Morning Report

November 2, 2021

“Monetary policy in the US and elsewhere is in sharp focus this week, with the FOMC widely expected to announce a tapering of stimulus. A 4.4% surge in the government’s index of core personal consumption expenditures – the Fed’s preferred inflation measure – seems to have solidified market expectations for a rates lift-off around the middle of next year.”

Sam Cornford, Partner and Head of Trading

Main Headlines

President Joe Biden on Monday sought to assure world leaders the United States would fulfill its promise to slash greenhouse gas emissions in half by the end of the decade, but a setback at home heightened uncertainty about his ability to follow through. Biden pledged earlier this year that the US would cut its greenhouse gas emissions 50-52% by 2030 compared with 2005 levels. The White House has expressed confidence it can achieve that, even as a bill that would help further those goals languishes in Congress, with a key Democratic senator Joe Manchin withholding his support  of the $1.75 trillion legislative framework that is central to achieving the president’s emissions reduction goals, for now.

PM Johnson is scheduled to announce the particulars of a deforestation agreement this morning with the president of Indonesia, Joko Widodo at COP26 as yesterday, leaders of more than 100 countries vowed to end deforestation by 2030, seeking to preserve forests crucial to absorbing carbon dioxide and slowing the rise in global warming. The pledge will demand “transformative further action,” and it was accompanied by several measures intended to help put it into effect. But some advocacy groups criticized them as lacking teeth, saying they would allow deforestation to continue. The governments committed $12 billion and private companies pledged $7 billion to protect and restore forests in a variety of ways, including $1.7 billion for Indigenous peoples.


The pound is lower versus most majors in the early morning trade. Rishi Sunak, the Chancellor is set for a “wild ride” in order to reduce his deficit under new rules announced at the budget, according to the Government’s Office for Budget Responsibility (OBR). Officials from the body warned that the amount of wiggle room for Chancellor Rishi Sunak to cut the deficit in the next three years and reduce national debt was the second-smallest level on record. They also told MPs on the Treasury Select Committee they expect inflation to fall in between six months and a year but said the number of people leaving the workforce could keep it higher.


The euro is unchanged toward the dollar and stronger than the pound this morning. PM Johnson told the EC president that French threats to hold up British exports in response to a dispute over fishing licences were “completely unjustified”, as the ports of Calais and Boulogne warned of an impending disaster. During a meeting with Ursula von der Leyen at the G20 summit in Rome, the PM raised his “concerns about the rhetoric from the French government”. The UK’s Brexit minister, David Frost, also expressed his “concern and surprise” over a letter from the French prime minister, Jean Castex, to Von der Leyen in which he sought an EU-level response on the alleged shortfall in licences for French vessels wanting to operate in the coastal waters of the UK and Jersey.


The dollar is stronger than the pound and unchanged toward the euro overnight. Volatility in US bonds is surging in stark contrast to the relatively placid run for equities, leading some analysts to warn over the danger that central banks trigger a spasm of volatility in Wall Street’s stock market. Fixed income markets have been jolted by fears that rising inflation will force monetary policymakers into scaling back stimulus programmes, but stocks have largely shrugged off these concerns, with Wall Street’s main equities barometers rallying to a series of new record peaks last week. The gap between measures of the near-term, derivatives-implied volatility of the S&P 500 benchmark and US Treasury bonds has widened at its fastest rate in a decade, according to Bank of America.


Most Asian stocks fell Tuesday as traders digested the latest coronavirus curbs in China and awaited key central bank decisions amid concerns about elevated inflation. The yen strengthened. Equities slid in China, where authorities in Beijing halted classes at 18 schools in one district after a teacher was infected with Covid-19. Samsung Electronics Co. bolstered South Korean shares. U.S. and European futures dipped following an overnight record on Wall Street. In Australia, the central bank scrapped its bond-yield target. The nation’s currency dropped after Governor Philip Lowe said it was still “likely to take some time” for inflation to sustainably return to target. Yields on three-year and 10-year debt declined. Gold was at $1,793.97 an ounce.

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

8:30 a.m.: Switzerland Oct. CPI, Sept. retail sales
9:50 a.m.: France Oct. manufacturing PMI
9:55 a.m.: Germany Oct. manufacturing PMI
10:00 a.m.: Euro-area Oct. manufacturing PMI
12:20 p.m.: ECB’s Elderson speaks
12:55 p.m.: ECB’s de Cos speaks
Russian energy ministry monthly data on oil production
API U.S. oil inventories report

Corporate Events

Earnings: BP, ConocoPhillips, Marathon Petroleum, Devon Energy, Pfizer, Amgen, Estee Lauder, Mondelez, Activision, Thomson Reuters, Vertex Pharmaceuticals, Prudential Financial, Samsung SDI, Mitsui & Co, American Water Works, Zebra Technologies, Sun Pharmaceutical, Yamaha, Under Armour, Bright Horizons Family Solutions, Cummins, Ralph Lauren, Maersk, Ferrari and Rockwell Automation.


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