europe

War in Europe, high inflation and rising interest rates were behind the poor performance of The Government Pension Fund Global. In contrast, the quick service restaurant industry in India has enjoyed a strong track record.

In this article:

  • Building a budget
  • Westlife Foodworld Ltd reported good after-tax net profit
  • A record loss

Building a budget

The year 2022 brought major changes in the main macroeconomic indicators. Overall, inflation has become a sore spot and in an attempt to combat it, the central bank has tightened monetary policy by raising interest rates and restricting liquidity.

Entering another fiscal year, many economies face challenges as to how best to allocate their finances.

Building a budget is not easy, you should consider whether saving or spending/investing is more important. Countries face an even greater challenge as growing fears of a global recession make it difficult to assess the situation.

"In this year’s India budget, government faces a

European Indices: Dax (GER 40), FTSE 100 (UK 100) And EuroStoxx 500 Analysed

European Indices: Dax (GER 40), FTSE 100 (UK 100) And EuroStoxx 500 Analysed

Jason Sen Jason Sen 04.03.2022 10:24
Dax 40 shorts at resistance at 14000/100 were the perfectly trade with a high for the day exactly here & a 700 point collapse over night. EuroStoxx 50 MARCH breaks 500 day & 100 week moving average support at 3710/3690. FTSE 100 MARCH looks like it is building a head & shoulders top - with a volatile right shoulder! - UODATE!! the neckline at 7135/25 has been broken for a sell signal - a weekly close below here tonight will confirm the sell signal. Update daily at 07:00 GMT Today's Analysis. Dax shorts at 14100/000 work on the expected break below 13780/750 as we hit my target of 13350/300 before an excellent buying opportunity at 13130/100. Longs need stops below 13000. A weekly close below 13000 is a very important sell signal for the start of next week. Gains are likely to be limited with resistance at 13750/800 & obviously strong resistance at 14000/100. EuroStoxx this time breaks support at the 500 day & 100 week moving average at 3710/3690 for an important sell signal targeting strong support at 3590/70. Longs need stops below 3530. Longs at strong support at 3590/70 can target 3690/3710. FTSE breaks the neck line at 7140/30 for an important longer term sell signal. If prices recover & hold above 7160 we can consider a false break this morning. Bulls need a break above 7190/7200 for a buy signal today. Holding below 7120 targets strong support at 6960/30. To subscribe to this report please visit daytradeideas.co.uk or email jason@daytradeideas.co.uk No representation or warranty is made as to the accuracy or completeness of this information and opinions expressed may be subject to change without notice. Estimates and projections set forth herein are based on assumptions that may not be correct or otherwise realised. All reports and information are designed for information purposes only and neither the information contained herein nor any opinion expressed is deemed to constitute an offer or invitation to make an offer, to buy or sell any security or any option, futures or other related derivatives.
The Bank Of England Is Anticipated To Hike Rates By 50 bp As A Result Of A Wealth Of Data

COT Currency Speculators raised British Pound Sterling bearish bets for 10th week

Invest Macro Invest Macro 15.05.2022 14:26
By InvestMacro | COT | Data Tables | COT Leaders | Downloads | COT Newsletter Here are the latest charts and statistics for this week’s Commitment of Traders (COT) data published by the Commodities Futures Trading Commission (CFTC). The latest COT data is updated through Tuesday May 10th and shows a quick view of how large traders (for-profit speculators and commercial entities) were positioned in the futures markets. All currency positions are in direct relation to the US dollar where, for example, a bet for the euro is a bet that the euro will rise versus the dollar while a bet against the euro will be a bet that the euro will decline versus the dollar. Highlighting the COT currency data this week was the rise in bearish bets for the British pound sterling currency futures contracts. Pound speculators have raised their bearish bets for a tenth consecutive week this week and for the eleventh time out of the past twelve weeks. Over the past ten-week time-frame, pound bets have dropped by a total of -79,261 contracts, going from -337 net positions on March 1st to a total of -79,598 net positions this week. The deterioration in speculator sentiment has now pushed the pound net position to the most bearish standing of the past one hundred and thirty-seven weeks, dating back to September 24th of 2019. Pound sterling sentiment has been hit by a recent slowing economy as the UK GDP declined by 0.1 percent in March after flat growth in February. Also, weighing on the UK economy is the war in Ukraine that has sharply raised inflation in the country (and elsewhere) and which could see the UK economy with the lowest growth rate among G7 countries in 2023, according to the IMF. Overall, the currencies with higher speculator bets this week were the Euro (22,907 contracts), US Dollar Index (1,705 contracts), Bitcoin (315 contracts) and the Mexican peso (2,102 contracts). The currencies with declining bets were the Japanese yen (-9,660 contracts), Australian dollar (-13,198 contracts), Brazil real (-1,010 contracts), Swiss franc (-1,856 contracts), British pound sterling (-5,785 contracts), New Zealand dollar (-6,386 contracts), Canadian dollar (-14,436 contracts), Russian ruble (-263 contracts) and the Mexican peso (2,102 contracts). Speculator strength standings for each Commodity where strength index is current net position compared to past three years, above 80 is bullish extreme, below 20 is bearish extreme OI Strength = Current Open Interest level compared to last 3 years range Spec Strength = Current Net Speculator level compared to last 3 years range Strength Move = Six week change of Spec Strength Data Snapshot of Forex Market Traders | Columns Legend May-10-2022OIOI-IndexSpec-NetSpec-IndexCom-NetCOM-IndexSmalls-NetSmalls-Index USD Index 57,556 84 34,776 86 -37,174 13 2,398 43 EUR 705,046 84 16,529 40 -43,026 64 26,497 18 GBP 264,594 80 -79,598 17 95,245 86 -15,647 23 JPY 247,278 87 -110,454 1 124,927 97 -14,473 24 CHF 51,282 37 -15,763 40 29,819 69 -14,056 16 CAD 151,009 31 -5,407 38 2,939 67 2,468 35 AUD 153,209 47 -41,714 46 47,126 54 -5,412 39 NZD 56,235 56 -12,996 49 16,874 56 -3,878 7 MXN 153,858 28 16,725 34 -20,866 64 4,141 61 RUB 20,930 4 7,543 31 -7,150 69 -393 24 BRL 61,450 55 40,778 90 -42,031 10 1,253 79 Bitcoin 10,841 57 703 100 -789 0 86 15 Open Interest is the amount of contracts that were live in the marketplace at time of data. US Dollar Index Futures: The US Dollar Index large speculator standing this week came in at a net position of 34,776 contracts in the data reported through Tuesday. This was a weekly lift of 1,705 contracts from the previous week which had a total of 33,071 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish-Extreme with a score of 85.8 percent. The commercials are Bearish-Extreme with a score of 12.8 percent and the small traders (not shown in chart) are Bearish with a score of 42.8 percent. US DOLLAR INDEX Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 86.6 3.2 8.6 – Percent of Open Interest Shorts: 26.2 67.8 4.5 – Net Position: 34,776 -37,174 2,398 – Gross Longs: 49,864 1,837 4,970 – Gross Shorts: 15,088 39,011 2,572 – Long to Short Ratio: 3.3 to 1 0.0 to 1 1.9 to 1 NET POSITION TREND:       – Strength Index Score (3 Year Range Pct): 85.8 12.8 42.8 – Strength Index Reading (3 Year Range): Bullish-Extreme Bearish-Extreme Bearish NET POSITION MOVEMENT INDEX:       – 6-Week Change in Strength Index: 6.6 -3.4 -19.3   Euro Currency Futures: The Euro Currency large speculator standing this week came in at a net position of 16,529 contracts in the data reported through Tuesday. This was a weekly increase of 22,907 contracts from the previous week which had a total of -6,378 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 40.1 percent. The commercials are Bullish with a score of 63.8 percent and the small traders (not shown in chart) are Bearish-Extreme with a score of 18.3 percent. EURO Currency Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 32.4 53.3 12.0 – Percent of Open Interest Shorts: 30.0 59.4 8.3 – Net Position: 16,529 -43,026 26,497 – Gross Longs: 228,230 376,043 84,921 – Gross Shorts: 211,701 419,069 58,424 – Long to Short Ratio: 1.1 to 1 0.9 to 1 1.5 to 1 NET POSITION TREND:       – Strength Index Score (3 Year Range Pct): 40.1 63.8 18.3 – Strength Index Reading (3 Year Range): Bearish Bullish Bearish-Extreme NET POSITION MOVEMENT INDEX:       – 6-Week Change in Strength Index: -1.5 1.2 0.9   British Pound Sterling Futures: The British Pound Sterling large speculator standing this week came in at a net position of -79,598 contracts in the data reported through Tuesday. This was a weekly fall of -5,785 contracts from the previous week which had a total of -73,813 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish-Extreme with a score of 16.6 percent. The commercials are Bullish-Extreme with a score of 86.0 percent and the small traders (not shown in chart) are Bearish with a score of 23.2 percent. BRITISH POUND Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 11.1 79.6 7.6 – Percent of Open Interest Shorts: 41.2 43.6 13.5 – Net Position: -79,598 95,245 -15,647 – Gross Longs: 29,469 210,627 20,157 – Gross Shorts: 109,067 115,382 35,804 – Long to Short Ratio: 0.3 to 1 1.8 to 1 0.6 to 1 NET POSITION TREND:       – Strength Index Score (3 Year Range Pct): 16.6 86.0 23.2 – Strength Index Reading (3 Year Range): Bearish-Extreme Bullish-Extreme Bearish NET POSITION MOVEMENT INDEX:       – 6-Week Change in Strength Index: -28.5 25.6 -7.7   Japanese Yen Futures: The Japanese Yen large speculator standing this week came in at a net position of -110,454 contracts in the data reported through Tuesday. This was a weekly decline of -9,660 contracts from the previous week which had a total of -100,794 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish-Extreme with a score of 0.8 percent. The commercials are Bullish-Extreme with a score of 96.6 percent and the small traders (not shown in chart) are Bearish with a score of 24.0 percent. JAPANESE YEN Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 4.5 86.2 8.0 – Percent of Open Interest Shorts: 49.2 35.7 13.9 – Net Position: -110,454 124,927 -14,473 – Gross Longs: 11,196 213,084 19,811 – Gross Shorts: 121,650 88,157 34,284 – Long to Short Ratio: 0.1 to 1 2.4 to 1 0.6 to 1 NET POSITION TREND:       – Strength Index Score (3 Year Range Pct): 0.8 96.6 24.0 – Strength Index Reading (3 Year Range): Bearish-Extreme Bullish-Extreme Bearish NET POSITION MOVEMENT INDEX:       – 6-Week Change in Strength Index: -5.1 0.0 16.7   Swiss Franc Futures: The Swiss Franc large speculator standing this week came in at a net position of -15,763 contracts in the data reported through Tuesday. This was a weekly fall of -1,856 contracts from the previous week which had a total of -13,907 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 39.8 percent. The commercials are Bullish with a score of 69.2 percent and the small traders (not shown in chart) are Bearish-Extreme with a score of 15.5 percent. SWISS FRANC Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 9.2 74.6 16.1 – Percent of Open Interest Shorts: 40.0 16.5 43.5 – Net Position: -15,763 29,819 -14,056 – Gross Longs: 4,727 38,258 8,271 – Gross Shorts: 20,490 8,439 22,327 – Long to Short Ratio: 0.2 to 1 4.5 to 1 0.4 to 1 NET POSITION TREND:       – Strength Index Score (3 Year Range Pct): 39.8 69.2 15.5 – Strength Index Reading (3 Year Range): Bearish Bullish Bearish-Extreme NET POSITION MOVEMENT INDEX:       – 6-Week Change in Strength Index: -7.7 8.0 -7.6   Canadian Dollar Futures: The Canadian Dollar large speculator standing this week came in at a net position of -5,407 contracts in the data reported through Tuesday. This was a weekly fall of -14,436 contracts from the previous week which had a total of 9,029 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 38.3 percent. The commercials are Bullish with a score of 66.9 percent and the small traders (not shown in chart) are Bearish with a score of 34.7 percent. CANADIAN DOLLAR Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 25.6 49.8 21.8 – Percent of Open Interest Shorts: 29.2 47.9 20.1 – Net Position: -5,407 2,939 2,468 – Gross Longs: 38,679 75,215 32,880 – Gross Shorts: 44,086 72,276 30,412 – Long to Short Ratio: 0.9 to 1 1.0 to 1 1.1 to 1 NET POSITION TREND:       – Strength Index Score (3 Year Range Pct): 38.3 66.9 34.7 – Strength Index Reading (3 Year Range): Bearish Bullish Bearish NET POSITION MOVEMENT INDEX:       – 6-Week Change in Strength Index: -4.0 14.5 -29.0   Australian Dollar Futures: The Australian Dollar large speculator standing this week came in at a net position of -41,714 contracts in the data reported through Tuesday. This was a weekly decrease of -13,198 contracts from the previous week which had a total of -28,516 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 46.2 percent. The commercials are Bullish with a score of 54.0 percent and the small traders (not shown in chart) are Bearish with a score of 39.2 percent. AUSTRALIAN DOLLAR Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 24.1 59.9 13.1 – Percent of Open Interest Shorts: 51.3 29.1 16.7 – Net Position: -41,714 47,126 -5,412 – Gross Longs: 36,869 91,731 20,131 – Gross Shorts: 78,583 44,605 25,543 – Long to Short Ratio: 0.5 to 1 2.1 to 1 0.8 to 1 NET POSITION TREND:       – Strength Index Score (3 Year Range Pct): 46.2 54.0 39.2 – Strength Index Reading (3 Year Range): Bearish Bullish Bearish NET POSITION MOVEMENT INDEX:       – 6-Week Change in Strength Index: 7.3 4.7 -34.4   New Zealand Dollar Futures: The New Zealand Dollar large speculator standing this week came in at a net position of -12,996 contracts in the data reported through Tuesday. This was a weekly fall of -6,386 contracts from the previous week which had a total of -6,610 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 49.5 percent. The commercials are Bullish with a score of 56.4 percent and the small traders (not shown in chart) are Bearish-Extreme with a score of 7.4 percent. NEW ZEALAND DOLLAR Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 27.0 68.5 3.9 – Percent of Open Interest Shorts: 50.1 38.5 10.8 – Net Position: -12,996 16,874 -3,878 – Gross Longs: 15,203 38,541 2,216 – Gross Shorts: 28,199 21,667 6,094 – Long to Short Ratio: 0.5 to 1 1.8 to 1 0.4 to 1 NET POSITION TREND:       – Strength Index Score (3 Year Range Pct): 49.5 56.4 7.4 – Strength Index Reading (3 Year Range): Bearish Bullish Bearish-Extreme NET POSITION MOVEMENT INDEX:       – 6-Week Change in Strength Index: -20.4 26.0 -54.4   Mexican Peso Futures: The Mexican Peso large speculator standing this week came in at a net position of 16,725 contracts in the data reported through Tuesday. This was a weekly advance of 2,102 contracts from the previous week which had a total of 14,623 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 34.5 percent. The commercials are Bullish with a score of 64.1 percent and the small traders (not shown in chart) are Bullish with a score of 60.6 percent. MEXICAN PESO Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 41.5 53.1 4.2 – Percent of Open Interest Shorts: 30.7 66.7 1.5 – Net Position: 16,725 -20,866 4,141 – Gross Longs: 63,921 81,735 6,467 – Gross Shorts: 47,196 102,601 2,326 – Long to Short Ratio: 1.4 to 1 0.8 to 1 2.8 to 1 NET POSITION TREND:       – Strength Index Score (3 Year Range Pct): 34.5 64.1 60.6 – Strength Index Reading (3 Year Range): Bearish Bullish Bullish NET POSITION MOVEMENT INDEX:       – 6-Week Change in Strength Index: 10.6 -10.1 -3.5   Brazilian Real Futures: The Brazilian Real large speculator standing this week came in at a net position of 40,778 contracts in the data reported through Tuesday. This was a weekly lowering of -1,010 contracts from the previous week which had a total of 41,788 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish-Extreme with a score of 90.5 percent. The commercials are Bearish-Extreme with a score of 10.3 percent and the small traders (not shown in chart) are Bullish with a score of 79.4 percent. BRAZIL REAL Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 79.5 15.4 5.0 – Percent of Open Interest Shorts: 13.1 83.8 3.0 – Net Position: 40,778 -42,031 1,253 – Gross Longs: 48,835 9,454 3,070 – Gross Shorts: 8,057 51,485 1,817 – Long to Short Ratio: 6.1 to 1 0.2 to 1 1.7 to 1 NET POSITION TREND:       – Strength Index Score (3 Year Range Pct): 90.5 10.3 79.4 – Strength Index Reading (3 Year Range): Bullish-Extreme Bearish-Extreme Bullish NET POSITION MOVEMENT INDEX:       – 6-Week Change in Strength Index: -1.8 3.5 -20.6   Russian Ruble Futures: The Russian Ruble large speculator standing this week came in at a net position of 7,543 contracts in the data reported through Tuesday. This was a weekly fall of -263 contracts from the previous week which had a total of 7,806 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 31.2 percent. The commercials are Bullish with a score of 69.1 percent and the small traders (not shown in chart) are Bearish with a score of 23.9 percent. RUSSIAN RUBLE Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 36.6 60.6 2.8 – Percent of Open Interest Shorts: 0.5 94.7 4.7 – Net Position: 7,543 -7,150 -393 – Gross Longs: 7,658 12,679 593 – Gross Shorts: 115 19,829 986 – Long to Short Ratio: 66.6 to 1 0.6 to 1 0.6 to 1 NET POSITION TREND:       – Strength Index Score (3 Year Range Pct): 31.2 69.1 23.9 – Strength Index Reading (3 Year Range): Bearish Bullish Bearish NET POSITION MOVEMENT INDEX:       – 6-Week Change in Strength Index: -15.6 16.7 -18.8   Bitcoin Futures: The Bitcoin large speculator standing this week came in at a net position of 703 contracts in the data reported through Tuesday. This was a weekly gain of 315 contracts from the previous week which had a total of 388 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish-Extreme with a score of 100.0 percent. The commercials are Bearish-Extreme with a score of 0.0 percent and the small traders (not shown in chart) are Bearish-Extreme with a score of 14.9 percent. BITCOIN Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 81.1 2.1 9.1 – Percent of Open Interest Shorts: 74.6 9.4 8.3 – Net Position: 703 -789 86 – Gross Longs: 8,789 227 989 – Gross Shorts: 8,086 1,016 903 – Long to Short Ratio: 1.1 to 1 0.2 to 1 1.1 to 1 NET POSITION TREND:       – Strength Index Score (3 Year Range Pct): 100.0 0.0 14.9 – Strength Index Reading (3 Year Range): Bullish-Extreme Bearish-Extreme Bearish-Extreme NET POSITION MOVEMENT INDEX:       – 6-Week Change in Strength Index: 19.0 -24.9 -13.6   Article By InvestMacro – Receive our weekly COT Reports by Email *COT Report: The COT data, released weekly to the public each Friday, is updated through the most recent Tuesday (data is 3 days old) and shows a quick view of how large speculators or non-commercials (for-profit traders) were positioned in the futures markets. The CFTC categorizes trader positions according to commercial hedgers (traders who use futures contracts for hedging as part of the business), non-commercials (large traders who speculate to realize trading profits) and nonreportable traders (usually small traders/speculators) as well as their open interest (contracts open in the market at time of reporting).See CFTC criteria here.
China’s Caixin Manufacturing PMI Data Might Support The New Zealand Dollar (NZD)

Discussing Monetary Policy Of Reserve Bank Of New Zealand, Bank Of Korea And Bank Of Indonesia, COVID In China And Equities | Market Insights Podcast (Episode 332) | Oanda

Jeffrey Halley Jeffrey Halley 23.05.2022 12:52
Jonny Hart speaks to APAC Senior Market Analyst Jeffrey Halley about news impacting the market and the week ahead. European PMIs are the week’s highlight tomorrow Welcome to a new week with policy decisions from the Reserve Bank of New Zealand, Bank of Korea, and Bank Indonesia. We start today’s podcast with a quick overview of Asian markets. A quiet news weekend has left Asian markets focusing once again on China and the covid zero slowdowns. We look at price action around Asia and discuss the future of China and covid zero. Next, it’s over to equity and currency markets. We discuss whether the worst is over for equities and if the US Dollar rally has run its course. We then look ahead to the data calendar which is fairly quiet this week. European PMIs are the week’s highlight tomorrow. We discuss them and their potential impact on the single currency. Read next: Altcoins: Ripple Crypto - What Is Ripple (XRP)? Price Of XRP | FXMAG.COM This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds. Learn more on Oanda
Bank Of England Is Expected To Choose Between 50 and 75bp, Ethereum Arouses More And More Discussions As Merge Is Around The Bend

USD Stucked! Russia Blocks The Oil For Europe Over The Payment Issues. Market Newsfeed

Saxo Strategy Team Saxo Strategy Team 10.08.2022 13:00
Summary:  Market sentiment weakened again yesterday, with the US Nasdaq 100 index interacting with the pivotal 13,000 area that was so pivotal on the way up ahead of today’s US July CPI release, which could prove important in either confirming or rejecting the complacent market’s expectations that a slowing economy and peaking inflation will allow the Fed to moderate its rate hike path after the September meeting. A surprisingly strong core CPI reading would likely unsettle the market today.   Our trading focus   Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) US interest rates are moving higher again and US equities lower with the S&P 500 at 4,124 yesterday with today’s price action testing the 100-day moving average around the 4,110 level. The past week has delivered more negative earnings surprises and weak outlooks impacting sentiment and the geopolitical risk picture is not helping either. In the event of a worse than expected US CPI release today we could take out the recent trading range in S&P 500 futures to the downside and begin the journey back to 4,000. Hong Kong’s Hang Seng (HSI.I) and China’s CSI300 (000300.I) Hang Seng Tech Index (HSTECH.I) fell 3%. China internet stocks declined across the aboard, losing 2-4%. Shares of EV manufacturers plunged 4-8% despite the China Passenger Car Association raised its 2022 EV sales estimate yesterday to 6mn, 9% higher from its previous estimate. Hang Seng Index plunged 2.4% and CSI300 fell 1.1%. USD decision time The USD remains largely stuck in neutral and may remain so unless or until some incoming input jolts the US treasury market and the complacent view that the US is set to peak its policy rate in December, with the potential to ease by perhaps mid-next year. Technical signs of a broad USD recovery, whether on yields pulling higher or due to a sudden cratering in market sentiment on concerns for the economic outlook or worsening liquidity as the Fed QT schedule is set to continue for now regardless of incoming data, would include USDJPY pulling above 136.00, EURUSD dropping down through 1.0100 and AUDUSD back down below 0.6900. Today’s July US CPI could prove a catalyst for a directional move in the greenback in either direction. Gold (XAUUSD) briefly tested a key area of resistance above $1800 on Tuesday ... before retracing lower as the recent support from rising silver and copper prices faded. With the dollar and yields seeing small gains ahead of today’s US CPI print, and with key resistance levels in all three metals looming, traders decided to book some profit. The market is looking for US inflation to ease from 9.1% to 8.8% and the outcome will have an impact on rate hike expectations from the Fed with a a higher-than-expected number potentially adding some downward pressure on metal prices. Silver (XAGUSD), as highlighted in recent updates, has been outshining Gold and in the process managing to mount a challenge above its 50-day moving average, now support at $20.33 with focus on resistance at $20.85.  Crude oil Crude oil prices rose on Tuesday on news pipeline flows of crude oil from Russia via Ukraine to Europe had been halted over a payment dispute of transit fees. The line, however, is expected to reopen within days but it nevertheless highlights and supports the current price divergence between WTI futures stuck around $90, amid rising US stockpiles and slowing gasoline demand, and Brent which trades above $96. The API reported a 2.2-million-barrel increase in US stockpiles last week with stocks at Cushing, the key storage hub, also rising. The official government inventory report is due today, with surveys pointing to a much smaller build at just 250k barrels. In addition, the market will be paying close attention to implied gasoline demand with recent data showing a slowdown. Also focus on China as lockdowns return, US CPI and Thursday’s Oil Market Reports from OPEC and the IEA. Grains eye Friday’s WASDE report US grain futures led by soybeans and corn trade higher on the week in response to worsening crop conditions. Just like central Europe, soaring heat and drought have raised concerns about lower production and yields. USDA will publish its monthly supply and demand estimates on Friday and given the current conditions a smaller yield could tighten the ending stock situation. The crop condition report, published every Monday by the USDA throughout the growing season, shows the proportion of the US crop being rated in a good to excellent condition. Last week the rating for corn dropped by 3% to 58% versus 64% a year ago. US Treasuries (IEF, TLT) US 10-year yields are poised in an important area ahead of the pivotal 3.00% level that would suggest a more determined attempt for yields to try toward the cycle top at 3.50%. Of late, the yield curve inversion has been the primary focus as long yields remain subdued relative to the front end of the curve, a development that could deepen if inflation remains higher than expected while economic activity slows. The three-year T-note auction yesterday saw solid demand, while today sees an auction of 10-year Treasuries.   Newsfeed   Taiwan officials want Foxconn to withdraw investment in Chinese chip company Foxconn announced a $800 million investment in mainland China’s Tsinghua Unigroup last month, but national security officials want the company to drop the investment, likely in connection with recent US-China confrontation in the wake of the visit to Taiwan from US House Speaker Pelosi and the ensuing Chinese military exercises around Taiwan. US Q2 Unit Labor costs remain high at 10.8%, while productivity weak at –4.6% These number suggest a very tight labor market as companies are beset with rising costs for work and less output per unit of worker effort. This number was down from the Q1 levels, but in many past cycles, rising labor costs and falling productivity often precede a powerful deceleration in the labor market as companies slow hiring (and once the recession hits begin firing employees which registers as lower unit costs and rising productivity). Japan PPI shows continued input price pressures Japan’s July producer prices came in slightly above expectations at 8.6% y/y (vs. estimates of 8.4% y/y) while the m/m figure was as expected at 0.4%. The continued surge reflects that Japanese businesses are waddling high input price pressures, and these are likely to get passed on to the consumers, suggesting further increases in CPI remain likely. The government is also set to announce a cabinet reshuffle today, and households may see increased measures to help relieve the price pressures. That will continue to ease the pressure on the Bank of Japan to tighten policy. Chipmaker warnings continue, with Micron warning of ‘challenging’ conditions After Nvidia, now Micron has issued warning of a possible revenue miss in the current quarter and ‘challenging’ memory conditions. The company officials said that they expect the revenue for the fiscal fourth quarter, which ends in August, “may come in at or below the low end of the revenue guidance range provided in our June 30 earnings call.” The company had called for $6.8-7.6bn in revenue in its June earnings report. Moreover, they also guided for a tough next quarter as well as shipments could fall on a sequential basis, given the inventory build-up with their customers. Vestas Q2 result miss estimates The world’s largest wind turbine maker has posted Q2 revenue of €3.3bn vs est. €3.5bn and EBIT of €-182mn vs est. €-119mn. The company is issuing a fiscal year revenue outlook of €14.5-16bn vs est. €15.2bn. Coinbase misses in revenue issues weak guidance Q2 revenue missed by 5% against estimates and the user metric MTU was lowered to 7-9mn from previously 5-15mn against estimates of 8.7mn. The crypto exchange is saying that retail investors are getting more inactive on cryptocurrencies due to the recent violent selloff. China’s PPI inflation eased while CPI picked up in July China’s PPI came in at 4.2% y/y in July, notably lower from June’s 6.1%).   The decline was mainly a result of lower energy and material prices.  The declines of PPI in the mining and processing sectors were most drastic and those in downstream industries were more moderate.  CPI rose to 2.7% y/y in July from 2.5% in June, less than what the consensus predicted.  Food inflation jumped to 6.3% y/y while the rise in prices of non-food items moderated to 1.9%, core CPI, which excludes food and energy, rose 0.8% y/y in July, down from June’s 1.0%. China issues white paper on its stance on Taiwan Despite extending the military drills near Taiwan beyond the originally schedule, in a less confrontational white paper released today, the Taiwan Affairs office and the Information Office of China’s State Council reiterated China’s commitment to “work with the greatest sincerity” and exert “utmost efforts to achieve peaceful reunification”.  The paper further says that China “will only be forced to take drastic measures” if “separatist elements or external forces” ever cross China’s red lines.    What are we watching next?   US CPI due today: the core in focus The highly watched US inflation data is due to be released today, and the debate on inflation peaking vs. higher-for-longer will be revived. Meanwhile, the Fed has recently stayed away from providing forward guidance, which has now made all the data points ahead of the September 21 FOMC meeting a lot more important to predict the path of Fed rates from here. Bloomberg consensus expects inflation to slow down from 9.1% YoY in June to 8.8% YoY last month. The core print will gather greater attention to assess stickiness and breadth of price pressures. Will any surprise just be noise given that we have another print for August due ahead of the next FOMC meeting, os is this market looking for an excuse to be surprised as it has maintained a rather persistent view that US inflation data will soon roll over and see a Fed set to stop tightening after the December FOMC meeting? Fed’s Evans will take the hot seat today Chicago President Charles Evans discusses the economy and monetary policy today. Evans is not a voter this year, but he votes in 2023. He said last week a 50bps rate hike is a reasonable assessment for the September meeting, but 75bps is a possibility too if inflation does not improve. He expects 25bps from there on until Q2 2023 and sees a policy rate between 3.75-4% in 2023, which is in line with Fed’s median view of 3.8% for 2023, but above the 3.1% that the market is currently pricing in. Earnings to watch Today’s US earnings in focus are marked in bold with the most important earnings release being Walt Disney and Coupang. Disney is expected to deliver revenue growth of 23% y/y with operating margins lower q/q as the company is still facing input cost headwinds. Coupang, which is the largest e-commerce platform in South Korea, is expected to deliver revenue growth of 13% y/y and another operating loss as e-commerce platforms are facing slowing demand and still significant input cost pressures. Today: Commonwealth Bank of Australia, Vestas Wind Systems, Genmab, E.ON, Honda Motor, Prudential, Aviva, Walt Disney, Coupang, Illumina Thursday: KBC Group, Brookfield Asset Management, Orsted, Novozymes, Siemens, Hapag-Lloyd, RWE, China Mobile, Antofagasta, Zurich Insurance Group, NIO, Rivian Automotive Friday: Flutter Entertainment, Baidu Economic calendar highlights for today (times GMT) 0700 – Czech Jul. CPI 1230 – US Jul. CPI 1430 – US Weekly DoE Crude Oil and Product Inventories 1500 – US Fed’s Evans (non-voter) to speak 1600 – UK Bank of England economist Pill to peak 1700 – US Treasury to auction 10-year notes 1800 – US Fed’s Kashkari (non-voter) to speak 2301 – UK Jul. RICS House Price Balance 0100 – Australia Aug. Consumer Inflation Expectations Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple  Spotify PodBean Sticher Source: https://www.home.saxo/content/articles/macro/market-quick-take-aug-10-2022-10082022
Walt Disney Results Are Beyond  All Expectations. Large Chinese Company Fires More Than 9K Employees!!! Market Newsfeed - 11.08.2022

Walt Disney Results Are Beyond All Expectations. Large Chinese Company Fires More Than 9K Employees!!! Market Newsfeed - 11.08.2022

