Morning Report

August 12, 2022

“World stocks are headed for a fourth straight week of gains this morning as investors cleared their views on how far US interest rates can climb, establishing that there are some encouraging signs regarding the trajectory of US inflation. Meanwhile, oil recouped some of the losses made last week.”

Sam Cornford, Partner – Head of Trading

Main Headlines

US petrol prices have dropped below $4 a gallon for the first time since Russia’s invasion of Ukraine, as fears of a looming recession put the brakes on soaring fuel markets, tempering rampant inflation. The average price of a gallon of gasoline tumbled to $3.99 yesterday, according to motoring group AAA. That leaves the price at the pump down by a fifth since hitting record levels over $5 in mid-June, in the fastest decline since the 2008 recession. The slide in prices is not confined to the US, as jitters over an impending global economic slowdown and a corresponding drop-off in driving offset some of the upheaval in oil markets triggered by the war in Ukraine.

Bank of England governor Andrew Bailey has sent a strong warning to the UK’s next prime minister not to interfere politically in the regulation of the City of London, saying it would hit the country’s competitiveness. The two Tory leadership contenders, Liz Truss and Rishi Sunak, want to allow ministers to “call in” decisions if they feel regulators are not embracing the “opportunities of Brexit” to redraw old EU rules. But in a letter to the House of Commons Treasury select committee dated July 27 and published yesterday, Bailey said political interventions of that kind could have the opposite effect to that intended and make the UK less competitive.


Sterling is weaker than most major currencies in the early morning trade. British households face average annual energy bills surging above £5,000 next year, heaping further pressure on the government to intervene to ease the spiralling cost of living crisis. The boss of Britain’s train drivers’ union has warned that his members are prepared to continue strike action into the winter in a dispute over pay, ahead of another walkout that will lead to a weekend of severe disruption. The number of people waiting more than 12 hours in A&E departments rose 33 per cent in July from the previous month, a record high that underscores the intense pressure facing the health system.


Euro is stronger against sterling and weaker against the dollar this morning. A European bank has agreed to process a payment for the transit of Russian oil through Ukraine, removing the cause of a stoppage of oil supplies to central Europe last week. Spain has said that a new gas pipeline linking Spain and France could be ready within nine months after Germany backed the idea of linking the Iberian Peninsula to central Europe to improve the continent’s energy security. Two more ships left Ukraine’s Black Sea ports, including one laden with the first Ukrainian wheat to be exported under a UN-brokered deal, Turkey’s defence ministry said.


The dollar is well bid against most major currencies overnight. The House of Representatives is poised to approve the $700bn climate, health and tax bill championed by Joe Biden and congressional Democrats, completing a significant legislative victory for the US president and his party. California Governor Gavin Newsom unveiled a new water strategy on Thursday that plans for a future with 10% less water and shifts the emphasis from conservation to capturing more water that otherwise flows out to sea. Roche has received approval from the US Food and Drugs Administration for its Xofluza drug to treat influenza in children aged five years and older, the drugmaker said today.


Stocks and US equity futures rose Friday as investors assessed whether signs of cooling inflation will enable the Federal Reserve to pivot to less aggressive interest-rate increases. Europe’s Stoxx 600 index advanced 0.4%. Health care giant GSK Plc was among the outperformers, trimming a rout that was driven by Zantac litigation worries. S&P 500 and Nasdaq 100 contracts both climbed about 0.6%. Traders have pared back bets on Fed rate hikes after a report yesterday showed US producer prices fell in July from a month earlier for the first time in over two years, adding to Wednesday’s data on slower increases in consumer prices to provide signs of cooling but still troubling inflation.

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

7:30 a.m.: France 2Q ILO unemployment rate
8:00 a.m.: Sweden July CPI
8:00 a.m.: UK 2Q GDP, private consumption, exports, government spending
8:00 a.m.: UK June industrial production, trade balance
8:45 a.m.: France July CPI
9:00 a.m.: Spain July CPI
9:00 a.m.: Turkey June factory output
10:00 a.m.: Italy June trade balance
11:00 a.m.: Euro-area June industrial production
12:00 p.m.: UK to sell bills
4:00 p.m.: University of Michigan sentiment
6:00 p.m.: Russia 2Q GDP
6:00 p.m.: WASDE crops report
EasyJet pilots set to strike in Spain through Aug. 14


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