Morning Report

September 05, 2022

“The 10-year UK gilt yield rose by 30 basis points to near 2.9% – but this did not prevent sterling from weakening. Euro managed to move up from its lows against the greenback last week. Meanwhile, investors across the eurozone are bracing ahead of the ECB policy meeting later this week, sensing the bank’s urge to tackle inflation by implementing further aggressive rate increases.”

Tim Hallinan – Trading Director

Main Headlines

Joe Biden travels to the battleground states of Wisconsin and Pennsylvania today, determined to reframe America’s midterm elections as a defining choice between democracy and the extremism of Donald Trump. The US president will mark Labor Day with growing confidence as opinion polls suggest that, while Republicans still have the lead, Democrats now have the momentum heading into the home stretch. A string of unlikely legislative victories, combined with fury at the supreme court’s decision to end the constitutional right to abortion, could galvanize Biden’s supporters to turn out in huge numbers in November.

Labour has claimed Liz Truss will push through a “huge stealth tax cut for banks” if she becomes the UK’s next prime minister, as the opposition party prepares to do battle with her on the economy. Labour has argued that the foreign secretary’s intention to scrap a planned corporation tax rise next year, should she become leader, would be particularly beneficial to big banks, which would see a net 5 percentage point cut in their tax bills. Allies of Rishi Sunak have also noted the potential political bear trap in Truss’s plans, relating to the special tax treatment given to banks after the bailouts the sector received following the 2008 financial crash.


Sterling is stronger against euro and weaker against the dollar this morning. Britain’s corporate leaders are preparing to back Liz Truss after she promised to be a “pro-business” prime minister but have raised concerns over the risk to the economy from unfunded plans to tackle the cost-of-living crisis. Headteachers have vowed to keep school doors open this winter but are warning “harsh decisions” lie ahead. Revolut is under pressure from its auditors to improve internal controls after UK regulators highlighted significant flaws in the auditing of its accounts, including an “unacceptably high” risk of “material misstatement.”


Euro is weaker than most major currencies in the early morning trade. Germany pledged about €65 billion to help households with energy bills. Sweden will provide Nordic and Baltic utilities with as much as 250 billion kronor in credit guarantees, while Finland will set up a €10 billion emergency backstop to help utilities. Turkey raised its year-end inflation estimate to 65%, up from 9.8% in the same report last year. Brussels is proposing wide-ranging powers to require businesses to stockpile supplies and break delivery contracts in order to shore up supply chains in the event of a crisis such as the coronavirus pandemic.


The dollar is well bid against most major currencies overnight. The Biden administration is considering moves that would restrict US investment in Chinese tech firms as tensions grow between the countries. The curbs would likely come as an executive order to be signed in coming months. Commerce Department may also place further restrictions on AI chips. Record high temperatures were expected in California’s Central Valley from Sacramento to outside of Los Angeles yesterday, with officials warning that the dangerous heat wave could afflict the state through the end of the week and test the limits of the electric grid.


European stocks slumped and the euro fell this morning as the region’s worsening energy crisis added to risks for a global economy already facing high inflation and a wave of monetary tightening. The Stoxx Europe 600 Index fell 1.5%. Energy stocks outperformed, while technology, construction and chemicals were laggards. An Asian equity index was also in the red, paced by losses in Hong Kong, where tech shares slid as traders weighed the risk of curbs on investment from the US. Wall Street contracts wavered after the worst week for world shares since June. The dollar jumped as commodity-linked currencies joined the euro’s retreat to a two-decade low. Oil rallied before an OPEC+ meeting on supply. Cash Treasuries and US stocks are closed because of Labor Day.

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

8:00 a.m.: Russia August composite PMI
9:00 a.m.: Turkey August CPI, PPI
9:00 a.m.: Switzerland 2Q GDP
9:15 a.m.: Spain August composite PMI
9:45 a.m.: Italy August composite PMI
9:50 a.m.: France August composite PMI
9:55 a.m.: Germany August composite PMI
10:00 a.m.: Euro-Area August composite PMI
10:30 a.m.: Euro-Area September Sentix investor confidence
10:30 a.m.: UK August composite PMI
11:00 a.m.: Euro-Area July retail sales
5:30 p.m.: BOE’s Mann speaks
US markets closed for Labor Day holiday
UK announces new PM
OPEC+ meeting

Corporate Events

Earnings include D’ieteren Group


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