October 31, 2022

“Yield on UK gilts have advanced ahead of what may be the Bank of England’s biggest interest rate hick in three decades. Meanwhile, the US dollar climbs ahead of busy week for central banks, regaining some ground lost earlier this month – nevertheless, it is set to decline amid expectation that the US Federal Reserve could signal less aggressive hikes at its meeting beginning this Tuesday.”

Tim Hallinan – Trading Director

Main Headlines

President Joe Biden’s administration is taking stock of a newly empowered Xi Jinping as the Chinese president begins a third, norm-breaking five-year term as Communist Party leader. With US-Chinese relations already fraught, concerns are growing in Washington that more difficult days may be ahead. Xi has amassed a measure of power over China’s ruling party unseen since Mao Zedong. Xi’s consolidation of power comes as the United States has updated its defence and national security strategies to reflect that China is now America’s most potent military and economic adversary.

Rishi Sunak has opened the door to a possible U-turn over his decision not to attend next month’s UN COP27 climate change summit after growing criticism from Tory MPs. Sunak’s allies said on Sunday that the prime minister’s priority “first and foremost has to be focusing on domestic issues” but they left open the possibility that he might fit in the summit in Egypt that starts on November 6. “Going depends on progress,” said one, adding that Sunak’s diary was currently focused on dealing with the economic crisis and the government’s autumn statement due on November 17.

GBP

Sterling is weaker than most major currencies in the early morning trade. Train operating companies and the UK rail infrastructure manager are due to hold talks with trade unions this week in an effort to avoid further strikes, following protracted industrial action over pay and working conditions that has caused widespread disruption to travel. Rishi Sunak is on a collision course with City of London regulators after the government confirmed he will press ahead with a new “intervention power” to enable Treasury ministers to overrule the watchdogs.

EUR

Euro is stronger against sterling and weaker against the dollar this morning. Some euro zone countries have eased rules for the banks that manage the trading of their government debt to help them cope with some of the most challenging market conditions in years. Far fewer German businesses feel their survival is at risk now than at the height of the COVID-19 pandemic, a survey by economic institute Ifo showed today. The survey of some 7,000 businesses, conducted from Oct. 4 to 24, showed 7.5% felt their economic survival is threatened.

USD

The dollar is well bid against most major currencies overnight. US President Joe Biden reportedly aims to affirm Washington’s commitment to Israel’s security and economic rights as contained in the maritime-border deal signed between Israel and Lebanon under Israel’s caretaker Prime Minister Yair Lapid. Two Big Oil majors, Chevron and Exxon have said they expect oil production in the Permian to rise by less than they had initially planned this year, suggesting industry problems are serious enough to hold back production growth in the most prolific shale play in the United States.

Markets

European stocks erased early gains and US equity futures slipped at the start of another busy week of earnings and key central bank decisions. Commodity shares dropped, while banks gained in Europe. The dollar rose and the yen fell as traders positioned for another large interest-rate hike by the Federal Reserve this week, widening the policy divergence with the Bank of Japan. The euro and the pound also declined. The yield on the 10-year Treasuries rose to 4.06% after surging by nine basis points on Friday.

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

9:00 a.m: Spain Sept. retail sales
10:00 a.m.: Italy 3Q GDP
10:00 a.m.: Poland Oct. CPI
10:30 a.m.: ECB’s Visco speaks
10:30 a.m.: Portugal 3Q GDP
10:30 a.m.: UK Sept. mortgage approvals
11:00 a.m.: Euro-area Oct. CPI
12:00 p.m.: Portugal Sept. retail sales, industrial output
2:00 p.m.: South Africa Sept. trade balance
4:00 p.m.: ECB’s Lane speaks
National Bank of Ukraine rate meeting minutes
Danmarks Nationalbank conference; Speakers include ECB’s Lane, Riksbank’s Ingves
OPEC 2022 World Oil Outlook
Vladimir Putin meets leaders of Armenia and Azerbaijan in Sochi

Corporate Events

Earnings include NXP Semiconductors

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