked by plans to release millions of barrels of crude from strategic reserves and China’s demand-sapping virus outbreak.

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

8:00 a.m.: Norway Feb. GDP
9:00 a.m.: Hungary March CPI
10:00 a.m.: Italy Feb. retail sales
10:00 a.m.: ECB’s de Cos speaks at private capital event
10:10 a.m.: ECB’s Centeno speaks at conference
11:00 a.m.: Hungary March budget balance
12:00 p.m.: U.K. to sell bills
12:00 p.m.: Ukraine President Zelenskiy speaks to the Finnish parliament
1:15 p.m.: ECB’s Panetta speaks
1:30 p.m.: ECB’s Stournaras, Makhlouf, Herodotou speak
2:00 p.m.: National Bank of Poland publishes minutes
6:00 p.m.: Russia March CPI, 4Q GDP
USDA April WASDE report

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