December 7, 2022

“World stocks eased, bonds remained supported and the US dollar was little changed this morning after several US banks warned of an imminent recession, tempering optimism about China’s major shift in its zero-COVID policy.”

Tim Hallinan – Trading Director

Main Headlines

The Biden administration says Beijing has relented and allowed US inspections of Chinese businesses, with several companies facing a deadline to co-operate by this week or risk being put on a trade blacklist. Alan Estevez, the US commerce under-secretary for industry and security, said China had started letting American officials inspect some Chinese companies after Washington recently brought in tough semiconductor export controls. Estevez said the Chinese commerce ministry had become more receptive since Washington imposed the controls in October.

House prices in the UK fell by 2.3% in November, according to Halifax, the largest monthly drop on its index since the beginning of the financial crash in 2008. The fall is the third in a row and means the average house price last month was £285,579, down from £292,406 in October. Meanwhile, the annual rate of house price growth slowed to 4.7%, down from 8.2% in October, the lender said. The rate of annual growth slowed in all areas of England, apart from the north-east, with a similar slowing trend in Northern Ireland, Scotland and Wales.

GBP

Sterling is weaker than most major currencies in the early morning trade. As Christmas approaches, the financial headwinds facing younger generations seem particularly harsh. Debts from university are greater, homes less affordable and company pensions less generous and reliable than they were for older generations. Now the soaring cost of living and rising borrowing costs are further aggravations. Rishi Sunak is under pressure from Tory MPs to accelerate new strike-busting legislation, as Britain faces the biggest wave of industrial action since the tail-end of Margaret Thatcher’s government.

EUR

Euro is well bid against most major currencies overnight. Germany’s constitutional court on Tuesday threw out a legal challenge to the European Union’s 750-billion-euro ($786 billion) recovery fund, which saw the EU take on joint debt to help member states overcome the COVID-19 crisis. Airbus on Tuesday abandoned a numerical forecast for jet deliveries and a date for its key production goal but maintained financial targets as it limped towards the end of a year haunted by disruption in factories and supply chains.

USD

The dollar is stronger against sterling and weaker against euro this morning. The Federal Reserve’s efforts to stamp out high inflation will push the US unemployment rate up to at least 5.5 per cent as the world’s largest economy tips into a recession next year, according to most leading academic economists polled by the Financial Times. Taiwan Semiconductor Manufacturing Company will more than triple its investment in the US state of Arizona to $40bn, as the world’s largest contract chipmaker steps up diversification of its production facilities on geopolitical tensions and pressure from customers.

Markets

US stock futures were struggling to recover ground after a four-day losing streak, amid worries about the chances of an economic downturn in coming months. A four-day losing streak, during which the S&P 500 has lost 3.4%, showed little sign of being snapped as investors continued to fret about the economic damage eventually inflicted by high inflation and the Federal Reserve’s campaign to damp it. Shares fell in Asia after Wall Street declined on fears the Federal Reserve will need to keep the brakes on the economy to get inflation under control, risking a sharp recession. Oil prices were mixed.

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

7:45 a.m.: Switzerland Nov. Unemployment
8:00 a.m.: Germany Oct. Industrial Production
8:00 a.m.: Sweden Oct. Industrial Orders
8:00 a.m.: Norway Oct. Industrial Production
8:10 a.m.: ECB’s Lane speaks
9:00 a.m.: Czech Oct. Industrial Output
9:00 a.m.: Hungary Oct. Industrial Production
10:00 a.m.: Italy Oct. Retail Sales
10:30 a.m.: Spain sells bills
11:00 a.m.: Euro-area 3Q GDP
11:00 a.m.: UK sells linkers
1:00 p.m.: US MBA Mortgage Applications
3:30 p.m.: ECB’s Panetta speaks
Poland central bank decision

Corporate Events

Earnings include Thor Industries, Campbell Soup, UNFI, Dollarama, Brown-Forman, GameStop, Academy Sports & Outdoors

To learn more about Ballinger & Co., please visit our website or our LinkedIn page.