September 20, 2022

“The Federal Open Market Committee is expected to again hike rates by 75bps on Wednesday – a strategy designed to avoid the catastrophic stop-go policy that allowed inflation to get out of hand in the 1970s. Meanwhile, the European currency managed to squeeze out some gains amid hawkish comments from ECB Vice-President.”

Tim Hallinan – Trading Director

Main Headlines

Investors wiped more than $10bn off the market value of the main Covid-19 vaccine makers yesterday after US president Joe Biden said, “the pandemic is over.” Shares in Moderna, BioNTech and Novavax fell as much as 9 per cent while Pfizer, which has a much broader portfolio of products, fell as much as 2 per cent in early trading in New York. The S&P 500 index was roughly unchanged. Analysts said the sell-off reflected concerns over demand for Covid vaccines at a time of increasing public apathy and the message from leaders in the US and elsewhere that the crisis phase of the coronavirus pandemic is coming to an end.

Queen Elizabeth II has completed the journey to her final resting place at Windsor after a momentous state funeral at Westminster Abbey, as world leaders joined Britons in mourning the country’s longest-serving monarch. The Queen was laid to rest with her late husband Prince Philip at a private ceremony at the King George VI memorial chapel at Windsor at 7.30pm on Monday. The royal family confirmed later in the evening that the burial had taken place. Crowds thronged the route as the Queen’s coffin made its way from the abbey through ceremonial London to Wellington Arch, before being taken to Windsor Castle for a service of committal at St George’s Chapel.

GBP

Sterling is well bid against most major currencies overnight. Hedge funds are betting that a tumble in shares of UK asset management companies including Abrdn and Ashmore will accelerate as a brutal bear market dents their investment performance and ability to attract new business. High energy prices have boosted UK small cap fossil fuel companies, lifting their share prices and allowing some to register rare profits. Liz Truss will tell world leaders this week that Britain will match or exceed the £2.3bn is committed to Ukraine’s war effort against Russia in 2022 next year on her first overseas trip as UK prime minister.

EUR

Euro is stronger against the dollar and weaker against sterling this morning. Sweden’s central bank hiked interest rates by a full percentage point to 1.75% this morning in surprise move and warned that more was to come as it sought to get to grips with surging inflation. Former Russian President Dmitry Medvedev said earlier today that it is “essential” for Russian-backed separatists in Ukraine to carry out referendums that would see their regions join Russia. PepsiCo Inc has stopped making Pepsi, 7UP and Mountain Dew in Russia nearly six months after the US company said it would suspend sales and production after Moscow sent tens of thousands of troops into Ukraine.

USD

The dollar is weaker than most major currencies in the early morning trade. US president Joe Biden pledged to boost federal support for Puerto Rico after a hurricane caused flooding and left more than a million people with no electricity. Biden said the US would defend Taiwan from a Chinese attack, in a strong warning to Beijing one month after China held large-scale military exercises in response to House Speaker Nancy Pelosi’s visit to Taipei. US-based Sempra Infrastructure is considering exporting blue hydrogen that is made from liquefied natural gas and employs carbon capture during the production process to Japan and elsewhere in Asia.

Markets

European stocks followed peers in Asia higher after an 11th-hour rebound on Wall Street indicated traders were coming to terms with another jumbo Fed hike but had priced out expectations for a bigger surprise. The Stoxx 600 Index pushed higher as investors shifted positions ahead of a flurry of central bank decisions this week led by the Federal Reserve. MSCI Inc.’s Asia-Pacific equity index advanced for the first time in six days. S&P 500 and Nasdaq 100 futures also rose. Treasury 10-year yields hovered near 3.5% while yields on the more policy-sensitive two-year rate hit the highest since 2007 and are poised to crack above 4%.

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

8:00 a.m.: Germany Aug. PPI
9:30 a.m.: Riksbank key rate
10:00 a.m.: Poland Aug. PPI, sold industrial output, employment
10:00 a.m.: ECB’s Muller speaks
2:30 p.m.: US Aug. housing starts, building permits
7:00 p.m.: ECB’s Lagarde speaks
UK markets reopen, Parliament in session

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