Saxo Strategy Team Saxo Strategy Team 11.08.2022 10:40
Summary:  Risk on mode activated with a softer US CPI print, both on the headline and core measures. Equities rallied but the Treasury market reaction faded amid the hawkish Fedspeak. The market pricing of Fed expectations also tilted more in favor of a 50 basis points rate hike for September immediately after the CPI release, but this will remain volatile with more data and Fed speakers on tap ahead of the next meeting. Commodities, including oil and base metals, surged higher as the dollar weakened and demand outlook brightened but the gains appeared to be fragile. Gold unable to hold gains above the $1800 level. What is happening in markets?   Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I)  U.S. equities surged after the CPI prints that came in at more moderate level than market expectations. Nasdaq 100 jumped 2.9% and S&P500 gained 2.1%. Technology and consumer discretionary stocks led the market higher. Helped by the fall in treasury yields and better-than-feared corporate earnings in the past weeks, the Nasdaq 100 has risen 21% from its intraday low on June 16 this year and may technically be considered in a new bull market. The U.S. IPO market has reportedly become active again this week and more activities in the pipeline. Tesla (TSLA:xnas) climbed nearly 4% on news that Elon Musk sold USD6.9 billion of Tesla shares to avoid fire sale if having to pay for Twitter. Walt Disney (DIS:xnys) jumped 7% in after-hours trading on better-than-expected results. U.S. yields plunged immediately post CPI but recouped most of the decline during the US session The yields of the front-end of the U.S. treasury curve collapsed initially after the weaker-than-expected CPI data, almost immediately after the CPI release, 2-year yields tumbled as much as 20bps to 3.07% and 10-year yield fell as much as 11bps to 2.67%. Treasury yields then spent the day gradually climbing higher. At the close, 2-year yields were only 6bps at 3.21% and the 10-year ended the day at 2.78% unchanged from its previous close. The 2-10 yield curve steepened by 6bps to -44bps. Hawkish Fedspeak contributed to some of the reversal in the front-end from the post-CPI lows. At the close, the market is pricing in 60bps (i.e. 100% chance of at least a 50bps hike and about 40% chance of a 75bps rate hike) for the September FOMC after having come down to pricing in just about 50bps during the initial post-CPI plunge in yields. Hong Kong’s Hang Seng (HSIQ2) and China’s CSI300 (03188:xhkg) Hang Sang Index declined nearly 2% and CSI300 was down 1.1% on Wednesday. Shares of Chinese property developers plunged.  Longfor (00960) collapsed 16.4% as there was a story widely circulated in market speculating that the company had commercial paper being overdue. In addition, UBS downgraded the Longor together with Country Garden, citing negative free cash flows in the first half of 2022.  Country Garden (02007) fell 7.2%.  After market close, the management held a meeting with investors and said that all commercial papers matured had been duly repaid. China High Speed Transmission Equipment (00658) tumbled 19% after releasing negative profit warnings.  The company expects a loss of up to RMB80 million for first half of 2022. Guangzhou Baiyunshan Pharmaceutical (00874) declined 4.1% after the company filed to the Stock Exchange of Hong Kong that the National Healthcare Security Administration was investigating the three subsidiaries of the company for allegedly “obtaining funds by ways of increasing the prices of pharmaceutical products falsely”. Wuxi Biologics (02269) dropped 9.3% as investors worrying its removal from the U.S. unverified list may be delayed in the midst of deterioration of relationship between China and the U.S. Oversized USD reaction on US CPI The US dollar suffered a heavy blow from the softer US CPI print, with the market pricing for September FOMC getting back closer to 50 basis points just after the release. As we noted yesterday, the July CPI print is merely noise with another batch of US job and inflation numbers due ahead of the September meeting. USD took out some key support levels nonetheless, with USDJPY breaking below the 133.50 support to lows of 132.10. Next key support at 131.50 but there possibly needs to be stronger evidence of an economic slowdown to get there. EURUSD broke above 1.0300 to its highest levels since July 5 but remains at risk of reversal given the frothy equity strength. Crude oil prices (CLU2 & LCOV2) Oil prices were relieved amid the risk on tone in the markets as softer US CPI and subsequent weakness in the dollar underpinned. WTI futures rose towards $91.50/barrel while Brent futures were at $97.40. EIA data also suggested improvement in demand. US gasoline inventories fell 4,978kbbl last week, which helped push gasoline supplied (a proxy for demand) up 582kb/d to 9.12mb/d. This was slightly tempered by a strong gain in US crude oil inventories, which rose 5,457kbbl last week. Supply concerns eased after Transneft resumed gas supplies to three central European countries which were earlier cut off due to payment issues. European Dutch TTF natural gas futures (TTFMQ2) European natural gas rallied amid concerns over Russian gas supplies and falling water levels on the key Rhine River which threatens to disrupt energy shipments. Dutch front month futures rose 6.9% to EUR 205.47/MWh as a drought amid extreme temperatures has left the river almost impassable. European countries have been filling up their gas storage, largely by factories cutting back on their usage. Further demand curbs and more imports of liquefied natural gas are likely the only option for Europe ahead of the winter. Gold (XAUUSD) and Copper (HGc1) Gold saw a run higher to $1800+ levels immediately after the US inflation report as Treasury yields plunged. However, the precious metal gave up much of these gains after Fed governors warned that it doesn’t change the US central bank’s path toward higher rates this year and next. With China also ceasing military drills around Taiwan, geopolitical risks remain capped for now easing the upside pressure on Gold. Copper was more buoyant as it extended gains on hopes of a stronger demand amid a fall in price pressures.   What to consider? Softer US CPI alters Fed expectations at the margin The US CPI print came in weaker than expected for both the headline and the core measures. The headline softness was driven by huge drops in energy prices from June levels, with the entire energy category market -4.6% lower month-on-month and gasoline down -7.7%, much of the latter on record refinery margins collapsing. The ex-Food & Energy category was up only +0.3% vs. the +0.5% expected, with soft prices month-on-month for used cars and trucks (-0.4%) and especially airfares (-7.8%) dragging the most on figure – again primarily a result of lower energy prices. While this may be an indication that US inflation has peaked, it is still at considerably high levels compared to inflation targets of ~2% and the pace of decline from here matters more than the absolute trend. Shelter costs – the biggest component of services inflation – was up 5.7% y/y, the most since 1991. Fed pricing for the September meeting has tilted towards a 50bps rate hike but that still remains prone to volatility with another set of labor market and inflation prints due ahead of the next meeting. Fed speakers continued to be hawkish Fed speaker Evans and Kashkari were both on the hawkish side despite being some of the most dovish members on the Fed panel. Evans again hinted that tightening will continue into 2023 as inflation remains unacceptably high despite a first sign of cooling prices. The strength of the labor market continued to support the case of a soft landing. Kashkari reaffirmed the view on inflation saying that he is happy to see a downside surprise in inflation, but it remains far from declaring victory. He suggested Fed funds rate will reach 3.9% in 2022 (vs. market pricing of 3.5%) and 4.4% in end 2023 (vs. market pricing of 3.1%). China’s PPI inflation eased while CPI picked up in July China’s PPI came in at 4.2% YoY in July, notably lower from June’s 6.1%).   The decline was mainly a result of lower energy and material prices.  The declines of PPI in the mining and processing sectors were most drastic and those in downstream industries were more moderate.  CPI rose to 2.7% YoY in July from 2.5% in June, less than what the consensus predicted.  Food inflation jumped to 6.3% YoY while the rise in prices of non-food items moderated to 1.9%. Core CPI, which excludes food and energy, rose 0.8% YoY in July, down from June’s 1.0%. In its 2nd quarter monetary policy report released on Wednesday, the People’s Bank of China expects the CPI to be at around 3% for the full year of 2022 and the recent downtrend of the PPI to continue. China issues white paper on its stance on Taiwan China ended its military drills surrounding Taiwan on Wednesday, which lasted three days longer what had been originally announced. In a less confrontational white paper released, the Taiwan Affairs Office and the Information Office of China’s State Council reiterated China’s commitment to “work with the greatest sincerity” and exert “utmost efforts to achieve peaceful reunification”.  The paper further says that China “will only be forced to take drastic measures” if “separatist elements or external forces” ever cross China’s red lines.  Walt Disney results beat estimates Disney reported solid Q2 results with stronger than expected 152.1 million Disney+ subscribers, up 31% YoY and beating market expectations (148.4 million).  Revenues climbed 26% YoY to USD21.5 billion and adjusted EPS came in at USD1.09 versus consensus estimates (USD0.96). Singapore Q2 GDP revised lower The final print of Singapore’s Q2 GDP was revised lower to 4.4% YoY from an advance estimate of 4.8% earlier, suggesting a q/q contraction of 0.2% as against gains of 0.2% q/q earlier. The forecast for annual 2022 growth was also narrowed to 3-4% from 3-5% earlier amid rising global slowdown risks. Another quarter of negative GDP growth print could now bring a technical recession in Singapore, but the officials have, for now, ruled that out and suggest a mild positive growth in Q3 and Q4. Softbank settled presold Alibaba shares early and Alibaba let go of a large number of employees The news that Softbank expects to post a gain of over USD34 billion from early physical settlement of prepaid forward contracts to unload its stake in Alibaba (09988:xhkg/BABA:xnas) and Alibaba laid off more than 9,000 staff between April and June this year added to the pressures over the share price of Alibaba.   For a week-ahead look at markets – tune into our Saxo Spotlight. For a global look at markets – tune into our Podcast.   Source: APAC Daily Digest: What is happening in markets and what to consider next – August 11, 2022  
Apple May Rise Price For iPhone 14! Are Fuel Warehouses Empty?

Apple May Rise Price For iPhone 14! Are Fuel Warehouses Empty?

Saxo Strategy Team Saxo Strategy Team 11.08.2022 13:39
Summary:  Equity markets are ebullient in the wake of the softer than expected US July CPI data print yesterday, as a sharp drop in energy prices helped drag the CPI lower than expected for the month. The knee-jerk reaction held well in equities overnight, if to a lesser degree in the weaker US dollar. But US yields are nearly unchanged from the levels prior to the inflation release, creating an interesting tension across markets, also as some Fed members are explicitly pushing back against market anticipation of the Fed easing next year.   What is our trading focus? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) The July CPI report showing core inflation rose only 0.3% m/m compared to 0.5% m/m expected was just what the market was hoping for and had priced into the forward curve for next year’s Fed Funds rate. Long duration assets reacted the most with Nasdaq 100 futures climbing 2.9%. However, investors should be careful not to be too optimistic as we had a similar decline in the CPI core back in March before inflation roared back. As Mester recently stated that the Fed is looking for a sustained reduction in the CPI core m/m, which is likely a 6-month average getting back to around 0.2% m/m. Given the current data points it is not realistic to be comfortable with inflation before late Q1 next year. In Nasdaq 100 future the next natural resistance level is around 13,536 and if the index futures can take out this then the next level be around 14,000 where the 200-day average is coming down to. Hong Kong’s Hang Seng (HSI.I) and China’s CSI300 (000300.I) Hong Kong and mainland Chinese equities climbed, Hang Seng Index +1.8%, CSI300 Index +1.6%. In anticipation of a 15% rise in the average selling price of Apple’s iPhone 14 as conjectured by analysts, iPhone parts supplier stocks soared in both Hong Kong and mainland exchanges, Q Technology (01478:xhkg) +16%, Sunny Optical (02382:xhkg) +7%, Cowell E (01415:xhkg) +4%, Lingyi iTech (002600:xsec) +10%. Semiconductors gained, SMIC (00981:xhkg) +3%, Hua Hong (01347:xhkg) +4%. After collapsing 16% in share price yesterday, Longfor (00960) only managed to recover around 3% after the company denied market speculation that it failed to repay commercial papers due. UBS’ downgraded Longfor and Country Garden (02007:xhkkg) yesterday citing negative free cash flows for the first half of 2022 highlighted the tight spots even the leading Chinese private enterprise property developers are in. Chinese internet stocks rallied, Alibaba (09988:xhkg) +3%, Tencent (0700:xhkg) +1%, Meituan (03690:xhkkg) +2.7%. China ended its military drills surrounding Taiwan on Wednesday, which lasted three days longer what had been originally announced. USD: Treasuries don’t point to further weakness here The US dollar knee-jerked lower on the softer-than-expected July CPI data, although US yields ended the day unchanged, creating an interesting tension in a pair like USDJPY, which normally takes its lead from longer US yields (unchanged yesterday after a significant dip intraday after the US CPI release). USDJPY dipped almost all the way to 132.00 after trading above 135.00 earlier in the day. What are traders to do – follow the coincident US yield indicator or the negative momentum created by yesterday’s move? Either way, a return above 135.00 would for USDJPY would likely require an extension higher in the US 10-year yield back near 3.00%. EURUSD is another interesting pair technically after local resistance just below 1.0300 gave way, only to see the pair hitting a brick wall in the 1.0350 area (major prior range low from May-June). Was this a break higher or a misleading knee-jerk reaction to the US data? A close below 1.0250 would be needed there to suggest that EURUSD is focusing back lower again. A similar setup can be seen in AUDUSD and the 0.7000 area, with a bit more sensitivity to risk sentiment there. Gold (XAUUSD) did not have a good day on Wednesday Gold was trading lower on the day after failing to build on the break above resistance at $1803 as the dollar weakened following the lower-than-expected CPI print, thereby reducing demand for gold as an inflation hedge. Instead, the prospect for a potential shallower pace of future rate hikes supported a major risk on rally in stocks and another daily reduction in bullion-backed ETF holdings. Yet comments by two Fed officials saying it doesn’t change the central bank’s path toward even higher rates – and with that the risk of a gold supportive economic weakness - did not receive much attention. Gold now needs to hold $1760 in order to avoid a fresh round of long liquidation, while silver, which initially received a boost from higher copper prices before following gold lower needs to hold above its 50-day SMA at $20.26. Crude oil Crude oil futures (CLU2 & LCOV2) traded higher on Wednesday supported by a weaker dollar after the lower US inflation print gave markets a major risk on boost. Also, the weekly EIA report showed a jump in gasoline demand reversing the prior week’s sharp drop. Gasoline inventories dropped 5 million barrels to their lowest seasonal level since 2015 on a combination of strong exports and improved domestic demand while crude oil stocks rose 5.4m barrels primarily supported by a 5.3 million barrels release from SPR. Focus today on monthly Oil Market Reports from OPEC and the IEA. Dutch natural gas The Dutch TTF natural gas benchmark futures (TTFMQ2) rallied amid concerns over Russian gas supplies and falling water levels on the key Rhine River which threatens to disrupt energy shipments of fuel and coal, thereby forcing utilities and industries to consumer more pipelined gas. Dutch front month futures rose 6.9% to EUR 205.47/MWh while the October to March winter contract closed at a fresh cycle high above €200/MWH. European countries have been filling up their gas storage, largely by factories cutting back on their usage and through LNG imports, the flow of the latter likely to be challenged by increased demand from Asia into the autumn. Further demand curbs and more imports of liquefied natural gas are likely the only option for Europe ahead of the winter. US Treasuries (IEF, TLT) shrug off soft July CPI data US yields at first reacted strongly to the softer-than-expected July CPI release (details below), but ended the day mostly unchanged at all points along the curve, suggesting that the market is unwilling to extend its already aggressive view that the Fed is set to reach peak policy by the end of this year and begin cutting rates. Some Fed members are pushing back strongly against that notion as noted below (particularly Kashkari). A stronger sign that yields are headed back higher for the US 10-year benchmark would be on a close above 2.87% and especially 3.00%. Yesterday’s 10-year auction saw strong demand. What is going on? US July CPI lower than expected The US CPI print came in lower than expected for both the headline and the core measures. The headline softness was driven by huge drops in energy prices from June levels, with the entire energy category marked -4.6% lower month-on-month and gasoline down -7.7%, much of the latter on record refinery margins collapsing. The ex-Food & Energy category was up only +0.3% vs. the +0.5% expected, with soft prices month-on-month for used cars and trucks (-0.4%) and especially airfares (-7.8%) dragging the most on figure. While this may be an indication that US inflation has peaked, it is still at considerably high levels compared to inflation targets of ~2% and the pace of decline from here matters more than the absolute trend. Shelter costs – the biggest component of services inflation – was up 5.7% y/y, the most since 1991. Fed pricing for the September meeting has tilted towards a 50bps rate hike but that still remains prone to volatility with another set of labor market and inflation prints due ahead of the next meeting. Fed speakers maintain hawkish message Fed speaker Evans and Kashkari were both on the hawkish side in rhetoric yesterday. Evans again hinted that tightening will continue into 2023 as inflation remains unacceptably high despite a first sign of cooling prices. The strength of the labor market continued to support the case of a soft landing. Kashkari reaffirmed the view on inflation saying that he is happy to see a downside surprise in inflation, but it remains far from declaring victory. Long thought of previously as the pre-eminent dove among Fed members, he has waxed far more hawkish of late and said yesterday that nothing has changed his view that the Fed funds rate should be at 3.9% at the end of this year (vs. market pricing of 3.5%) and 4.4% by the end 2023 (vs. market pricing of 3.1%). Siemens cuts outlook Germany’s largest industrial company is cutting its profit outlook on impairment charges related to its energy division. FY22 Q3 results (ending 30 June) show revenue of €17.9bn vs est. €17.4bn and orders are strong at €22bn vs est. €19.5bn. Orsted lifts expectations The largest renewable energy utility company in Europe reports Q2 revenue of DKK 26.3bn vs est. 21.7bn, but EBITDA misses estimates and the fiscal year guidance on EBITDA at DKK 20-22bn is significantly lower than estimates of DKK 30.4bn. However, the new EBITDA guidance range is DKK 1bn above the recently stated guidance, so Orsted is doing better than expected but the market had just become too optimistic. Disney beats on subscribers Disney reported FY22 Q3 (ending 2 July) results showing Disney+ subscribers at 152.1mn vs est. 148.4mn surprising the market as several surveys have recently indicated that Amazon Prime and Netflix are losing subscribers. The entertainment company also reported revenue for the quarter of $21.5bn vs est. $21bn with Parks & Experiences deliver the most to the upside surprise. EPS for the quarter was $1.09 vs est. $0.96. If subscribers for ESPN and Hulu are added, then Disney has surpassed Netflix on streaming subscribers. Shares were up 6% in extended trading. Despite the positive result the company lowered its 2024 target for Disney+ subscriber to 135-165mn range. Coupang lifts fiscal year EBITDA outlook The South Korean e-commerce company missed slightly on revenue in Q2 but lifted its fiscal year adjusted EBITDA from a loss of $400mn to positive which lifted shares 6% in extended trading. China’s central bank expects CPI to hover around 3% In its 2nd quarter monetary policy report released on Wednesday, the People’s Bank of China (PBOC) expects the CPI being at around 3% for the full year of 2022 and at times exceeding 3%.  The release of pend-up demand from pandemic restrictions, the upturn of the hog-cycle, and imported inflation, in particular energy, are expected to drive consumer price inflation higher for the rest of the year in China but overall within the range acceptable by the central bank.  The PBOC expects the recent downtrend of the PPI to continue and the gap between the CPI and PPI growth rates to narrow. What are we watching next? Next signals from the Fed at Jackson Hole conference Aug 25-27 There is a considerable tension between the market’s forecast for the economy and the resulting expected path of Fed policy for the rest of this year and particularly next year, as the market believes that a cooling economy and inflation will allow the Fed to reverse course and cut rates in a “soft landing” environment (the latter presumably because financial conditions have eased aggressively since June, suggesting that markets are not fearing a hard landing/recession). Some Fed members have tried to push back against the market’s expectations for Fed rate cuts next year it was likely never the Fed’s intention to allow financial conditions to ease so swiftly and deeply as they have in recent weeks. The risks, therefore, point to a Fed that may mount a more determined pushback at the Jackson Hole forum, the Fed’s yearly gathering at Jackson Hole, Wyoming that is often used to air longer term policy guidance. Earnings to watch Today’s US earnings in focus are NIO and Rivian with market running hot again on EV-makers despite challenging environment on input costs and increased competition. NIO is expected to grow revenue by 15% y/y in Q2 before seeing growth jumping to 72% y/y in Q3 as pent-up demand is released following Covid restrictions in China in the first half. Rivian, which partly owned by Amazon and makes EV trucks, is expected to deliver its first quarter with meaningful activity with revenue expected at $336mn but free cash flow is expected at $-1.8bn. Today: KBC Group, Brookfield Asset Management, Orsted, Novozymes, Siemens, Hapag-Lloyd, RWE, China Mobile, Antofagasta, Zurich Insurance Group, NIO, Rivian Automotive Friday: Flutter Entertainment, Baidu Economic calendar highlights for today (times GMT) 0800 – IEA's Monthly Oil Market Report 1230 – US Weekly Initial Jobless Claims 1230 – US Jul. PPI 1430 – US Weekly Natural Gas Storage Change 1700 – US Treasury to auction 30-year T-Bonds 2330 – US Fed’s Daly (Non-voter) to speak During the day: OPEC’s Monthly Oil Market Report Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple  Spotify PodBean Sticher Source: Financial Markets Today: Quick Take – August 11, 2022  
The US Has Again Benefited From Military Conflicts In Other Parts Of The World, The Capital From Europe And Other Regions Goes To The US

Is Fed Ready For It's Counter-Attack? Commodities, Earnings And More

Saxo Bank Saxo Bank 11.08.2022 13:52
Summary:  Today we look at the sharp correction in energy prices driving a softer than expected CPI print for the US in July, which saw sentiment responding by piling on to the recent rally and taking equities to new highs for the local cycle since June. Interestingly, the reaction to the CPI data has generated some tension as US treasury yields are trading sideways after erasing the knee-jerk drop in yields in the wake of yesterday's data. With financial conditions easing aggressively, the Fed faces quite a task if it wants to counter this development, with recent protests from individual Fed members failing to make an impression. Perhaps the Jackson Hole Fed forum at the end of this month is shaping up as a key event risk? Crude oil, the USD, metals, earnings and more also on today's pod, which features Peter Garnry on equities, Ole Hansen on commodities and John J. Hardy hosting and on FX. Listen to today’s podcast - slides are found via the link. Follow Saxo Market Call on your favorite podcast app: Apple  Spotify PodBean Sticher If you are not able to find the podcast on your favourite podcast app when searching for Saxo Market Call, please drop us an email at marketcall@saxobank.com and we'll look into it.   Questions and comments, please! We invite you to send any questions and comments you might have for the podcast team. Whether feedback on the show's content, questions about specific topics, or requests for more focus on a given market area in an upcoming podcast, please get in touch at marketcall@saxobank.com. Source: Podcast: Soft CPI revives risk rally, but treasury reaction creates dissonance    
Oz Minerals’ Quarterly Copper Output Hit A Record High, Brent Futures Rose

Copper Is Smashing For The Second Time This Summer! WTI Is Back From The Dead

Marc Chandler Marc Chandler 11.08.2022 14:12
Overview: The US dollar is consolidating yesterday’s losses but is still trading with a heavier bias against the major currencies and most emerging market currencies. The US 10-year yield is soft below 2.77%, while European yields are mostly 2-4 bp higher. The peripheral premium over the core is a little narrower today. Equity markets, following the US lead, are higher today. The Hang Seng and China’s CSI 300 rose by more than 2% today. Among the large bourses, only Japan struggled, pressured by the rebound in the yen. Europe’s Stoxx 600 gained almost 0.9% yesterday and is edging higher today, while US futures are also firmer. Gold popped above $1800 yesterday but could not sustain it and its in a $5 range on both sides of $1788 today. September WTI rebounded yesterday from a low near $87.65 to close near $92.00. It is firmer today near $93.00. US natgas is 1.4%, its third successive advance and is near a two-week high. Europe’s benchmark is also rising for the third session. It is up nearly 8% this week. Iron ore rose 2% today and it is the fourth gain in five sessions. September copper is also edging higher. If sustained, it would be the fifth gain in six sessions. It is at its highest level since late June. September wheat is 1.1% higher. It has risen every session this week for a cumulative gain of around 4.25%.  Asia Pacific In its quarterly report, the People's Bank of China seemed to downplay the likelihood of dramatic rate cuts or reductions in reserve requirements. It warned that CPI could exceed 3% and ruled out massive stimulus, while promising "high-quality" support, which sounds like a targeted measure. It is not tightening policy but signaled little scope to ease. Note that the 10-year Chinese yield is at the lower end of its six-month range near 2.74%. Its two-year yield is a little above 2.15%, slightly below the middle of its six-month range. Separately, Yiwa, a city of two million people, south of Shanghai has been locked down for three days starting today due to Covid. It is a manufacturing export hub. South Korea reported its first drop (0.7%) in technology exports in two years last month. While some read this to a statement about world demand, and there is likely something there given the earnings reports from the chip sector. However, there seems to be something else at work too. South Korea figures show semiconductor equipment exports to China have been more than halved this year (-51.9%) through July. China had accounted for around 60% of South Korea's semiconductor equipment. Reports suggest the main drivers are the US-China rivalry. Semiconductor investment in China has fallen and South Korea has indicated it intensions to join the US Chip 4 semiconductor alliance. Singapore's economy unexpectedly contracted in Q2. Initially, the government estimated the economy stagnated. Instead, it contracted by 0.2%. Given Singapore's role as an entrepot, its economic performance is often seen as a microcosm of the world economy. There was a nearly a 7% decline in retail trade services, while information and communication services output also fell. After the data, the Ministry of Trade and Industry narrowed this year's GDP forecast to 3%-4% from 3%-5%. While the drop in the US 10-year yield saw the dollar tumble against the yen yesterday, the recovery in yields has not fueled a recovery in the greenback. The dollar began yesterday above JPY135- and fell to nearly JPY132.00. Today, it has been confined to a little less than around half a yen on either side of JPY132.85. The cap seen at the end of last week and early this week in the JPY135.50-60 area, and the 20-day moving average (~JPY135.30) now looks like formidable resistance. Recall that the low seen earlier this month was near JPY130.40. The Australian dollar is also consolidating near yesterday's high set slightly below $0.7110. It was the best level in two months. The $0.7050 area may now offer initial support. The next upside target is seen in the $0.7150-70 band, which houses the (50%) retracement objective of the Aussie's slide from the April high (~$0.7660) and the July low (~$0.6680), and the 200-day moving average. The broad greenback sell-off yesterday saw it ease to about CNY6.7235, its lowest level in nearly a month. Despite the less-than-dovish message from the PBOC, it seemed to signal it did not want yuan strength. It set the dollar's reference rate at CNY6.7324, a bit above the median (Bloomberg's survey) of CNY6.7308. Europe Germany's coalition government has begun debating over the contours of the next relief package. The center-left government has implemented two support programs to ease the cost-of-living squeeze for around 30 bln euros. A third package is under construction now. The FDP Finance Minister Linder suggested as one of the components a 10 bln euro program to offset the "bracket creep" of higher inflation putting households into a higher tax bracket. The Greens want a more targeted effort to help lower income families. More work needs to be done, but a package is expected to be ready next month. The International Energy Agency estimates that Russian oil output will fall by around a fifth early next year as the EU import ban is implemented. The IEA warns that Russian output may begin declining as early as this month and estimates 2 mln barrels a day will be shut by early 2023. The EU's ban on most Russian oil will begin in early December, and in early February, oil products shipments will also stop. Now the EU buys around 1 mln barrels a day of oil products and 1.3 mln barrels of crude. Russia boosted output in recent months, to around 10.8 mln barrels a day. The IEA estimates that in June, the PRC overtook the EU to become the top market for Russia's seaborne crude (2.1 mln bpd vs. 1.8 mln bpd). Separately, the IEA lifted its estimate of world consumption by about 380k barrels a day from its previous forecast, concentrated in the Middle East and Europe. The unusually hot weather in the Middle East, where oil is burned for electricity, has seen stronger demand. In Europe, there has been more switched from gas to oil. The euro surged to almost $1.0370 yesterday on the back of the softer than expected US CPI. It settled near $1.03. It is trading firmly in the upper end of that range today. It held above $1.0275, just below the previous high for the month (~$1.0295). Today's high, was set in the European morning, near $1.0340. There is a trendline from the February, March, and June highs found near $1.04 today. It is falling by a little less than half a cent a week. Sterling's rally yesterday stalled in front of this month's high set on August 1 slightly shy of $1.2295. It is straddling the area where it settled yesterday (~$1.2220). We suspect the market may test the lows near $1.2180, and a break could see another half-cent loss ahead of tomorrow's Q2 GDP. The median forecast in Bloomberg's survey is for a 0.2% contraction after a 0.8% expansion in Q1.  America What the jobs data did for expectations for the Fed at next month's meeting were largely reversed by slower the expected CPI readings. On the eve of the employment data, the market was discounting a little better than a 35% chance of another 75 bp hike. It jumped to over a 75% chance after employment report but settled yesterday around a 45% chance. It is still in its early days, and the Fed will see another employment and CPI report before it has to decide. Although the market has downgraded the chances of a 75 bp hike at next month's meeting, it still has the Fed lifting rates 115 bp between now and the end of year. The market recognizes that that Fed is not done tightening no matter what trope is dragged out to use as a strawman. The truth is the market is pushing against some Fed views. Chicago Fed's Evans, who many regard as a dove from earlier cycles, said that Fed funds could finish next year in the 3.75%-4.00% area, which opined would be the terminal rate. The swaps market says that the Fed funds terminal rate is closer to 3.50% and in the next six months. More than that, the Fed funds futures are pricing in a cut late next year. At least a 25 bp cut has been discounted since the end of June. It was the Minneapolis Fed President Kashkari that surprised many with his hawkishness. Many see him as a dove because five years ago, he dissented against rate increases in 2017. However, he has been sounding more hawkish in this context and revealed yesterday that it was his "dot" in June at 3.90% this year and 4.4% next year. These were the most extreme forecasts. Perhaps it is not that he is more dovish or hawkish, labels that seemingly take a life on of their own but more activity. While neither Evans nor Kashkari vote on the FOMC this year, they do next year. San Francisco Fed President Daly seemed more willing to consider moderating the pace of tightening but still sees more work to be done. She does not vote this year or next.  Headline CPI was unchanged last month and the 0.3% rise in the core rate was less than expected. At 8.5%, the headline is rate is still too high for comfort, and the unchanged 5.9% core rate warns significant progress may be slow. Shelter is about a third of the CPI basket and it is rising about 0.5% a month. It is up 5.7% year-over-year. If everything else was unchanged, this would lift CPI to 2%. The US reports July Producer Prices. Both the core and headline readings are expected to have slowed. The headline peaked in March, 11.6% above year ago levels. It was 11.3% in June and is expected to have fallen to 10.4%. The core rate is likely to post its fourth consecutive decline. It peaked at 9.6% in March and fell to 8.2% in June. The median forecast (Bloomberg's survey) is for a 7.7% year-over-year pace, which would be the lowest since last October.  Late in the North American session, Mexico's central bank is expected to deliver its second consecutive 75 bp rate hike. It will lift the overnight target rate to 8.5%. The July CPI reported Tuesday stood at 8.15% and the core 7.65%. The swaps market has a terminal rate near 9.5% in the next six months. The subdued US CPI reading, helped spur a 0.85% rally in the JP Morgan Emerging Market Currency Index yesterday, its largest gain in almost four weeks. The peso, often a liquid and accessible proxy, rose around 1.1%. The greenback briefly traded below MXN20.00 for the first time since late June. The move was so sharp that closed below its lower Bollinger Band (~MXN20.08) for the first time in six months. The US dollar slumped to almost CAD1.2750 yesterday to hold above the 200-day moving average (~CAD1.2745). It is the lowest level in nearly two months, and it has not traded below the 200-day moving average since June 9. Like the other pairs, it is consolidating today near the lower end of yesterday's greenback range. The swaps market downgraded the likelihood that the Bank of Canada follows last month's 100 bp hike with a 75 bp move when it meets on September 7. It is now seen as a 30% chance, less than half of what was projected at the end of last week. We suspect that the US dollar can recover into the CAD1.2800-20 area today.     Disclaimer   Source: US Dollar Soft while Consolidating Yesterday's Drop
Eyes On Iran Nuclear Deal: Oil Case. Gold Price Is Swinging

Eyes On Iran Nuclear Deal: Oil Case. Gold Price Is Swinging

Craig Erlam Craig Erlam 11.08.2022 14:32
Oil treading water after volatile 24 hours Needless to say, it was quite a volatile session in oil markets on Wednesday. A positive surprise on inflation was followed by a huge inventory build reported by EIA and then the highest US output since April 2020. Meanwhile, oil transit via the Druzhba pipeline resumed after a brief pause that jolted the markets. That’s a lot of information to process in the space of a couple of hours and you can see that reflected in the price action. And it keeps coming this morning, with the IEA monthly oil report forecasting stronger oil demand growth as a result of price incentivised gas to oil switching in some countries. It now sees oil demand growth of 2.1 million barrels per day this year, up 380,000. It also reported that Russian exports declined 115,000 bpd last month to 7.4 million from around 8 million at the start of the year. The net effect of all of this is that oil prices rebounded strongly on Wednesday but are pretty flat today. WTI is back above $90 but that could change if we see progress on the Iran nuclear deal. It’s seen plenty of support around $87-88 over the last month though as the tight market continues to keep the price very elevated. Gold performs handbrake turn after breakout It was really interesting to see gold’s reaction to the inflation report on Wednesday. The initial response was very positive but as it turned out, also very brief. Having broken above $1,800, it performed a swift u-turn before ending the day slightly lower. It can be difficult to gauge market reactions at the moment, in part because certain markets seem to portray far too much economic optimism considering the circumstances. With gold, the initial response looked reasonable. Less inflation means potentially less tightening. Perhaps we then saw some profit-taking or maybe some of that economic optimism crept in and rather than safe havens, traders had the appetite for something a little riskier. Either way, gold is off a little again today but I’m not convinced it’s peaked. From a technical perspective, $1,800 represents a reasonable rotation point. Fundamentally, I’m just not convinced the market is currently representative of the true outlook. For a look at all of today’s economic events, check out our economic calendar: www.marketpulse.com/economic-events/ This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds. Source: Oil stablizes, gold pares gains
Bitcoin Is Showing The Potential For The Further Downside Rotation

