Morning Report

June 27, 2023

“Economists are strongly predicting that the Bank of England will take decisive action in their next meeting by raising borrowing costs by a further 50 basis points. This move is seen as a proactive measure to address the prevailing economic conditions and inflationary pressures. If this forecast holds true, it would mark a significant step towards achieving monetary stability and potentially have far-reaching implications for various sectors of the economy.”

Tim Hallinan – Trading Director


Main Headlines

The prolific US shale oil and gas industry is decelerating in the face of weakening commodity prices, suggesting production growth will stall at a time of booming demand. Evidence of stagnating activity is mounting. A survey by the Federal Reserve Bank of Dallas posted a score of zero for business activity growth in the second quarter among some 150 oil and gas groups in its region — suggesting any expansion had hit a wall. It was the lowest score since 2020, when an oil price crash during the coronavirus pandemic forced operators to slash headcounts and idle drilling rigs.

Plunging oil and gas prices have led to a significant drop in the cost of Britain’s energy support schemes and a sharp decrease in government windfall tax revenues from North Sea producers over the next five years, according to official estimates. Initial projections of up to £41.6bn in tax revenue with a 75 percent rate have now been revised to £26bn, reflecting the substantial decline in wholesale energy market prices.



Sterling is stronger against Dollar and weaker against Euro this morning. The Bank of England is expected to raise borrowing costs by a further 50 basis points at their next meeting, according to economists polled by Reuters. They believe that elevated inflation is proving more challenging to control than previously anticipated. However, there is some relief for households as British shop price inflation has slowed this month, with prices rising by 8.4% compared to last year. Food prices, although still a strain on families, rose at a slower pace for the second month in a row. The British Retail Consortium will release the Shop Price Index, which is expected to show a decrease to 8.4% in June compared to May’s 9.0%.



Euro is well bid against most major currencies overnight. Italy plans to issue medium to long-term sovereign bonds in 2023 despite a higher budget deficit. The Treasury expects to issue €118 billion ($128.69 billion) of bonds between July and December, in addition to the €202 billion sold in the first half of the year. The World Bank warns Montenegro that without a new growth strategy, its income levels won’t catch up with the EU average in the next 40 years. Montenegro’s current strategy relies on a few large investment projects, making the economy vulnerable to shocks and hindering growth.



Dollar is weaker than most major currencies in the early morning trade. Later today, the Federal Reserve Bank of Richmond is set to publish the manufacturing activity index. This index serves as a crucial indicator, shedding light on the prevailing trends within the expansive network of 55 manufactories situated in the vibrant Richmond Area. It is worth noting that historical analysis suggests a consistent pattern of underestimation in the forecasted values, giving rise to the intriguing possibility that the forthcoming figures might surpass initial expectations. US consumer sentiment continues to be mixed. The percentage of consumers who are pessimistic has held fairly constant in the first months of 2023, at a level higher than at any point during the COVID-19 pandemic. Still, there was a small uptick in optimism: 36 percent of US consumers, up from 33 percent in March 2023 and 26 percent in June 2022, expect a quick economic rebound. Optimism isn’t yet back to 2021 levels, but it’s trending in a favourable direction.



European stocks and US equities futures rose this morning, mirroring the upward movement observed in Asian shares as investors awaited the next raft of data and speeches by policy makers for pointers on the outlook for the economy and interest rates. The Stoxx Europe 600 index was on track to gain for the first time in seven days, with miners leading the advance as iron ore and copper rallied on hopes China will announce more stimulus for its ailing economy. Prosus NV jumped more than 7% after getting regulatory approval to remove its cross-holding structure with Naspers Ltd.


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

10:00 a.m.: Italy June Consumer and Manufacturing Confidence
10:00 a.m.: ECB’s Lagarde speaks
10:30 a.m.: BOE’s Tenreyro speaks
1:00 p.m.: Norges Bank’s Bache speaks
2:30 p.m.: US May Durable Goods Orders
3:00 p.m.: US April FHFA House Price Index
4:00 p.m.: US May New Home Sales, June Conf. Board Consumer Confidence
ECB Forum on Central Banking in Sintra, Portugal
WEF’s Annual Meeting of the New Champions in Tianjin, China


Corporate Events

Earnings include Walgreens Boots, Korn Ferry, Prosus, Manchester United, Wise


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