August 9, 2022

“US headline inflation is projected to fall in the next three months, but core measures are likely to stay uneasy as the Federal Reserve urges to regain control by implementing aggressive rate hikes – some analysts are unenthusiastic to the recent increase in jobs and consider that prices for stocks and corporate bonds do not reflect escaping a recession.”

Tim Hallinan – Trading Director

Main Headlines

The US will send $1bn in additional military aid to Ukraine, the largest single drawdown of equipment since the start of the war. The latest package will include additional ammunition for high mobility artillery rocket systems, tens of thousands of rounds of artillery and mortar ammunition, anti-armour systems and armoured medical treatment vehicles. Including this package, the US has now given approximately $9.8bn in security aid to Ukraine since President Joe Biden took office. The new US aid comes as Kyiv prepares to mount a fresh offensive in the south, where it hopes to take back the city of Kherson and end Russia’s use of the Dnipro river as a natural barrier.

Energy companies have urged the UK to take “urgent” action over the amount of “toxic” and “hazardous” contaminants in the gas it is processing for export to the EU. They warned the problem could force critical subsea pipelines to be shut down this winter as mainland Europe struggles to replace the gas it usually buys from Russia. The UK has become a vital gas bridge to the EU since Russia’s full-scale invasion of Ukraine in February, leaving the bloc rushing to secure alternative supplies. EU countries are urgently trying to fill up their gas storage facilities amid fears that Russia could cut off supplies entirely. To help these efforts, the UK has been processing large volumes of liquefied natural gas arriving at its ports from countries including the US and Qatar.

GBP

Sterling is weaker than most major currencies in the early morning trade. Rishi Sunak, one of the contenders to be Britain’s next prime minister, has pledged renewed help for households struggling with the cost-of-living crisis, as his allies stepped up attacks on his rival Liz Truss. Passengers on one of the UK’s busiest inter-city rail routes face a prolonged period of disruption after the operator of the west coast mainline sharply reduced services, blaming “severe” staff shortages. Britain’s long spell of hot weather boosted sales in shops and spending on “staycations” as consumers opted to cut back on overseas travel. The BRC said its measure of retail sales rose 2.3% in July. Barclaycard said consumer spending rose 7.7% from a year ago and 1.6% from June.

EUR

Euro is well bid against most major currencies overnight. Spain’s government said an energy saving plan approved last week will not be postponed and is mandatory, despite calls by the opposition and regional chiefs for it to be changed or scrapped over fears it could hurt tourism. European natural gas prices fell for a third day as fuel held in storage facilities across Europe edged above the seasonal norm. Benchmark gas fell as much as 2.5% on this morning to its lowest level in over a week. The EU has called on member states to cut natural-gas use by 15 percent under a new plan intended to prepare the bloc for a possible halt in Russian supplies.

USD

The dollar is stronger against sterling and weaker against euro this morning. The Department of Homeland Security said that it ended a Trump-era policy requiring asylum-seekers to wait in Mexico for hearings in US immigration court. Joe Biden’s $740bn package tackling climate, the deficit and healthcare that has just passed the Senate and is almost certain now to become law is a far cry from his original even bigger ambitions, but it still represents a major triumph for the president. The Biden administration has decided to stretch out its limited supply of monkeypox vaccine by allowing a different method of injection that uses one-fifth as much per shot, the New York Times reported, citing senior officials familiar with the planning.

Markets

Stocks struggled to make headway in Asia on Tuesday and bonds rose, a pattern reflecting concerns about the outlook for economic growth as central banks hike interest rates to curb runaway inflation. MSCI’s Asia-Pacific equity index dipped as a rally in Hong Kong real-estate shares fizzled after the territory said it has no plans to relax stamp duty on some home purchases. S&P 500 and Nasdaq 100 futures weathered a blow to sentiment from poor earnings at chipmaker Nvidia, but the gains in the contracts were modest. An inversion in the US yield curve highlights expectations that further aggressive Federal Reserve interest-rate hikes could spark a recession. The dollar was steady.

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

9:00 a.m.: Hungary July CPI
12:00 p.m.: Ireland June industrial production
12:00 p.m.: Portugal June trade balance
3:00 p.m.: Belarus July CPI
Kenya holds presidential election

Corporate Events

Earnings include Alcon, Continental, Intercontinental Hotels, Ralph Lauren

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