Morning Report

July 13, 2022

“The outlook for the oil market is growing into more uncertainty – despite scarcity, investors are determined to sell oil futures on fears that a potential recession and aggressive rate hikes to tame inflation will hit demand globally.”  

Tim Hallinan – Trading Director

Main Headlines

Investor concerns that the US economy is overheating are giving way to recession jitters as analysts fret the Federal Reserve could stifle growth with its rapid tightening of monetary policy. Markets are pricing in an aggressive path for Fed rate rises in the coming months while also signalling expectations that the central bank will then change course next year and begin cutting rates. Economic reports released over the past two weeks have heightened the sense of uncertainty. Key surveys on the US services and manufacturing sectors from the Institute for Supply Management showed corporate America is cutting back on hiring. Weekly figures on unemployment claims have also pointed to slowing momentum.

Governor Andrew Bailey said yesterday that the Bank of England’s independence will be put to the ultimate test as it seeks to bring inflation back down to its 2% target from more than 9%. The cost-of-living squeeze is a big political issue in the contest to replace Boris Johnson as prime minister, and some Conservative lawmakers believe the BoE was too slow to raise rates and wrong to continue asset purchases until last December. The BoE has raised interest rates five times since December as it tries to stop the surge in inflation from becoming embedded in Britain’s economy, and it is expected to increase them again at its August monetary policy meeting. Investors see a roughly 60% chance of the BoE announcing a rare half-percentage point hike on 4th of August.


Sterling is well bid against most major currencies overnight. Ministers are due today to push ahead with legislation to rip up Boris Johnson’s post-Brexit trading arrangements for Northern Ireland with no sign that any of the Tory leadership contenders plans to stop it. Health chiefs overseeing England’s Covid-19 vaccination programme must beware of taking “their eye off the ball”, the House of Commons public accounts committee said this morning, warning that almost 3mn people are yet to receive a single Covid shot. The field to replace Boris Johnson as the next Conservative party leader and prime minister narrowed last night as eight candidates qualified for the ballot ahead of the first round of voting today.


Euro is weaker than most major currencies in the early morning trade. In the sumptuous palace of Versailles, President Emmanuel Macron this week hosted 180 bosses of multinationals such as Disney, Siemens and JPMorgan at his annual Choose France summit aimed at wooing foreign investment. Ukraine’s international partners are sounding the alarm about the mounting pressure on Kyiv’s public finances as Russia’s invasion drives down tax revenue and its allies struggle to advance financial support rapidly. Several wildfires swept across Portugal’s central region yesterday, forcing the evacuation of hundreds of locals as firefighters struggled to put out flames at a time the country is battling a sweltering heatwave.


The dollar is stronger against euro and weaker against sterling this morning. The US Bureau of Labor Statistics was forced to publicly discredit a fake inflation data report that circulated on Tuesday, just one day before the scheduled release. The document, which sought to mirror the formatting of the monthly consumer price index report, claimed annual inflation in June reached 10.2 per cent, much higher than economists’ forecasts of an 8.8 per cent jump. US president Joe Biden is set to meet with Saudi Crown Prince Mohammed bin Salman, the biggest US banks report earnings this week and are expected to show bumper profits from lending, and EU officials fear criminal groups are smuggling weapons out of Ukraine and on to Europe’s black markets.


American equity futures edged higher this morning while stocks in Europe dipped in cautious trading dominated by a dimming economic outlook and an anxious wait for data that may show US inflation at a fresh four-decade high. S&P 500 and Nasdaq 100 futures posted modest gains after yet another volatile day that ended with both gauges solidly in the red on Monday. The Stoxx Europe 600 index dropped about 0.6%, with declines for carmakers and insurers offsetting gains for retailers. Treasuries were steady and a key part of the yield curve remains inverted, a potential signal of recession ahead. The 10-year yield at one point yesterday was 12.4 basis points below the 2-year rate, a level unseen since 2007. Most European bonds gained. Brent crude oil stabilized at about $100 a barrel after a tumble. The dollar hovered near the highest levels since March 2020.

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

8:00 a.m.: UK May industrial production, monthly GDP
8:00 a.m.: Germany June CPI
8:45 a.m.: France June CPI
9:00 a.m.: Spain June CPI
11:00 a.m.: Euro area May Industrial production
11:00 a.m.: Italy sells bonds
11:15 a.m.: Switzerland sells bonds
11:30 a.m.: Germany sells bonds
2:30 p.m.: US June CPI
4:00 p.m.: Bank of Canada rate decision
4:30 p.m.: EIA US oil inventory report
IEA monthly oil market report

Corporate Events

Earnings include Fastenal, Delta Air Lines


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