November 17, 2022

“Sterling rose for a third day against the dollar this morning, ahead of Hunt’s new budget which is expected to outline large spending cuts and tax hikes for all. On the back of yesterday’s inflation data, the general consensus is that UK CPI may be approaching, or have already reached, its peak.”

Tim Hallinan – Trading Director

Main Headlines

US stocks of diesel and heating oil have plunged to historic lows, driving up prices for fuels critical to industry, freight, farming, and many households. Inventories of the fuel category that includes both products stood at 107.4mn barrels last week, up slightly from the week before, but the lowest level for this time of year since 1951. The highway price of diesel is up 47 per cent from a year ago to $5.35 a gallon, while heating oil has jumped 70 per cent to almost $6 a gallon. West Texas Intermediate, the US crude benchmark, has gained only 6 per cent year over year.

Chancellor Jeremy Hunt is set to deliver his Budget to parliament today, as he seeks to offer clarity on how the Rishi Sunak government plans to weather an economic “storm.” He is now widely expected to unveil a package of tax rises worth £25bn and spending cuts of £35bn in order to plug a £60bn funding black hole in Treasury coffers and reassure global markets that Britain remains a trusted trading partner. He will tell MPs that his statement will put the UK on a “balanced path to stability” as he tackles the “enemy” of inflation, which has soared to a 41-year high.

GBP

Sterling is well bid against most major currencies overnight. Rishi Sunak has pledged to publish his tax returns in a move that will provide more transparency about the new prime minister’s personal finances. The UK has spent about 20 per cent less per person on health each year than similar European countries over the past decade, according to new research that shows how the NHS has been consistently starved of funding. Paris is challenging London’s lead as the home to Europe’s biggest stock market, eating away at Britain’s position after Brexit as the continent’s most important financial centre.

EUR

Euro is weaker than most major currencies in the early morning trade. The United Nations Secretary General, Antonio Guterres, said he welcomed an agreement by all parties to extend the Black Sea grain deal to facilitate Ukraine’s agricultural exports from its southern Black Sea ports. The European Central Bank sees an increased likelihood of a recession in the 19 countries that use the euro currency, warning that soaring energy prices and high inflation fed by Russia’s war in Ukraine have raised risks for bank losses and turmoil on financial markets. Emmanuel Macron said that France was advancing cooperation with Indonesia on the provision of warplanes and submarines.

USD

The dollar is stronger against euro and weaker against sterling this morning. The Republicans will take back control of the House of Representatives by a narrow margin, ushering in a new era of divided government in Washington after Democrats retained a majority in the Senate in unexpectedly close US midterm elections. Joe Biden has disputed Zelenskyy’s assertions that a missile that landed in Poland and killed two people was not of Ukrainian origin. The Biden administration has asked Congress to approve $500 million in funds for the modernization of the four sites of the country’s Strategic Petroleum Reserve, suggesting in its request that the SPR is at risk of shortfalls.

Markets

US equity futures pointed to a recovery on Wall Street Thursday, with European shares rising in sympathy, as investors weighed mixed economic signals about the health of the American economy and interest rates. Contracts on the tech-heavy Nasdaq 100 rose 0.4% after the underlying gauge ended down 1.5% Wednesday. Those on the S&P 500 added 0.3%, with the European stock benchmark also ticking higher. Treasury 10-year yields edged higher. A closely watched section of the US yield curve remained near levels not seen in four decades, a sign of investor concern about the world’s biggest economy.

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

10:00 a.m.: Norges Bank Expectations Survey 4Q
11:00 a.m.: Eurozone Oct. CPI
12:00 p.m.: Portugal Oct. PPI
1:30 p.m.: BOE’s Pill speaks
2:00 p.m.: Russia Gold and FX Reserve
3:30 p.m.: BOE’s Tenreyro speaks
4:00 p.m.: ECB’s Villeroy speaks
6:30 p.m.: SNB’s Maechler, T. Moser speak
UK fiscal statement, economic forecasts

Corporate Events

Earnings include Alibaba, Siemens, Bouygues, Halma, Acciona, Burberry, Thyssenkrupp, Farfetch, Applied Materials

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