Bitcoin Like Phoenix!? Crypto Community Can Breathe A Sigh Of Relief

Craig Erlam Craig Erlam 11.08.2022 14:48
Investors are certainly in a more upbeat mood as the relief from the US inflation data ripples through the markets. Positive surprises have been hard to come by on the inflation front this year and yesterday’s report was very much welcomed with open arms. While we shouldn’t get too carried away by the data, with headline inflation still running at 8.5% and core 5.9%, it’s certainly a start and one we’ve waited a long time for. Fed policymakers remain keen to stress that the tightening cycle is far from done and a policy u-turn early next year is highly unlikely. Once again, the markets are at odds with the Fed’s assessment on the outlook for interest rates but this time in such a way that could undermine its efforts so you can understand their concerns. I expect we’ll continue to see policymakers unsuccessfully push back against market expectations in the coming weeks while further driving home the message that data dependency works both ways. That said, the inflation report has further fueled the optimism already apparent in the markets and could set the tone for the rest of the summer. PBOC signals no further easing Unlike many other central banks, the PBOC has the scope to tread more carefully and continue to support the economy as it contends with lockdowns amid spikes in Covid cases. The country’s zero-Covid policy is a huge economic headwind and proving to be a drain on domestic demand. The PBOC has made clear in its quarterly monetary policy report though that it doesn’t want to find itself in the same position as many other countries right now. With inflation close to 3%, further easing via RRR or interest rates looks unlikely for the foreseeable future. Cautious targeted support looks the likely path forward as the central bank guards against inflation risks, despite the data yesterday surprising to the downside. Singapore trims growth forecasts A surprise contraction in the second quarter has forced Singapore to trim its full-year growth forecast range from 3-5% to 3-4% as the economy contends with a global slowdown, to which the country is particularly exposed, and Covid-related uncertainty in China. While the MAS has indicated monetary policy is appropriate after tightenings this year, inflation remains high so further pressures on this front may add to the headwinds for the economy. Where’s the momentum? Bitcoin took the inflation news very well and it continues to do so. Slower tightening needs and improved risk appetite is music to the ears of the crypto community who will be more confident that the worst is behind it than they’ve been at any point this year. Whether that means stellar gains lie ahead is another thing. The price hit a new two-month high today but I’m still not seeing the momentum I would expect and want. That may change of course and a break of $25,000 could bring that but we still appear to be seeing some apprehension that may hold it back in the near term. For a look at all of today’s economic events, check out our economic calendar: www.marketpulse.com/economic-events/ This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds. Source: Welcome relief
The Bank Of England Is Anticipated To Hike Rates By 50 bp As A Result Of A Wealth Of Data

Boris Johnson Resignation Cause Further Difficulties For Pound Sterling (GBP)!? MarketTalk

Swissquote Bank Swissquote Bank 11.08.2022 12:20
US consumer prices eased in July, and they eased more than expected. US yields pulled lower after the CPI print, the US 10-year yield retreated, the US dollar slipped, gold gained, and the US stock markets rallied. Forex The EURUSD jumped to 1.0370 mark, as Cable made another attempt to 1.2272 but failed to extend gains into the 1.23 mark. And It will likely be hard for the pound sterling to post a meaningful recovery even if the dollar softens more, as there are too much political uncertainties in Britain following Boris Johnson’s resignation.   The sterling is under pressure, but the FTSE100 does just fine, and I will focus on why the British blue-chip companies are in a position to extend gains in this episode. Disney Elsewhere, Disney jumped on strong quarterly results, Tesla rallied despite news that Elon Musk dumped more stocks to prepare for an eventual Twitter purchase. Twitter shares gained.   Watch the full episode to find out more!   0:00 Intro 0:27 Softer-than-expected US CPI boosts appetite… 2:03 … but FOMC members warn that inflation war is far over! 3:39 FX update: USD softens, gold, euro, sterling advance 5:55 Why FTSE 100 is still interesting? 8:06 Disney jumps on strong results, Tesla, Twitter gain Ipek Ozkardeskaya Ipek Ozkardeskaya has begun her financial career in 2010 in the structured products desk of the Swiss Banque Cantonale Vaudoise. She worked at HSBC Private Bank in Geneva in relation to high and ultra-high net worth clients. In 2012, she started as FX Strategist at Swissquote Bank. She worked as a Senior Market Analyst in London Capital Group in London and in Shanghai. She returned to Swissquote Bank as Senior Analyst in 2020. #US #inflation #data #Gold #XAU #USD #EUR #GBP #FTSE #Disney #earnings #Tesla #Twitter #SPX #Dow #Nasdaq #investing #trading #equities #stocks #cryptocurrencies #FX #bonds #markets #news #Swissquote #MarketTalk #marketanalysis #marketcommentary _____ Learn the fundamentals of trading at your own pace with Swissquote's Education Center. Discover our online courses, webinars and eBooks: https://swq.ch/wr _____ Discover our brand and philosophy: https://swq.ch/wq   Learn more about our employees: https://swq.ch/d5 _____ Let's stay connected: LinkedIn: https://swq.ch/cH Source: Stocks up on soft US CPI, but inflation war is not over! | MarketTalk: What’s up today? | Swissquote
Stock Markets Opened The Week Lower | Apple Seeing Losses

US Jobless Claims: Even More Than The Previous Year. PBOC Hopes CPI To Stay At 3%

Saxo Strategy Team Saxo Strategy Team 12.08.2022 09:03
Summary:  Another downside surprise in US inflation in the wake of lower energy prices lifted the equity markets initially overnight. However, sustained hawkishness from Fed speakers brought the yields higher, weighing on equities which closed nearly flat in the US. Crude oil prices made a strong recovery with the IEA boosting the global growth forecast for this year. EURUSD stayed above 1.0300 and will be eying the University of Michigan report today along with UK’s Q2 GDP. What is happening in markets?   Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I)  After rising well over 1% in early trading amid the weaker-than-expected PPI prints, U.S. equities wiped out gains and closed lower, S&P 500 -0.07%, Nasdaq 100 -0.65%. Energy stocks were biggest gainers, benefiting from a 2.6% rally in the price of WTI crude, Devon Energy (DVN:xnys) +7.3%, Marathon Oil (MRO:xnys) +7%, Schlumberger (SLB:xnys) +5.7%.  Consumer discretionary and technology were the biggest decliners on Thursday. Chinese ADRs gained, Nasdaq Golden Dragon Index climbed 2.6%.  U.S. treasuries bear steepened In spite of weaker-than-expected PPI data, U.S. long-end treasury yields soared, 10-year yields +10bps to 2.99%, 30-year yields +14bps to 3.17%. The rise in long-end yields were initially driven by large blocks of selling in the T-bond and Ultra-long contracts and exacerbated in the afternoon after a poor 30-year auction. The yield of 2-year treasury notes was unchanged and the 2-10-year yield curve steepened 10bps to minus 23bps.  Hong Kong’s Hang Seng (HSIQ2) and China’s CSI300 (03188:xhkg) Hong Kong and mainland Chinese equities surged, Hang Seng Index +2.4%, CSI300 Index +2.0%. Northbound inflows into A shares jumped to a 2-month high of USD1.9 billion. In anticipation of a 15% rise in the average selling price of Apple’s iPhone 14 as conjectured by analysts, iPhone parts supplier stocks soared in both Hong Kong and mainland exchanges, Q Technology (01478:xhkg) +17.7%, Sunny Optical (02382:xhkg) +9%, Cowell E (01415:xhkg) +4%, Lingyi iTech (002600:xsec) +10%. China internet names rebounded, Alibaba (09988:xhkg) +4.3%, Tencent (00700:xhkg) +2.7%, Meituan (03690:xhkkg) +4.0%, Baidu (09888:xhkg) +5.2%. Power tool and floor care manufacturer, Techtronic Industries (00669:xhkg) soared nearly 11% after reporting  a 10% year-on-year growth in both revenues and net profits in 1H22. The company rolled out a new generation of drill drivers that have embedded with machine learning algorithm. After collapsing 16% in share price yesterday, Longfor (00960) managed to stabilize and recover 5.7% following the company’s refutation of market speculation that it had failed to repay commercial papers due. EURUSD re-tested resistance levels EURUSD reclaimed the key 1.0300 on Thursday amid a softer dollar, and printed highs of 1.0364. While weaker-than-expected inflation prints in the US this week have curtailed dollar strength, it is hard for EURUSD to sustain gains amid the energy crisis and European recession concerns. A break below 1.0250 would be needed for EURUSD to reverse the trend, however. AUDUSD, likewise, trades above 0.7100 amid the risk on tone, but a turn lower in equities could reverse the trend. GBPUSD has been more range-bound around 1.2200 ahead of the Q2 GDP data scheduled to be released today, and EURGBP may be ready to break above 0.8470 resistance if the numbers come out weaker-than-expected. Crude oil prices (CLU2 & LCOV2) Crude oil prices gained further on Thursday amid signs of softer inflation, weaker dollar and improving demand. The International Energy Agency (IEA) lifted its consumption estimate by 380 kb/d, saying soaring gas prices amid strong demand for electricity is driving utilities to switch to oil. This could be aided by lower gasoline prices, which have dented demand during the US driving season. Prices fell below USD4/gallon for the first time since March. Meanwhile, OPEC may struggle to raise output in coming months due to limited spare capacity. WTI futures touched $94/barrel while Brent futures rose towards the 100-mark.   What to consider? Another downside surprise in US inflation US July PPI dipped into negative territory to come in at -0.5% MoM, much cooler than 1% last month or the +0.2% expected. But on a YoY basis, PPI remains up a shocking 9.8%. Core PPI rose 0.4% MoM, which means on a YoY basis core producer prices are up 7.6% (lower than June's +8.2% but still near record highs). Goods PPI fell 1.8%, dominated by a 9.0% drop in energy. Meanwhile, services PPI was up 0.1% in July. Despite the slowdown in both PPI and CPI this week, PPI is still 1.3% points above CPI, suggesting margin pressures and a possible earnings recession. Fed’s Daly said she will be open to a 75bps rate hike at the September meeting. US jobless claims rise, University of Michigan ahead US initial jobless claims 262K vs 265K estimate, notably higher than the 248k the prior week and the highest since November 2021. The 4-week moving average of initial jobless claims increased to 252K vs 247.5K last week, but still below 350k levels that can cause an alarm. The modest pickup in claims suggests that turnover at weaker firms is increasing. Key data to watch today is the preliminary University of Michigan survey for August, where expectations are for a modest improvement given lower gasoline prices. China’s central bank expects CPI to hover around 3% In its 2nd quarter monetary policy report released on Wednesday, the People’s Bank of China (PBOC) expects the CPI being at around 3% for the full year of 2022 and at times exceeding 3%.  The release of pend-up demand from pandemic restrictions, the upturn of the hog-cycle, and imported inflation, in particular energy, are expected to drive consumer price inflation higher for the rest of the year in China but overall within the range acceptable by the central bank.  The PBOC expects the recent downtrend of the PPI to continue and the gap between the CPI and PPI growth rates to narrow. The PBOC reiterates that it will avoid excessive money printing to spur growth so as to safeguard against inflation.  China’s President Xi is said to be visiting Saudi Arabia next week The Guardian reports that President Xi Jinping is expected to visit Saudi Arabia on an invitation extended from Riyadh in March.  China has been eager to secure its oil supply and explore the possibility of getting its sellers to accept the renminbi to settle oil trade.   While relying on the United States for security in a volatile region and supplies of weapons, Saudi Arabia with Prince Mohammed being in charge is looking for leverage in the kingdom’s relationship with the United States.  UK Q2 GDP likely to show a contraction The Q2 GDP in the UK is likely to show a contraction after April was down 0.2% and May up 0.5%. June GDP is likely to have seen a larger contraction given less working days in the month, as well as constrained household spending as inflation surged to a fresh record high. While there may be a growth recovery in the near-term, the Bank of England clearly outlined a recession scenario from Q4 2022 and that would last for five quarters. Our Macro Strategist Chris Dembik has painted a rather pessimistic picture of the UK economy.   For a week-ahead look at markets – tune into our Saxo Spotlight. For a global look at markets – tune into our Podcast.   Source: APAC Daily Digest: What is happening in markets and what to consider next – August 12, 2022
Siemens Gained 27% But Announced Its First Loss Since 2010. What Are The Causes?

Siemens Gained 27% But Announced Its First Loss Since 2010. What Are The Causes?

Conotoxia Comments Conotoxia Comments 12.08.2022 10:00
Germany's Siemens, a manufacturer of technology to automate and digitalise businesses and households by supplying hydraulic, electrical and electronic equipment and household appliances, today reported revenue growth of 27% (year-on-year) and 1% growth between quarters. What happened? This exceeded analysts' expectations of €17.47 billion, reaching €17.87 billion in Q3 (the financial year starts earlier than the calendar year). This growth was mainly attributed to an increase in orders from the areas of business automation and intelligent infrastructure.   "Demand in the European capital goods sector is holding up," commented Barclays last week, following the publication of results from other companies in the sector, such as ABB and Schneider Electric. This was also confirmed by CEO Roland Busch, who said that demand remained strong in the quarter despite an environment affected by sanctions on Russia, high inflation and the ongoing effects of a pandemic. However, it is worth noting that these companies typically operate on long-term contracts and the decline in demand can be noticed after a long delay.    Siemens has a strongly diversified business, not only in terms of products but also in respect of the countries of origin of its customers. However, this may not protect it from the looming recession, which seems to be a problem not only for Europe or the US but for the whole world.    Alarming are, for example, the data of the German manufacturing PMI (Purchasing Managers' Index), which measures the assessment of the economic situation by managers. This index is currently at almost its lowest level in two years. The results in other countries in Europe and America also look similar. Asian economies also appear to be weakening.   Siemens also incurred a net loss of €1.66 billion charge for the write-down of the value of its stake in Siemens Energy, which operated in Russia. In addition, the company estimates that it has incurred additional losses of €0.6 billion due to the actions of the Russian Federation.   Despite high energy prices, Siemens is struggling to make savings from its 35% stake in the turbine and wind energy company. It has had a difficult two years since the spin-off in 2020, with operational problems and losses in the Siemens Gamesa wind turbine division.   Rafał Tworkowski, Junior Market Analyst, Conotoxia Ltd. (Conotoxia investment service)   Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results.   CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 82.59% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.   Source: Siemens posted its first loss since 2010, yet shares are gaining
Commodities: Favorable weather conditions may be gone some time soon, so energy prices may go further up

Natural Gas Report After Weekly US Storage - Obnoxious Results

Saxo Bank Saxo Bank 12.08.2022 11:34
Summary:  Today we note that the big surge in yields at the long end of the US yield curve were likely the critical factor in capping and reversing the extension of the rally in equities yesterday. The US dollar found a bit of resilience on the development as well, if only half-hearted. Elsewhere, we zoom in on global natural gas supply concerns after the latest weekly US storage yesterday, discuss the grains outlook with a key report up late today and look ahead at the fairly busy macro calendar next week, while wondering how the Fed deals with re-establishing its hawkish credibility. Today's pod features Peter Garnry on equities, Ole Hansen on commodities and John J. Hardy hosting and on FX. Listen to today’s podcast - slides are found via the link. Follow Saxo Market Call on your favorite podcast app: Apple  Spotify PodBean Sticher If you are not able to find the podcast on your favourite podcast app when searching for Saxo Market Call, please drop us an email at marketcall@saxobank.com and we'll look into it.   Questions and comments, please!   We invite you to send any questions and comments you might have for the podcast team. Whether feedback on the show's content, questions about specific topics, or requests for more focus on a given market area in an upcoming podcast, please get in touch at marketcall@saxobank.com.   Source: Podcast: US yields jump, capping complacency
Most Fed Members Support A Hawkish Scenario

Dollar (USD) Became Stronger, Not Enough Yet. Fed Better Meet Expectations!

John Hardy John Hardy 12.08.2022 14:23
Summary:  US treasury yields at the long end of the yield curve jumped higher yesterday to multi-week highs, a challenge to widespread complacency across global markets. The USD found a modicum of support on the development, though this was insufficient to reverse the recent weakening trend. It will likely take a more determined rise in US yields and a tightening of financial conditions, possibly on further Fed pushback against market policy expectations, to spark a more significant USD comeback. FX Trading focus: US yields jump, not yet enough to reverse recent USD dip A very interesting shift in the US yield curve yesterday as long yields jumped aggressively higher, with the 30-year yield getting the most focus on a heavy block sale of US “ultra” futures and a softer than expected 30-year T-bond auction from the US treasury. The 30-year benchmark yield jumped as much as 15 basis points from the prior close, with the 10-year move a few basis points smaller. We shouldn’t over-interpret a single day’s action, but it is a technical significant development and if it extends, could be a sign of tightening liquidity as the Fed ups its sales of treasuries and even a sign that market concern is growing that the Fed will fail to get ahead of inflation. As for the market reaction, the USD found some support, but it was modest stuff – somewhat surprisingly in the case of the normally very long-US-yield-sensitive USDJPY. Overnight, a minor shuffle in Japanese PMI Kishida’s cabinet has observers figuring that there is no real determined pushback yet against the Kuroda BoJ’s YCC policy, with focus more on bringing relief to lower income households struggling with price rises for essentials. Indeed, BoJ policy is only likely to come under significant pressure again if global yields pull to new cycle highs and the JPY finds itself under siege again. As for USDJPY, it has likely only peaked if long US yields have also peaked for the cycle. Chart: EURUSD EURUSD caught in limbo here, having pulled up through the resistance in the 1.0275+ area after a long bought of tight range trading, but not yet challenging through the next key layer of resistance into 1.0350+. It wouldn’t take much of a further reversal here to freshen up the bearish interest – perhaps a dip and close below 1.0250 today, together with a bit of follow through higher in US yields and a further correction in risk sentiment. Eventually, we look for the pair to challenge down well through parity if USD yields retest their highs and beyond. Source: Saxo Group Elsewhere – watching sterling here as broader sentiment may be at risk of rolling over and as we wind our way to the conclusion of the battle to replace outgoing Boris Johnson, with Liz Truss all but crowned. Her looser stance on fiscal prudence looks a sterling negative given the risks from UK external deficits. Her instincts seem pro-supply side on taxation, but the populist drag of cost-of-living issues has shown her to be quick to change her stripes – as she has often been, having reversed her position on many issues, including Brexit (was a former remainer). Today’s reminder of the yawning trade deficit (a current run rate of around 10% of GDP) and the energy/power situation together with dire supply side restraints on the UK economy have us looking for sterling weakness – a start would be a dip below 1.2100 in GBPUSD, which would reverse the reaction earlier this week to the US July CPI release. The week ahead features an RBNZ on Wednesday (market nearly fully priced for another two meetings of 50 basis points each). NZDUSD has looked too ambitious off the lows – there is no strong external surplus angle for the kiwi like there is for the Aussie – might be a place to get contrarian to the recent price action if global risk sentiment is set to roll over again finally now that the VIX has pushed all the way to 20 (!).  A Norges Bank meeting on Thursday may see the bank hiking another 50 basis points as it continues to catch up to inflationary outcomes. The US FOMC minutes are up next Wednesday and may be a bit of a fizzle, given that the bulk of the easing financial conditions that the Fed would like to push back against came after the meeting. Table: FX Board of G10 and CNH trend evolution and strength. The US dollar hasn’t gotten much from the latest development in yields – watching the next couple of sessions closely for direction there, while also watching for the risk of more sterling downside, while NZD looks overambitious on the upside. Source: Bloomberg and Saxo Group Table: FX Board Trend Scoreboard for individual pairs. The EURGBP turn higher could follow through here – on the lookout for that development while also watching GBPUSD status in coming sessions and whether the EURUSD move higher also follows through as per comments on the chart above. Source: Bloomberg and Saxo Group Upcoming Economic Calendar Highlights (all times GMT) 1400 – US Fed’s Barkin (non-voter) to speak 1400 – US Aug. Preliminary University of Michigan sentiment Share Source: FX Update: US yield jump brings USD resilience if not a reversal.
"Fight Against Inflation Is Our Primary Concern..." Central Banks Predicate

Zantac: $40bn Scandal Meets The Market! S&P 500 Has Troubles?

Peter Garnry Peter Garnry 12.08.2022 14:52
Summary:  The easing inflation narrative has been building strength for six weeks now and the short-term vindication in the US CPI release on Wednesday has bolstered the bulls. However, the structural issues in the supply-side of the economy have been resolved and wages combined with rents will add more pressure on inflation going forward. We also highlight the unfolding scandal around the heartburn drug Zantac as it has erased $40bn in market value from Sanofi and GSK. Finally, we take a look at next week's earnings. It is too early to call inflation is tamed The US July CPI release on Wednesday has bolstered the soft-landing and easing inflation trade catapulting high duration assets higher. S&P 500 futures are attempting to push higher and the 200-day moving average sitting around the 4,325 level is suddenly not an outrageous gravitational point for US equities in the near-term. While the equity market is buying the all good scenario on inflation we would emphasise that it is too early to call. The Fed will like to see the 6-month average on the US CPI core m/m to go back to 0.2% before easing policy and that is simply not possible until at least the end of Q1 next year. Many of the structural issues except maybe for logistics, and this pain could come back again this winter if China gets another big Covid outbreak, are still not solved as capital expenditures in real terms are still not coming up in the global mining and energy industry. Labour markets remain tight with especially the US being the worst hit having lost around 1.5%-point of its labour force due to the pandemic and these people are likely never coming back. Rent dynamics are also heating up in both the US and Europe, and this winter will test the strength of the European population as the energy crisis could get much worse. We encourage investors to watch the US 10-year yield as a break above 3% again should cause a negative reaction in global equities. S&P 500 continuous futures | Source: Saxo Group US CPI core m/m | Source: Bloomberg Potential gigantic Zantac liabilities hit Sanofi, GSK, and Pfizer Health care is typically associated with stability, high valuations, and high predictability in the underlying cash flows, but the industry is being rocked by increasing concerns over the heartburn drug Zantac. Sanofi, GSK, and Pfizer have lost combined market value of $40bn and analysts are estimating that damage liabilities could reach $10-45bn. Zantac was removed from the market in 2019 by the FDA as the drug appears to be producing unacceptably high levels of a cancer-causing chemical. There is case coming up in Illinois on 22 August which will give the first indications of where this is going. There will continue to be short-term headwinds for both Sanofi and GSK where Pfizer seems to have been selling the drug for a much more reduced period than the two others. Weekly share prices of Sanofi, GSK, and Pfizer | Source: Bloomberg Earnings to watch next week The Q2 earnings season is slowly coming to end and what a quarter it has been with earnings jumping to a new all-time high (see chart) driven by a significant increase in profits in the energy sector. The technology sector measure by the Nasdaq 100 had another bad quarter with earnings declining reinforcing the need to cut costs of many of these previously fast growing technology companies. Next week’s most important earnings are highlighted below with the names in bold being those that can move market or industry sentiment. Meituan on Monday is important for gauging consumer spending and behaviour in China. BHP Group is must watch on Monday as the Australian miner is tapped into China’s growth and demand for iron ore. On Tuesday, earnings from Walmart and Home Depot can provide an updated picture on global supply chains and price pressures across a wide range of consumer products. Tencent reports on Wednesday and is an important earnings release for investors watching Chinese technology stocks as the recent amendment to China’s anti-monopoly laws is adding more pressure on the big technology platform companies. In the payments industry, Adyen’s result on Thursday will be highly watched as Adyen is really challenging PayPal on growth and dominance in the industry. Monday: China Construction Bank, Agricultural Bank of China, Meituan, China Life Insurance, China Shenhua Energy, China Petroleum & Chemical, BHP Group, COSCO Shipping, Li Auto, Trip.com Group, DiDi Global Tuesday: China Telecom, Walmart, Agilent Technologies, Home Depot, Sea Ltd Wednesday: Tencent, Hong Kong Exchanges & Clearing, Analog Devices, Cisco Systems, Synopsys, Lowe’s, CSL, Target, TJX, Coloplast, Carlsberg, Wolfspeed Thursday: Applied Materials, Estee Lauder, NetEase, Adyen, Nibe Industrier, Geberit Friday: China Merchants Bank, CNOOC, Shenzhen Mindray, Xiaomi, Deere Source: The soft-landing and inflation easing narrative is thriving
Commodities: Prices Are Rising, Heatwaves In US And China Affects The Production Of Cotton

Commodities: Prices Are Rising, Heatwaves In US And China Affect The Production Of Cotton

Ole Hansen Ole Hansen 12.08.2022 16:00
Summary:  The correction that for some commodities already started back in March has since the end of July increasingly been showing signs of reversing, driven by recent economic data strength, dollar weakness and signs inflation may have peaked. With the broad position adjustments having run their course, the focus has returned to supply which in many cases remains tight, thereby providing renewed support, especially across the sectors of energy and key agriculture commodities. The correction that for some commodities already started back in March has since the end of July increasingly been showing signs of reversing. According to the Bloomberg commodity sector indices, the correction period triggered peak to bottom moves of 41% in industrial metals, 31% in grains and 27% in energy. The main reason for the dramatic correction following a record run of strong gains was the change in focus from tight supply to worries about demand. Apart from China’s slowing growth outlook due to its zero-Covid policy and housing market crisis hitting industrial metals, the most important driver has been the way in which central banks around the world have been stepping up efforts to curb runaway inflation by forcing down economic activity through aggressively tightening monetary conditions. This process is ongoing but recent economic data strength, dollar weakness and signs inflation may have peaked have all helped support markets that have gone through weeks and in some cases months of sharp price declines, and with that an aggressive amount of long liquidation from financial traders as well as selling from macro-focused funds looking for a hedge against an economic downturn.With the broad position adjustments having run their course, the focus has returned to supply which in many cases remains tight, thereby providing renewed support and problems for those who have been selling markets looking for even lower prices in anticipation of recession and lower demand. Backwardation remains elevated despite growth worries The behaviour of spot commodity prices, as seen through first month futures contracts, rarely gives us the full fundamental picture with the price action often being dictated by technical price-driven speculators and funds focusing on macroeconomic developments, as opposed to the individual fundamental situation. The result of this has been a period of aggressive selling on a combination of bullish bets being scaled back but also increased selling from funds looking to hedge an economic slowdown.An economic slowdown, or in a worst-case scenario a recession, would normally trigger a surplus of raw materials as demand falters and production is slow to respond to a downturn in demand. However, during the past three months of selling, the cost of commodities for immediate delivery has maintained a healthy premium above prices for later deliveries. The chart below shows the spread measured in percent between the first futures and the 12-month forward futures contract, and while the tightness has eased a bit, we are still seeing tightness across a majority, especially within energy and agriculture. A sign that the market has sold off on expectations more than reality, and it raises the prospect of a strong recovery once the growth outlook stabilises. Crude oil The downward trending price action in WTI and Brent for the past couple of months is showing signs of reversing on a combination of the market reassessing the demand outlook amid continued worries about supply and who will and can meet demand going forward. The recovery from below $95 in Brent and $90 in WTI this week was supported by signs of softer US inflation reducing the potential peak in the Fed fund rates, thereby improving the growth outlook. In addition, the weaker dollar and improving demand, especially in the US where gasoline prices at the pumps have fallen below $4 per gallon for the first time since March.In addition, the International Energy Agency (IEA) lifted its global consumption estimate by 380 kb/d, saying soaring gas prices amid strong demand for electricity is driving utilities to switch from expensive gas to fuel-based products. Meanwhile, OPEC may struggle to raise output in the coming months due to limited spare capacity. While pockets of demand weakness have emerged in recent months, we do not expect these to materially impact on our overall price-supportive outlook. Supply-side uncertainties remain too elevated to ignore, not least considering the soon-to-expire releases of crude oil from US Strategic Reserves and the EU embargo of Russian oil fast approaching. With this in mind, we maintain our $95 to $115 range forecast for the third quarter. Gold (XAUUSD) The recently under siege yellow metal was heading for a fourth weekly gain, supported by a weaker dollar after the lower-than-expected US CPI and PPI data helped reduce expectations for how high the Fed will allow rates to run. However, rising risk appetite as seen through surging stocks and bond yields trading higher on the week have so far prevented the yellow metal from making a decisive challenge at key resistance above $1800/oz, and the recent decline in ETF holdings and low open interest in COMEX futures points to a market that is looking for a fresh and decisive trigger. We believe the markets newfound optimism about the extent to which inflation can successfully be brought under control remains too optimistic and together with several geopolitical worries, we see no reason to exit our long-held bullish view on gold as a hedge and diversifier. Gold has found some support at the 50-day moving average line at $1783, and needs to hold $1760 in order to avoid a fresh round of long liquidation the short-term. While some resistance is located just above $1800 gold needs a decisive break above $1829 in order to trigger the momentum needed to attract fresh buying in ETFs and managed money accounts in futures. Source: Saxo Group Industrial metals (Copper)   Copper has rebounded around 18% since hitting a 20-month low last month, thereby supporting a general recovery across industrial metals, the hardest hit sector during the recent correction. Supported by a softer dollar, data showing the US economy remains robust, easing concerns about the demand outlook in China and not least disruptions to producers in Asia, Europe as well as South America potentially curtailing supply at a time when exchange-monitored inventories remain at a decade low. All developments that have forced speculators to cut back recently established short positions.The potential for an improved demand outlook in China and BHP's recent announcement that it has made an offer for OZ Minerals and its nickel and copper-focused assets, is the latest in a series of global acquisitions aimed at shoring up supplies of essential metals for the energy transition. With its high electrical conductivity, copper supports all the electronics we use, from smartphones to medical equipment. It already underpins our existing electricity systems, and it is crucial to the electrification process needed over the coming years in order to reduce demand for energy derived from fossil fuels.Following a temporary recovery in the price of copper around the beginning of June when China began easing lockdown restrictions, the rally quickly ran out of steam and copper went on to tumble below key support before eventually stabilizing after finding support at $3.14/lb., the 61.8% retracement of the 2020 to 2022 rally. Since then, the price has recovered strongly but may temporarily pause after reaching finding resistance in the $3.70/lb area. We maintain a long-term bullish view on copper and prefer buying weakness instead of selling into strength. Source: Saxo Group The grains sector traded at a five-week high ahead of Friday’s supply and demand report from the US Department of Agriculture. The Bloomberg Grains Index continues to recover following its 28% June to July correction with gains this past week being led by wheat and corn in response to a weaker dollar and not least hot and dry weather in the US and another heatwave in Europe raising concerns about yield and production. Hot and dry weather at a critical stage for yield developments ahead of the soon-to-be-harvested crop has given the World Agricultural Supply and Demand Estimates report some additional attention with surveys pointing to price support with the prospect of lower yields lowering expectations for the level of available stocks ahead of the coming winter. Cotton, up 8% this month has seen the focus switch from growth and demand worries, especially in China, to deepening global supply concerns as heatwaves in the US and China hurt production prospects. Friday’s monthly supply and demand report (WASDE) from the US Department of Agriculture was expected to show lower US production driving down ending stocks by around 10% to 2.2 m bales, an 11-year low. Arabica coffee, in a downtrend since February, has also seen a steady rise since bouncing from key support below $2/lb last month. A persistent and underlying support from South American production worries has reasserted itself during the past few weeks as the current on-season crop potentially being the lowest since 2014. Brazil’s drought and cold curbed flowering last season and severe frosts in July 2021 led farmers to cut down coffee trees at a time of high costs for agricultural inputs, notably fertilizer. In addition, Columbia another top producer, has seen its crop being reduced by too much rainfall. Source: WCU: Commodity correction may have exhausted itself
The Gold Rally Is Continuing To Stall, This Could Be A Good Year For Crude Oil

WTI Astonishing Streak! Japan Jumps. China, Australia And South Korea Are In Trouble?

