Morning Report

August 15, 2022

“Global shares struggled to advance this morning, with investors digesting news of an unexpected cut in Chinese interest rates, as data pointed to declining growth in the world’s second largest economy – the move sent oil prices nearly 2% lower.”

Tim Hallinan – Trading Director

Main Headlines

Inflation is the top challenge facing small businesses this year, according to a report issued by the National Federation of Independent Businesses, with a whopping 91% admitting that rising prices are having either a “substantial” or “moderate” impact on their companies. The US Chamber of Commerce says that nearly seven in 10 small businesses have raised prices to cope with inflation, which is their “dominating challenge”. Sixty-five percent of small business respondents in a study said rising input costs have forced them to raise the price of their goods and services this year, with almost 80% saying the economy has gotten worse over the past three months.

Brexit has exacerbated the UK’s labour shortages over the past year, with industries most reliant on freedom of movement hit hard, according to a report led by academics from Oxford university. The research found that in parts of the economy such as hospitality and corporate support services there had been large declines in the number of EU workers, a substantial rise in vacancies and few opportunities for employers to recruit from non-EU countries. The academics found no evidence that employers had responded by raising wages to attract UK-born workers to fill the roles previously occupied by people born in the bloc.


Sterling is weaker than most major currencies in the early morning trade. Liz Truss, the Tory leadership favourite, has ruled out splitting up the UK Treasury if she becomes prime minister next month, but she will turn Number 10 into an “economic nerve centre” calling the shots on economic policy. The City of London has borne the brunt of restaurant closures in the UK since the onset of the pandemic, with one in seven businesses shutting as the switch to homeworking has hobbled the hospitality sector in the financial district. The sector regulator has said reforms to pension rules will mean some UK employers will have to clear scheme deficits faster than currently scheduled.


Euro is stronger against sterling and weaker against the dollar this morning. Kosovo has urged western powers to help it achieve its ambition to join the EU and Nato by convincing reluctant governments to recognise the country’s independence and pressing Serbia to resolve decades-long tensions over its statehood. The EU border agency Frontex has been accused of exploiting staff by using a contractor who it is claimed offers interpreters an effective wage of less than €2.50 an hour. Energy Minister Simonetta Sommaruga told Switzerland could prevent an energy shortage by aligning with a European Union plan to cut gas use by 15% this winter.


The dollar is well bid against most major currencies overnight. Former Secretary of State Henry Kissinger warned that the United States could be ‘on the edge of war’ with Russia and China, as the Biden administration grapples with its historically low relations with the two autocratic regimes. United States lawmakers were set to meet Taiwan’s president days after China reacted to a similar visit by the US House speaker, Nancy Pelosi, with huge military drills that raised fears of conflict. Several major Wall Street banks have begun offering to facilitate trades in Russian debt in recent days, giving investors another chance to dispose of assets widely seen in the West as toxic.


US equity-index futures slipped and commodities from oil to iron ore fell as disappointing data and a surprise interest-rate cut from China further clouded the outlook for the global economy. Contracts on both the S&P 500 and Nasdaq 100 were lower, suggesting last week’s stocks rally may cool. Europe’s equity benchmark advanced about 0.3%, buoyed by corporate news. Treasury yields ticked higher, and the bond curve remained deeply inverted, pointing to worries that the Federal Reserve’s campaign of monetary tightening against high inflation will spark a US recession. The dollar gained. Equity markets in recent weeks have drawn succor from signs of slowing price pressures, which stirred hopes of a shift by the Fed to less aggressive rate hikes.

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

8:00 a.m.: Germany July wholesale price index
8:00 a.m.: Norway July trade balance
8:00 a.m.: Denmark July PPI
8:30 a.m.: Switzerland July producer and import prices
10:00 a.m.: Turkey central government budget balance
11:30 a.m.: Germany to sell bills
11:30 a.m.: Netherlands to sell bills
12:00 p.m.: Ireland June trade balance
5:15 p.m.: Germany’s Scholz to meet Nordic premiers in Oslo


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