Morning Report

May 17, 2023

“Investor sentiment was relatively subdued yesterday due to increased hawkishness in the Federal Reserve’s rhetoric and robust US economic data. Industrial production in April exceeded expectations, rising by 0.5% vs. 0% forecast, led by a notable 1% increase in manufacturing. April retail sales had a modest 0.4% growth, below the projected 0.8%. Worries about the US debt ceiling also persisted, although there were reports of certain progress made overnight.”

Tim Hallinan – Trading Director

Main Headlines

Despite the change in plans, President Biden will proceed with his scheduled departure to Japan on Wednesday but will forego his planned visits to Australia and Papua New Guinea. The decision to return to the United States early was made to focus on addressing the debt ceiling issue. The White House confirmed this information and stated that the President had a meeting with the four key congressional leaders on the matter. The urgency arises from the limited time available to reach an agreement and avoid a potential default on the nation’s debt. Republicans are pushing to raise the country’s borrowing limit but only if it is accompanied by spending cuts. Democrats, including President Biden, are seeking to increase the debt limit without any conditions.

Unite, the Labour Party’s main financial supporter, will urge Sir Keir Starmer to reconsider nationalizing the entire UK energy sector. The trade union claims that companies in the energy sector have engaged in excessive profit-making and “greedflation.” Although Starmer has abandoned previous plans to nationalize the energy, mail, and water industries, he supports the idea of a state-backed green energy company. With Labour leading in the opinion polls ahead of the next general election, Unite’s general secretary, Sharon Graham, will increase pressure on Starmer to reconsider energy nationalization due to public discontent with high bills and company profits.


Sterling is weaker than most major currencies in the early morning trade. Automaker Stellantis has issued a warning that it might have to close its Ellesmere Port factory unless the UK government renegotiates a crucial aspect of the Brexit deal with the EU. The company claims that electric vans manufactured at the Cheshire site, owned by Vauxhall, will face a 10% tariff when exported to mainland Europe next year due to insufficient locally sourced parts. The British Chambers of Commerce has also called on the government to make it easier for UK businesses to hire foreign workers in response to ongoing labour shortages affecting sectors such as hospitality and agriculture. Official data shows that over 3 million more people are struggling with bills and payments, highlighting the growing cost-of-living crisis in UK households.


Euro is stronger against sterling and weaker against the dollar this morning. The EU and the UK have agreed to collaborate in addressing irregular migration across the English Channel, signalling an improvement in relations after years of post-Brexit tension. Brussels and London will negotiate an agreement to share intelligence, expertise, and personnel to combat smuggling activities. In July last year, the United Nations and Turkey brokered the Black Sea deal for 120 days to address a global food crisis worsened by Russia’s invasion of Ukraine, a major grain exporter. The pact was extended by Russia for another 120 days in November but was further extended until May 18 unless certain demands related to its agricultural exports were met.


The dollar is well bid against most major currencies this morning. Executives in the clean energy and semiconductor industries are calling for relaxed immigration rules in the US, citing the urgent need for foreign labour to support President Joe Biden’s plan to reindustrialize the economy. Numerous projects have been announced since Congress passed substantial subsidies, part of Biden’s efforts to bring back manufacturing jobs lost to Asia. Democratic Representative Robert Garcia initiated the process of forcing a vote to expel Republican George Santos, a congressman from New York who is facing federal charges of fraud, money laundering, and misappropriation of public funds.


Global markets traded mixed Wednesday, with risk-taking tempered by disappointing data out of China, inflation numbers awaited in Europe and deadlocked talks in Washington. US stock futures ticked higher as White House and congressional negotiators continued to try to breach an impasse to raise the debt ceiling. Treasuries steadied after Tuesday’s selloff. European stocks opened lower ahead of a read on Eurozone inflation that will help shape bets on the rate-hiking cycle.

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

8:00 a.m.: UK March Labor Market Statistics
8:30 a.m.: Hungary 1Q GDP
9:30 a.m.: Netherlands 1Q GDP
10:00 a.m.: Italy April CPI
10:00 a.m.: Poland 1Q GDP
10:15 a.m.: ECB’s Makhlouf speaks
11:00 a.m.: Germany May ZEW Survey
11:00 a.m.: Euro-Area 1Q GDP
2:00 p.m.: Poland April CPI
2:15 p.m.: Fed’s Mester speaks
2:30 p.m.: US April Retail Sales
3:15 p.m.: US April Industrial Production
4:00 p.m.: ECB’s Lagarde speaks
4:00 p.m.: Fed’s Barr testifies before the House Financial Services Committee
6:15 p.m.: Fed’s Williams speaks
8:30 p.m.: Fed’s Goolsbee speaks
Economic and Financial Affairs Council (ECOFIN) meeting in Brussels
Council of Europe meeting in Reykjavik

Corporate Events

Earnings include Vodafone, Siemens, Imperial Brands, Ubisoft, Euronext, Bouygues, Sonova, Home Depot, Keysight Tech
Aviation Festival Americas in Miami through May 17


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