Marc Chandler Marc Chandler 12.08.2022 15:15
Overview: The markets are putting the finishing touches on this week’s activity. Japan, returning from yesterday’s holiday bought equities, and its major indices jumped more than 2%. China, South Korea, and Australia struggled. Europe’s Stoxx 600 is firmer for the third consecutive session. It is up about 1.3% this week. US futures are also firmer after reversing earlier gains yesterday to close lower on the day. The US 10-year yield is flat near 2.88%, while European benchmarks are 4-6 bp higher. The greenback is mixed. The dollar-bloc currencies and Norwegian krone are slightly firmer, while the Swedish krona, sterling, and the yen are off around 0.3%-0.6%. Emerging market currencies are also mixed, though the freely accessible currencies are mostly firmer. The JP Morgan Emerging Market Currency Index is up about 1.15% this week, ahead of the Latam session, which if sustained would be the strongest performance in three months. Gold is consolidating at lower levels having been turned back from $1800 in the middle of the week. Near $1787.50, it is up less than 0.7% for the week. September WTI is edging higher for the third consecutive session, which would match the longest streak since January. US natgas surged 8.2% yesterday but has come back offered today. It is off 2.3%. Europe’s natgas benchmark is snapping a three-day advance of nearly 8% and is off 1.8% today. Iron ore rose 2.2% yesterday and it gave most of its back today, sliding almost 1.7%. September copper is unchanged after rallying more than 3.3% over the past two sessions. September wheat has a four-day rally in tow but is softer ahead of the Department of Agriculture report (World Agricultural Supply and Demand Estimates). Asia Pacific   Japan and China will drop some market sensitive high-frequency economic data as trading begins in the new week.  Japan will release its first estimate of Q2 GDP. The median in Bloomberg's survey and the average of a dozen Japanese think tanks (cited by Jiji Press) project around a 2.7% expansion of the world's third-largest economy, after a 0.5% contraction in Q1. Consumption and business investment likely improved. Some of the demand was probably filled through inventories. They added 0.5% to Q1 growth but may have trimmed Q2 growth. Net exports were a drag on Q1 (-04%) and may be flat. The GDP deflator was -0.5% in Q1 and may have deteriorated further in Q2. Some observers see the cabinet reshuffle that was announced this week strengthening the commitment to ease monetary policy. The deflation in the deflator shows what Governor Kuroda's successor next April must address as well. China reports July consumption (retail sales), industrial output, employment (surveyed jobless rate), and investment (fixed assets and property).  The expected takeaway is that the world's second-largest economy is recovering but slowly. Industrial output and retail sales are expected to have edged up. Of note, the year-to-date retail sales compared with a year ago was negative each month in Q2 but is expected to have turned positive in July. The year-over-year pace of industrial production is expected to rise toward 4.5%, which would be the best since January. The housing market, which acted as a critical engine of growth is in reverse. New home prices (newly build commercial residential building prices in 70 cities) have been falling on a year-over-year basis starting last September, and likely continued to do so in July. Property investment (completed investment in real estate) likely fell for the fourth consecutive month. It has slowed every month beginning March 2021. The pace may have accelerated to -5.6% year-over-year after a 5.4% slide in the 12-months through June. The surveyed unemployed rate was at 4.9% last September and October. It rose to 6.1% in April and has slipped back to 5.5% in June. The median forecast in Bloomberg's survey expects it to have remained there in July. Lastly, there are no fixed dates for the lending figures and the announcement of the one-year medium-term lending facility rate. Lending is expected to have slowed sharply from the surge in June, while the MLF rate is expected to be steady at 2.85%. Over the several weeks, foreign investors have bought a record amount of Japanese bonds.  Over the past six weeks, foreigners snapped up JPY6.44 trillion (~$48 bln). It may partly reflect short-covering after the run-in with the Bank of Japan who bought a record amount to defend the yield-curve control cap of 0.25% on the 10-year bond. There is another consideration. For dollar-based investors, hedging the currency risk, which one is paid to do, a return of more than 4% can be secured. At the same time, for yen-based investors, hedging the currency risk is expensive, which encourages the institutional investors to return to the domestic market. Japanese investors have mostly been selling foreign bonds this year. However, the latest Ministry of Finance data shows that they were net buyers for the third consecutive week, matching the longest streak of the year. Still, the size is small. suggesting it may not be a broad or large force yet. Although the US 10-year yield jumped 10 bp yesterday, extending its recovery from Monday's low near 2.75% for a third session, the dollar barely recovered against the yen.  After falling 1.6% on Wednesday, after the softer than expected US CPI, the greenback rose 0.1% yesterday and is edging a little higher today. Partly what has happened is that the exchange rate correlation with the 10-year yield has slackened while the correlation with the two-year has increased. In fact, the correlation of the change in the two-year and the exchange rate is a little over 0.60 and is the highest since March. The dollar appears to be trading comfortably now between two large set of options that expire today. One set is at JPY132 for $860 mln and the other at JPY134 for $1.3 bln. Around $0.7120, the Australian dollar is up about 3% this week and is near two-month highs. It reached almost $0.7140 yesterday. The next technical target is in the $0.7150-$0.7170 area. Support is seen ahead of $0.7050. Next week's data highlight is the employment data (August 18). The greenback traded in a CNY6.7235-CNY6.7600 on Wednesday and remained in that range yesterday and today. For the second consecutive week, the dollar has alternated daily between up and down sessions for a net change of a little more than 0.1%. The PBOC set the dollar's reference rate at CNY6.7413, tight to expectations (Bloomberg's survey) of CNY6.7415. Europe   The UK's economy shrank by 0.6% in June, ensuring a contraction in Q2.  The 0.1% shrinkage was a bit smaller than expected but the weakness was widespread. Consumption fell by 0.2% in the quarter, worse than expected, while government spending collapsed by 2.9% after a 1.3% pullback in Q1. A decline in Covid testing and slower retail sales were notable drags. The one bright spot was business investment was stronger than expected. The June data itself was miserable, though there was an extra holiday (Queen's jubilee). All three sectors, industrial output, services, and construction, all fell in June and the trade balance deteriorated. The market's expectation for next month's BOE meeting was unaffected by the data. The swaps market has about an 85% chance of another 50 bp hike discounted.  Industrial output in the eurozone rose by 0.7%, well above the 0.2% median forecast in Bloomberg's survey and follows a 2.1% increase in May.  The manufacturing PMI warned that an outright contraction is possible. Of the big four members, only Italy disappointed. The median forecast in Bloomberg's survey anticipated a decline in German, France, and Spain. Instead, they reported gains of 0.4%, 1.4%, and 1.1% respectively. Industrial output was expected to have contracted by 0.1% in Italy and instead it reported a 2.1% drop. In aggregate, the strength of capital goods (2.6% month-over-month) and energy (0.6%) more than offset the declines in consumer goods and intermediate goods. The year-over-year rise of 2.4% is the strongest since last September. The disruption caused by Russia's invasion of Ukraine and the uneven Covid outbreaks and responses are as Rumsfeld might have said known unknowns.  But the disruptive force that may not be fully appreciated is about to get worse. The German Federal Waterways and Shipping Administration is warning that water in the Rhine River will fall below a critical threshold this weekend. At an important waypoint, the level may fall to about 13 inches (33 centimeters). Less than around 16 inches (40 centimeters) and barges cannot navigate. An estimated 400k barrels a day of oil products are sent from the Amsterdam-Rotterdam-Antwerp region to Germany and Switzerland. The International Energy Agency warns that the effects could last until late this year, and hits landlocked countries who rely on the Rhine the hardest. Bloomberg reported that Barge rates from Rotterdam to Basel have risen to around 267 euros a ton, a ten-fold increase in a few months. The strong surge in the euro to almost $1.0370 on Wednesday has stalled.  The euro is consolidating inside yesterday's relatively narrow range (~$1.0275-$1.0365). The momentum traders may be frustrated by the lack of follow-through. We suspect a break of $1.0265 would push more to the sidelines. The downtrend line from the February, March, and June highs comes in slightly above $1.0385 today. The broad dollar selloff in response to the July CPI saw sterling reach above $1.2275, shy of the month's high closer to $1.2295. Similar to the euro, sterling stalled. It has slipped through yesterday's low (~$1.2180). A break of the $1.2140 area could see $1.2100. That said, the $1.20 area could be the neckline of a double top and a convincing break would signal the risk of a return to the lows set a month ago near $1.1760. America   Think about the recent big US economic news.  It began last Friday with a strong employment report, more than twice what economists expected (median, Bloomberg survey) and a new cyclical low in unemployment. The job gains were broadly distributed. That was followed by a softer than expected CPI and PPI. Some observers placed emphasis on the slump in productivity and jump in unit labor costs. Those are derived from GDP figures and are not measured separately, though they are important economic concepts. Typically, when GDP is contracting, productivity contracts and by definition, unit labor costs rise. In effect, the market for goods and services adjusts quicker the labor market, and the market for money, even quicker. If the economy expands as the Atlanta Fed GDPNow tracker or the median in Bloomberg's survey project (2.5% and 2.0%, respectively), productivity will improve, and unit labor costs will fall. Barring a precipitous fall today, the S&P 500 and NASDAQ will advance for the fourth consecutive week.  The 10-year yield fell by almost 45 bp on the last three week of July and has recovered around half here in August. That includes five basis points this week despite the softer inflation readings. The two-year note yield fell almost 25 bp in the last two weeks of July and jumped 34 bp last week. It is virtually flat this week around 3.22%. The odds of a 75 bp rate hike at next month's FOMC meeting fell from about 75% to about 47%. The year-end rate expectation fell to 3.52% from 3.56%. Some pundits claim the market is pricing in a March 2023 cut, but the implied yield of the March 2023 Fed funds futures contract is 18 bp above the December 2022 contract. It matches the most since the end of June. Still, while the Federal Reserve is trying to tighten financial conditions the market is pushing back. The Bloomberg Financial Conditions Index is at least tight reading since late April. The Goldman Sachs Financial Condition index is the least tight in nearly two months.  US import and export prices are the stuff that captures the market's imagination.  However, the preliminary University of Michigan's consumer survey, and especially the inflation expectations can move the markets, especially given that Fed Chair Powell cited it as a factor encouraging the 75 bp hike in June. The Bloomberg survey shows the median expectation is for a tick lower in inflation expectations, with the one-year slipping to 5.1% from 5.2%. The 5-10-year expectation is seen easing to 2.8% from 2.9%. If accurate, it would match the lowest since April 2021. The two-year breakeven (difference between the conventional yield and the inflation-protected security) peaked in March near 5% and this week reached 2.70%, its lowest since last October. It is near 2.80% now. Mexico delivered the widely anticipated 75 bp hike yesterday.  The overnight rate target is now 8.50%. The decision was unanimous. It is the 10th consecutive hike and concerns that AMLO's appointments would be doves has proven groundless. The central bank meets again on September 29. Like other central banks, it did not pre-commit to the size of the next move, preserving some tactical flexibility. If the Fed hikes by 75 bp, it will likely match it. Peru's central bank hiked its reference rate by 50 bp, the 10th consecutive hike of that magnitude after starting the cycle last August with a 25 bp move. It is not done. Lima inflation was near 8.75% last month and the reference rate is at 6.50%. The Peruvian sol is up about 1.2% this month, coming into today. It has appreciated by around 3.25% year-to-date, making it the second-best performer in the region after Brazil's 8.1% rise. Argentina hiked its benchmark Leliq rate by 950 bp yesterday to 69.5%. It had delivered an 800 bp hike two weeks again. Argentina's inflation reached 71% last month. The Argentine peso is off nearly 23.5% so far this year, second only to the Turkish lira (~-26%). The US dollar fell slightly below CAD1.2730 yesterday, its lowest level since mid-June. The slippage in the S&P 500 and NASDAQ helped it recover to around CAD1.2775. It has not risen above that today, encouraged perhaps by the firmer US futures. Although the 200-day moving average (~CAD1.2745) is a good mile marker, the next important chart is CAD1.2700-CAD1.2720. A convincing break would target CAD1.2650 initially and then CAD1.2600. While the Canadian dollar has gained almost 1.4% against the US dollar this week (around CAD1.2755), the Mexican peso is up nearly 2.4%. The greenback is pressing against support in the MXN19.90 area. A break targets the late June lows near MXN19.82. The MXN20.00 area provides the nearby cap.       Disclaimer   Source: Heading into the Weekend, Dollar's Downside Momentum Stalls
The Commodity Sector Has Dropped Significantly

People Are Buying Gold. SIlver And Copper Stopped? Crude Oil Weakness

Ole Hansen Ole Hansen 16.08.2022 09:23
Summary:  Our weekly Commitment of Traders update highlights future positions and changes made by hedge funds and other speculators across commodities and forex during the week to August 9. A relatively quiet week where a continued improvement in risk appetite drove stocks higher while softening the dollar. Some commodity positions, with crude oil the major exceptions, showed signs of having reached a trough following weeks of heavy selling Saxo Bank publishes weekly Commitment of Traders reports (COT) covering leveraged fund positions in commodities, bonds and stock index futures. For IMM currency futures and the VIX, we use the broader measure called non-commercial. Link to latest report This summary highlights futures positions and changes made by hedge funds across commodities and forex during the week to August 9. A relatively quiet summer holiday impacted week where stocks traded higher ahead of last week’s CPI and PPI print after better than expected economic data helped reduce US recession fears while the market was looking for inflation to roll over. The dollar traded a tad softer, bond yields firmed up while commodities showed signs of having reached a trough following weeks of heavy selling.    Commodities Hedge funds were net buyers for a second week with demand concentrated in metals and agriculture while the energy sector saw continued selling. Overall the net long across 24 major commodity futures rose for a second week after recently hitting a two-year low. Buying was concentrated in gold, platinum, corn and livestock with crude oil and wheat being to most notable contracts seeing net selling. Energy: Speculators responded to continued crude oil weakness by cutting bullish bets in WTI and Brent crude by a combined 14% to a pre-Covid low at 304.5k lots. The reductions were primarily driven by long liquidation in both contracts following a demand fear driven breakdown in prices. Gas oil and gasoline longs were also reduced. Metals: Buying of metals extended to a second week led by gold which saw a 90% jump in the net long to 58.2k lots. Overall, net short positions were maintained in silver, platinum and copper with the latter seing a small amount of fresh selling due to profit taking on recently established longs. Agriculture: Grains were mixed with corn and soybeans seeing continued buying ahead of Friday's WASDE  report while the CBOT corn net short jumped 36% to 20k lotsand the Kansas net long was cut to a two-year low. The total grain long rose for second week having stabilised around 300k lots having collapse from a near record 800k lot on April 22.Soft commodities saw elevated short positions in sugar and cocoa being maintained with price gains in coffee and not least cotton supporting a small increase in their respective net longs. This before Friday's surge in cotton which left it up 13% on the week after the US Department of Agriculture slashed the US crop forecast by 19% to a 12-year low. Driven by a high level of abandonment of fields in the drought-stricken Southwest.      Forex In the week to August 9 when the dollar traded close to unchanged against a basket of major currencies, speculators increased to three the number of weeks of continued dollar selling. The pace of selling even accelerated to the highest since January after the gross long against ten IMM futures and the Dollar Index was slashed by 20% to $17.4 billion, a nine week low. Most notable selling of the greenback was seen against GBP and JPY followed by EUR and CHF. The Japanese yen, under pressure for months as yield differentials to the dollar widened saw its net short being cut by 22% to a 17-month low.     What is the Commitments of Traders report? The COT reports are issued by the U.S. Commodity Futures Trading Commission (CFTC) and the ICE Exchange Europe for Brent crude oil and gas oil. They are released every Friday after the U.S. close with data from the week ending the previous Tuesday. They break down the open interest in futures markets into different groups of users depending on the asset class. Commodities: Producer/Merchant/Processor/User, Swap dealers, Managed Money and otherFinancials: Dealer/Intermediary; Asset Manager/Institutional; Leveraged Funds and otherForex: A broad breakdown between commercial and non-commercial (speculators) The reasons why we focus primarily on the behavior of the highlighted groups are: They are likely to have tight stops and no underlying exposure that is being hedged This makes them most reactive to changes in fundamental or technical price developments It provides views about major trends but also helps to decipher when a reversal is looming  Source: COT: Speculators cut oil long to pre-covid low
USA: People Are Not Interested In Buying New Houses! Equities Are Still Trading High As The Hopes For Iran Nuclear Deal Are Still Alive

USA: People Are Not Interested In Buying New Houses! Equities Are Still Trading High As The Hopes For Iran Nuclear Deal Are Still Alive

Saxo Strategy Team Saxo Strategy Team 16.08.2022 14:00
Summary:  Equities traded higher still yesterday as treasury yields fell further back into the recent range and on hopes that an Iran nuclear deal will cement yesterday’s steep drop in oil prices. The latest data out of the US was certainly nothing to celebrate as the July US Homebuilder survey showed a further sharp drop in new housing interest and a collapse in the first regional US manufacturing survey for August, the New York Fed’s Empire Manufacturing.   What is our trading focus? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) S&P 500 futures extended their gains yesterday getting closer to the 200-day moving average sitting around the 4,322 level. The US 10-year yield seems well anchored below 3% and financial conditions indicate that S&P 500 futures could in theory trade around 4,350. The news flow is light but earnings from Walmart later today could impact US equities should the largest US retailer lower their outlook for the US consumer. Hong Kong’s Hang Seng (HSI.I) and China’s CSI300 (000300.I) Hong Kong and mainland Chinese equities were mixed. CSI300 was flat, with electric equipment, wind power, solar and auto names gained. Hang Seng Index declined 0.5%. Energy stocks fell on lower oil price. Technology names were weak overall, Hang Seng TECH Index (HSTECH.I) declined 0.9%. Sunny Optical (02382:xhkg) reported worse than expected 1H22 results, revenues -14.4% YoY, net profits -49.5%, citing weakening component demand from the smartphone industry globally. The company’s gross margin plunged to 20.8% from 24.9%. Li Auto’s (02015:xhkg/LI:xnas) Q2 results were in line with expectations but Q3 guidance disappointed. The launch L9 seems cannibalizing Li ONE sales. USD: strength despite weak US data and falling treasury yields and strong risk sentiment Yesterday, the JPY tried to make hay on China cutting rates and as global yields eased back lower, with crude oil marked several dollars lower on hopes for an Iran nuclear deal. But the move didn’t stick well in USDJPY, which shrugged off these developments as the USD firmed further across the board, despite treasury yields easing lower, weak data and still strong risk sentiment/easy financial conditions. A strong US dollar is in and of itself is a tightening of financial conditions, however, and yesterday’s action has cemented a bullish reversal in some pairs, especially EURUSD and GBPUSD, where the next important levels pointing to a test of the cycle lows are 1.0100 and 1.2000, respectively. Elsewhere, USDJPY remains in limbo (strong surge above 135.00 needed to suggest upside threat), USDCAD has posted a bullish reversal but needs 1.3000 for confirmation, and AUDUSD is teetering, but needs a close back below 0.7000 to suggest a resurgent US dollar and perhaps widening concerns that a Chinese recession will temper interest in the Aussie. Crude oil Crude oil (CLU2 & LCOV2) trades lower following Monday’s sharp drop that was driven by a combination softer economic data from China and the US, the world’s top consumers of oil, and after Iran signaled a nuclear deal could be reached soon, raising the prospect of more Iranian crude reaching the market. The latest developments potentially reducing demand while adding supply forced recently established longs to bail and short sellers are once again in control. Brent needs to hold support at $93 in order to avoid further weakness towards $90. Focus on Iran news. Copper Copper (COPPERUSSEP22) led the metals pack lower, without breaking any key technical levels to the downside, after China’s domestic activity weakened in July. Meanwhile, supply side issues in Europe also cannot be ignored with surging power prices putting economic pressure on smelters, and many of them running at a loss. HG copper jumped 19% during the past month and yesterday’s setback did not challenge any key support level with the first being around $3.50/lb. BHP, the world’s top miner meanwhile hit record profits while saying that China is likely to offer a “tail wind” to global growth (see below). EU power prices hit record high on continued surge in gas prices ... threatening a deeper plunge into recession. The latest surge being driven by low water levels on Europe’s rivers obstructing the normal passage for diesel, coal, and other fuel products, thereby forcing utilities to use more gas European Dutch TTF benchmark gas futures (TTFMU2) has opened 5% higher at €231/MWh, around 15 times higher than the long-term average, suggesting more pain ahead for European utility companies. Next-year electricity rates in Germany (DEBYF3) closed 3.7% higher to 477.50 euros ($487) a megawatt-hour on the European Energy Exchange AG. That is almost six times as much as this time last year, with the price doubling in the past two months alone. UK power prices were also seen touching record highs. US Treasuries (IEF, TLT) see long-end yields surging. Yields dipped back lower on weak US economic data, including a very weak Empire Manufacturing Survey (more below) and another sharp plunge in the NAHB survey of US home builders, suggesting a rapid slowdown in the housing market. The survey has historically proven a leading indicator on prices as well. The 10-year benchmark dipped back further into the range after threatening to break up higher last week. The choppy range extends down to 2.50% before a drop in yields becomes a more notable development, but tomorrow’s US Retail Sales and FOMC minutes offer the next test of sentiment. What is going on? Weak Empire State manufacturing survey and NAHB Index Although a niche and volatile measure, the United States NY Empire State Manufacturing Index, compiled by the New York Federal Reserve, fell to -31.3 from 11.1 in July, its lowest level since May 2020 and its sharpest monthly drop since the early days of the pandemic. New orders and shipments plunged, and unfilled orders also declined, albeit less sharply. Other key areas of concern were the rise in inventories and a decline in average hours worked. This further weighed on the sentiment after weak China data had already cast concerns of a global growth slowdown earlier. Meanwhile, the US NAHB housing market index also saw its eighth consecutive monthly decline as it slid 6 points to 49 in August. July housing starts and building permits are scheduled to be reported later today, and these will likely continue to signal a cooling demand amid the rising mortgage rates as well as overbuilding. China's CATL plans to build its second battery factory in Europe CATL unveiled plans to build a renewable energy-powered factory for car battery cells and modules in Hungary. It will invest EUR 7.34 billion (USD 7.5bn) on the 100-GWh facility, which will be its second one in Europe. To power the facility CATL will use electricity from renewable energy source, such as solar power. At present, CATL is in the process of commissioning its German battery production plant, which is expected to roll out its first cells and modules by the end of 2022. Disney (DIS) shares rise on activist investor interest Daniel Loeb of Third Point announced a significant new stake in Disney yesterday, helping to send the shares some 2.2% higher in yesterday’s session. The activist investor recommended that the company spin off its ESPN business to reduce debt and take full ownership of the Hulu streaming service, among other moves. Elliott exits SoftBank Group The US activist fund sold its stake in SoftBank earlier this year in a sign that large investors are scaling back on their investments in technology growth companies with long time to break-even. In a recent comment, SoftBank’s founder Masayoshi Son used more cautious words regarding the investment company’s future investments in growth companies. BHP reports its highest ever profit, bolstered by coal BHP posted a record profit of $21.3bn supported by considerable gains in coal, nickel and copper prices during the fiscal year ending 30 June 2022. Profits jumped 26% compared to last year’s result. The biggest driver was a 271% jump in the thermal coal price, and a 43% spike in the nickel price. The world’s biggest miner sees commodity demand improving in 2023, while it also sees China emerging as a source of stable commodity demand in the year ahead. BHP sees supply covering demand in the near-term for copper and nickel. According to the company iron ore will likely remain in surplus through 2023. In an interview Chief Executive Officer Mike Henry said: Long-term outlook for copper, nickel and potash is really strong because of “unstoppable global trends: decarbonization, electrification, population growth, increasing standards of living,” What are we watching next? Australia Q2 Wage Index tonight to determine future RBA rate hike size? The RBA Minutes out overnight showed a central bank that is trying to navigate a “narrow path” for keeping the Australian economy on an “even keel”. The RBA has often singled out wages as an important risk for whether inflation risks becoming more embedded and on that note, tonight sees the release of the Q2 Wage Index, expected to come in at 2.7% year-on-year after 2.4% in Q1. A softer data point may have the market pulling back expectations for another 50 basis point rate hike at the next RBA meeting after the three consecutive moves of that size. The market is about 50-50 on the size of the RBA hike in September, pricing a 35 bps move. RBNZ set to decelerate its guidance after another 50 basis point move tonight? The Reserve Bank of New Zealand is expected to hike its official cash rate another 50 basis points tonight, taking the policy rate to 3.00%. With business and consumer sentiment surveys in the dumps in New Zealand and oil prices retreating sharply the RBNZ, one of the earliest among developed economies to tighten monetary policy starting late last year, may be set for more cautious forward guidance and a wait and see attitude, although wages did rise in Q2 at their second fastest pace (+2.3% QoQ) in decades. The market is uncertain on the future course of RBNZ policy, pricing 44 bps for the October meeting after tonight’s 50 bps hike and another 36 bps for the November meeting. US retailer earnings eyed After disappointing results last quarter, focus is on Walmart and Home Depot earnings later today. These will put the focus entirely on the US consumer after the jobs data this month highlighted a still-tight labor market while the inflation picture saw price pressures may have peaked. It would also be interesting to look at the inventory situation at these retailers, and any updated reports on the status of the global supply chains.   Earnings to watch Today’s US earnings focus is Walmart and Home Depot with analysts expecting Walmart to report 7% revenue growth y/y and 8% decline y/y in EPS as the US retailer is facing difficulties passing on rising input costs. Home Depot is expected to report 6% growth y/y in revenue and 10% growth y/y in EPS as the US housing market is still robust driving demand for home improvement products. Sea Ltd, the fast-growing e-commerce and gaming company, is expected to report revenue growth of 30% y/y in Q2 but worsening EBITDA margin at -16.2%. The previous winning company is facing headwinds in its gaming division and cash flow from operations have gone from positive $318mn in Q1 2021 to negative $724mn in Q1 2022. Today: China Telecom, Walmart, Agilent Technologies, Home Depot, Sea Ltd Wednesday: Tencent, Hong Kong Exchanges & Clearing, Analog Devices, Cisco Systems, Synopsys, Lowe’s, CSL, Target, TJX, Coloplast, Carlsberg, Wolfspeed Thursday: Applied Materials, Estee Lauder, NetEase, Adyen, Nibe Industrier, Geberit Friday: China Merchants Bank, CNOOC, Shenzhen Mindray, Xiaomi, Deere Economic calendar highlights for today (times GMT) 0900 – Germany Aug. ZEW Survey 0900 – Eurozone Jun. Trade Balance 1200 – Poland Jul. Core CPI 1215 – Canada Jul. Housing Starts 1230 – US Jul. Housing Starts and Building Permits 1230 – Canada Jul. CPI 2030 – API Weekly Report on US Oil Inventories 2350 – Japan Jul. Trade Balance 0130 – Australia Q2 Wage Index 0200 – New Zealand RBNZ Official Cash Rate announcement 0300 – New Zealand RBNZ Governor Orr Press Conference  Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple  Spotify PodBean Sticher Source: Financial Markets Today: Quick Take – August 16, 2022
Lowest China's Yield Level In 2 Years!? Dollar (USD) Is Disturbing Gold In It's Challenge

Lowest China's Yield Level In 2 Years!? Dollar (USD) Is Disturbing Gold In It's Challenge

Marc Chandler Marc Chandler 16.08.2022 11:44
Overview: Equities were mostly higher in the Asia Pacific region, though Chinese and Hong Kong markets eased, and South Korea and India were closed for national holidays. Despite new Chinese exercises off the coast of Taiwan following another US congressional visit, Taiwan’s Taiex gained almost 0.85%. Europe’s Stoxx 600 is advancing for the fourth consecutive session, while US futures are paring the pre-weekend rally. Following disappointing data and a surprise cut in the one-year medium-term lending facility, China’s 10-year yield fell to 2.66%, its lowest in two years. The US 10-year is soft near 2.83%, while European yields are mostly 2-4 bp lower. Italian bonds are bucking the trend and the 10-year yield is a little higher. The Antipodeans and Norwegian krone are off more than 1%, but all the major currencies are weaker against the greenback, but the Japanese yen, which is practically flat. Most emerging market currencies are lower too. The Hong Kong Dollar, which has been supported by the HKMA, strengthened before the weekend, and is consolidating those gains today. Gold tested the $1800 level again but has been sold in the wake of the stronger dollar and is at a five-day low near $1778. The poor data from China raises questions about demand, and September WTI is off 3.6% after falling 2.4% before the weekend. It is near $88.60, while last week’s five-month lows were set near $87.00. US natgas is almost 2% lower, while Europe’s benchmark is up 2.7% to easily recoup the slippage of the past two sessions. China’s disappointment is weighing on industrial metal prices. Iron ore tumbled 4% and September copper is off nearly 3%. September wheat snapped a four-day advance before the weekend and is off 2.3% today.  Asia Pacific With a set of disappointing of data, China surprised with a 10-bp reduction in the benchmark one-year lending facility rate to 2.75%  It is the first cut since January. It also cut the yield on the seven-day repo rate to 2.0% from 2.1%. The string of poor news began before the weekend with a larger-than-expect in July lending figures. However, those lending figures probably need to be put in the context of the surge seen in June as lenders scramble to meet quota. Today's July data was simply weak. Industrial output and retail sales slowed sequentially year-over-year, whereas economists had projected modest increases. New home prices eased by 0.11%, and residential property sales fell 31.4% year-over-year after 31.8% decline in June. Property investment fell 6.4% year-over-year, year-to-date measures following a 5.4% drop in June. Fix asset investment also slowed. The one exception to the string of disappointment was small slippage in the surveyed unemployment rate to 5.4% from 5.5%. Incongruous, though on the other hand, the jobless rate for 16–24-year-olds rose to a record 19.9%. Japan reported a Q2 GDP that missed estimates, but the revisions lifted Q1 GDP out of contraction  The world's second-largest economy grew by 2.2% at an annualized pace in Q2. While this was a bit disappointing, Q1 was revised from a 0.5% fall in output to a 0.1% expansion. Consumption (1.1%) rebounded (Q1 revised to 0.3% from 0.1%) as did business spending (1.4% vs. -0.3% in Q1, which was originally reported as -0.7%). Net exports were flat after taking 0.5% off Q1 GDP. Inventories, as expected, were unwound. After contributing 0.5% to Q1 GDP, they took 0.4% off Q2 growth. Deflationary forces were ironically still evident. The GDP deflator fell 0.4% year-over-year, almost the same as in Q1 (-0.5%). Separately, Japan reported industrial surged by 9.2% in June, up from the preliminary estimate of 8.9%. It follows a two-month slide (-7.5% in May and -1.5% in April) that seemed to reflect the delayed impact of the lockdowns in China. The US dollar is little changed against the Japanese yen and is trading within the pre-weekend range (~JPY132.90-JPY133.90). It finished last week slightly above JPY133.40 and a higher closer today would be the third gain in a row, the longest advance in over a month. The weakness of Chinese data seemed to take a toll on the Australian dollar, which has been sold to three-day lows in the European morning near $0.7045. It stalled last week near $0.7140 and in front of the 200-day moving average (~$0.7150). A break of $0.7035 could signal a return to $0.7000, and possibly $0.6970. The greenback gapped higher against the Chinese yuan and reached almost CNY6.7690, nearly a two-week high. The pre-weekend high was about CNY6.7465 and today's low is around CNY6.7495. The PBOC set the dollar's reference rate at CNY6.7410, a little above the Bloomberg survey median of CNY6.7399. Note that a new US congressional delegation is visiting Taiwan and China has renewed drills around the island. The Taiwan dollar softened a little and traded at a three-day low. Europe Turkey's sovereign debt rating was cut a notch by Moody's to B3 from B2  That is equivalent to B-, a step below Fitch (B) and two below S&P (B+). Moody's did change its outlook to stable from negative. The rating agency cited the deterioration of the current account, which it now sees around 6% of GDP, three times larger than projected before Russia invaded Ukraine. The Turkish lira is the worst performing currency this year, with a 27.5% decline after last year's 45% depreciation. Turkey's two-year yield fell below 20% today for the first time in nine months, helped ostensibly by Russia's recent cash transfer. The dollar is firm against the lira, bumping against TRY17.97. The water level at an important junction on the Rhine River has fallen below the key 30-centimeter threshold (~12 inches) and could remain low through most of the week, according to reports of the latest German government estimate  Separately, Germany announced that its gas storage facility is 75% full, two weeks ahead of plan. The next target is 85% by October 1 and 95% on November 1. Reports from France show its nuclear reactors were operating at 48% of capacity, down from 50% before the weekend. A couple of reactors were shut down for scheduled maintenance on Saturday.  Ahead of Norway' rate decision on Thursday, the government reported a record trade surplus last month  The NOK229 bln (~$23.8 bln). The volume of natural gas exports surged more than four-times from a year earlier. Mainland exports, led by fish and electricity, rose by more than 20%. The value of Norway's electricity exports increased three-fold from a year ago. With rising price pressures (headline CPI rose to 6.8% in July and the underlying rate stands at 4.5%) and strong demand, the central bank is expected to hike the deposit rate by 50 bp to 1.75%. The euro stalled near $1.0370 last week after the softer than expected US CPI  It was pushed through the lows set that day in the European morning to trade below $1.02 for the first time since last Tuesday. There appears to be little support ahead of $1.0160. However, the retreat has extended the intraday momentum indicators. The $1.0220 area may now offer initial resistance. Sterling peaked last week near $1.2275 and eased for the past two sessions before breaking down to $1.2050 today. The intraday momentum indicators are stretched here too. The $1.2100 area may offer a sufficient cap on a bounce. A break of $1.20 could confirm a double top that would project back to the lows. America The Congressional Budget Office estimates that the Inflation Reduction Act reduces the budget deficit but will have a negligible effect on inflation  Yet, starting with the ISM gauge of prices paid for services, followed by the CPI, PPI, and import/export prices, the last string of data points came in consistently softer than expected. In addition, anecdotal reports suggest the Big Box stores are cutting prices to reduce inventories. Energy is important for the medium-term trajectory of measured inflation, but the core rate will prove sticky unless shelter cost increases begin to slow. While the Democrats scored two legislative victories with the approval of the Chips and Science Act and the Inflation Reduction Act, the impact on the poll ahead of the November midterm election seems minor at best. Even before the search-and-seizure of documents still in former President Trump's residence, PredictIt.Org "wagers" had turned to favor the Democratic Party holding the Senate but losing the House of Representatives. In terms of the Republican nomination for 2024, it has been back-and-forth over the last few months, and recently Florida Governor DeSantis narrowly pulled ahead of Trump. The two new laws may face international pushback aside from the domestic impact  The EU warned last week that the domestic content requirement to earn subsidies for electric vehicles appears to discriminate against European producers. The Inflation Reduction Act offers $7500 for the purchases of electric cars if the battery is built in North America or if the minerals are mined or recycled there. The EU electric vehicle subsidies are available for domestic and foreign producers alike. On the other hand, the Chips and Science Act offers billions of dollars to attract chip production and design to the US. However, it requires that companies drawing the subsidies could help upgrade China's capacity for a decade. Japan and Taiwan will likely go along. It fits into their domestic political agenda. However, South Korea may be a different kettle of fish. Hong Kong and China together accounted for around 60% of South Korea's chip exports last year. Samsung has one overseas memory chip facility. It is in China and produces about 40% of the Galaxy phones' NAND flash output. Pelosi's apparent farewell trip to Asia, including Taiwan, was not well received in South Korea. President Yoon Suk Yeol did not interrupt his staycation in Seoul to meet the US Speaker. Nor was the foreign minister sent. This is not to cast aspersions on South Korea's commitment to regional security, simply that it is not without limits. Today's economic calendar features the August Empire State manufacturing survey  A small decline is expected. The June TIC data is out as the markets close today. Today is also the anniversary of the US ending Bretton Woods by severing the last links between gold and the dollar in 1971. Canada reports manufacturing sales and wholesale trade, but the most market-sensitive data point may be the existing home sales, which are expected to have declined for the fifth consecutive month. Canada reports July CPI tomorrow (Bloomberg survey median forecast sees headline CPI slowing to 7.6% from 8.1% in June).  The Canadian dollar is under pressure  The US dollar has jumped above CAD1.2900 in Europe after finishing last week near CAD1.2780. Last week's high was set near CAD1.2950, where a $655 mln option is set to expire today. A move above CAD1.2920 could target CAD1.2975-CAD1.3000 over the next day or day. A combination of weaker equities, thin markets, and a short-term market leaning the wrong way after the likely drivers today. The greenback posted its lowest close in two months against the Mexican peso before the weekend near MXN19.85. However, it is rebounding today and testing the MXN20.00 area Initial resistance may be encountered around MXN20.05, but we are looking for a move toward MXN20.20 in the coming days. Mexico's economic calendar is light this week, and the highlight is the June retail sales report at the end of the week.    Disclaimer Source: China Disappoints and Surprises with Rate Cut
Walmart And Home Depot Did Better Than Expected. S&P 500 Reaches The 4,3k Level

