Morning Report

May 23, 2022

“The US dollar index flashed the biggest weekly loss since January, snapping a six-week uptrend, as the market’s risk-on mood aligns with repeated comments from the US Federal Reserve.”

Tim Hallinan – Trading Director

Main Headlines

Joe Biden is poised to launch a trade initiative with 12 Indo-Pacific countries, in his first serious effort to boost economic engagement in the region and help other nations resist Chinese pressure. Biden is expected to unveil the Indo-Pacific Economic Framework this afternoon in Tokyo after meeting Prime Minister Fumio Kishida on his first visit to Asia as US president. Jake Sullivan, US national security adviser, said allies such as Japan, Australia, New Zealand, and South Korea would join the agreement. India and seven south-east Asian nations — Singapore, Malaysia, Indonesia, Vietnam, the Philippines, Thailand, and Brunei — will also join IPEF, which includes nations that represent 40% of the global economy. US commerce secretary Gina Raimondo said IPEF was an “important turning point in restoring US economic leadership in the region” that would provide countries “an alternative to China’s approach”.

Asking prices for houses in Britain surged again in May, pushed up by a lack of new homes coming to the market rather than strong demand which looks set to fade as the cost-of-living crunch tightens. Property search website Rightmove said asking prices for property put on sale between mid-April and mid-May rose by 2.1% after a 1.6% rise the month before. It marked the biggest May increase since 2014. Compared with a year ago, asking prices are 10.2% higher. The British government should “come clean” with consumers over the impact new nuclear plants will have on their energy bills, the infrastructure chief has warned. The £20 billion Sizewell C project on the Suffolk coast will require £1.7 billion of taxpayers’ money and its construction will be funded by the RAB model under which taxpayers subsidise the project through a surcharge on energy bills as it is being built. The new nuclear programme has been dogged by years of delays and cost overruns.


Sterling is well bid against most major currencies overnight. The Liberal Democrats have urged Downing Street to clarify whether Boris Johnson – who is resisting the idea of ​​an energy windfall tax – has discussed the issue with his informal political adviser Sir Lynton Crosby, whose companies represent various clients in the oil and gas industry. Italian oil major Eni plans to spend at least €2.5 billion in the UK over the next four years as government demands oil and gas companies significantly increase investment in Britain’s energy system or face a windfall tax on their soaring profits. The industry argues that it is already a major taxpayer in the UK and that an additional levy could make future investment more difficult. Net zero investment has the potential to drive economic growth and help the government with its levelling-up agenda in poorer, low productivity areas of the UK, a study by the Resolution Foundation and London School of Economics has found.


The euro is stronger against the dollar and weaker against sterling this morning. The head of the IMF has warned at the start of the World Economic Forum in Davos that the global economy faces perhaps its “biggest test since the second world war”. Kristalina Georgieva, IMF managing director, said Russia’s invasion was “devastating lives, dragging down growth and pushing up inflation”, and urged countries not to “surrender to the forces of geo-economic fragmentation that will make our world poorer and more dangerous”. Italy has increased its imports of Russian crude despite EU efforts to end ties to Russian energy in an unintended consequence of western sanctions against the Kremlin. Egypt’s finance minister has warned that “millions” could die because of the food price crisis triggered by the Ukraine war, echoing warnings made by the UN and G7 countries as worries about a global wheat shortage intensify.


The dollar is weaker than most major currencies in the early morning trade. US President Joe Biden has pledged to defend Taiwan militarily if China were to invade in remarks made during his first visit to Japan. This stance conflicts with decades-old US policy of ambiguity, designed to warn Taipei not to declare independence – which would almost certainly spark a Chinese attack – while forcing the Chinese military to reconsider action against Taiwan. National Economic Council Director Brian Deese said Sunday that the high inflation rates across the country are a result of the economy’s “period of transition” in recovering from the pandemic. And although talk of a recession gained traction in recent weeks, Deese said that Americans should “take confidence that [the US is] better positioned than any other country to navigate through this and keep our recovery going.” A military cargo plane carrying the first shipment of infant formula from Europe to address a critical shortage in the United States landed in Indianapolis on Sunday.


Stocks and the yuan advanced after President Joe Biden said China tariffs imposed by the Trump administration were under consideration. The dollar and Treasuries retreated. Energy and basic resources shares led gains in Europe’s Stoxx 600 Index and US equity futures jumped more than 1% after the S&P 500 dropped for a seventh straight week. Stocks also rose in Asia and emerging markets. Traders interpreted Biden’s comments that he’ll discuss the US tariffs on Chinese imports with Treasury Secretary Janet Yellen when he returns from his Asia trip as a signal there could be a reversal of some Trump-imposed measures. Treasuries dropped as traders debate the Federal Reserve’s tightening path amid mounting worries about an economic slowdown. Base metals extended their rebound from a five-month low as the demand outlook was bolstered by the weaker dollar and China’s loan-rate cut.

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

8:00 a.m.: Sweden 1Q residential construction
9:00 a.m.: Switzerland April M3 money supply
10:00 a.m.: Poland April retail sales
10:00 a.m.: Germany May IFO Business Climate
11:30 a.m.: Germany to sell bills
11:30 a.m.: EU to sell bonds
2:50 p.m.: France to sell bills
3:00 p.m.: Riksbank Seminar: Climate Change and Energy Market Dynamics
3:00 p.m.: Belgium May Business Confidence
4:15 p.m.: ECB’s Holzmann, Nagel, BOE’s Bailey speak
4:30 p.m.: ECB’s Villeroy, IMF’s Georgieva speak
6:00 p.m.: ECB’s Villeroy speaks about cryptocurrencies

Corporate Events

Earnings include Zoom
JPMorgan investor day


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