November 11, 2021
“The euro keeps the downward momentum, reaching its lowest since July 2020, as the European Central Bank is seen lagging on policy tightening. Market participants have shown moderate reaction to the US inflation concerns, in faith that the Fed will not allow very high inflation to persist indefinitely.”
Tim Hallinan, Trading Director
US consumer prices jumped in October at the fastest pace in three decades as inflationary pressures spread further throughout the economy. October’s annual rate was 6.2%, the highest since 1990. Driving the surge was an uptick in costs for energy along with shelter, food, used cars and trucks and new vehicles. Key drivers, like hot housing markets and a global energy crunch, show few signs of fading away soon, meaning that even bigger jumps can be expected in the coming months. The data reinforce the view that inflationary pressures are not as “transitory” as the Fed had been insisting — making it increasingly likely that the Fed will raise interest rates next year.
UK economic growth beat expectations in September and narrowed the gap with pre-pandemic levels, supported by strong activity in the construction and health sectors. Gross domestic product rose by a monthly rate of 0.6 per cent in September, up from the 0.2 per cent expansion in August. Consumer-facing services fell 0.6% because of a drop in retail sales. That may fan concerns at the BOE of a drop in consumption, which might weigh more heavily on the recovery in the months ahead as inflation bites and taxes increase. Construction returned to strong growth after two months of contraction.
Sterling is weaker against most major currencies this morning. Boris Johnson defended the principle of MPs holding second jobs and insisted that the UK was not a corrupt country, after footage appeared to show Sir Geoffrey Cox, a Tory MP and former attorney-general, using his House of Commons office for legal work advising the British Virgin Islands. Meanwhile, England has recorded its longest unbroken run of declining daily coronavirus caseloads since February. UK retailers have reaped big productivity gains from the shift to online sales, as businesses become better able to operate with fewer workers.
The euro is higher versus the pound but lower against the dollar overnight. The European Central Bank could stop buying bonds as early as next September if inflation looks to have sustainably returned to the official target, Governing Council member Robert Holzmann said. EU trade ministers are preparing to discuss the bloc’s recent lack of trade deals today. Heated debate is expected between France and the rest of the bloc. Emmanuel Macron, who had personally lobbied Ursula von der Leyen to ensure the deals on food were not signed until after the French election in April.
The dollar is stronger against most majors in the early morning trade. China and the US vowed to work together to slow global warming, issuing a surprise joint statement Wednesday that injects new momentum into the last days of global climate negotiations. The two sides agreed to boost their efforts to cut emissions, including by tackling methane and illegal deforestation. The US investment industry’s top regulator has called for sweeping reforms of the rapidly growing $4.2tn private equity industry, proposing rules to ensure clearer disclosures of funds’ expenses and their performance metrics.
Asian stocks were steady Thursday as an advance in Chinese shares helped to support sentiment after the fastest US inflation in three decades sparked a Wall Street slide and a sovereign bond rout. Equities in China gained amid speculation officials will seek to ease the cash crunch at struggling property developers. Chinese technology shares jumped on a report that Didi Global Inc. is preparing to reintroduce its apps in China by year-end as regulators wrap up their probes into the ride-hailing giant. European futures slipped, while US contracts climbed as traders digested filings showing Tesla Inc. Chief Executive Officer Elon Musk unloaded $5 billion of stock in the firm. Concerns about price pressures brought forward expectations of interest-rate hikes. Treasury yields soared, with the 10-year yield up more than 10 basis points. Sovereign bonds slid in Australia and New Zealand.
Main Economic Data/Central Banks/Government (All Times CET)
06:00 a.m.: Sweden Oct. unemployment rate
8:00 a.m.: Turkey Sept. current account balance
8:00 a.m.: U.K. Sept. GDP, 3Q GDP, trade balance
8:00 a.m.: U.K. Sept. industrial, manufacturing production
10:00 a.m.: Poland Oct. CPI
10:00 a.m.: ECB’s Makhlouf speaks
10:00 a.m.: ECB publishes economic bulletin
11:00 a.m.: EU Commission economic forecasts
12:00 p.m.: Ireland Oct. CPI
12:00 p.m.: Portugal Oct. CPI
1:15 p.m.: ECB’s Lane speaks
2:00 p.m.: Russia gold and forex reserve
5:00 p.m.: ECB’s Schnabel speaks
U.S. VP Kamala Harris to meet Macron and speak at Paris Peace Forum
EU trade ministers discuss WTO reforms in Brussels
CPC crude loading program for December
Holidays: U.S., Canada, France, Belgium, Angola, Poland
Earnings include SMIC, Wix, Burberry, Aegon, Paysafe, Sundial Growers, 3i, RWE, Suzuki, Bridgestone, Bechtle