Walmart And Home Depot Did Better Than Expected. S&P 500 Reaches The 4,3k Level

Saxo Strategy Team Saxo Strategy Team 17.08.2022 08:35
Summary:  S&P500 index broke above the key 4,300 resistance level while the NASDAQ pushed lower amid mixed economic data and better-than-feared earnings from Walmart and Home Depot. US housing data continues to worsen, but the focus now turns to FOMC minutes due later today, as well as the US retail sales which will be next test of the strength of the US consumer. Asia session may have trouble finding a clear direction, but Australia’s wage price index and RBNZ’s rate hike may help to provide some bounce. What is happening in markets? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I)  U.S. equities were mixed. Tech names had an initial pullback, followed by short-coverings that narrowed the loss of the Nasdaq 100 to 0.23% at the close. S&P500 edged up 0.19% to 4,305 on better-than-feared results from retailers, moving towards its 200-day moving average (4,326). Walmart (WMT:xnys) and Home Depot (HD:xnys) reported Q2 results beating analyst estimates. Walmart gained 5% on strong same-store sales growth and a deceleration in inventory growth. Home Depot climbed 4% after reporting better than expected EPS and same-store sales but with an acceleration in inventory buildup. The declines in housing starts and building permits released on Monday and the downbeat comments about the U.S. housing market from the management of Compass (COMP:xnys), an online real estate brokerage, highlighted the challenges faced in the housing sector.  Short-end U.S. treasury yields rose as the long-end little changed The bigger than expected increases in July industrial production (+0.6% MoM), manufacturing production (+0.7% MoM), and business equipment production (+0.6%) triggered some selling in the short-end of U.S. treasury curve, pushing the 2-year yield 8 bps higher to 3.25% as 10-year yield edged up 1bp.  Hong Kong’s Hang Seng (HSIQ2) and China’s CSI300 (03188:xhkg) China internet stocks were sold off on Tuesday afternoon after Reuters ran a story suggesting that Tencent (00700:xhkg) plans to divest its 17% stake (USD24 billion) in Meituan (03690:xhkg).  The shares of Meituan collapsed 9% while Tencent gained 0.9%.  After the close of the Hong Kong market, Chinese media, citing sources “close to the matter” suggested that the divesture story is not true. However, the ADRs of Meituan managed to recover only 1.7% in New York trading. The newswire story also triggered selling on Kuaishou (01024:xhkg), -4.4%, which has Tencent as a major investor. The decline in internet stocks dragged the Hang Seng Index 1% lower. On the other hand, Chinese developers soared on another newswire report that state-owned China Bond Insurance is going to provide guarantees to new onshore debts issued by several “high quality” developers, including Country Garden (02007:xhkg) +9%, Longfor (00960:xhkg) +12%, CIFI (00884:xhkg) +12.9%, and Seazen (01030:xhkg) +7.6%.  Shares of Chinese property management services also surged higher.  GBPUSD bounced off the 1.2000 support, NZD eyeing RBNZ A mixed overnight session for FX as the US yields wobbled. Risk sentiment held up with the mixed US data accompanied by a less bad outcome in the US retailer earnings than what was expected. This made the safe-haven yen a clear underperformer, and USDJPY rose back above 134. But a clear trend in the pair is still missing and a break above 135 is needed to reverse the downtrend. Cable got lower to remain in close sight of the 1.2000 big figure, but rose above 1.2100 subsequently. UK CPI report due today may confirm the need for further BOE action after labor data showed wage pressures. NZDUSD remains near lows of 0.6320 but may see a knee-jerk higher if RBNZ surprises on the hawkish side. Crude oil prices (CLU2 & LCOV2) Crude oil prices remain under pressure due to the prospect of Iran nuclear deal, and printed fresh lows since the Ukraine invasion. Some respite was seen in early Asian session, and WTI futures were last seen at $87/barrel and Brent is below $93. The EU submitted a final proposal to salvage the Iran nuclear deal, and prospects of more energy supply are dampening the price momentum. It has been reported that Iran’s response was constructive, and they are now consulting with the US on a way ahead for the protracted talks. The API reported crude inventories fell by 448,000 barrels last week, while gasoline stockpiles increased by more than 4 million barrels. Government data is due later Wednesday. European Dutch TTF benchmark gas futures (TTFMU2) touched €250/MWh, but has cooled off slightly recently, but still signals the heavy price that Europe is paying for the dependence on Russian gas. Copper holding up well despite China slowdown concerns Despite reports of weaker financing and activity data from China earlier this week, Copper remains well supported and registered only modest declines. BHP’s results provided some offset, as did the supply side issues in Europe. Only a break below the key 350 support will turn the focus lower. Meanwhile, zinc rallied amid concerns of smelter closures in Europe. What to consider? US housing scare broadens, industrial production upbeat Housing starts fell 9.6% in July to 1.446 mn, well beneath the prior 1.599 mn and the expected 1.537 mn. Housing starts are now down for five consecutive months, and suggest a cooling housing market in the wake of higher borrowing costs and higher inflation. Meanwhile, building permits declined 1.3% in July to 1.674 mn from 1.696 mn, but printed above the expected 1.65 mn. There will be potentially more scaling back in construction activity as demand weakens and inventory levels rise. On the other hand, industrial production was better than expected at 0.6% m/m (prev: -0.2%) possibly underpinned by holiday demand but the outlook is still murky amid persistent inflation and supply chain issues. US retailer earnings come in better than feared Walmart (WMT:xnys) and Home Depot (HD:xnys) reported better-than-feared results on Tuesday. Walmart’s Q2 revenues came in at USD152.9 billion (+8.4% YoY, consensus USD150.5bn). Same-store sales increased 8.4% YoY (vs consensus +6.0% YoY).  EPS of USD1.77, down 0.8% from a year ago quarter but better than the consensus estimate of USD1.63. While inventories increased 25.5% in Q2, the rate of increase has moderated from the prior quarter’s +32.0%. The company cited falls in gas prices, market share gain in grocery, and back-to-school shopping key reasons behind the strength in sales.  Home Depot reported Q2 revenues of USD43.9 billion (vs consensus USD43.4bn), +6.5% YoY.  Same-store sales grew 5.8%, beating analyst estimates (+4.9%).  EPS rose 11.5% to $5.05, ahead of analyst estimates (USD4.95). However, inventories grew 38% YoY in Q2, which was an acceleration from the prior quarter. The management cited inflation and pulling forward inventory purchases given supply chain challenges as reasons for the larger inventory build-up. Target (TGT:xnys) is scheduled to report on Wednesday. Eyes on US retail sales US retail sales will be next test of the US consumer after less bad retailer earnings last night. Retail sales should have been more resilient given the lower prices at pump improved the spending power of the average American household, and Amazon Prime Day in the month possibly attracted bargain hunters as well. However, consensus expectations are modest at 0.1% m/m compared to last month’s 1.0%. A cooling labor market in the UK UK labor market showed signs of cooling as job vacancies fell for the first time since August 2020 and real wages dropped at the fastest pace in history. Unemployment rate was steady at 3.8%, and the number of people in employment grew by 160,000 in the April-June period as against 256,000 expected. There was also a sprinkle of good news, with the number of employees on payrolls rising 73,000 in July, almost triple the pace expected. Also, wage growth was strong at 4.7% in the June quarter from 4.4% in the three months to May, which may be key for the BOE amid persistent wage pressures. Australia Q2 Wage Index to determine future RBA rate hike size? The RBA Minutes out on Tuesday showed a central bank that is trying to navigate a “narrow path” for keeping the Australian economy on an “even keel”. The RBA has often singled out wages as an important risk for whether inflation risks becoming more embedded and on that note, today sees the release of the Q2 Wage Index, expected to come in at 2.7% year-on-year after 2.4% in Q1. A softer data point may have the market pulling back expectations for another 50 basis point rate hike at the next RBA meeting after the three consecutive moves of that size. The market is about 50-50 on the size of the RBA hike in September, pricing a 35bps move. RBNZ set to decelerate its guidance after another 50 basis point move today? The Reserve Bank of New Zealand is expected to hike its official cash rate another 50 basis points tonight, taking the policy rate to 3.00%. With business and consumer sentiment surveys in the dumps in New Zealand and oil prices retreating sharply the RBNZ, one of the earliest among developed economies to tighten monetary policy starting late last year, may be set for more cautious forward guidance and a wait and see attitude, although wages did rise in Q2 at their second fastest pace (+2.3% QoQ) in decades. The market is uncertain on the future course of RBNZ policy, pricing 45bps for the October meeting after today’s 50bps hike and another 37bps for the November meeting. FOMC minutes to be parsed for hints on future Fed moves The Federal Reserve had lifted rates by 75bps to bring the Fed Funds rate at the level that they consider is neutral at the July meeting, but stayed away from providing any forward guidance. Meeting minutes will be out today, and member comments will be watched closely for any hints on the expectation for September rate hike or the terminal Fed rate. The hot jobs report and the cooling inflation number has further confused the markets since the Fed meeting, even as Fed speakers continue to push against any expectations of rate cuts at least in ‘early’ 2023. We only have Kansas City Fed President Esther George (voter in 2022) and Minneapolis Fed President Kashkari (non-voter in 2022) speaking this week at separate events on Thursday, so the bigger focus will remain on Jackson Hole next week for any updated Fed views.   For a week-ahead look at markets – tune into our Saxo Spotlight. For a global look at markets – tune into our Podcast.   Source: APAC Daily Digest: What is happening in markets and what to consider next – August 17, 2022
Online Sales Are Becoming A Part Of Everyday Life. Supermarkets Are Having A Good Time

Online Sales Are Becoming A Part Of Everyday Life. Supermarkets Are Having A Good Time

Conotoxia Comments Conotoxia Comments 17.08.2022 09:15
Home Depot (HD) and Walmart (WMT) are among the largest US retailers whose results seem to show the attitude of the average American consumer towards spending money. HD is a chain of large-format home improvement shops, very similar to Europe's Leroy Merlin. WMT, on the other hand, is the largest US retail chain. Last month, Walmart spooked markets by lowering its profit forecasts and warned of a rapid decline in demand. However, the results announced today said sales were up more than 8% year-on-year to $152.9 billion against expectations of $150.8 billion. Online sales alone rose by as much as 12%. The company is struggling with a gigantic inventory problem (worth $61 billion at the end of Q1), prominent among the backlog of products is apparel, for example. To deal with this, discounts have been introduced on many products, thereby boosting sales by stimulating demand. At present, the value of stock amounts to USD 59.9 billion. However, the increased sales do not translate directly into profits. "The actions we’ve taken to improve inventory levels in the US, along with a heavier mix of sales in grocery, put pressure on the profit margin for Q2 and our outlook for the year," - CEO Doug McMillon said. Walmart's second-quarter net income rose to $5.15bn, or $1.77 per share (EPS) against Wall Street analysts' estimates of $1.62. In the same period a year ago, net income was $4.28bn, or $1.52 per share (EPS). Walmart maintained its forecast for the second half of the year. It expects US shop sales to grow by about 3% (excluding fuel), in the second half of the year, or about 4 per cent for the full year. It expects adjusted earnings per share to decline 9% for the year. Home Depot also announced a 5.8% increase in sales, to 43.8 billion against expectations of $43.36 billion. Net sales were up 6.5% year-over-year, marking the highest quarterly sales in the company's history. "Our team has done a fantastic job serving our customers while continuing to navigate a challenging and dynamic environment," - CEO Ted Decker said, commenting on the company's results. Net income increased to $5.17 billion, up 7.6% year-over-year. EPS was $5.05 against analysts' forecasts of $4.94. Walmart and Home Depot gain 4.7% and 1.9%, respectively, on the market open. The retailers' results show that, despite the looming recession, consumers are spending money and the situation could be not that bad in the short term. However, at the same time, the figures for financing this spending are alarming. A large proportion of Americans are covering higher prices with credit cards, which must eventually be repaid, according to data published by Bloomberg. The worsening outlook for economic health, alarming PMI levels and the bond yield curve all translate into possible future deterioration in consumer health.   Rafał Tworkowski, Junior Market Analyst, Conotoxia Ltd. (Conotoxia investment service) Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 82.59% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.  Source: Retailers announce strong results - shares rise
Commodities: Deglobalization, Green Transformation, Urbanization And Other Things That Got Involved

Commodities: Deglobalization, Green Transformation, Urbanization And Other Things That Got Involved

Ole Hansen Ole Hansen 19.08.2022 15:50
Summary:  Commodities traded with a softer bias this week as the focus continued to rest on global macro-economic developments, in some cases reducing the impact of otherwise supportive micro developments, such as the fall in inventories seen across several individual commodities. Overall, however, we do not alter our long-term views about commodities and their ability to move higher over time, with some of the main reasons being underinvestment, urbanization, green transformation, sanctions on Russia and deglobalization. Commodities traded with a softer bias this week as the focus continued to rest on global macro-economic developments, in some cases reducing the impact of otherwise supportive micro developments, such as the fall in inventories seen across several individual commodities. The dollar found renewed strength and bond yields rose while the month-long bear-market bounce across US stocks showed signs of running out of steam.The trigger being comments from Federal Reserve officials reiterating their resolve to continue hiking rates until inflation eases back to their yet-to-be revised higher long-term target of around 2%. Those comments put to rest expectations that a string of recent weak economic data would encourage the Fed to reduce the projected pace of future rate hikes.The result of these developments being an elevated risk of a global economic slowdown gathering pace as the battle against inflation remains far from won, not least considering the risk of persistent high energy prices, from gasoline and diesel to coal and especially gas. A clear sign that the battle between macro and micro developments continues, the result of which is likely to be a prolonged period of uncertainty with regards to the short- and medium-term outlook.Overall, however, these developments do not alter our long-term views about commodities and their ability to move higher over time. In my quarterly webinar, held earlier this week, I highlighted some of the reasons why we see the so-called old economy, or tangible assets, performing well over the coming years, driven by underinvestment, urbanization, green transformation, sanctions on Russia and deglobalization. Returning to this past week’s performance, we find the 2.3% drop in the Bloomberg Commodity Index, seen above, being in line with the rise in the dollar where gains were recorded against all the ten currencies, including the Chinese renminbi, represented in the index. It is worth noting that EU TTF gas and power prices, which jumped around 23% and 20% respectively, and Paris Milling wheat, which slumped, are not members of the mentioned commodity index.Overall gains in energy led by the refined products of diesel and US natural gas were more than offset by losses across the other sectors, most notably grains led by the slump in global wheat prices and precious metals which took a hit from the mentioned dollar and yield rise. Combating inflation and its impact on growth remains top of mind Apart from China’s slowing growth outlook due to its zero-Covid policy and housing market crisis hitting industrial metals, the most important driver for commodities recently has been the macro-economic outlook currently being dictated by the way in which central banks around the world have been stepping up efforts to curb runaway inflation by forcing down economic activity through aggressively tightening monetary conditions. This process is ongoing and the longer the process takes to succeed, the bigger the risk of an economic fallout. US inflation expectations in a year have already seen a dramatic slump but despite this the medium- and long-term expectations remain anchored around 3%, still well above the Fed’s 2% target.Even reaching the 3% level at this point looks challenging, not least considering elevated input costs from energy. Failure to achieve the target remains the biggest short-term risk to commodity prices with higher rates killing growth, while eroding risk appetite as stock markets resume their decline. These developments, however, remain one of the reasons why we find gold and eventually also silver attractive as hedges against a so-called policy mistake. Global wheat prices tumble The prospect for a record Russian crop and continued flows of Ukrainian grain together with the stronger dollar helped push prices lower in Paris and Chicago. The recently opened corridor from Ukraine has so far this month seen more than 500,000 tons of crops being shipped, and while it's still far below the normal pace, it has nevertheless provided some relief at a time where troubled weather has created a mixed picture elsewhere. The Chicago wheat futures contract touched a January low after breaking $7.75/bu support while the Paris Milling (EBMZ2) wheat traded near the lowest since March. With most of the uncertainties driving panic buying back in March now removed, calmer conditions should return with the biggest unknown still the war in Ukraine and with that the country’s ability to produce and export key food commodities from corn and wheat to sunflower oil. EU gas reaches $73/MMBtu or $415 per barrel of oil equivalent Natural gas in Europe headed for the longest run of weekly gains this year, intensifying the pain for industries and households, while at the same time increasingly threatening to push economies across the region into recession. The recent jump on top of already elevated prices of gas and power, due to low supplies from Russia, has been driven by an August heatwave raising demand while lowering water levels on the river Rhine. This development has increasingly prevented the safe passage of barges transporting coal, diesel and other essentials, while refineries such as Shell’s Rhineland oil refinery in Germany have been forced to cut production. In addition, half of Europe’s zinc and aluminum smelting capacity has been shut, thereby adding support to these metals at a time the market is worried about the demand outlook.An abundance of rain and lower temperatures may in the short term remove some of the recent price strength but overall, the coming winter months remain a major worry from a supply perspective. Not least considering the risk of increased competition from Asia for LNG shipments. Refinery margin jump lends fresh support to crude oil Crude oil, in a downtrend since June, is showing signs of selling fatigue with the technical outlook turning more price friendly while fresh fundamental developments are adding some support as well. Worries about an economic slowdown driven by China’s troubled handling of Covid outbreaks and its property sector problems as well as rapidly rising interest rates were the main drivers behind the selling since March across other commodity sectors before eventually also catching up with crude oil around the middle of June. Since then, the price of Brent has gone through a $28 dollar top to bottom correction. While the macro-economic outlook is still challenged, recent developments within the oil market, so-called micro developments, have raised the risk of a rebound. The mentioned energy crisis in Europe continues to strengthen, the result being surging gas prices making fuel-based products increasingly attractive. This gas-to-fuel switch was specifically mentioned by the IEA in their latest update as the reason for raising their 2022 global oil demand growth forecast by 380k barrels per day to 2.1 million barrels per day. Since the report was published, the incentive to switch has increased even more, adding more upward pressure on refinery margins. While pockets of demand weakness have emerged in recent months, we do not expect these to materially impact on our overall price-supportive outlook. Supply-side uncertainties remain too elevated to ignore, not least considering the soon-to-expire releases of crude oil from US Strategic Reserves and the EU embargo of Russian oil fast approaching. In addition, the previously mentioned increased demand for fuel-based products to replace expensive gas. With this in mind, we maintain our $95 to $115 range forecast for the third quarter. Gold and silver struggle amid rising dollar and yields Both metals, especially silver, were heading for a weekly loss after hawkish sounding comments from several FOMC members helped boost the dollar while sending US ten-year bond yields higher towards 3%. It was the lull in both that helped trigger the recovery in recent weeks, and with stock markets having rallied as well during the same time, the demand for gold has mostly been driven by momentum following speculators in the futures market. The turnaround this past week has, as a result of speculators' positioning, been driven by the need to reduce bullish bets following a two-week buying spree which lifted the net futures long by 63k lots or 6.3 million ounces, the strongest pace of buying in six months. ETF holdings meanwhile have slumped to a six-month low, an indication that investors, for now, trust the FOMC’s ability to bring down inflation within a relatively short timeframe. An investor having doubts about this should maintain a long position as a hedge against a policy mistake. Some investors may feel hard done by gold’s negative year-to-date performance in dollars, but taking into account it had to deal with the biggest jump in real yields since 2013 and a surging dollar, its performance, especially for non-dollar investors relative to the losses in bonds and stocks, remains acceptable. In other words, a hedge in gold against a policy mistake or other unforeseen geopolitical events has so far been almost cost free.   Source: WCU: Bearish macro, bullish micro regime persists
NZD/USD: Reserve Bank Of New Zealand Is Expected To Hike The Rate By 50bp

Breaking News: Eurozone: Is Europe In Recession Already!? PMI Plunged!

ING Economics ING Economics 23.08.2022 11:49
The August PMI indicates this economy is heading towards recession quickly if it’s not already in one. Meanwhile, weaker demand is leading to some fading of inflationary pressure, but the question is how soaring energy costs will impact this in the coming months The post-pandemic rebound in consumer spending on services is fading rapidly   The composite PMI fell from 49.9 to 49.2. Anything under 50 indicates falling business activity, so the survey is hinting at a contraction that started in the third quarter. This is consistent with our forecasts, and the colour that the survey gives on the weakness is not pretty. The manufacturing output PMI ticked up a bit in August but remained deep in contraction territory at 46.5. New orders continue to fall and inventory build-up is very strong, which reflects the squeeze in demand that the eurozone economy is currently experiencing. The services PMI fell rapidly in August to a level indicating stagnation in activity at 50.2. Demand also weakened for the service sector as the post-pandemic rebound in consumer spending on services is fading rapidly. The good news is coming from the inflation side. While high costs continue to play a major role in weakening demand, the pace of inflation seems to be fading among manufacturers and in the service sector. Weaker demand and easing input prices are helping selling price inflation moderate a bit, but the question is whether this can last now that natural gas prices are reaching new records again. For the months ahead, economic weakness is set to persist. We expect that a eurozone recession has started as the purchasing power squeeze in the eurozone economy continues. For the ECB, this complicates matters significantly, but we do think that September will still see a 50 basis point rate hike. After that, we think the rapid cooling of the economy will cause the ECB to pause its hike cycle, if we can call it that… Read this article on THINK TagsInflation GDP Eurozone Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Saxo Bank Podcast: Natural Gas On Colder Weather, Wheat And Coffee Under Pressure, JPY Weaker And More

Governments Are Looking Into Ways To Mitigate The Impact Of Higher Energy Prices

ING Economics ING Economics 03.09.2022 08:55
  It is no secret that Europe is heading for a severe energy crisis. Energy prices have already skyrocketed but companies and households will only be confronted with higher energy bills in the coming months. While rising bills are inevitable, the other big risk for Europe is supply disruption In this article Europe's gas storage tanks are 80% full Governments are stepping in Europe's gas storage tanks are 80% full Amid all the doom and gloom, there is at least some positive news in that European countries have been able to fill gas storage ahead of schedule. The European Commission has asked member states to fill reserves up to at least 80% by 1 November. Most countries have already reached that level well ahead of time. Overall, Europe is currently at 80.2%, which is about two months ahead of time. European gas storage has been filling up Natural gas, stock level, country total, fill level (%) Source: Gas Infrastructure Europe (GIE), Macrobond Governments are stepping in This means that the EU has chosen to pay a high price to achieve sufficient gas supply ahead of the winter. At the same time, it is no guarantee that shortages will not happen. As Europe still relies on further imports in the winter months, there is a chance that a cold winter still results in shortages. If these shortages occur, it will be at the end of the winter. However, it currently also looks as if energy supply issues could go beyond this winter into next. While countries are filling their national gas reserves, governments are looking into ways to tackle or at least mitigate the impact of higher energy prices on consumers and corporates. Measures differ between countries, both in terms of magnitude and nature. We provide an overview of the current state of play below and expect more measures to be announced in the coming weeks. National policies introduced to help consumers with rising energy prices Western Europe Eastern Europe   Energy Source: https://think.ing.com/articles/how-europe-is-preparing-for-a-hard-winter/?utm_campaign=September-01_how-europe-is-preparing-for-a-hard-winter&utm_medium=email&utm_source=emailing_article&M_BT=1124162492   Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Hungary: Budget deficit jumps above full-year cash flow target by ca. 10%

HUF And PLN May Be Fluctuating This Week! Hungarian Forint Meets Economic Data And National Bank Of Poland Is Expected To Hike The Rate

ING Economics ING Economics 03.09.2022 23:00
A busy week ahead for Hungary with July's economic activity data and August's inflation reading. Retail sales should improve while inflation is expected to lift further. We're also expecting a 25bp rate hike from the National Bank of Poland In this article Poland: central bank decision on rates Russia: inflation subsiding after a big spike Turkey: annual inflation expected to increase further Hungary: August core inflation reading expected to be 18.6% Kazakhstan: above expected inflation calls for another key rate hike Source: Shutterstock Poland: central bank decision on rates In recent public statements, Polish policymakers pointed out the need to continue monetary tightening albeit at a smaller scale than before. Rate-setters mainly mentioned a 25bp rate hike and some even seemed reluctant to hike at all. An upward surprise from the August flash CPI means that a 25bp rate hike to 6.75% (our baseline scenario) looks like a done deal and the Council may even discuss a 50bp rate hike. Still, the end of the rate-hiking cycle is nearing and we currently see the terminal National Bank of Poland rate at 7.0-7.5%. Russia: inflation subsiding after a big spike Following a sharp spike to 17.8% year-on-year in April, Russia has been on a disinflationary path due to weaker demand, ruble appreciation and a good harvest. Next Friday’s CPI numbers for August are likely to show a 0.6% month-on-month decline in prices and a deceleration in the annual rate to 14.2% YoY. This challenges our year-end expectations of 13% and suggests that the actual print is likely to be at the lower end of the Bank of Russia’s 12-15% range. This means that the key rate, which has already been cut from 20.0% in February-March to 8.0% in July, has room to go lower. Yet given the stabilisation of households’ inflationary expectations and unclear supply-side prospects, we expect CPI to remain elevated next year and doubt that this downside to the key rate could exceed 100 basis points by year-end. The next Central Bank of Russia meeting is scheduled for 16 September. Turkey: annual inflation expected to increase further We expect annual inflation to have risen further in August to 81.6% (2.2% on monthly basis) from 79.6% a month ago, despite a decline in gasoline prices, as pricing pressures will likely remain broad-based with a largely supportive policy framework leading to currency weakness and external factors weighing on import prices. Hungary: August core inflation reading expected to be 18.6% We are facing a really busy calendar in Hungary next week. The first set of data will be July economic activity. Retail sales could improve a bit as pensioners got extra transfers from the government which is practically a retroactively increased pension due to higher-than-expected inflation. This could boost food consumption, while non-food retail got a boost from the new (less favourable) utility bill support scheme, which urged households to replace old household appliances with newer, more energy-efficient ones. Based on PMI data, July industrial production could still be OK, though we see some downside risk here due to planned summer shutdowns. While industry is doing well despite the plethora of challenges, the trade balance is rather driven by the ever-rising energy bill of the country, and so we see further deterioration in the trade deficit in July. The highlight of the week is going to be the August inflation reading. Due to a refined fuel price cap, which narrowed the range of beneficiaries, the Statistical Office will recalculate the fuel price higher in the consumer basket (some weighted average of capped and market prices). This might explain 0.9-1.0ppt from the 2.3% month-on-month inflation, which will lift the yearly reading up to 16.2%. As rising energy and agricultural commodity prices spill over into processed food and service providers adjusting their prices to the rising utility bills, we see core inflation at 18.6% year-on-year. However, there is one beneficiary of this sky-high inflation environment: the government budget, where we expect yet another surplus on rising revenues in August. Kazakhstan: above expected inflation calls for another key rate hike National Bank of Kazakhstan is likely to make another key rate hike on Monday from the current level of 14.50% to 15.00% or higher. Following the latest 50bp hike at the end of July, inflation continued to outperform the market and NBK expectations, reaching 16.1% YoY in August. Higher inflationary pressure appears to be broad-based in terms of structure and most likely calls for an adjustment in the key rate level. Key events in EMEA next week Source: Refinitiv, ING TagsEmerging Markets EMEA Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
German labour market starts the year off strongly

Better Supply Chain Status Contrasted With Ecological Problems And Energy Prices. Situation In Germany Leaves Investors With Mixed Feelings

ING Economics ING Economics 05.09.2022 12:51
With disappointing July trade data, the German economy starts the third quarter on a weak footing Trade is no longer a growth driver but has become a drag on German growth Germany: Exports and imports declined German exports (seasonally and calendar-adjusted) disappointed at the start of the third quarter and dropped by 2.1% month-on-month in July. Imports also decreased, by 1.5% month-on-month, lowering the trade surplus to €5.4bn, from €6.2bn in June. Exports to Russia as a result of the sanctions almost came to a standstill and fell by another 15% month-on-month. Lower energy imports from Russia were the reason for German imports from Russia to drop by more than 17% MoM. Trade is no longer a growth driver but has become a drag on German growth. Since the second quarter of 2021, the growth contribution of net exports has actually been negative. Global supply chain frictions, geopolitical risks and rising production costs are the obvious drivers behind this new trend. Looking ahead, the outlook for German trade is mixed. There is some relief in supply chains and transportation costs. However, at the same time, low water levels, high energy prices and the possible fundamental change in supply chains and production processes on the back of geopolitical uncertainty will be clear obstacles to growth. After yesterday’s encouraging increase in July retail sales, today’s trade data add to the long list of growth concerns for the German economy in the second half of the year. Read this article on THINK TagsGermany Exports Eurozone Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Monitoring Hungary: Glimmering light at the end of the tunnel

Hungary: Retail Sales Hit 4.3%, What Leaves Investors With Mixed Feelings

ING Economics ING Economics 05.09.2022 15:14
Behind the solid headline retail sales figure, we see some worrying developments. In our assessment, the economy is getting closer to a technical recession Shoppers in Budapest 4.3% Retail sales (year-on-year, wda) ING forecast 5.1% / Previous 4.5% Worse than expected July Retail sales looks not that bad, but... If we look at things superficially, the July retail sales performance in Hungary looks quite good. It shows a 4.3% year-on-year growth rate (adjusted for working days), which is only a tad slower than the headline figure from the previous month. However, as soon as we dig a bit deeper into the data, we see some red flags and signs of weakness. First and foremost, the month-on-month growth in retail sales was only 0.5%. The only good thing we have to say about this is that it is at least positive after three months of continuous decline. But is also says a lot about the yearly index, which was able to remain strong because of the base effect and not due to the strong monthly performance. Breakdown of retail sales (% YoY, wda) Source: HCSO, ING   After checking the detailed data, today’s release on retail sales paints a rather gloomy picture. Retail sales turnover in the food sector decreased by roughly 0.1% on a monthly basis and also showed an annual drop. This is quite a bad reading in light of the fact that consumers with the highest marginal propensity to consume (i.e. pensioners), received their pension supplement in July. But even this was not enough to boost the volume of food shop turnover, so it can still be said that ever-rising prices are increasingly restraining the consumption of households. A similar phenomenon can also be observed in the sales volume of non-food stores. Turnover in this segment fell by 0.25% compared to the previous month, even though the news was full of stories about households rushing to the shops to replace non-energy-efficient appliances as the government announced changes to the utility bill support scheme. Moreover, sales people have echoed that demand has increased sharply for alternative heating devices in order to reduce gas consumption. It seems that either these effects have not yet been reflected in the July statistics or, despite the boost in demand, households have already closed their purses and cancelled shopping for non-essential major goods and cut fast-moving consumer good spending. Retail sales volume in detail (2015 = 100%) Source: HCSO, ING   Only the turnover of fuel retailers was able to increase on a monthly basis in July. In essence, this one item ensured that retail turnover did not shrink continuously for four months. This, therefore, paints a rather gloomy picture, especially as we know that the increase in fuel sales may be a one-time effect as the government announced a reduced range of beneficiaries of the fuel price cap from 1 August. Many people who use a company car for private purposes will have to buy fuel at a much higher market price from August, so the last chance to buy fuel at administered prices came in July, giving an extra boost to fuel demand. In addition to all of this, it is also quite telling that in all the sub-sectors, the turnover of second-hand shops increased the most, which once again highlights the increase in the price sensitivity of consumers and the transformation of shopping habits. Retail sales and consumer confidence Source: Eurostat, HCSO, ING Q3 begins with reduced consumption? Based on today's retail statistics, we can say that although the main indicator does not reflect this, the underlying processes and detailed data already show a strong slowdown in consumption at the beginning of the third quarter. Households continue to adapt to higher inflation, and in the coming months the effect of budget tightening (e.g. the changes in the utility bill support scheme) may further strengthen this. Although it is still too early to make a judgment, the probability that the volume of GDP will show a quarter-on-quarter decrease in the July-September period has clearly increased. Our silver lining here would be that during the summer, services can help the expansion of consumption to a greater extent. Instead of buying things, consumers are focusing their spending on experiences, which is not measured by retail sales data. Read this article on THINK TagsRetail sales Hungary Households Consumption Consumer confidence Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Germany’s Economic Outlook For This Year Looks Complicated

Germany: What Is Third Relief Package About? Germans' Battle With Inflation

ING Economics ING Economics 05.09.2022 15:36
The German government is increasing fiscal stimulus to offset the impact of higher energy prices, but we doubt that these measures will be sufficient to prevent a recession German Chancellor Olaf Scholz What does third relief package help Germans with? The German government on Sunday announced a third relief package to cushion citizens and companies from soaring energy costs while also vowing to reform the energy market to collect windfall profits and cap prices. The measures are aimed at, at least, partly offsetting the impact of higher energy prices on low-income households but the more groundbreaking elements of the package are so far only plans and not actual measures. The announced measures in more detail: One-off financial support of 300 euro for pensioners and 200 euro for students. Extension of housing allowance from currently 700,000 recipients to around 2 million recipients and a slight increase Cuts in social security contributions for people with a monthly income below €2,000 Increase in the child allowances by 18 euro per month The reduction of the VAT to 7% for restaurants and bars, which was part of the pandemic stimulus package, will be extended Extension of furlough schemes Credit support for companies And here is what the government did not announce or plans that still need additional work: The government announced a price cap on electricity prices but this price cap is linked to a mechanism to tax windfall profits, which the government wants to be agreed at the European level. The government did not announce a price cap on gas consumption but only the start of a task force to look into this issue. There is no new incentive to use public transportation but the government offered to spend 1.5bn euro per year if the regional states find an agreement on the details of such an incentive and are willing to spend at least the same amount as the federal government. Interestingly, the government also talks about a concerted action between social partners for the next wage rounds, offering to exempt one-off payments by companies to their employees from taxes and social contributions. Hardly enough The new relief package, which comes on top of two previous packages that together amounted to 30bn euro, is obviously aimed at bringing financial relief for low-income households and the ones who will be hit the hardest by higher energy prices. How much relief this package will actually provide remains unclear. At the press conference, German Chancellor Olaf Scholz talked about a 65bn euro package. However, as so often with these kind of packages, it is unclear how the number is really calculated. In any case, while the announced package will indeed bring some relief for the financially weaker ones, it is doubtful that the package will be enough to offset the impact from higher energy bills entirely. Don't forget that 65bn euro are less than 2% of German GDP. German fiscal stimulus during the pandemic, excluding guarantees, amounted to roughly 15% of GDP.  Also, the fact that two crucial elements, price caps and a windfall profit tax, are still works in progress suggests that the full package is hardly operational this year. The fact that there is basically no support for households, which currently do not receive social transfers and that there is also little support for companies, implies that the package will probably fall short in preventing the broader economy from falling into recession. Read this article on THINK TagsGermany Fiscal stimulus Eurozone Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
The UK Markets Remain Volatile, Possible Contraction Of The Eurozone Economy

Would Liz Truss (UK Prime Minister-Elect) Freeze Energy Bills? Bitcoin Jumped Above $20K, But Seems Not To Feel Strong.

