Morning Report

October 21, 2022

“The UK leadership vote may delay the long-awaited fiscal plan that was due Oct. 31 amid Truss’s resignation, adding further pressure on the markets and the Bank of England. Investors, who dumped the pound and government bonds following Truss’s mini-budget plan, are increasingly becoming unsettled.”

Tim Hallinan – Trading Director

Main Headlines

Investors now expect the Federal Reserve to raise interest rates to 5 per cent next year, suggesting that it will need to hammer the brakes on the economy harder than expected to tackle high inflation. Traders have fully priced in the benchmark policy rate reaching 5 per cent in May 2023, up from 4.6 per cent before the latest inflation data released late last week. Expectations had ratcheted up after September’s consumer price index report showed an alarming acceleration in monthly price pressures across a broad array of everyday items and services.

Rishi Sunak, former chancellor, has emerged as the early favourite to become Britain’s next prime minister, after Liz Truss terminated a 44-day premiership marked by economic and political turmoil. Truss’s resignation made her the shortest-serving prime minister in Britain’s history; her time in Number 10 will be remembered for a disintegrating economic policy and a disastrous slump in Conservative party support. Sunak predicted correctly that his rival would set off panic in the markets if she pressed ahead with a massive package of debt-funded tax cuts.


Sterling is weaker than most major currencies in the early morning trade. UK consumer confidence hovered around a 50-year low last month as Britons struggled against a backdrop of soaring inflation, political turmoil, and high borrowing costs. One of Britain’s biggest utilities has said that all energy companies should pay into a multibillion-pound fund to subsidise electricity and gas bills from April, when blanket UK government support ends. Tax experts have urged the UK’s new chancellor Jeremy Hunt to review the off payroll working rules, known as IR35, after he cancelled plans to repeal controversial reforms.


Euro is stronger against sterling and weaker against the dollar this morning. Olaf Scholz dropped his opposition to an EU gas price cap after late-night summit talks aimed at quelling the energy crisis hanging over the union’s economy. Hungary’s prime minister said that an agreement had been reached at the EU summit in Brussels that any future EU gas price cap will not apply to long-term gas supply deals like the 15-year deal that Hungary has with Russia’s Gazprom. Italian media had only just begun talking about the threat of winter gas rationing when Marco Checchi sprang into action to ensure bottle top maker Pelliconi would continue to supply customers.


The dollar is well bid against most major currencies overnight. Joe Biden issued a statement thanking UK Prime Minister Liz Truss for “her partnership on a range of issues” in response to the Conservative leader’s resignation after just six weeks in office. US health officials have launched an inquiry into a controversial study by scientists at Boston University who created an artificial form of Covid-19 in a laboratory. The head of the US Navy has warned that the American military must be prepared for the possibility of a Chinese invasion of Taiwan before 2024, as Washington grows increasingly alarmed about the threat to the island.


Stocks dropped as Treasury yields held at the highest level since the global financial crisis and investors assessed companies’ resilience to economic headwinds in the latest earnings reports. Europe’s Stoxx 600 fell more than 1%, with Adidas AG plunging the most in seven months after the German sportswear maker cut its outlook for the year. US stock futures were lower. Shares of some Chinese chip-related stocks fell as the US was said to be considering new export controls that would limit China’s access to powerful computing technologies.

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

8:00 a.m.: UK Sept. Retail Sales
8:00 a.m.: Denmark Oct. Consumer Confidence
8:00 a.m.: Sweden Sept. Unemployment
9:00 a.m.: Switzerland Sept. M3
11:00 a.m.: Euro-area 2021 Government Debt/GDP ratio
12:00 p.m.: Ireland Sept. PPI
12:00 p.m.: UK to sell bills
3:00 p.m.: Bank of Italy releases quarterly economic bulletin
4:00 p.m.: Euro-area Oct. Consumer Confidence

Corporate Events

Earnings include Verizon, CATL, AmEx, Schlumberger, Sika, Reliance Industries, Telia


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