Morning Report

August 09, 2023

“July saw a 0.3% decrease in China’s CPI, along with a 4.4% year-on-year drop in PPI, contributing to a mild USD softening. Despite previous elevated figures, US Crude Oil Inventories are projected at 2.1 million barrels, except for last month’s significant shortfall.”

Tim Hallinan – Trading Director 

Main Headlines 

US power plant operators cautioned the Biden administration about the impracticality of its emissions reduction plan, citing concerns about unproven technologies. A key utility trade group asked the US EPA to revise power plant standards dependent on carbon capture, storage, and green hydrogen. Meanwhile, US lawmakers urged the FCC to address security issues tied to Chinese cellular modules, emphasizing remote control fears. The FCC spokesperson highlighted a comprehensive review and commitment to network security, referencing past bipartisan actions against unreliable operators. 

Britain’s Electoral Commission revealed a cyberattack by “hostile actors,” involving email breaches and voter data access. The incident, that was internally disclosed last year, highlights ongoing targeting of UK democratic institutions. The attackers accessed servers containing emails, control systems, and electoral registers. In other news, the Bank of England faces a challenge in reaching a 2% inflation target by 2028, per the National Institute of Economic and Social Research. They forecast a decline in inflation to 5.2% by 2023 end, followed by slower progress towards the 2% goal in 2025-2027. The UK economy’s return to pre-pandemic levels is expected by late 2024, implying five years of no growth.  


Sterling is stronger against the Dollar and weaker against the Euro this morning. Today, the UK 10-y Bond Auction report will be released, which measures the yield and bid-to-cover ratio of the bonds. There is no forecast, however as seen from previous reporting the average interest rates of the bonds have been gradually increasing, with an increase of 101bps over the last 6 months, so we will see if this trend continues. Also, the National Institute of Economic and Social Research predicts that gross domestic output won’t recover to pre-pandemic levels until 2024. While overall output will be sluggish, specific regions such as London, anticipate up to a 7% real wage increase from late 2019 to the next five years. However, the West Midlands, including Birmingham, expects a 5% decrease in inflation-adjusted pay. 


The Euro is well bid against most major currencies overnight. The German 10-y bond auctions will be released today. This measures the same metrics as the UK, with the only difference between the two being that the interest rate increases have only been by a 33bps deviation, which is significantly less volatile than the UK. The Italian Government imposed a 40% tax on one-time profits from increased interest rates, hurting its financial sector, following criticism of lenders for not adequately compensating deposits. Italian banks surpassed a 20% European sector growth with a 50% increase in the past year, while depositors received an average of 12% of the rate increase, compared to 22% in the euro area. 


The Dollar is weaker than most major currencies in the early morning trade. The US is also releasing its 10-y bond auction report today. The past reporting figures are similar to Germany’s than the UK’s, with an interest rate deviation of only 55bps over the last 6 months reporting. The US Energy Information Administration is also releasing their Crude Oil Inventories for the month, which measures the weekly fluctuation in commercial firms’ crude oil inventory. The current forecast is at 2.1m barrels, however the last few months reporting has been mostly higher than anticipated, with only the last month having a much higher deficit, so we will see if this trend progresses. 


Stocks rose and bonds steadied in subdued trading Wednesday as traders avoided big positions before a key US inflation report. A gauge of European equities bounced 0.6% in early trading, while US futures pointed to a recovery on Wall Street. Dip buyers arrived Tuesday to halt a slide sparked by worries about the financial system and the economy. Investors also took some comfort from assurances by the Italian government that a new windfall tax will be capped. The big focus for the market is the US inflation report due Thursday. The latest reading is forecast to show that consumer prices grew 3.3% in July from a year ago, up slightly from the prior month but still near the slowest pace in two years. 

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

10:30 a.m.: Bank of Italy releases Banks and Money monthly statistics
12:00 p.m.: Ireland June Industrial Production
1:00 p.m.: US MBA Mortgage Applications
2:30 p.m.: Ukraine July CPI
6:00 p.m.: Russia July CPI
Kenya central bank MPC meeting 

Corporate Events 

Earnings include Disney, Roblox 


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