Craig Erlam Craig Erlam 06.09.2022 11:50
It’s been a mixed start to trade on Tuesday, similar to what we saw in Asia overnight, and as we await the return of the US after the long bank holiday weekend. Europe in particular was rattled on Monday by the Gazprom announcement that came after the close on Friday in relation to Nord Stream 1. The latest move in the apparent weaponisation of energy supplies has once more created huge uncertainty ahead of the winter. Conveniently the announcement came hours after the G7 agreed to a Russian price cap and as Europe was boasting about being ahead of schedule on filling gas stores. RBA signals more hikes ahead The Reserve Bank of Australia raised the cash target rate by 50 basis points to 2.35% on Tuesday, in line with expectations, as it continues to aggressively push back against soaring inflation. The central bank reiterated that it is not on a pre-set path but will continue hiking interest rates with markets of the belief that there’s still plenty more to come including another 50bps next month and 25 at each of the following three. Read next: Russia Suspends Flow Through The Nord Stream 1 Pipeline, Cotton Futures, Gold Prices Increase For The First Time In 3-weeks| FXMAG.COM Of course, forecasting even that far ahead has become far more challenging in such an uncertain global environment but it’s clear that central banks around the world still have a massive job on their hands and the coming months will be tough. That said, the RBA is of the belief that inflation will peak later this year before returning to 3% in 2024. PBOC desperate to support CNY The PBOC once again set a stronger yuan fix today as it continues to push back against its decline. Controlling the decline in the yuan has clearly become a huge priority, with the 2% cut in the FX reserve requirement ratio intended to support that initiative. Rather than stop a decline in the yuan, these efforts may simply slow it with a move above 7 against the dollar looking like a matter of when rather than if, given the relentless rally in the greenback. Hit the ground running Liz Truss will be sworn in as Prime Minister today and will have to hit the ground running as the UK prepares for a brutal winter. Reports claim the new PM intends to freeze energy bills this winter at a cost of up to £130 billion, a move that would certainly fall into the bold category. The question is what impact it will have on inflation and gas demand. This will be a core part of what will need to be a much greater package to shield the economy from the grim forecasts we’ve seen in recent weeks. Struggling for rally momentum Bitcoin pushed briefly back above $20,000 today but is struggling to build on that. Broadly speaking, it’s trading in a range between $19,500 and $20,500 as it has for a little over a week now but rallies do appear to be increasingly struggling which may be a slightly bearish signal. A break of $19,500 would confirm that although with trading currently so choppy, it’s tough to read too heavily into today’s moves so far. The broader market environment also remains quite risk averse which could work against cryptos. For a look at all of today’s economic events, check out our economic calendar: www.marketpulse.com/economic-events/ This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds. Steady after a rocky start - MarketPulseMarketPulse
For What It Is Worthy To Pay Attention Next Week 23.01-29.01

The New UK Prime Minister Will Face Energy Bills Climb. The EBC Open For Further Rate Hikes.

ING Economics ING Economics 03.09.2022 09:12
Despite headline inflation at a new record high and multiple hawkish comments by European Central Bank members, we are expecting the ECB to ‘only’ hike by 50bp next week. In Canada, with excess demand causing inflation to remain well above target, we expect the Bank of Canada to opt for a 75bp hike on Wednesday In this article US: Focus next week will be Powell's comments on monetary policy UK: New prime minister to face immediate test as energy bills climb Canada: Bank of Canada expected to hike rates by 75bp next week Eurozone: ECB to implement another 50bp hike; 75bp not ruled out US: Focus next week will be Powell's comments on monetary policy Markets continue to favour a 75bp rate hike from the Federal Reserve on 21 September despite the economy having been in a technical recession since the first half of the year. With more than three million jobs added since the start of 2022, consumer spending continuing to grow, and inflation running at more than 8%, it is hard to argue this is a “real recession” with the fall in GDP instead down to volatility in trade and inventory data which continues to swing wildly due to ongoing supply chain issues. Monday is a holiday and the data calendar is light so instead we will be focusing on Federal Reserve Chair Jerome Powell’s comments at a conference on monetary policy next Thursday. With the Fed’s “quiet period” ahead of the 21 September FOMC meeting set to kick in the following weekend, it will be the last opportunity he has to shift market expectations. We expect him to talk up the need to act forcibly to get a grip on inflation. Moreover, with core inflation set to rise from 5.9% to 6.1% on 13 September, we agree that a 75bp hike is the most likely outcome. UK: New prime minister to face immediate test as energy bills climb The new UK prime minister will finally be announced on Monday, and Foreign Secretary Liz Truss is widely expected to beat Rishi Sunak to be Boris Johnson’s successor. Markets will be looking at two key areas in the first few days of the new leader. First, extra government support for households and businesses amid soaring energy costs seems inevitable – the question is what form it will take. Truss has said during her campaign that her preference is for tax cuts, though the sheer scale of the energy bill increase anticipated by early next year suggests this is unlikely to be sufficient. Most households will be paying more than 10% of their income on energy in the 12 months from October, which is when the next big increase in bills kicks in. That suggests blanket support payments (or a price cap of some form), in addition to more targeted measures for low-income households, will be required – as will similar support for smaller businesses. Markets are increasingly assuming this will translate into extra Bank of England rate hikes. We agree with that assessment, even if markets are heavily overestimating the scale of tightening that’s likely to be required. Second, Brexit is expected to come back to the fore. Truss is pushing for the passage of the Northern Ireland Protocol Bill, which would enable ministers to unilaterally override parts of the deal agreed with the EU in 2019, and has already passed through the House of Commons. Press reports also suggest Truss is considering triggering Article 16, which in theory allows either side to take safeguard measures if elements of the Northern Ireland agreement aren’t perceived to be working. This story is not likely to be a fast-moving one, but ultimately a unilateral move by the UK to overwrite parts of the deal could see Brussels suspend the UK-EU trade deal, which it can do with 9-12 months' notice. Canada: Bank of Canada expected to hike rates by 75bp next week Next week will see the Bank of Canada hike rates by 75bp after a 100bp hike in July. Inflation is well above target and the economy is growing strongly, and with the BoC having openly talked of the need to front-load policy tightening we do not expect it to switch back to more modest 50bp incremental changes just yet. Read our full BOC preview Eurozone: ECB to implement another 50bp hike; 75bp not ruled out Even if the ECB doves have been very silent in recent weeks, we expect the ECB to ‘only’ hike by 50bp next week. This would be a compromise, keeping the door open for further rate hikes. A 75bp rise looks like one bridge too far for the doves but cannot be excluded. Further down the road, we can see the ECB hiking again at the October meeting but have difficulties seeing the ECB continue hiking when the eurozone economy is hit by a winter recession. Hiking into a recession is one thing, hiking throughout a recession is another. Read our full ECB preview Key events in developed markets next week Source: Refinitiv, ING   ECB Canada Bank of Canada    Source: https://think.ing.com/articles/key-events-in-developed-markets-next-week-020922/?utm_campaign=September-02_key-events-in-developed-markets-next-week-020922&utm_medium=email&utm_source=emailing_article&M_BT=1124162492 Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
The Structure Of Views And Economic- Mercantilism And Libertarianism

The Current Picture Of Economies In The Old Continent

Conotoxia Comments Conotoxia Comments 01.09.2022 14:45
Among economic data, PMI indexes can often be the fastest to show the current picture of the economy. Unlike GDP data, for which one has to wait a long time, preliminary PMIs are published the same month they refer to, with final readings appearing as early as the following month. The donwward of Europe's largest economy The data released today seem to indicate a deterioration in the economy, which could have an impact on stock indexes. For Europe, data from its largest economy, Germany, may be important. The S&P Global/BME Germany Manufacturing PMI for August was revised downward to 49.1 points from a preliminary reading of 49.8 points, indicating a second consecutive month of decline in factory activity. According to this report, there is a sustained decline in new orders, which seemed to affect production levels and slowed the pace of job creation in factories. On the positive side, companies may have been less pessimistic about the outlook than a month earlier, although concerns about high inflation, uncertainty in the energy market and the risk of an economic slowdown still seem to persist. PMI for the eurozone The index for the eurozone as a whole was also at a lower level. The S&P Global Eurozone Manufacturing PMI was revised down to 49.6 points in August from an initial estimate of 49.7 points. Manufacturing declined at a similar pace to July, when the deceleration was the strongest since May 2020. New orders once again fell sharply. Weak demand conditions were a major drag on manufacturers in August, reflecting deteriorating purchasing power across Europe with high inflation. In response to the deteriorating economic outlook, manufacturers further reduced their purchasing activity, the report said. The Lowest Poland Manufacturing PMI In Poland, the situation does not seem optimistic either. Poland Manufacturing PMI was the lowest since 2020. The S&P Global Poland Manufacturing PMI fell to 40.9 in August from 42.1 in July, below market forecasts of 41.8 points. The reading pointed to the fourth consecutive month of declining factory activity and was the worst since May 2020, as both production and new orders fell sharply. On the price front, costs and fees continued to rise at a slower pace, although high inflation continues to erode purchasing power, with sales from both domestic and international sources falling, a statement to the publication said. So it seems that economies still may not have reached their, which may also translate into a lack of bottoms in stock market indices. The following indicated their drop today, with Germany's DAX losing 1.7 percent from the start of the session until 10:55 GMT+3, France's CAC40 losing 1.68 percent and Italy's FTSE MIB losing 1.5 percent.
Less Precipitation Make Aluminium Smelters In Yunnan (China) Change Its Operating Rate

Poland: Industrial Production Increased By Almost 11%

ING Economics ING Economics 20.09.2022 12:29
Industrial output expanded by 10.9% YoY in August even though manufacturers face soaring energy prices and uncertainty about the availability of energy sources this winter. At the same time, producers’ prices continued running at ¼ level higher than in the corresponding period of 2021 and higher costs will continue to be passed on to retail prices August's production reading is a signal of economic resilience   Industrial production rose by 10.9% year-on-year in August (ING: 9.8%YoY; consensus: 9.7%YoY), following an increase of 7.1%YoY in July (revised from 7.6%YoY). The higher annual growth rate than the month before was due in part to calendar effects (a negative pattern of working days in July). Production was also supported by a smaller scale of shutdowns in the automotive and house appliances sectors in August. Production of motor vehicles, trailers and semi-trailers increased by 40%YoY and electrical appliances by 23.9%YoY. Interestingly, while the second quarter saw month-on-month declines in seasonally-adjusted production, the third quarter has brought a rebound in the level of output. No manufacturing recession in 3Q22 Industrial output (MoM SA)   We find the August production reading a positive signal of economic resilience, given poor leading indicators, weaker orders and high energy and commodity prices as well as uncertainty about the availability of energy in the autumn-winter period. We observe a gradual cooling down rather than a sudden and abrupt halt in activity as suggested by the latest manufacturing PMI index readings. We estimate that there will be an increase in 3Q22 GDP on a quarter-on-quarter seasonally-adjusted basis and that annualised growth will be close to 3%. In other words, we do not see a technical recession in 3Q22, but we still expect the second half of the year to be markedly worse for the Polish economy than the first with the most risk still in winter. Producer prices increased by 25.5% YoY in August, i.e. at the same pace as in July (after revision), despite another marked decline in fuel production prices (-6.5% month-on-month). Prices in manufacturing increased by 20.2%YoY and in mining and quarrying by 30.4%YoY. However, the greatest pressure was seen from energy prices, which rose in August at a double-digit rate (10.0%MoM) for the second month in a row and are already nearly 80% higher than a year earlier. Overall, the producers’ prices index (PPI) is around ¼ higher than a year ago, and the process of passing on rising production costs to final prices will continue in the coming months. This confirms our concern that the next few months will bring a new wave of retail price increases. We do not share the optimism of the Monetary Policy Council representatives who speak of a stabilisation or decline in CPI inflation before the end of the year. We rather expect an adjustment of prices and the economy to face another price surge, this time an energy shock. In our view, the expansionary nature of fiscal policy will even increase beyond what we see in 2022, making it easier to still pass on high costs to retail prices. Nevertheless, rate hikes are coming to an end. Recent comments show that the National Bank of Poland (NBP) is rather targeting a decline in the annual CPI (in our view possible by the end of 2023) and a 'soft landing' of the economy, while CPI at 2.5%YoY is a seemingly forgotten target. An important factor that reduces the effectiveness of the rate hikes so far is fiscal expansion. Currently, the total policy mix is only slightly restrictive despite inflation at 16.1%YoY. With such a definition of NBP targets, we can imagine a rate cut in 2023. With that in place, we may face another cycle of rate hikes in 2024. The way to fight inflation on the monetary and budgetary policy fronts in Poland differs from the approach of other countries, where central banks and governments communicate that domestic demand and labour market need to cool down and wage growth to moderate below the rate of inflation. All of this is to avoid a repeat of the 1970s scenario in the US when it took a couple of cycles of rate hikes to bring inflation down to required levels. The ultimate cost of fighting it was greater than the cooling of the economy at the start of a period of high inflation. Read this article on THINK TagsPoland industrial production Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
The EUR/USD Pair Is Showing A Potential For Bearish Drop

Europe: Eurozone PMI Declined. Is Recession Here? | Euro: Next ECB Move Could Be A 75bp Hike

ING Economics ING Economics 23.09.2022 14:35
The third decline in a row for the eurozone PMI indicates that business activity has been contracting throughout the quarter. This confirms our view that a recession could have already started. At the same time, the August increase in energy prices is translating into stronger price pressures Shoppers in Lubeck, Germany German Composite PMI Reached 45.9 The third quarter clearly marks a turning point in the eurozone economy. After a strong rebound from contractions caused by the pandemic, the economy is now becoming more severely affected by high inflation both at the consumer and producer level. Led by Germany, which saw its composite PMI drop to 45.9 in September, the eurozone saw its composite PMI fall to 48.2. Both services and manufacturing output are well below 50 at 48.9 and 46.2, respectively, signalling broad-based contracting business activity. Read next:  The manufacturing sector is bearing the brunt of the problems. Supply chain problems still disturb production, but weaker global demand has caused backlogs of work to fall as new orders are decreasing quickly. Incidental production stoppages due to high energy costs are also adding to declining production in the sector. But with the tourism season behind us, there are few opportunities left for any marked catch-up effects in the eurozone economy. That has pushed the services PMI deeper into negative territory as consumers are starting to become more cautious in spending as energy bills rise across the monetary union. Overall, the view of a eurozone economy moving into recession seems confirmed by the gloomy September PMI survey. European Central Bank May Hike The Rate By 75bp The surge in gas and electricity prices in August is now leading to further price pressures emerging for businesses in September, even though other costs have been moderating due to weakening global demand. This confirms the stagflationary environment that the eurozone is currently in. The ECB has made clear that it will continue to hike in a determined manner for the short-run, as it tries to battle stubbornly high inflation. A 75 basis point hike in October is therefore definitely on the table, despite a weakening economy. Read this article on THINK TagsInflation GDP Eurozone ECB Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Forex: CEE FX Will Be Driven Mainly By The Global Story, The Polish Zloty (PLN) Should See Slightly Stronger Levels

Polish Zloty (PLN): National Bank Of Poland Surprised With Its Monetarty Policy Decision

ING Economics ING Economics 06.10.2022 12:08
The Monetary Policy Council kept National Bank of Poland rates unchanged, surprising investors. The Council rather prefers a longer period of disinflation and soft landing than a prompt return of CPI to 2.5%. Given the fast hikes in developed markets and a tense geopolitical environment, the zloty is at a risk of further weakening   ING and the consensus expected a 25bp rise in the main policy rate, while markets priced in a 25-50bp hike. In previous weeks, some Council members had explicitly declared a significant probability of ending the hiking cycle. The further sharp rise in inflation in September (especially core) did not change that opinion. This is surprising, since September's CPI negated the scenario of inflation peaking in the summer and trending downwards in the following months. In addition, major central banks entered a period of strong interest rate hikes, and the PLN weakened again. The decision to leave interest rates unchanged raises the risk of PLN depreciation, which will make it even more difficult to contain already high inflation. In the first reaction after the decision was announced, the PLN lost some 4gr against the EUR. In the post-meeting statement, the MPC assessed that past rate hikes and the expected economic downturn will contribute to weakening demand and lowering inflation "toward the inflation target". In particular, the document notes that the MPC writes about lowering inflation "towards the target", not "to the target". In addition, it was noted that the return to the NBP target will be gradual, suggesting that the MPC is not determined to bring inflation down to 2.5% year-on-year quickly, and accepts a longer period of elevated CPI levels. Markets will now focus on tomorrow's speech by NBP President Adam Glapinski, which may shed more light on the outlook for interest rates in the coming months. In our view, September's inflation data clearly point to another wave of price increases in response to earlier increases in costs, especially wholesale energy prices. Given the lag mechanism, the pass-through of higher costs to final prices will continue in the months ahead, even as demand softens. Inflation risks remain high, and in our view the peak in inflation is still ahead. At this stage we think the guidance that the tightening cycle is completed and discussion on possible rate cuts in 2023 to be risky. We see increasing chances of PLN weakening. The NBP's goals at the moment are rather to reverse the inflation trend and ensure a soft landing for the economy, than to bring inflation down to the target (2.5% YoY) as quickly as possible. Such a strategy raises the risk of a sustaining high inflation expectations and a prolonged period of elevated inflation. While we expect CPI in 2023 will fall from 20% to below 10% YoY, in 2024, when the fiscal measures (mainly cuts in indirect taxes) are reverted, inflation will rebound. Also, our models present a persistently high CPI in 2023-24 even with a GDP slowdown from 4.1% on average in 2022 to 1.5% ion average in 2023. Therefore, in our opinion, we are facing policy tightening again in 2024, either rate hikes or fiscal tightening. The ultimate cost of fighting long-term high inflation will be higher than if the policy mix tightens now. Read this article on THINK TagsPoland rates Poland MPC Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Eurozone: Germany - annual GDP growth is forecasted to reach 1.8%

Supply Chain Issues And Rivers Status Affect German Industry Sector. Retail Sales Down (07/10/22)

ING Economics ING Economics 09.10.2022 17:23
Weak industrial production and retail sales provide further evidence that the German economy continues to slide into recession Industrial production declined... Germany continues to descend into recession. In August, production in industry in real terms was down by 0.8% on the previous month on a price, seasonally and calendar-adjusted basis, from an upwardly revised stagnation in July. Over the year, industrial production was up by 2.1%. Ongoing supply chain frictions as well as the low water levels in German rivers were the main reasons behind this drop in industrial activity. To make things worse, production in the energy sector was down by 6.1% month-on-month and the construction sector by 2.1%. According to the statistical office, production in the energy-intensive sectors was down by 2.1% MoM and by 8.6% compared with February this year. Retail sales in August were down by 1.3%, from an increase of 0.7% in July. Read next: Great Britain Expects Positive Results For Its Economy | FXMAG.COM More to come German industry and the entire economy have not come to an abrupt stop but are rather in the middle of a long and gradual slide into recession. Some examples? At the start of the year, production expectations were close to all-time highs but since the start of the war in Ukraine they have gradually come down, with no end currently in sight. Order books were richly filled at the start of the year and companies were filling inventories. Since then, new orders have dropped in almost every single month, and actual production has weakened since the summer. We don't need a crystal ball to see a further weakening of German industry in the coming months. The full impact of higher energy prices will only be felt in the last months of the year. It is not only the price effect putting a burden on German industry but also the lack of industrial input goods (including industrial gas). Today’s data are like a sneak preview of more to come. High energy prices will increasingly weigh on private consumption and industrial production, making a contraction of the economy inevitable. The only question is how severe such a contraction or recession will be. Read this article on THINK TagsIndustrial Production Germany Eurozone Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
The Hungarian Central Bank Confirmed Its Commitment To Keeping Conditions Tight For A Longer Period

Europe: The Latest Hungarian Budget Data Is Quite Surprising

ING Economics ING Economics 10.10.2022 15:33
The recent budgetary performance has been volatile from month to month. This time, we saw a positive surprise. We see further improvement in the short run but growing challenges in the long run Source: Shutterstock Budget deficit improves in September The Hungarian budget posted a HUF 181bn surplus in the month of September, after posting a deficit in August and a surplus in July. This is quite a surprise, especially considering the historic budgetary performances in September. After the good result last month, the cash flow-based year-to-date budget balance shows a HUF 2,691.7bn deficit, which amounts to 85.4% of the full-year target. The main reason for the improvement is the revenue side of the budget. The press release from the Ministry of Finance highlighted that tax- and excise duty-related income increased by almost 16% compared to a year ago. This outcome hardly comes as a surprise with the still positive real GDP growth and surging inflation, which boosts revenues. Cash flow-based year-to-date central budget balance Source: Ministry of Finance, ING   When it comes to the expenditure side, the press release did not reveal any new information about the budgetary developments. The latest information related to spending is that the government mandated a general “expenditure freeze” in late September. This takes us back to summer when the government ordered budgetary institutions to cut expenditures. It looks as though some of these institutions failed to meet their targets, and the government has now reacted. In practice, this “expenditure freeze” means that the finance minister will oversee all the invoices on spending. In our view, this decision is more of a political and management issue than a financing matter. 2022 deficit target increase is formally announced The Finance Ministry also announced – formally for the first time – that it increased the accrual-based (Maastricht) deficit-to-GDP target. The 1.2ppt increase to 6.1% is due to the accelerated accumulation of natural gas reserves by the Hungarian Hydrocarbon Stockpiling Association (HUSA), which covers roughly HUF 740bn worth of gas purchases. As Eurostat has counted HUSA as part of the public sector since 2019, its gas purchases increase the Maastricht deficit, while the debt taken by the association increases the public debt. However, since the extra purchases were sourced from a syndicated loan with a state guarantee, this did not generate a debt financing requirement. To put it more simply, the deficit from a cash-flow perspective was not affected by this, so the higher deficit target is purely a technical change. Steps might be needed to meet the 2023 deficit target Looking forward, we expect a significant improvement in the budgetary figures as the latest tax measures (e.g. windfall tax-related payments) will start to boost revenues alongside rising inflation. On the other hand, due to higher inflation, the government needed to adjust the pension expenditure to preserve its purchasing power at a real value, fulfilling a legal requirement. This, with an extra one-off pension bonus (due to the expected +3.5% real GDP growth in 2022), will create an extra budgetary burden of roughly HUF 200bn in November. But even with that, we expect the government to be in line with this year’s cash flow and accrual-based deficit targets. Next year, however, could be trickier as the 2023 budget included a 3.5% deficit target. The severely dampened economic outlook compared to the summer outlook might provide some extra hurdles. The government will reveal the amended budget in late December when we still see the government keeping the original 3.5% deficit target, but probably deciding on some measures on both the revenue and the expenditure sides. Read this article on THINK TagsHungary Fiscal policy Deficit Debt Budget Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Italy: ING Economics expect quarter-on-quarter GDP in the fourth quarter may contract by 0.2%

ING Economics: Italy - Even If In Q3 Gross Domestic Product (GDP) Will Avoid A Decline, Q4 May Be Worse

ING Economics ING Economics 11.10.2022 18:27
Volatile August production data should be taken with a pinch of salt as underlying developments continue to point to more accentuated weakness over 4Q22, when industry will very likely be confirmed as a drag on growth Car production line in Turin, Italy   According to Istat data, Italy's seasonally-adjusted industrial production increased a surprisingly strong 2.3% month-on-month in August (from an upwardly revised 0.5% in July). The working day adjusted measure posted a 2.9% year-on-year change (from -1.3% YoY in July). "August effect" possibly at play, in 3Q22 industry should remain a drag on GDP growth The broad aggregate breakdown shows that consumer and investment goods were the main drivers of the acceleration while the production of energy contracted. To be sure, this is a positive reading, but it should be taken with a pinch of salt, as the August release is often affected by marked volatility due to firm closures and their impact on seasonal adjustments. In order to get a sense of the underlying developments, we look at the moving quarter and note that over the June-August period, production contracted by 1.2% from the previous three months. Confidence and PMI data point to a deterioration in September While the August reading can still be partially interpreted as evidence that Italian industry continues to be relatively more resilient to international supply chain disruptions and to ballooning energy prices, we expect the picture to get gloomier over the coming months. The manufacturing PMI has been in contraction territory since July and business confidence plunged in September, with the expected production subcomponent down to levels not seen since November 2020. The set of measures recently put in place by the outgoing government to weather the energy inflation shock will help limit the damage for businesses but is unlikely to stop industry from becoming a drag on growth in both 3Q22 and 4Q22. The European Central Bank's tightening mode will not make things any easier over the next few months, possibly weighing on the investment component. A GDP contraction could still be avoided in 3Q22, not in 4Q22 After today’s reading we are mildly comforted in our view that the Italian economy might manage to avoid a contraction in 3Q22 (we expect a minor 0.1% GDP expansion) but remain convinced that this will not be possible in 4Q22, when we project a 0.5% quarter-on-quarter contraction, which should mark the start of a recession. Read this article on THINK Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
That's A Surprise! Eurozone Industrial Production Went Up By Over 1%

That's A Surprise! Eurozone Industrial Production Went Up By Over 1%

ING Economics ING Economics 12.10.2022 12:00
The strong August reading does not fully reverse the losses from July, and expectations for manufacturing in the months ahead continue to weaken. Still, for the ECB this is another argument not to pivot towards a more dovish stance in the short run   Industrial production increased by 1.5% in August after a -2.3% drop in July. This was much better than expected but still does not erase losses from July. Ireland is experiencing very volatile production at the moment, which is affecting total eurozone numbers, but among the large industrial economies we see similar – though more muted – moves. France, Italy and Spain all experienced decent to strong growth in August, while Germany remained the exception with another month-on-month loss in production. This is the third consecutive month of declines in German production. Industrial production is generally volatile from month to month and therefore we do not think this is to be taken as the start of a recovery. All survey data and anecdotal evidence point toward a more significant slump ahead as demand is weakening and high energy costs are forcing businesses to slow production or stop it altogether in certain energy-intensive sectors. The upside risk to that view comes from improving supply chains, which could unlock some backlogs of production. Still, our base case is for the manufacturing sector to contract in the months ahead. Overall, while the outlook for production is weakening, this data in itself is no reason for the ECB to change tack in terms of its rate hike strategy. For a dovish pivot, the ECB would need to see evidence that the economy is contracting quickly. While a quarterly contraction in manufacturing is definitely a possibility, these August data are far from alarming. A 75bp hike in October is therefore very much on the table at the moment. Read this article on THINK TagsGDP Eurozone Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
If German Numbers Remain Weak, The ECB Will Have To Consider Easing Up On Rates

Podcast: Europe's Real Troubles Discovered As A Result Of The War In Ukraine

Saxo Bank Saxo Bank 13.10.2022 11:42
Summary:  As we await today's US September CPI and wonder whether a soft surprise can really move the needle, we highlight one of the starkest assessments of Europe's current predicament, which has crystallized since Russia invaded Ukraine earlier this year and is not just about stocking up on enough gas to survive the coming winter, but will require decades to address. A look at burgeoning interest in the nuclear energy, stocks to watch and upcoming earnings reports, crude oil, wheat and a 79-year low in the orange crop in the US and more on today's pod, which features Peter Garnry on equities, Ole Hansen on commodities and John J. Hardy hosting an on FX. Listen to today’s podcast - slides are found via the link. Follow Saxo Market Call on your favorite podcast app: Apple  Spotify PodBean Sticher If you are not able to find the podcast on your favourite podcast app when searching for Saxo Market Call, please drop us an email at marketcall@saxobank.com and we'll look into it.   Questions and comments, please! We invite you to send any questions and comments you might have for the podcast team. Whether feedback on the show's content, questions about specific topics, or requests for more focus on a given market area in an upcoming podcast, please get in touch at marketcall@saxobank.com.   Source: https://www.home.saxo/content/articles/podcast/podcast-oct-13-2022-13102022
Short-term analysis - Euro to US dollar by InstaForex - 31/10/22

ING Economics Think Inflation Is Already There In The Eurozone. Q3 GDP May Decline By 0.2%

