Morning Report

October 20, 2021

“The dollar was under pressure today from a global equity rally that sapped demand for assets regarded as safe havens. Markets are coming to the realisation that whether the Fed raises its policy rate in 2022 or not until later, other central banks are getting in ahead of them, such as the BoE.”

Sam Cornford – Partner, Head of Trading 

Main Headlines  

A US congressional committee probing the deadly Jan. 6 assault on the Capitol voted unanimously on Tuesday in favour of contempt-of-Congress charges against Steve Bannon. Bannon was a key aide to former president Donald Trump until he was fired in 2017. The committee says it is pursuing Bannon’s testimony because of his reported communications with Trump ahead of the January 6 siege this year, in which dozens of police officers were injured, and elected officials ran for their lives as Trump supporters fought their way in to the Capitol building in Washington DC. In the meantime, Donald Trump is attempting to block the committee’s work.

Rishi Sunak, Chancellor of the Exchequer, is preparing to slash a tax surcharge on bank profits by more than 60% in next week’s budget to keep the City of London competitive on a global scale after Brexit. The Chancellor will cut the surcharge from 8% to 3% from April 2023, to keep banking activity in the UK healthy in an era of higher corporation tax rates. The City of London claims the financial services sector, including staff and customers, contributes £75.6 billion a year in tax. Sunak also announced in his budget in March plans to raise corporation tax rates from 19 to 25% from 2023.


The pound is lower than most majors overnight. The UK’s lorry driver shortage is “not visibly getting better” and could last until 2023, MPs have heard. Industry leaders from the haulage, recruitment and food sectors warned at the  BEIS committee today over the current scale and impact of drive shortages. The Road Haulage Association has previously warned of a shortage of around 100,000 drivers and said the issue has not improved despite efforts from government. Figures revealed by the Office for National Statistics earlier on Tuesday showed that driver numbers have plunged by 53,000 over the past four years, largely driven by retiring drivers not being replaced fast enough by new recruits.


The euro is stronger than most majors this morning. UBS President Axel Weber is expected to take center stage in a court battle today over the multi-million-euro bid by Spain’s Santander to UBS’s former top investment banker to become its CEO. Italian banker Andrea Orcelle has sued Spain’s biggest lender after it dropped a job offer nearly three years ago in dispute over its salary package. The matter revolves around whether the four-page offer letter to Orcell in September 2018 was a binding contract or a non-binding preliminary offer. Santander said the bank could not meet Orcel’s salary demands, which included covering 35 million euros ($41 million) of a 55 million euro compensation package expected to be received in future years from UBS.


The dollar is higher than the pound but lower than the euro in the early morning trade. Global supply chains are under strain due to factors such as a resurgence of Covid-19 cases in Asia and labour shortages in the US, leading to a surge in raw material prices that is also squeezing profits at Unilever and Reckitt Benckiser. Procter & Gamble (P&G) said it will raise prices of some of its products to counter higher commodity and freight costs that are expected to take a bigger bite out of its earnings this year. Shares of the company, which reported lower quarterly earnings, while maintaining its full-year forecasts, were down 2.2% at $139.24. CFO Andre Schulten said that US retailers are aware of the new sticker prices.


Asian stocks were mixed Wednesday as traders weighed company earnings and risks from inflationary pressures. Treasury yields rose and the dollar dipped. A rally in Chinese technology firms such as Alibaba Group Holding Ltd. bolstered Hong Kong on hopes the worst of Beijing’s regulatory crackdown is over. Equities slipped in China, where the central bank boosted short-term liquidity, held loan prime rates steady and set a weaker-than-expected yuan reference rate in a sign of discomfort over currency strength. U.S. and European futures edged lower. The S&P 500 closed near a record as traders weighed the corporate impact of supply-chain snarls and higher commodity prices. Johnson & Johnson raised a profit forecast, Netflix Inc. subscribers jumped and Procter & Gamble Co. faced rising costs. Gold was at $1,776.87 an ounce, up 0.4%

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

8:00 a.m.: U.K. Sept. CPI, RPI
9:00 a.m.: ECB’s Villeroy speaks
9:00 a.m.: Norges Bank’s Olsen speaks
9:20 a.m.: ECB’s Elderson speaks
10:00 p.m.: Poland Sept. PPI, sold industrial output
11:00 a.m.: Euro-area CPI
3:40 p.m.: ECB’s Holzmann speaks
4:30 p.m.: EIA crude oil inventory report
5:00 p.m.: ECB’s Villeroy speaks
5:20 p.m.: Italy’s Visco speaks
6:00 p.m.: Jansson panel discussion on inflation
6:00 p.m.: Russia CPI (weekly), PPI
India Energy Forum


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