Morning Report

March 30, 2022

“British consumers borrowed a record amount in February, indicating that the cost-of-living squeeze had hit wallets even before energy prices skyrocketed following Russia’s invasion of Ukraine –individuals borrowed net £1.5 billion on credit cards in February, representing the highest monthly amount since records began in 1993.”

Sam Cornford, Partner – Head of Trading

Main Headlines

A closely watched recession signal flashed red yesterday, as investors fretted that the Federal Reserve’s efforts to tame inflation will bring about a sharp slowdown in US economic activity. Two-year Treasury note yields rose above those of the 10-year for the first time since August 2019, inverting a portion of the yield curve monitored closely by Wall Street and policymakers. Inversions typically signal malaise about the economy’s long-term growth prospects and have preceded every US recession in the past 50 years. Typically, a recession has followed in the two years after an inversion of this measure of the yield curve. Two-year yields, which move with interest rate expectations, rose as high as 2.45%, the highest level since March 2019. The two-year yield has risen by 1.64 percentage points this year as the US central bank has tightened monetary policy, including its first rate rise since 2018, in order to combat inflation that’s at a 40-year high. Investors argue, however, that the inversion may not be as reliable a recession indicator this time round because the Fed’s massive bond purchases during the coronavirus crisis have skewed the yields.

Boris Johnson faced fresh calls to resign on Tuesday after the police said 20 fines would be issued to people who attended government parties that breached coronavirus rules. The Metropolitan Police is investigating at least 12 government gatherings in 2020 and 2021 held when Covid-19 curbs were in force, including several at 10 Downing Street. The prime minister said last year that “the [Covid] guidelines were followed at all times” when media reports about gatherings were first published, but the Met has concluded that breaches of regulations had been made in the so-called partygate scandal. The Met said in a statement on Tuesday it would “initially begin to refer 20 fixed-penalty notices to be issued for breaches of Covid-19 regulations”, adding it would not name those who had been fined. The prime minister’s spokesperson confirmed Number 10 would announce any fixed penalty notice handed out to Johnson but declined to comment on whether he would resign in these circumstances.


Sterling is well bid against most major currencies overnight. A ceasefire agreement between Russia and Ukraine would not be enough to trigger the lifting of British sanctions, Boris Johnson told a meeting of his senior ministers yesterday. Johnson’s spokesman said, “the pressure on Putin must be increased both through further economic measures and providing military aid to ensure Russia changes course completely.” UK consumers borrowed a record amount in February, with some economists saying it was a sign of the cost-of-living crisis hitting wallets even before Russia’s invasion of Ukraine pushed energy prices higher. Individuals borrowed a net £1.5bn on credit cards in February, the highest monthly amount since records began in 1993, according to data published by the Bank of England yesterday. Steeply rising inflation is unlikely to knock the profits of housebuilders because house prices are climbing even faster, according to Bellway, one of the UK’s largest builders. They announced that their operating margin had increased from 17.3% in January 2021 to 18.7% this year.


The euro is stronger against the dollar and weaker against sterling this morning. Russia said it would work out practical arrangements by Thursday for foreign companies to pay for its gas in roubles, raising the probability of supply disruptions as Western nations have so far rejected Moscow’s demand for a currency switch. However, European countries, which mostly pay in euros, say Russia is not entitled to redraw contracts. The G7 group of nations rejected Moscow’s demands this week. German energy giant E.ON SE and a unit of Australia-based Fortescue Metals Group Ltd. plan to supply green hydrogen to Europe as the continent seeks to reduce its dependency on Russian energy. The companies will work together to deliver 5 million metric tons of hydrogen a year by 2030. Ukraine’s president Volodymyr Zelensky has warned the country “should not lose vigilance” following an announcement from Russia that it would dramatically scale back its military activities near Kyiv, following a round of peace talks.


The dollar is weaker than most major currencies in the early morning trade. In President Joe Biden’s budget proposal, he said he was calling for higher defense spending to strengthen the US military and “forcefully respond to Putin’s aggression against Ukraine” with $1 billion in additional US support for Ukraine’s economic, humanitarian, and security needs. On Friday, Biden plans to unveil tougher fuel economy standards for vehicles that would reverse his predecessor Donald Trump’s rollback of US regulations aimed at improving gas mileage and cutting tailpipe pollution, officials said. The National Highway Traffic Safety Administration (NHTSA) have proposed rules that would reduce consumer fuel costs by $140 billion for new vehicles sold by 2030 and $470 billion by 2050. The Kremlin has said that Joe Biden’s comments that Vladimir Putin “cannot remain in power” are a cause for concern. Spokesperson Dmitry Peskov said: “This is a statement that is certainly alarming. We will continue to track the statements of the US president in the most attentive way.”


Stocks fell and oil rose as optimism about a de-escalation of the war in Ukraine faded. Europe’s Stoxx 600 snapped a three-day winning streak after surging to the highest level in five weeks yesterday. US futures slipped amid warnings that gains of the past two weeks have the hallmarks of a bear-market rally. The dollar slipped and the euro climbed to the highest in four weeks. Energy and commodity stocks advanced as investors remained circumspect about the chances of a resolution to the war. NATO allies are evaluating whether Russia’s promise to scale back military operations in Ukraine marks a turning point in the conflict or simply a tactical shift. Germany activated an emergency plan to manage limited energy supplies, as concerns mount that Russia could shut off natural gas deliveries. Consumer sentiment appears resilient, as the latest US confidence data suggest solid job growth has offset Americans’ concerns over accelerating inflation for now. Chinese technology stocks pared gains after a Wall Street Journal report of new curbs in the live-streaming industry.

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

9:00 a.m.: Spain March CPI
10:00 p.m.: ECB’s Lagarde speaks
10:10 p.m.: BOE’s Broadbent speaks
11:00 a.m.: Euro-Area March economic and consumer confidence
11:00 a.m.: Italy Feb. PPI
2:00 p.m.: Germany March CPI
2:15 p.m.: US March ADP employment change
2:30 p.m.: US 4Q GDP, personal consumption, PCE
3:15 p.m.: Fed’s Barkin speaks
4:15 p.m.: ECB’s Panetta speaks on digital euro
6:00 p.m.: Russia Feb. unemployment rate, retail sales
7:00 p.m.: Fed’s George speaks
UK PM Boris Johnson appears before Liaison Committee

Corporate Events

Earnings include Paychex, BioNTech, UiPath, Dollarama, AerCap, Sixt, ICBC, AgBank, PSBC, CNOOC


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