ING Economics ING Economics 17.10.2022 12:34
Looking at all the evidence available so far, it looks like the eurozone fell into a shallow recession in the third quarter. For the European Central Bank, this is unlikely to be enough to prompt an immediate dovish pivot given its determination to hike interest rates in the face of double-digit inflation. We still expect another 75bp hike in October   A recession in the eurozone has now become the near-consensus view, with the IMF being the latest international institution to predict a contraction in the eurozone economy in 2023. The only question seems to be how severe this winter recession will be and when it will start. We take a look at whether the economy actually started to shrink in the third quarter. Soft data suggests that a recession is likely to have started During the pandemic, we developed a nowcast indicator that gave us insight into how the eurozone economy was performing during lockdowns. While it was designed to perform well in the specific circumstances of the pandemic, there is merit in looking at it once again. The big caveat is that electricity use is an important driver of the index, which has of course been subject to large productivity gains as the energy crisis has unfolded. Nevertheless, we see that the direction for most underlying variables is slightly negative at the moment, corresponding to a view that the economy fell into a mild contraction at the end of the third quarter. Nowcast tracker suggests that activity has been moderately declining recently For more on how this index is constructed, read here: https://think.ing.com/articles/introducing-the-ing-weekly-economic-activity-index-for-the-eurozone/ Source: ING Research   Mobility indicators are an important part of the nowcast index. When the economy reopened earlier in the year, we saw a strong increase. But except for workplace activity, most mobility indicators normalised during the spring and have remained at these levels over the course of the third quarter. Our average of the Google mobility indicators shows that the second quarter still saw large mobility gains, while the third quarter was flat. While seasonal factors may understate the performance in this regard, it does seem fair to assume that most, if not all, of the post-lockdown rebound is now behind us. Adding to meagre nowcast data, surveys suggest that a recession is likely to have started already. The composite PMI was below 50 – signalling contraction – for all three months of the third quarter. In fact, it gradually worsened as the quarter progressed, with September showing more serious signs of contraction as the summer months ended. Both services and manufacturing activity are now well below 50. This is a broader indicator of activity, which adds to signs that a shallow recession began in 3Q. Still, some evidence from data not collected from surveys would be useful so as not to miss out on positive surprises. Retail sales are weak and tourism is not expected to make up for it When looking at consumer spending, we see a clear downward trend in retail sales. November last year was the recent peak in sales activity after which a steady decline set in. This is because of the sharp decline in purchasing power that households have experienced since then, but will also be related to the reopening of certain services. With people returning to restaurants and bars and starting to take holidays again, spending patterns have shifted away from goods. The latter seems to be a smaller part of this though. As chart 2 shows, people are spending more than ever in retail, but volumes are down. So the impact of inflation is that people are forced to spend more and more at the store but take home less for it. Interestingly, car sales have been increasing in August, coming from a very low base. Consumers pay more in retail, but take home lower volumes than late last year Source: Eurostat, ING Research   The ECB put a lot of emphasis on the positive impact of tourism on third-quarter growth. This is a bit of a blind spot in terms of more frequent data and could indeed add to positive activity this quarter. Looking at overnight stays in the eurozone, we see that July and August were very close to pre-pandemic levels which suggests continued 3Q strength, but businesses are less optimistic. Surveys suggest that the peak in tourism activity was in June and that the summer may have slightly disappointed. Still, tourism is likely to have added positively to the third quarter GDP growth number. All in all though, it looks like the summer was not strong enough to have kept consumption growth positive overall. Industry limits losses so far due to improving supply chains, but trend is down When looking at industry, we see a divergence between the survey and hard data so far. While surveys suggest a sizable weakening in activity, August data was better than expected. It seems that the improvement in supply chain problems and the availability of inputs to production are allowing businesses to catch up on backlogs of orders. Still, new orders are falling and survey data suggests a weaker September. Particularly in energy-intensive sectors, production seems to have dropped again in September. The German statistical office has started to release a new times series for energy-intensive industry, showing that production in these sectors dropped by more than 8% between February and August. If September was indeed weaker than August, industrial production will have been negative on the quarter, adding to expectations that the economy was already in a shallow contraction in 3Q. Production recovered a bit in August, but energy-intensive sectors look problematic in September Right chart shows total manufacturing and the most energy-intensive sectors Source: Eurostat, Macrobond, European Commission DGECFIN, ING Research   Interestingly enough, trade is very difficult to judge at the moment. Data on volumes is hard to come by and strongly rising prices for energy have caused nominal imports to soar. It looks like real export growth weakened over the summer, but imports could have fallen even more as energy is such an important component and energy use is down due to high prices. This means that net exports could have actually contributed positively to GDP growth last quarter. If this makes growth positive, it would mean that a recessionary environment saw positive growth. Just as the US went through a technical recession in the first half of this year when the economy contracted but no real signs of recession were visible, so the eurozone could be in a technical expansion, where the economy expands in a recessionary setting. Contraction in 3Q, but no smoking gun for a dovish pivot from the ECB Taking this all together, we find enough weakness in recent data to believe that a recession has already started and stick to our forecast of a -0.2% quarter-on-quarter contraction in 3Q. But shallow negative growth – still held up by temporary recovery factors – is also unlikely to give the ECB the smoking gun for a dovish pivot. In fact, at the next ECB meeting on 27 October, there won’t be any new staff projections, nor will there be hard data for September, allowing the ECB to announce another hike by 75 basis points. It will take until the December meeting before the ECB has a better view on the severity of the recession, which should then be enough to embark on a dovish pivot. Read this article on THINK TagsGDP Eurozone ECB Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
China's Position On The Russo-Ukrainian War Confirmed At The G20 Meeting

The Japanese Yen (JPY) Is The Only G20 Currency Which Have Been Weaken | China Delays Publication Of GDP Report

Saxo Bank Saxo Bank 18.10.2022 10:40
Summary:  Risk sentiment was supported by more U-turns in UK fiscal policy and strong earnings from Bank of America supporting the US banks. Equities rallied and the USD declined, but the Japanese yen failed to ride on the weaker USD and continued to test the authorities’ patience on intervention. Higher NZ CPI boosted bets for RBNZ rate hikes, and the less hawkish RBA meeting minutes brought AUDNZD to fresh lows. EU meetings remain key ahead as the bloc attempts to finalize Russian price caps. What’s happening in markets?   The Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) rally after UK-policy U-turn. So far this reporting season earnings are declining The mood was risk-on amid Monday’s rally; with the major indices charging higher with the S&P500 up 2.7%. The breadth of the rally was so strong that at one point over 99% of the companies in the S&P500 were rising, which pushed the index up away from its 200-week moving average (which it fell below last week). Meanwhile the Nasdaq 100 gained 3.5%. The rally came after the UK made $30 billion pounds worth of savings after scrapping tax cuts (see below for more). It was received well by markets and investors looking for short term relief. Bond yields fell, equities rallied and after the GBP lifted 1.6% the US dollar lost strength. But the UK is not out of the lurch with power outages likely later this year. Plus also consider, so far this US earnings season, only 38 of the S&P500 companies have reported results and earnings growth has so far declined on average by 3%. So it’s too soon to gauge if markets can sustain this rally, particularly with the Fed likely to hike rates by 75 bps later this month and next. Strong earnings from bank boosted market sentiment. Bank of America (BAC:xnys), reporting solid Q3 results with net interest income beat and a 50bp sequential improvement on CET1 capital adequacy ratio, surged 6% and was one of the most actively traded stock on the day. U.S. treasury curve (TLT:xnas, IEF:xnas, SHY:xnas) steepened Initially US treasuries traded firmer with yields declining, after taking clues from the nearly 40bps drop in long-dated U.K. gilts following the new U.K. Chancellor Hunt scrapping much of the "mini budget" tax cuts and the support for household energy bills. Some block selling in the long-end treasury curve however took 30-year yields closing 3bps cheaper and 10-year yields little changed at 4.01%. The 2-year to 5-year space finished the session richer, with yields falling around 5bps and 2-year closed at 4.44%. The market has now priced in a 5% terminal Fed fund rate in 2023 and a 100% probability for a 75bps hike in November and over 60% chance for another 75bps hike in December. Australia’s ASX200 (ASXSP200.1) lifts 1.4%; with a focus on Uranium, stocks exposed to the UK and lithium Firstly Lithium stocks are in the spotlight after Pilbara Minerals (PLS) accepted a new sales contract to ship spodumene concentrate for lithium batteries from Mid-may, at $7,100 dmt. PLS shares are up 3.1% with other lithium stocks rising including Core Lithium (CXO) up 3.7% and Sayona Mining (SYA) up 4.7%. Secondly, shares in Uranium are focus today after Germany plans to extend the life of the countries three nuclear power plants till April, as it contends with the energy crisis. The Global Uranium ETF (URA) rose 5.9% on Monday and ASX uranium stocks are following suit like Paladin (PDN) up 2%. For a deep look at the uranium/nuclear sector, covering the stocks to perhaps watch and why read our Quarterly Outlook on the Nuclear sector here. Thirdly, amid the risk-on short term relief in markets from the UK, companies with UK exposure are rallying amid the short-term sentiment shift , including the UK’s 5th biggest bank, Virgin Money (VUK) which is listed on the ASX and trades up 5.3%. Ramsay Health Care (RHC), which is a private hospital/ health care business with presence in the UK trades up almost 2% today. Ramsay's recent full-year showed UK revenue doubled to $1.2 billion. Hong Kong’s Hang Seng (HSIV2) China’s CSI300 (03188:xhkg) Stocks in Hong Kong and mainland China traded lower initially and spent the rest of the day climbing to recover all the losses, with Hang Seng Index and CSI300 finishing marginally higher. General Secretary Xi’s speech last Sunday hailed China’s “Dynamic Zero-Covid” strategy and gave no hint of shifting policy priorities toward economic growth as some investors had hoped for. Among the leading Hang Seng constituent stocks, HSBC (00005:xhkg) gained 1.5% and the Hong Kong Stock Exchange (00388:xhkg), which is reporting Q3 results on Wednesday, climbed 2.3%. Chinese banks gained, with China Merchant Bank rising 2.3% and ICBC (01389) up 1.7%.  Healthcare names gained, Hansoh Pharmaceutical (03692:xhkg) surged 13.2% and Sino Biopharm (01177:xhkg) rose 3.6%. EV stocks were among the laggards, dropping from 1% to 5%. Li Ning (02331:xhkg) tumbled over 13% at one point and finished the trading day 4.3% lower following accusations on mainland social media about the sportswear company’s latest designs resembling WWII Japanese army uniforms.  Japanese yen paying no heed to jawboning efforts The US dollar moved lower on Monday, but that was no respite for the Japanese yen. All other G10 currencies got a boost, with sterling leading the bounce against the USD with the help of dismantling of the fiscal measures by the newest Chancellor of the Exchequer Jeremy Hunt and the slide in UK yields. The only G10 currency that weakened further on Monday was the JPY, which continued to test the intervention limits of the authorities. USDJPY rose to 149.08, printing fresh 42-year highs. Bank of Japan Governor Kuroda will be appearing before the Japanese parliament from 9.50am Tokyo time, after some stern remarks in the morning saying that they “cannot tolerate excessive FX move driven by speculators”. While intervention expectations rose, the yen still did not budge until last check. NZD rose on higher New Zealand CPI boosting RBNZ tightening bets Another surprisingly strong inflation print from New Zealand, with Q3 CPI easing only a notch to 7.2% y/y from 7.3% y/y against consensus expectations of 6.5% y/y and an estimate of 6.4% from the RBNZ at the August meeting. The q/q rate rose to 2.2% from 1.7% in Q2 and way above expectations of 1.5%. This has prompted expectations of more aggressive tightening from the RBNZ with a close to 75bps hike priced in for the Nov 23 meeting vs. ~60bps earlier, and the peak in overnight cash rate at over 5.3% from ~5% previously. NZDUSD rose to 0.5660 with the AUDNZD down to over 1-month lows of 1.1120 with RBA minutes due today as well for the October meeting when the central bank announced a smaller than expected rate hike of 25bps. Crude oil (CLX2 & LCOZ2) Crude oil prices stabilized in early Asian hours on Tuesday after a slight decline yesterday, despite a weaker dollar and an upbeat risk sentiment. WTI futures rose towards $86/barrel while Brent was above $91. Chinese demand concerns however weighed on the commodities complex coming out of the weekend CCP announcements. On the OPEC front, Algeria's Energy Minister echoed familiar rhetoric from the group that the decision to reduce output is a purely technical response to the world economic circumstances.   What to consider? UK need to know: Policy U-Turn provides shorter term risk-on rally, but long-term headwinds remain, UK holds talks to avoid power shutdowns New British chancellor Jeremy Hunt reversed almost all of PM Liz Truss’ mini-budget. Initially Truss’ plans sent markets into a tailspin - whereby the pound hit record lows and the Bank of England was forced to intervene. However, after Hunt virtually scrapped all of the announced tax cuts, and cut back support for household energy bills, saving $32 billion pounds, then risk sentiment improved and the pound gained strength. But, the issue is, firstly; there are still almost $40 billion pounds worth of savings to be made to close the fiscal gap; meaning more government spending cuts will come and possibly tax hikes. This is probably why new UK finance chief, Hunt, declined to rule out a windfall profit tax. Nevertheless, the U-turn was received well by markets for the short term, bond yields fell, equities rallies and the pound sterling (GPBUSD) rose 1.6% against the USD with the US dollar losing strength. And the second reason the UK is not out of the lurch is that the fundamentals haven’t changed; the UK energy crisis is not resolved – yesterday in the UK government officials met major data centers discussing the need to use diesel as backup if the power grid goes down in the coming months. Amazon.com and Microsoft run data centers in the UK. Earlier this month, National Grid also warned some UK customers they could face 3-hour power cuts on cold days. The Bank of England is expected to downgrade its rate hike expectations.    NY Fed manufacturing headline lower on mixed components The NY Fed manufacturing survey for October fell to -9.1, contracting for a third consecutive month and coming in below the expected -4.0 and the prior -1.5. While survey data remains hard to trust to decipher economic trends, given a small sample size and questioning techniques impacting results, it is worth noting that more factories are turning downbeat about future business conditions which fell 10 points to -1.8 and was the second weakest since 2009. Also, the prices paid measure rose for the first time since June, echoing similar results as seen from the University of Michigan survey. Fed speakers ahead today include Bostic and Kashkari and terminal rate expectations remain on watch after they are touching close to 5%. La Nina is underway in Australia; floods decimate some wheat crops In the Australian state of Victoria at the weekend, floods decimated some wheat crops, which has resulted in the price of Wheat futures contracts for March and May 2023 lifting in anticipation that supply issues will worsen. The Australian Federal Emergency Management Minister said parts of Australia face ‘some serious flooding’ with more rain forecast later this week, with 34,000 homes in Victoria potentially expected to be inundated or isolated. The Bureau of Meteorology forecasts the La Lina event to peak in spring that’s underway in the Southern Hemisphere, before turning to neural conditions early next year. La Nina is not only disastrous to lives, homes and businesses, but the extra rainfall usually brings about lot of regrowth when rain eases. The risk is, if El Nino hits Australia in 2023 for instance, bringing diminished rainfall and dryness, then there is a greater risk of grassfires and bushfires. Investors will be watching insurance companies like Insurance Australia Group, QBE. As well as companies that produce wheat, including GrainCorp and Elders on the ASX and General Mills in the US. RBA Meeting Minutes out – AUDUSD climbs of lows, up 1.7% The Aussie dollar rose 1.7% off its low after the USD lost strength when the UK re winded some tax cuts. The AUDUSD will be in focus with the RBA Meeting Minutes released, highlighted why the RBA rose interest rates by just 0.25% this month, moving from a hawkish to dovish stance. The RBA previously highlighted it sees unemployment rising next year, and sees inflation beginning to normalize next year, which in our view, implies the RBA will likely pause with rate hikes after December, after progressively making hikes of 25bps (0.25%). Still the Australian dollar against the US (AUDUSD) remains pressured over the medium term, given the Fed’s expected heavy-pace of hikes, while China’s commodity buying-power is restricted with President Xi maintaining a covid zero policy. As such, the AUD's rally might be questioned unless something fundamentally changes. China delays the release of Q3 GDP and September activity data Chin’s National Bureau of Statistics delays the release of Q3 GDP, September industrial production, retail sales, and fixed asset investment data that were scheduled to come on Tuesday without providing a reason or a new schedule.   For our look ahead at markets this week - Listen/watch our Saxo Spotlight.   For a global look at markets – tune into our Podcast. Source: https://www.home.saxo/content/articles/equities/market-insights-today-18-oct-18102022
The EUR/USD Pair Is Showing A Potential For Bearish Drop

Eurozone Inflation Hits 9.9%, It's The Highest Level In More Than 25 Years!

Conotoxia Comments Conotoxia Comments 19.10.2022 15:26
While consumer inflation seems to be slowing down in the United States, looking at the CPI measure, the opposite is true in the Eurozone or the United Kingdom. Price growth continues to accelerate, according to data released today. What is the inflation rate in Europe? The annual inflation rate in the eurozone rose to 9.9 percent in September 2022, up from 9.1 percent a month earlier. This is the highest inflation rate since measurements began in 1991. Inflation has thus moved further away from the European Central Bank's 2 percent target, which may cause policymakers to continue tightening monetary policy despite the risk of recession. The main upward pressure for eurozone prices came from the energy sector (40.7 percent versus 38.6 percent in August), followed by food (11.8 percent versus 10.6 percent), services (4.3 percent versus 3.8 percent) and non-energy industrial goods (5.5 percent versus 5.1 percent). Annual core inflation, which excludes volatile energy, food, alcohol and tobacco prices, rose to 4.8 percent in September. On a monthly basis, consumer prices rose 1.2 percent, Eurostat reported. Source: Conotoxia MT5, EUR/USD, H4 Prices in the UK are also rising The UK's annual inflation rate rose to 10.1 percent in September 2022 from 9.9 percent in August, returning to the 40-year high reached in July and beating market expectations of 10 percent, trading economics reported. The biggest contributor to the increase was food, which became more expensive by 14.8 percent. Costs also rose sharply for housing and utilities, as they rose by as much as 20.2 percent, mainly, due to soaring electricity or gas prices. In contrast, core inflation on an annualized basis, which excludes energy, food, alcohol and tobacco, rose to a record 6.5 percent, compared to expectations of 6.4 percent, according to data from the Office for National Statistics. Source: Conotoxia MT5, GBP/USD, H4 High inflation in Europe - central banks with no way out? High inflation may not give much room for further action by central banks in the context of executing the so-called pivot, i.e. a turnaround in the current monetary policy, which consists mainly of interest rate hikes. Further price increases could seal further interest rate hikes in the Eurozone or the UK, which in turn could affect household budgets, but also company valuations. Daniel Kostecki, Director of the Polish branch of Conotoxia Ltd. (Conotoxia investment service) Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results.
Belarusian opposition leader proposed a collaboration to Ukraine

Belarusian opposition leader proposed a collaboration to Ukraine

Center Of Eastern Studies Center Of Eastern Studies 21.10.2022 13:57
On 10 October, the leader of the Belarusian opposition Sviatlana Tsikhanouskaya proposed to President Volodymyr Zelensky that an alliance be formed between Ukraine and a free & democratic Belarus – i.e. the interim cabinet formed under Tsikhanouskaya’s leadership in August this year. At the same time, she declared that Belarus should give up its political, economic and military alliance with Russia, and that Ukraine would win its war against the Russian aggressor. So far, the offer has not met with a high-level reaction from Kyiv. On 12 October Oleksiy Arestovych, an advisor to the Ukrainian presidential office, reacted positively to the Belarusian opposition leader’s appeal, while at the same time criticising the Ukrainian political class for “unfairly” holding Belarusians responsible for the pro-Russian policy of Alyaksandr Lukashenka. However the chairman of the Ukrainian parliament’s foreign affairs committee and member of the Servant of the Nation party Oleksandr Merezhko, together with another deputy from the same party Bohdan Yaremenko, stated that Ukraine could not recognise Tsikhanouskaya and her cabinet because the stance of the Belarusian opposition towards Russia remains unclear (including its failure to condemn Russia as a terrorist state); they also questioned the credibility of “certain people within her entourage”. Read full article on OSW.WAW.PL
Euro to US dollar - Ichimoku cloud analysis - 21/11/22

The week ahead looks promising. ECB Decides on interest rate, ING Economics expects a 75bp rate hike

ING Economics ING Economics 21.10.2022 15:06
All eyes will be on the European Central Bank meeting next week. We think a 75bp hike looks like a done deal. The PMI survey on Monday will also be closely watched, providing clues on whether the eurozone economy has contracted even further. For the Bank of Canada, we expect a similar 75bp rate hike, given the upside surprise in inflation In this article US: The Fed cannot slow the pace of hikes yet Canada: a 75bp hike is the most likely outcome UK: Markets looking for clarity on fiscal plans and government stability Eurozone: ECB to hike by 75bp again amid ongoing inflation concern Source: Shutterstock   US: The Fed cannot slow the pace of hikes yet There are lots of important numbers out for the US next week, but none are likely to change the market's forecast for a 75bp interest rate hike on 2 November. 3Q GDP is likely to show positive growth after the “technical” recession experienced in the first half of the year. Those two consecutive quarters of negative growth were primarily caused by volatility in trade and inventories, which should both contribute positively to the 3Q data. Consumer spending is under pressure though while residential investment will be a major drag on growth. We are forecasting a sub-consensus 1.7% annualised rate of GDP growth. We will also get the Fed’s favoured measure of inflation, the core personal consumer expenditure deflator. This is expected to broadly match what happened to core CPI so we look for the annual rate to rise to 5.2% from 4.9%. With the economy growing and inflation heading in the wrong direction, the Fed cannot slow the pace of hikes just yet. Also, look out for durable goods orders – Boeing had a decent month so there should be a rise in the headline rate although ex-transportation, orders will likely be softer. We should also pay close attention to consumer confidence and house prices. The surge in mortgage rates and collapse in mortgage applications for home purchases has resulted in falling home sales. With housing supply also on the rise, we expect to see prices fall for a second month in a row. Over the longer term, this should help to get broader inflation measures lower given the relationship with the rental components that go into the CPI. Canada: a 75bp hike is the most likely outcome In Canada, the central bank is under pressure to hike rates a further 75bp given the upside surprise in inflation. Job creation has also returned and consumer activity is holding up so we agree that 75bp is the most likely outcome having previously forecast a 50bp hike. UK: Markets looking for clarity on fiscal plans and government stability The ruling Conservative Party has said it will fast-track plans to get a new leader in place by next Friday - and potentially even by Monday if only one candidate makes it through the MP selection round. Candidates have until Monday at 2pm to clear the hurdle of 100 MP nominations to make it onto the ballot paper, before Conservative MPs vote on the outcome. With only a week to go until the Medium Term Fiscal Plan on 31 October, there's inevitably a question of whether this is enough time for a new prime minister to rubber stamp Chancellor Jeremy Hunt's plans for debt sustainability. Investors are - probably rightly - assuming that Hunt will remain in position under a new leader. But the bigger question is whether the Conservative Party can unite behind a new leader and whether a more stable political backdrop can emerge - because if it can't, then not only is there uncertainty surrounding future budget plans, but also whether we're moving closer to an early election. Eurozone: ECB to hike by 75bp again amid ongoing inflation concern The hawks have clearly convinced the few doves left of the necessity to go big on rate hikes again. Contrary to the run-up to the July and September meetings, there hasn’t been any publicly debated controversy on the size of the rate hike. In fact, European Central Bank President Christine Lagarde seems to have succeeded in disciplining a sometimes very heterogeneously vocal club. To this end, it is hard to see how the ECB cannot move again by 75bp at next week’s meeting. As the 75bp rate hike looks like a done deal, all eyes will also be on other, more open, issues: excess liquidity, quantitative tightening and the terminal interest rate. Read more here. Besides the ECB, which will be the key focal point for eurozone investors, we’re looking at the survey gauges of the economy next week. The PMIs on Monday will be critical to determine whether the eurozone economy has slid further into contraction or whether an uptick has occurred. There is not much evidence on the latter in our view, but Monday will provide more clarity on how the eurozone economy is performing in October. Key events in developed markets next week Source: Refinitiv, ING This article is part of Our view on next week’s key events   View 3 articles TagsUS UK election Eurozone Canada Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Spain: Price Pressures Higher Up The Production Chain Are Starting To Ease

According to ING, unemployment rate in Spain, which amounted to 12.7% in Q3, may crawl over 14% in 3Q2024

ING Economics ING Economics 27.10.2022 11:40
The Spanish unemployment rate rose slightly to 12.7% in the third quarter, but is still very low. However, a sharp decline in hiring intentions shows that a cooling-off in the labour market is on the way. We expect unemployment to rise further in the coming quarters due to the deteriorating economic outlook, peaking at 14.3% in the third quarter of next year We expect unemployment to continue to rise in the coming quarters due to deteriorating economic conditions Unemployment rate slightly up in the third quarter According to INE figures released this morning, unemployment rose to 12.7% in the third quarter from 12.5% in the second quarter. With the exception of the previous quarter, this still puts unemployment at its lowest level since the third quarter of 2008, the start of the financial crisis. Although the unemployment rate is historically low, it is still well above the euro average. Eurostat's harmonised figures, which differ slightly from those published by INE, show that Spain's unemployment rate was 12.4% in August, compared with the eurozone average of 6.6%, a difference of 5.8 percentage points. For under-25s, the deviation from the eurozone average even runs to 12.7 percentage points. This average harbours large differences between regions. In the south of the country (Andalusia, Extremadura, Murcia etc) unemployment is typically above the national average, while the northern regions (Cantabria, Navarre, Catalonia, and so on) pull the average down a bit. We expect unemployment to continue to rise in the coming quarters due to deteriorating economic conditions. We predict that the Spanish economy will enter a mild recession starting in the fourth quarter of 2022 that will continue until the first quarter of next year. This will put some upward pressure on unemployment rates. Since unemployment rates usually lag somewhat behind the economic cycle, the biggest impact will be next year. We think that Spanish unemployment will peak at 14.3% in the third quarter of 2023. Unemployment rate, 1976-2022 Hiring intentions dropped sharply Although the labour market is still very tight, more signals point to a cooling in the coming months. The 12-month moving average of the number of vacancies has been stabilising for several months and seems to be at a peak. Business confidence has also deteriorated sharply in recent months, which will encourage companies to be more careful with new hires. This is already reflected in the latest Manpower survey, which polls every three months on the hiring intentions of companies. The latest results polling hiring intentions in the fourth quarter of 2022 show the largest quarterly decline in the index since the start of the survey in 2003. Although the index was historically high, this points to a turnaround in the labour market. The deteriorating economic outlook is already causing companies to be more cautious about hiring new people. Manpower survey – hiring intentions in the next three months, 2003-2022 A cooling economy will take longer to restore productivity to pre-Covid levels GDP per person of working age, a good measure of an economy's productivity, is still below its pre-Covid levels. Since 2014, following the financial crisis and debt crisis, the productivity parameter was on a strong remount. Between 2014 and 2019, GDP per working age population rose by an average of 2.6% per year. This came to an abrupt end with the onset of the Covid-19 pandemic. In the first two quarters of 2020, GDP per person of working age fell 24.2% from the last quarter of 2019 due to a sharp drop in activity. Afterwards, the measure recovered strongly. In each of the past three quarters, it grew more than 6% year-on-year but is still 3.5% below its 4Q19 pre-Covid levels. However, this increase is likely to be strongly driven by the activation of lower-productivity workers. This pushes GDP per person of working age higher, but puts pressure on real labour productivity per hour worked. We see that the latter has been under strong pressure since the beginning of this year (-3.1%). The end of Covid restrictions has allowed a lot of employees in the tourism and hospitality sector to get back to work, but these are typically employees who contribute relatively less to GDP. The tight labour market also makes it easier for less skilled and recent graduates to find a job – in general, these are also people with lower productivity. With activity again under strong pressure from the energy crisis and high inflation, productivity is likely to fall. Over the winter months, we forecast a contraction of 0.8% in the Spanish economy. As a result, it will probably take until 2024 before GDP per working age person returns to its pre-pandemic level. Productivity – GDP per working age population, Q4 2019 = 100 Spanish labour market supported by strong growth in open-ended contracts The high number of temporary contracts in Spain has long been one of the weaknesses of the Spanish labour market. According to Eurostat data, about 22% of Spaniards were on temporary contracts before the pandemic, compared to an average of 14.4% in the EU. However, the number of open-ended contracts has increased over the past year. The number of permanent employees reached a record high in the second quarter to 13.5 million employees (seasonally adjusted figures), an increase of 8.7% compared to the second quarter of last year. The number of employees on temporary contracts has fallen by 6.7% in the past year to just over four million. The increase started in the middle of last year but was accelerated by the labour market reform approved by the government in December. The share of permanent contracts has increased by three percentage points in one year, from 74% in the second quarter of last year to more than 77% in the second quarter of this year. It is too early to estimate the long-term effects of the labour market reform, but we can already say that the reform, which imposes additional restrictions on the use of temporary contracts, has resulted in many temporary contracts being converted into open-ended contracts. These also offer better protection during economic headwinds. A higher share of permanent contracts is also likely to mean that the rise in the unemployment rate, which usually follows a fall in economic activity, will be less pronounced than during previous recessionary periods. Share of permanent contracts Bleak economic outlook will lead to higher unemployment rate All in all, despite a slight rise in the unemployment rate in the third quarter, the labour market remains very tight. The bleak economic outlook, which is already prompting companies to be more cautious about new hires, will ease the pressure on the labour market in the coming months. We expect the unemployment rate to rise further to 14.3% in 3Q23, partly held back by a higher number of permanent contracts, before slowing down again. Read this article on THINK TagsUnemployment rate Spain Labour market GDP Eurozone Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
The EUR/USD Pair Is Showing A Potential For Bearish Drop

We could say European Central Bank has three variants to choose from today

Kenny Fisher Kenny Fisher 27.10.2022 12:06
EUR/USD is in a holding pattern ahead of today’s ECB rate meeting. In the European session, the euro is trading at 1.0068, down 0.16%. ECB projected to hike by 0.75% The ECB holds its policy meeting later today, amidst difficult economic conditions in the eurozone. Inflation jumped to 9.9% in September, up sharply from 9.1%. The manufacturing and services sectors are in decline and confidence levels are low. The markets have priced in a 0.75% hike and there has even been talk of a jumbo full-point increase. Could the ECB surprise with a lower-than-expected hike of 0.50%? Earlier this week, the Bank of Canada and Reserve Bank of Australia both delivered smaller hikes than expected, at 0.50% and 0.25%, respectively.  The message from both central banks is that they are close to ending their rate-tightening cycles and expect inflation to peak in the next several months. Read next: ECB is expected to hike by 75bp. USD is not that powerful at the moment, and it seems that a less hawkish move may be on the cards| FXMAG.COM Will the ECB follow suit? It’s possible but unlikely. The ECB only entered the tightening game in July, and the current benchmark of 1.25% remains out-of-sync with inflation, which is close to double-digits and the ECB needs to be aggressive if it hopes to beat inflation. The benchmark rates are much higher in Canada (3.75%) and Australia (2.60%) and have slowed economic growth, while the ECB’s low benchmark rate has not had the same effect. Still, the weak eurozone economy could tip into recession as a result of sharp rate hikes, which means that a 0.50% hike cannot be completely discounted. We can expect some movement from EUR/USD in response to the ECB decision – an increase of 0.75% or 1.00% will be bullish for the currency, while a 0.50% hike would disappoint investors and likely send the euro lower. EUR/USD Technical There is resistance at 1.0095 and 1.0154 0.9924 and 0.9814 are the next support levels   This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds. EUR/USD eyes ECB rate decision - MarketPulseMarketPulse
Italy: ING Economics expect quarter-on-quarter GDP in the fourth quarter may contract by 0.2%

ING Economics expects GDP of Italy will plunge 0.5% in Q4, but stay positive at 3.4% considering 2022 as a whole

ING Economics ING Economics 27.10.2022 17:30
Italian consumers are feeling the pain of increasingly squeezed disposable income, and businesses worry that less demand - an increasingly important factor - is going to weigh on production Consumers in Italy are becoming increasingly pessimistic. Pictured: shoppers in Lazio Broad-based confidence decline in October points to contraction Early evidence is pointing to a contraction in Italy's economy in the fourth quarter. Today's consumer confidence data for October shows falls in all business sectors except services, taking it to the lowest level since March 2013. It has to be said that the jury's still out as to whether the Italian economy managed to avoid a contraction in the third quarter; we'll get the flash estimates for that on Monday.  The five-point fall in consumer confidence was driven by a steep decline in the difficulties people have in purchasing durable goods and saving for the future. The prospect of unemployment is also a big concern as is a general worry about current economic conditions. The re-opening effect after Covid lockdowns, which helped consumption over the first half of the year and part of the summer, is now coming to an end as confirmed by the steep fall of confidence among tourism businesses. The ongoing compression in real disposable income is the most obvious macro driver. As price expectations among businesses continue to point higher (with the exception of manufacturers) the real disposable income effect looks set to remain in place, barring unlikely generous wage concessions. Admittedly, firms are not showing clear intentions to shed workers right now and employment should continue acting as something of a shock absorber, at least in the short term.  Manufacturers increasingly point to insufficient demand The further decline in manufacturing business confidence is hardly surprising. Interestingly, manufacturers' responses are signalling that demand constraints are again at play. Orders, and particularly the domestic component, are slowing down, stocks of finished products are increasing and the level of current production is declining. For the first time since the first quarter of 2021, insufficient demand is perceived as a stronger obstacle to production than the availability of plants and materials, typical supply factors. This means that a further easing of existing supply constraints in global value chains might not automatically translate into higher production in a deteriorating demand environment. In the manufacturing domain, producers of investment goods seem to be faring better, suggesting that the demand flow originated by the implementation of the recovery and resilience facility is still playing out. GDP contraction in the last quarter seems inevitable Today’s confidence data suggest that an economic contraction in the fourth quarter of this year will be almost impossible to avoid. On the demand side, this will be driven by the evaporation of the re-opening effect (often related to tourism) and by the compression of real disposable income, which will likely translate into softer consumption. From the supply side angle, both industry and services now look likely to act as a growth drag in the quarter.   We are pencilling in a 0.5% GDP contraction in 4Q22, with average GDP growth of 3.4% for the full year.   Read this article on THINK Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Czech Republic: Tax Revenues Should Be Higher Than MinFin Expects

