Morning Report

May 25, 2022

“With growing doubts on whether the world’s biggest economy will prove its resilience and monetary policy aggressive as previously projected, the US dollar’s rally to two-decade highs seems to have stalled.”

Tim Hallinan – Trading Director

Main Headlines

The US Food and Drug Administration is easing regulations to allow infant formula imports from Britain, a move that would bring around 2 million cans onto empty shelves by June to ease a nationwide shortage. The FDA said it was “exercising enforcement discretion” to allow Britain-based Kendal Nutricare to import certain infant formula products under the Kendamil brand that it has no safety or nutrition concerns over following an evaluation. Abbott, the biggest US supplier of powder baby formula, shut its facility after reports of bacterial infections among four infants. It exacerbated a shortage among multiple manufacturers that began with supply-chain issues tied to the coronavirus pandemic. The FDA said it would allow the release of about 300,000 cans of Abbott’s EleCare amino acid-based formula for children who urgently need it to survive.

Inequality is on the rise again in the UK, with pay growing fastest for the highest earners, while inflation hits those on low incomes hardest. Average earnings in finance were 25 per cent higher in cash terms in March than the pre-pandemic level, outstripping the 15 per cent growth seen over the same period in mean earnings across the economy as a whole. In two other high-paying sectors, professional services and IT, pay growth was almost as strong, at 21 per cent, and was driven by pay rises at the top, with the mean rising faster than the median. This means the highest paid have been better insulated than workers on low incomes against soaring inflation. The same figures, based on payroll data by HM Revenues & Customs, show that for the top 1 per cent of employees, pay rose by more than 7 per cent in real terms between December 2019 and March 2022.


Sterling is well bid against most major currencies overnight. Britain faces a summer of travel chaos after railway workers voted for nationwide strike action in a dispute over jobs and pay. Shares in some of Britain’s biggest power companies fell sharply yesterday, as Rishi Sunak drew up plans for a windfall tax on the energy sector to help offset spiralling domestic fuel bills. Qatar has pledged to invest £10bn in the UK, including in the technology, healthcare, infrastructure and clean energy sectors, as the British government steps up efforts to woo sovereign wealth fund investment from oil-rich Gulf states. Boris Johnson is facing renewed criticism of his handling of the “party gate” scandal after fresh allegations emerged of a culture of routine drinks events at Downing Street during the pandemic.


Euro is weaker than most major currencies in the early morning trade. The EU will propose new laws that would give member states more power to seize criminal assets, potentially including those of sanctioned Russian individuals and entities. The proposal would expand the ability of member states to trace, freeze and investigate certain assets, people familiar said. EU nations would set up asset recovery strategies and offices as part of the plan. German consumer morale is projected to inch up in June after falling to a record low in May, but high inflation and the war in Ukraine continue to weigh on household spending. Natural gas buyers in Europe are seeking to lock in supplies via long-term contracts as a buffer against volatile global prices, industry executives said, in moves that will reverse the last decade’s trend of increasing spot purchases.


The dollar is stronger against euro and weaker against sterling this morning. Billionaire hedge fund manager Bill Ackman said raging inflation will only dissipate if the Federal Reserve acts more aggressively or the market sell-off turns into a full-on collapse. According to Bank of America CEO Brian Moynihan, US consumers are “in good shape” and will keep spending at an elevated clip, at least in the near term. The bank’s customers have checking and savings accounts that are still larger than before the pandemic and are spending 10% more so far in May than the year-earlier period, he said. Georgia Republicans on Tuesday dealt Donald Trump his biggest defeat in his bid to play kingmaker in this year’s US midterm elections, choosing Governor Brian Kemp and Secretary of State Brad Raffensperger despite Trump’s efforts to oust them.


Stocks rose today, while Treasury yields stabilized after a sharp retreat as markets assessed the outlook for Federal Reserve monetary tightening. The dollar pushed higher. Miners and utilities led gains in Europe’s Stoxx 600. US futures advanced after stocks fell overnight, with the Nasdaq 100 down more than 2% as Snap Inc.’s profit warning pummelled companies that rely on digital advertising. Treasuries steadied after a flight to havens sent yields lower, while traders dialled back the expected pace of Fed hikes. The Fed minutes from its last meeting, due today, may provide some clarity. Meanwhile, the Bank of Russia will hold an unscheduled rate meeting tomorrow. The government will get pushed closer to a potential default after the US Treasury Department said it will let a key sanctions waiver benefiting American investors expire.

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

8:00 a.m.: Germany June GfK consumer confidence, 1Q private consumption; 1Q GDP
8:00 a.m.: Sweden April PPI, unemployment rate
8:45 a.m.: France May consumer confidence
9:00 a.m.: ECB’s Rehn, Panetta speak
9:00 a.m.: Spain April PPI
9:40 a.m.: ECB’s Holzmann speaks
10:00 a.m.: ECB’s Lagarde speaks
10:00 a.m.: ECB publishes Financial Stability Report
10:00 a.m.: Hungarian central bank publishes Financial Stability Report
11:00 a.m.: Norway sells bonds
11:30 a.m.: Germany sells bonds
11:35 a.m.: ECB’s de Cos speaks
11:45 a.m.: ECB’s Lane, Knot speak
4:30 p.m.: EIA US oil inventory report
5:15 p.m.: BOE’s Tenreyro speaks
6:00 p.m.: Russia April PPI, Weekly CPI

Corporate Events

Earnings include Novatek, Sberbank, Gazprom Neft, SSE, Nvidia


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