October 14, 2021

“The Fed is starting to feel the pressure to normalise policy sooner, with inflation figures outpacing forecasts and reaching their highest since 2008. The question remains whether the rising prices are transitory, even though the policymakers are insisting that this is the case. Sterling is approaching its highest level this month, despite a sustained flow of chaotic news regarding the energy crisis.”

Sam Cornford, Partner and Head of Trading

Main Headlines

The Federal Reserve could begin phasing out its pandemic-era stimulus programme as early as next month and wrap up the process by mid-2022, as more officials pencil in an interest rate rise next year. Minutes from the September meeting of the Federal Open Market Committee showed officials firming up their plans for the eventual end to the $120bn monthly asset purchase programme that has been in place since last year to bolster financial markets and the economy. Consensus is building for a reduction of those bond-buys “soon”, according to the minutes.

Another two energy suppliers with about 250,000 customers have collapsed in the latest escalation in the UK’s energy crisis. BP Plc-backed Pure Planet and Colorado Energy announced they have gone out of business on Wednesday, taking the total number of households that have been forced to switch supplier since the start of August to almost 2 million. Since the start of August, 12 utilities in the country have gone under. The unprecedented volatility in power and natural gas markets last week has added to pressure already on suppliers as surging prices push them to breaking point. Meanwhile, a Glencore-backed gas shipping company has told its customers it can no longer continue its services.

GBP

Sterling is stronger against most major currencies this morning. UK retailers and logistics companies have warned that the supply chain disruptions at Felixstowe are spreading to other container ports in the country and will exacerbate Christmas supply shortages. The Bank of England has banned its Monetary Policy Committee members from having private discussions with bankers after rumours that a deputy governor had revealed policy information in a recent meeting with an investment bank. Ministers are looking to relax rules shielding tens of millions of UK retirement savers from high charges as they step up efforts to funnel pension fund cash into the government’s “levelling up” agenda.

EUR

The euro is higher versus the dollar and weaker versus the pound overnight. Klaus Iohannis, a potential new prime of Romania, called on centrist-liberal leader of the USR party, Dacian Ciolos to form a government in a notoriously shifting political landscape. Covid infections and death rates in Romania have surged to their highest level since the onset of the pandemic and the vaccination rate hovers just above 30 per cent, one of the lowest in Europe. Slovak prosecutors said on Wednesday that the governor of the country’s central bank, Peter Kazimir, had been charged with a “corruption-related crime”.

USD

The dollar is lower against most majors in the early morning trade. The pace of US consumer price growth pushed higher in September, hovering at a 13-year high as inflationary pressures drove up the cost of food, energy and rent. The consumer price index rose 5.4 per cent in September from a year ago, slightly higher than the annual increase reported for August and the 5.3 per cent expected by analysts. Walmart, UPS and FedEx have pledged to extend their working hours in a bid to ease supply chain bottlenecks that are weighing down the US and global economic recoveries.

Markets

Most Asian stocks rose along with US equity futures Thursday as traders took in their stride further signs of the global inflationary pressures building up in the recovery from the pandemic. MSCI Inc.’s Asia-Pacific share index rose for a second day. South Korea outperformed but stocks were steady in China, where data showed the highest factory-gate inflation in almost 26 years. US and European futures pushed higher after Wall Street snapped a three-day losing streak, with the tech-heavy Nasdaq 100 outperforming the S&P 500. Longer term Treasuries slipped, trimming an overnight rally, but the 10-year yield remained below 1.60%. Crude oil stabilized above $80 a barrel and gold dipped from the highest in nearly a month.

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

8:30 a.m.: Switzerland Sept. producer and import prices
9:00 a.m.: Spain Sept. CPI
9:30 a.m.: Sweden Sept. CPI
10:15 a.m.: Norway new cabinet announced
10:30 a.m.: BOE bank liabilites/credit conditions surveys
12:05 p.m.: ECB’s Elderson speaks
12:10 p.m.: BOE’s Tenreyro speaks
1:15 p.m.: Riksbank’s Skingsley speaks
2:30 p.m.: ECB’s Knot speaks
2:30 p.m.: U.S. initial jobless claims
3:30 p.m.: Riksbank’s Ohlsson speaks
4:40 p.m.: BOE’s Mann speaks
5:00 p.m.: EIA U.S. crude inventories
8:00 p.m.: BOE’s Cunliffe speaks
U.S. FDA meets to discuss boosters

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