ING Economics expects the interest rate of Czech National Bank won't be changed

ING Economics ING Economics 28.10.2022 14:39
We do not expect any further CNB interest rate hikes. The new forecast should show lower inflation but also higher wage growth. The cost of FX intervention is low enough to continue to play a major monetary policy role. However, together with high wage growth, they remain for us as the main risk of a potential additional rate hike The Czech National Bank in Prague Lower inflation gives doves enough buffer The third monetary policy meeting under the new CNB leadership will take place on Thursday next week. We expect interest rates to remain unchanged. Thus, the central bank's new forecast will be the main focus. Compared to the August forecast, we see the biggest deviation in inflation, which surprised to the downside. In September, this deviation came in at 2.4 percentage points. Therefore, here we can expect the biggest downward revision in the new forecast. The government's new energy measures should also come into play to bring inflation down artificially. However, given the statistical office's unclear approach, the question is how the CNB will take into account this change. On the other hand, wage growth surprised to the upside by 1.7pp in the second quarter compared to the CNB forecast. Moreover, the monthly numbers show a further acceleration in the third quarter. In doing so, wage growth has become the main focus of the board as a reason for a potential additional interest rate hike. 7.00% CNB's key policy rate We expect no change next week   Nevertheless, the interest rate forecast can be expected to remain roughly similar to the CNB's summer version, indicating a rate cut already in the next quarter due to the nature of the central bank's model. On the FX side, we don't expect much change in the forecast weakening trajectory of the koruna under the pressure of the declining interest rate differential. However, we don't see much implication for FX interventions, which are fully decoupled from the CNB forecast and depend only on the discretionary decision of the board. But, at the moment, we see the CNB in a comfortable position with no reason to change anything about the current regime. CNB summer forecast Source: Macrobond, ING forecast We see little risk of a rate hike in the future, but remain vigilant In the long run, we do not expect any further CNB rate hikes. Despite the board's highlighting of the wage-inflation risk, we believe that the stability or decline in annual inflation combined with a weaker economy will be enough in coming months for the CNB to confirm the end of the rate hike cycle at future meetings. In the meantime, the main monetary policy tool will remain FX intervention, the cost of which we believe is low enough for now (around 19% of FX reserves). However, while we see the risks of additional rate hikes as low, we think the key will be the further development of wage growth and the cost of FX intervention, which we will monitor closely in the coming months. Czech FRA curve expectations Source: Refinitiv, ING What to expect in rates and FX markets The market retains a small chance (less than 50%) of a rate hike at the next meeting or possibly at subsequent meetings until the end of the first quarter of next year. Market expectations are that the CNB should then start cutting rates in the second half of 2023, later than we expect. However, given the CNB's current limited communication regarding next year, we do not see much opportunity at the short end of the curve. Therefore, we prefer to look at the long end, which we believe reopens the opportunity for ratepayers thanks to the current global rally, and next week's CNB meeting could bring tempting levels due to the central bank's dovish tone. On the bond side, Czech government bonds (CZGBs) have cheapened significantly, but we see that there is still a need to cover high financing needs this year and recent fiscal headlines are also not supporting buyers. Moreover, we expect the global sell-off to continue after the temporary current pause, which will bring further pain to the Czech bond market. However, we remain constructive and believe that the moment for buyers will come when funding strategy becomes clearer in the deluge of budget changes. In addition, the risk of a sovereign rating downgrade has been averted for this year, which may attract investors back into CZGBs at the end of the global sell-off. On the FX side, the CNB remains the main driver, remaining active in the 24.60-70 EUR/CZK levels according to our estimates. The market can be expected to build short koruna positions again ahead of next week's meeting in anticipation of changes in the FX regime. However, we do not expect any changes and anticipate a similar scenario after the CNB meeting as in the case of the last two meetings, i.e. liquidation of short positions and a stronger koruna. Read this article on THINK Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Eurozone: Spanish Gross Domestic Product jumped much less than in August

Eurozone: Spanish Gross Domestic Product jumped much less than in August

ING Economics ING Economics 28.10.2022 14:58
The Spanish economy grew by 0.2% Q-on-Q in the third quarter, a significant slowdown from the 1.5% we saw the previous month. A strong tourism season helped stop the growth figures from turning negative Spain has had a good tourism season Spain's economy slowed sharply in the third quarter Spain's economy still grew by 1.5% on a quarterly basis In the second quarter, thanks to strong growth in domestic demand and the revival of tourism. However, growth slowed sharply to 0.2% QoQ. In the manufacturing sector, economic activity stagnated. While manufacturing recorded growth of 1.7% QoQ in the previous quarter, it fell to just 0.1% in the third. The services sector also slowed significantly from 1.6% to 0.7%. The leisure sector still recorded strong growth rates (7.6% QoQ), mainly thanks to a strong tourist season. The tourism sector, contributing 14% of total GDP in 2019, has held up much better than the rest of the economy so far and positively contributed to the growth figures. Economy is likely to fall in a recession over the winter months The latest figures suggest the economy is likely to contract in the fourth quarter. Both manufacturing and service sector PMIs fell below 50 in September, signalling contraction. New orders were again noticeably down in September as the high inflation and bleak economic outlook weighed on demand. There is little improvement in sight as Spanish consumer confidence fell again in September. The index stands below the Covid-19 pandemic low illustrating that Spaniards are increasingly worried about high inflation. Also, tourism, which contributed positively to growth figures in the second quarter, is starting to show signs of weakening. While the number of international visitors in July was still at 92% of its pre-pandemic levels, this dropped to 87% in August. The slowdown in domestic tourism was even greater than that of foreign tourism. The number of hotel stays booked by residents fell to 101% of pre-pandemic levels in August, from 107% in July. On the other hand, the aid packages, amounting to 30 billion euros or 2.3% of Spanish GDP announced by the government last month will bring some relief. We forecast a mild recession for the Spanish economy in the next 2 quarters. Thanks to the strong first half of the year, GDP growth will still come in at 4.3% in 2022, but for 2023 we are now looking at 0.3% growth. Read this article on THINK TagsTourism Spain PMI GDP Eurozone Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Spain: Price Pressures Higher Up The Production Chain Are Starting To Ease

Among others, lower energy prices made Spanish inflation go down by over 1.5%!

ING Economics ING Economics 28.10.2022 17:19
Spanish inflation fell in September to 7.3% from 8.9% in September, marking the third consecutive month of decline. The main driver is the fall in the energy component Spanish inflation falls to 7.3% in October Spanish inflation fell to 7.3% in October from 8.9% a month earlier. This is now the second month in a row in which inflation has fallen. Core inflation, excluding more volatile energy and food prices, remained flat at 6.2%. The decline in headline inflation is mainly due to a drop in energy prices. This translates into a significant drop in the energy component. Clothing and footwear prices also rose more moderately than last year, reducing headline inflation, albeit to a lesser extent. From 1 October, the Spanish government reduced VAT on gas from 21% to 5% to soften the inflation shock. However, according to our calculations, this had only a marginal effect on the CPI of 0.1 percentage point. Many factors ease inflationary pressures, but the decline will be very gradual There are many structural factors easing some of the pressure on inflation. Many commodity prices have already fallen sharply from their peak levels a few months ago. Container transport prices have also fallen significantly, and supply chain problems continue to ease. These factors point to less inflationary pressure in the pipeline. Much will also depend on the development of energy prices. These have recently fallen sharply from the peak in August thanks to favourable weather conditions, but the question is how long this will last when winter really starts. Due to all these factors, producer price inflation has also already fallen from 47% in March to 36% in September but is still very high. This ensures that transmission to consumer prices also starts to weaken, and that will continue as the economy slips into recession. Cooling demand will continue to ease inflationary pressures as it will become more difficult for companies to pass on higher prices to the end customer. Although still historically high, the number of companies planning to raise prices further also shows a downward trend in a wide range of sectors. Price selling expectations only continue to edge higher in food and consumer goods.  This shows that inflationary pressures will remain high in the coming months and only very gradually start to ease. For the full year of  2022, we forecast inflation to reach around 8.7%. In 2023, inflation will gradually start to come down, reaching 4.4% in 2023. Read this article on THINK TagsSpain Inflation Eurozone Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Italy: ING Economics expect quarter-on-quarter GDP in the fourth quarter may contract by 0.2%

Italian Gross Domestic Product growth came at 0.5%. Q4 could be worse, ING expects

ING Economics ING Economics 31.10.2022 11:54
We suspect that a combination of post-Covid re-opening and tourism effects was at play, possibly with the support of investments. We still expect a short recession to start in 4Q22 A good recovery in domestic and international tourism helped boost Italy's second-quarter GDP Italian economy decelerating, but well clear of contraction in 3Q22 The flash estimate just released by Istat shows that Italy managed to avoid contraction in 3Q22. We had expected a positive reading, but the 0.5% QoQ gain (was 1.1% QoQ in 2Q) is clearly a positive surprise. The 2.6% YoY gain (was 4.7% in 2Q22) marks a clear deceleration, which looks set to continue ever the next few quarters. As usual at the preliminary estimate stage, no detailed demand breakdown was released but the indication is that domestic demand (gross of inventories) provided a positive contribution to quarterly growth, while net exports acted as a drag. On the supply side, value added contracted over the quarter in agriculture and industry and increased in services. The tail effects of re-opening and positive tourism numbers likely the main drivers Today’s release confirms our belief that the re-opening effect and a very positive tourism season were still powerful growth drivers in the third quarter of 2022. We suspect that detailed demand data will eventually show positive contributions from both consumption and, possibly, investments, the latter helped by the support of European recovery funds and generous domestic tax investments in the construction domain. A contraction in 4Q22 still looks hard to avoid Looking forward, we remain convinced that a GDP contraction is hard to avoid in 4Q22, opening a short-lived recession which looks set to end by 2Q23 . Confidence data headed further south in October, including in the tourism sector. Households are gloomier as disposable incomes are increasingly eroded by accelerating inflation and with a backdrop of slowly growing wages. The new government will likely prioritize a new wave of compensatory measures, but these will mostly refinance expiring ones and so limit damage rather than inducing a turnaround. Statistical carryover for 2022 GDP growth is now at 3.6%. Taking into account the 0.5% contraction that we are currently penciling in for 4Q22, we would end up with average GDP growth of 3.5% in 2022. Keeping our previous profile for 2023 unaltered, we now look for average GDP growth of 0.2% in 2023. Read this article on THINK Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Poland: Wage growth go above the consensus, but still lower than inflation

In Poland flash estimation of inflation almost hit 18%

ING Economics ING Economics 31.10.2022 12:22
Consumer inflation rose by 17.9% year-on-year in October (flash) from 17.2% YoY in September. In monthly terms, prices increased at the fastest pace since April. Price growth is increasingly broad-based. The majority of the MPC is calling for an end to the tightening cycle, but we believe the Council will hike rates by 25bp in November Food prices continue to soar in Poland   According to StatOffice's flash estimate, CPI inflation rose by 17.9% YoY in October from 17.2% YoY in September. CPI growth was close to our forecast (18.1% YoY) and broadly in line with the market consensus. As expected, October saw an increase in petrol prices (4.1% MoM). This was accompanied by a further increase in energy prices (2.0% MoM). Market reports suggest that the peak in coal prices is probably behind us. At the same time, we continue to see an increase in food prices. Compared to September, prices for food and non-alcoholic beverages have risen by as much as 2.7%, and on a year-on-year basis, the price increase in this category is already close to 22%. The spillover of price increases into the overall economy is ongoing, following earlier increases in energy and transport costs. We estimate that core inflation excluding food and energy prices rose to around 11.1-11.2% YoY in October from 10.7% YoY in September. Food prices rising fast Prices of food and non-alcoholic beverages, % YoY Source: GUS.   Momentum is strong, with the CPI rising by 1.8% on a monthly basis, the highest since April this year. Not only has the scenario of an inflation peak in the summer not materialised, the story of an inflation plateau is also becoming increasingly difficult to defend. The local inflation peak is still ahead. Next February, inflation will exceed 20% YoY and a decline to single-digit levels will not occur before the fourth quarter of next year. The inflation outlook remains highly uncertain with risks tilted to the upside. Should the government decide not to extend the VAT reduction on electricity from 23% to 5% beyond end-2022, inflation could jump by around 0.5 percentage points from January 2023 on top of our current estimate.   The fight against inflation is not over yet, but the MPC appears to be dominated by those who support an end to the cycle of interest rate rises. November's interest rate decision will largely depend on the shape of the latest NBP macroeconomic projection. We expect this to indicate a higher CPI path than the July projection, and the persistence of inflation above the NBP's target. Therefore, we expect the Council to raise interest rates by 25bp next week (our baseline scenario), although the probability of interest rates remaining unchanged again is also high. Read this article on THINK Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Portuguese Gross Domestic Product goes up by almost 0.5%

Portuguese Gross Domestic Product goes up by almost 0.5%

ING Economics ING Economics 03.11.2022 12:50
The Portuguese economy performed much better than expected in the third quarter, growing 0.4% while the labour market remained very tight. However, the inflation shock has deepened, reaching double digits in October for the first time Source: istock Growth accelerates in 3Q Portuguese GDP grew 0.4% quarter-on-quarter in the third quarter, an improvement on the 0.1% growth in the second quarter. Despite high inflation, private consumption increased, allowing domestic demand to make a positive contribution to the growth figures. Tourism, which represented about 15% of GDP before the pandemic, also remained a powerful growth driver. Overnight stays were 2.9% above pre-pandemic levels in 3Q, thanks to a strong rebound in domestic tourism (+10.8% from 3Q19). This offset the slightly lower number of stays booked by international tourists (-0.8% compared to 3Q19).  Read next: Ferrari And Still High Demand | Tips For Money Managing| FXMAG.COM High inflation continues to trigger concern for both businesses and consumers, which will cause the economy to cool considerably towards the end of the year. The latest indicators are already pointing to a deterioration in the economic outlook, likely pushing the economy into a mild recession from the fourth quarter onwards. Consumer confidence declined further in October and is now at its lowest level since the start of the pandemic. Business confidence also fell once again across almost all sectors. In addition, funds from the EU’s Recovery and Resilience Facility (RRF) will now be lower than initially anticipated, although support measures announced by the government are expected to cushion the blow. In early September, the Portuguese government announced a support package to help households cope with rising inflation. Together with measures taken previously, this is estimated to amount to around 1.5% of GDP. Inflation hits double digits in October The inflation shock is getting worse, which is likely to put pressure on household consumption. Inflation rose sharply again in October to 10.2% year-on-year from 9.3% in the previous month, reaching the highest level since May 1992. In the space of just one month, prices rose 1.3% (up from 1.2% in September). The main drivers were the energy and food components within the inflation basket. However, the sharp rise in core inflation from 6.9% to 7.1% shows that energy and food are not the only drivers and that inflation is increasingly spreading throughout the Portuguese economy. This is likely to increase further over the coming months as the spillover effect of high energy and food prices on other sectors persists. Price expectations in industry and trade rebounded significantly in September and October, although they had fallen slightly from their peak levels before summer. This shows that, despite the recent fall in gas prices, inflationary pressures will remain high and it will probably take until early next year for Portuguese inflation to fall below 10%. Jobless figure slightly up in September In September, unemployment stood at 6.1%, 0.1 percentage points higher than in August. Despite the slight increase in the overall unemployment rate, the labour market remains very tight. In particular, employers in the tourism and construction sectors are struggling to fill vacancies. Hiring intentions also remain intact for now, with a recent survey by Manpower reporting historically high figures for expectations from Portuguese companies for the fourth quarter. Despite a slight decrease from the previous quarter, the overall health of the labour market remains strong. If growth stalls further during the winter months, unemployment is likely to rise, but any increase is expected to be modest. All in all, we still expect a year-on-year growth rate of 6.6% in Portugal thanks to a strong start to the year and a solid contribution from tourism, which has now seen a full recovery from the pandemic. High inflation and economic uncertainty will likely dampen investment and consumption over the winter months, but government support is expected to cushion the impact. Read this article on THINK TagsUnemployment rate Portugal Inflation GDP Eurozone Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Spain: Price Pressures Higher Up The Production Chain Are Starting To Ease

Spain: ING Economics expect prices of real estate will decline moderately in the near future. Spanish economy said to experience a "mild" recession

ING Economics ING Economics 03.11.2022 13:41
In the second quarter of 2022, Spanish property prices rose again by 8.0% year-on-year. Rising mortgage rates and a weakening economic outlook will dampen price growth from an expected 7% this year to 1% in 2023 House prices have risen sharply across most of Spain Strong price growth continues, although we are past the peak Spanish home prices rose 8.0% in the second quarter compared to the same period last year, a slight cooling compared to the first quarter of 2022, but price growth is still well above its historical average. On a quarterly basis, prices rose 1.9% in the second quarter compared to 2.6% in the first quarter. New and existing home prices showed similar trends, although the former rose slightly more strongly (+8.8% year-on-year) than the latter (+7.9% YoY). Figures from Tinsa, which include a monthly profile and are well correlated with the INE quarterly index, show a weakening trend over the summer. In July, Spanish house prices still rose by 3% month-on-month, but this slowed down to a growth of 0.5% MoM in September. The start of the Covid-19 pandemic has turbocharged price growth in many countries. Since the start of 2020, prices of existing dwellings in Spain have increased by 11.5%. This is slightly weaker than price growth in Portugal (+26.2%) and France (+15.5%), but stronger than in Italy where prices have risen by 7.2% since the outbreak of the pandemic. These strong price dynamics during the pandemic stretched affordability to the limit. Combined with a cocktail of rising mortgage rates, deteriorating economic prospects and high inflation eroding household purchasing power, the real estate market will continue to cool. We expect price growth to reach 7% in 2022, but slow to 1% next year. This means that nominal price growth will not be able to keep up with inflation. With a current expected inflation rate of 8.7% for this year, real price growth will turn negative at -1.7%. At an expected inflation rate of 4.4%, real price growth in 2023 will also be negative at -3.4%. Fig. 1. House price index, % YoY INE, ING Research Price growth starting to cool everywhere except in the metropolitan areas Although house prices have risen sharply in almost all of Spain, there are varying dynamics across regions and cities. The latest Tinsa figures for September show that price growth is beginning to cool off everywhere except in the metropolitan areas. Price dynamics have slowed down the most on the Mediterranean coast and in the Balearic and Canary Islands. Price growth of 6.5% on the Mediterranean coast and 3.5% in the Balearic and Canary Islands was well below the national average. On the Islands, in particular, price growth has come to a complete halt this year, even declining slightly over the summer. The cooling off does, however, come after strong price growth at the start of the pandemic. By comparison, in metropolitan areas, price growth continues unabated for now. Although house prices in the rest of Spain fell by an average of 0.4% compared to August, in metropolitan areas they still rose by 1.2% in one month, bringing the total annual growth rate in September to 10.0%. Fig 2. House price index, % YoY, Sept '22 Tinsa, ING Research Higher mortgage rates inhibit future price growth Mortgage rates have already risen sharply since the beginning of the year, and it’s unlikely that we have reached the peak yet. Mortgage rates closely follow the evolution of the 1-year Euribor, with a small lag. The 1-year Euribor has started to rise sharply. While the Euribor was still negative at -0.5 on 1 January, it rose to 2.7 in October. Although the 1-year Euribor already anticipated interest rate hikes by the European Central Bank (ECB) to combat inflation, further rate hikes could put some upward pressure on the Euribor again in the coming months. Nevertheless, we expect the Euribor to peak toward the end of the year. If the eurozone falls into recession, the ECB's willingness to raise interest rates further will also decrease. Mortgage rates, which have also risen sharply this year, are likely to follow suit. The gap between Euribor and mortgage rates has narrowed significantly recently, suggesting that mortgage rates have yet to catch up. However, the biggest upside risk lies with floating rates. Although the gap between fixed and floating rates has narrowed significantly recently, floating rates tend to be well above fixed rates. Consequently, increases in floating rates will be more outspoken, while they will be more moderate for fixed rates. We expect mortgage rates to rise to around 3.4-3.6% for fixed rates and 3.9-4.1% for variable rates early next year before stabilising at their higher levels. These higher mortgage rates, which reduce households' borrowing capacity, will dampen housing demand and price growth. Fig. 3. Fixed and floating rate of new loans for house purchase & Euribor 1Y BDE, ING Research Growing popularity of fixed interest rates continues In the past, almost all mortgage loans had variable rates, but the number of new fixed-rate mortgages has been rising sharply since 2015. According to INE data, before 2015, the share of new fixed-rate loans was less than 5%, while accounting for more than half of all loans since 2021. Many Spanish homeowners have taken advantage of the low-interest rate environment in recent years to lock in their loan costs. The prospect of further interest rate hikes by the ECB and increasing uncertainty accelerated this trend. In July, three-in-four mortgage loans were at a fixed rate, which protects households from the sharp rise in mortgage rates as their monthly repayment burden remains stable. This keeps their creditworthiness intact, reducing the risks to the banking sector. Despite the popularity of fixed rates, floating-rate loans still represent the vast majority of total outstanding mortgages. Fig. 4. Share of mortgage loans for dwellings with a fixed vs floating rate INE, ING Research Transaction data remain strong, but we expect momentum to slow The sales figures for August recently published by INE do not (yet) show a weakening in the number of transactions. The number of transactions in August 2022 were still almost 15% higher than in the same month last year, which was already an exceptionally strong year in terms of transactions. If we compare with the pre-Covid period, the number of transactions in August was still 60% and 28% higher than in August 2019 and 2018, respectively. For the coming quarters, we expect the number of transactions to start declining. The cost-of-living crisis is putting strong downward pressure on real disposable income, combined with rapidly rising mortgage rates and weakening economic growth, which are creating strong headwinds for the property market. We expect the Spanish economy to dip into a mild recession from the fourth quarter onwards. Fig. 5. Number of transactions, 2019-August 2022 INE, ING Research Mortgage production still well above pre-Covid levels Despite higher mortgage rates, mortgage production is holding up well for now. In the first eight months of this year, 14% more mortgages were issued than in the same period last year, and 2021 was already a strong year in terms of mortgage production. If we compare this to 2019, the year before Covid-19, the number of new mortgages in 2022 is up to 24% higher. In August, the last month for which figures are available, the number of new mortgages was still 10.9% higher than the same month last year. It is likely that many homeowners still took advantage of low interest rates in the first half of the year to refinance their existing mortgage loans at a fixed rate. Potential homebuyers also probably tried to get ahead of rising interest rates by accelerating their property purchases. Both factors will have boosted mortgage production in the first half of the year, but this effect will gradually diminish. Furthermore, increasing household pessimism and less favourable credit conditions will dampen demand for real estate, putting downward pressure on mortgage production. Consumer confidence has deteriorated significantly in recent months, which shows that households are increasingly concerned about high inflation amid economic uncertainty. Consumer confidence has now fallen below the low seen at the beginning of the pandemic, and is now at its lowest level in almost 10 years. This could prompt potential home buyers to postpone their purchase decision in the coming months. The latest European Commission survey that gauges Spaniards' buying intentions to buy a home in the next 12 months is holding up much better for now than in other European countries, but has also weakened somewhat over the past year. During the Covid pandemic, the index had risen to its highest level since 2010. Although the index is still historically high, we see a downward trend in 2022. Fig. 6. Mortgage production for dwellings, 2019- August 2022 INE, ING Research Strong household growth and falling supply are likely to support price growth On the other hand, structural growth in the number of households will support the real estate market over the coming years. Due to strong household thinning, the number of households is increasing faster than population growth, which supports the demand side of the real estate market. Over the past 20 years, more than 20 million households have been added, a 70% increase. Between 2002 and 2012, the number of households increased particularly sharply with an average annual growth rate of 2.4%. The growth rate has slowed to an average of 0.4% per year over the past decade, but has continued unabated. In the years ahead, household growth will continue to support the real estate market. INE forecasts that the number of households will increase by 1.1 million by 2035, a 5.3% increase in 13 years. This is mainly due to strong growth in the number of single and two-person families. These two groups are expected to grow by 16% and 11%, respectively, while the number of households with more than three people will shrink by about 5%. Spain already has a high proportion of flats (66%), compared with, for example, France (34%), Italy (55%) and Portugal (46%), but this proportion is likely to increase further over the next decade driven by a growing number of singles. In 2035, single people will account for 29% of all households, up from 26% in 2022 and 20% in 2002. Moreover, supply is rising less rapidly than the number of households, which naturally puts upward pressure on prices. Between 2011 and 2021, the number of households increased by 5.4%, while the housing stock increased by only 2.9% over the same period, according to figures from the Ministry of Transport. For this year and next, we forecast a further decline in construction volumes, which will put additional pressure on the property market. The sharp rise in the cost of building materials puts an extra brake on construction activity. Production levels are currently more than 20% lower than before the Covid pandemic and we expect the sector to shrink for the fourth year in a row. For next year, we expect some marginal recovery. The upward trend in costs seems to have slowed. In addition, the Spanish construction sector will see some positive effects from investments in the EU recovery funds. Nevertheless, the number of households is also expected to continue to grow faster than the property supply in the coming years, fuelling price growth.   Fig. 7. Evolution of the total number of households, 2002-2035 INE, ING Research Affordability under pressure, especially for low-income earners Property market inequality is relatively low in Spain. Compared to other European countries, home ownership in Spain is relatively high among low-income earners. According to Eurostat data, 73% of households in the lowest quintile are homeowners; only Hungary (78%) and Slovakia (80%) score better, and the proportion is much higher than in, for example, Italy (48%), Portugal (61%) and France (33%). The gap between the bottom and upper quintile is also much lower than in other European countries. However, the strong price increases in recent years combined with higher mortgage interest rates and declining purchasing power due to high inflation have put pressure on affordability, especially for lower-income earners. The housing cost overburden rate, or the proportion of the population living in households that spend 40% or more of their disposable income on housing, was 9.9% in 2021 compared to 8.2% in 2020. This is well above many other European countries, including Italy (7.2%), France (5.6%) and Portugal (5.9%). Fig. 8. Homeownership across the income distribution OECD, ING Research Increasing focus on energy efficiency Rising energy prices and high energy bills are a game-changer, including in the real estate market. We expect that when purchasing a home, more attention will be paid to energy efficiency, which will influence price trends. The price differences between energy-efficient homes and energy-wasting homes will increase in the coming years. There is increasing evidence from different countries of a clear relationship between the energy efficiency of a property and transaction prices. A one-letter improvement in a property’s energy performance certificate (or EPC) is estimated to increase the price by 8% in Austria, 4.3% in France and 2.8% in Ireland. In Belgium, research shows that a significant improvement in energy efficiency is associated with a 4.3% higher (advertised) price. Also, in Portugal, there is a significant relationship between eco-friendly dwellings (EPC value of A or B) and the median sales value per m². Most of this research predates the sharp rise in energy prices this year. Therefore, we expect these effects to have increased significantly by now. In Spain, there is no convincing scientific evidence (yet) that houses with a better energy label (A or B) are sold at a higher price. Owners and sellers have no incentive to disclose their EPC score. As a result, houses with low energy scores can be sold at the same price as houses with good energy scores. Although generally favourable, climate conditions play in Spain's favour compared to more northern European countries (though cooling might become an issue if the climate warms up further), so the importance of energy efficiency for both home buyers and sellers will continue to increase, which will also lead to price differences in Spain. Sellers of energy-efficient homes have a strong competitive advantage that they can exploit. Anecdotal evidence also shows increasing interest in energy efficiency among home buyers. The more energy-efficient the home, the more it can reduce energy bills and thus generate savings. Moreover, increasingly stringent regulations will further accelerate the turnaround in the coming years. We anticipate a soft landing in 2023 Although we expect a further cooling of the Spanish real estate market, a severe correction is unlikely. We expect the price level to be close to a peak and may fall slightly over the next two quarters. Currently, we expect a slight price drop during the winter months before recovering. In this way, we still arrive at 7% price growth for 2022 and 1% for 2023, considerably less than inflation. Real price growth will turn negative, expected to be -1.7% for this year and -3.4% for next year. Uncertainty, rising interest rates and a looming recession will dampen price growth. We expect the Spanish economy to fall into a mild recession from the next quarter onwards, which also makes the labour market outlook less rosy. Moreover, household purchasing power is already under severe pressure from high inflation and energy prices. While the prospect of rising interest rates may temporarily cause households to speed up their buying process to get ahead of rising interest rates, this effect will gradually disappear. On the other hand, demand for property remains strong (for now). Both the number of transactions and mortgage production are still at very high levels. A supply that increases less rapidly than the number of households will continue to put upward pressure on prices. Spanish house prices have risen less rapidly than in most other European countries, which also makes a correction less likely. Read this article on THINK TagsSpain Housing transactions Housing Prices Housing market Eurozone Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
The Economy In Britain And The EU May Shrink In The Second Quarter Of The Fourth

Positive PMI Results In Europe And Great Britain | Waiting For The Result Of US Nonfarm Payrolls

Kamila Szypuła Kamila Szypuła 04.11.2022 10:48
In the first half of the day, attention will be paid to PMI reports in Europe. In the second half of the day, attention will shift to the results of the North American labor market. Retail Sales The first important data for the market came from Australia at the beginning of the day. the published retail sales report for another consecutive reading remains unchanged at 0.6%. This means that the demand for manufactured goods in this country remains unchanged, which may be due to the economic situation. European Services PMI The largest economies of the euro zone today published their reports for Services PMI. The overall picture is positive. Spain was the first country in the European bloc to provide a positive report. Services PMI indices reached the level of 49.7 and it was an increase against the expected 48.3 and against the previous reading of 48.5. In France, the result was also higher than expected (51.3) and reached the level of 51.7. The current reading is much lower than the previous 52.9. In the largest economy of the European Union, i.e. Germany, this indicator also increased from the level of 45.0 to the level of 46.6. These three positive readings significantly influenced the European Services PMI score which reached 48.6 and was only 0.2 from the previous reading. Only in Italy did this indicator drop. The current reading in this country is at 46.4. UK Construction PMI For the UK, the most important event of today is the Construction PMI report. The reading turned out to be really positive. The result for this sector was higher not only than the forecasts but also higher than the previous result. Construction PMI increased from 52.3 to 53.2 ECB President’s speech At the end of the week, an important speech will be from the European Union. At 10:30 CET, the following spoke: European Central Bank (ECB) President Christine Lagarde. Her comments may determine a short-term positive or negative trend. As the most important person in a European bank, he can provide very valuable comments and guidelines regarding future actions within the framework of monetary policy. Nonfarm Payrolls The United States will publish data on the number of people employed outside the agricultural sector. This number is expected to reach 200K. This forecast shows that the downward trend continues. After March, the number dropped significantly and maintained this trend until it broke out in August which was a false sign of a change in the trend. After a positive August, the decline will begin again. It may be a positive fact that he achieved better results than expected. Source: investing.com US Unemployment Rate The unemployment rate is expected to reach 3.6%. If the results met the expectations, it would mean an increase of 0.1% and thus a return to the level obtained between April and July. Canada Employment Change Canada also share the results of its job market. The outlook for the Canadian labor market is not very good. Employment Change is expected will reach the level of 10K over the previous 21.1K. The latest reading was a positive reflection from the negative levels from previous periods, but it may turn out to be one-off. Although expectations are above zero, it is not a good picture of the Canadian economy. The unemployment rate can reflect this as well. The unemployment rate is expected to increase by 10 porcet points to 5.3%. Summary 1:30 CET Australia Retail Sales (MoM) 9:15 CET Spanish Services PMI 9:45 CET Italian Services PMI 9:50 CET French Services PMI 9:55 CET German Services PMI 10:00 CET EU Services PMI (Oct) 10:30 CET UK Construction PMI 10:30 CET ECB President Lagarde Speaks 13:30 CET US Nonfarm Payrolls (Oct) 13:30 CET US Unemployment Rate (Oct) 13:30 CET Canada Employment Change (Oct) Source: https://www.investing.com/economic-calendar/
Spain: Price Pressures Higher Up The Production Chain Are Starting To Ease

Spanish services and manufacturing PMIs hit less than 50 points, according to ING, annual GDP growth may amount to 4.3%

ING Economics ING Economics 04.11.2022 13:49
The downturn in the Spanish economy continues unabated. Both the services and manufacturing PMI remained below 50 in October, signalling a contraction. The PMIs clearly show that the Spanish economy is slipping into a winter recession The decline of the manufacturing sector in Spain seems to be accelerating Falling number of new orders in both manufacturing and services sectors The services PMI was better than expected, but remains below the neutral level of 50, signalling a contraction. The PMI index rose to 49.7 in October from 48.5 in September. However, we do not expect the rebound to continue in the coming months. The number of incoming orders fell again as households and businesses postponed their buying decisions due to high inflation and uncertainty. More worrying is the evolution in the manufacturing sector. The manufacturing PMI already fell much more sharply than expected on Wednesday, from 49 in September to 44.7 in October, deep into contraction territory. Both production and new orders fell sharply, at a pace not seen since the start of the Covid-19 pandemic or the debt crisis in 2012. In fact, the decline of the manufacturing sector seems to be accelerating. These figures do not bode well for the development of industrial production. INE figures released this morning show that industrial activity in September has already fallen by 0.3% month-on-month. The PMI figures for October already show that we can expect a solid fall in industrial production next month as well. Recession during winter months seems inevitable Despite better-than-expected inflation figures last week, the economic situation is deteriorating very fast. A recession, meanwhile, seems inevitable. Although little data is yet available for the fourth quarter, we assume a contraction of 0.5% quarter-on-quarter in the last quarter of this year. This brings annual growth for 2022 to a still very good 4.3%. However, for 2023, we expect the Spanish economy to grow by only 0.3% year-on-year. High inflation and energy prices combined with higher interest rates and greater uncertainty will dampen demand and investment, putting downward pressure on the growth figures. Read this article on THINK TagsSpain GDP Services PMIs Manufacturing production Eurozone Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Inflation Data Shows That The National Bank Of Romania Sees No Possibility Of Further Hikes This Year

In less than a week time, we'll get to know Romanian National Bank's decision

ING Economics ING Economics 04.11.2022 14:56
The Romanian National Bank (NBR) will announce its latest policy rate decision on 8 November. We expect a reduction of the tightening pace to 50 basis points, taking the key rate to 6.75%. An open-end press release leaving the door open for another hike in January is to be expected The Romanian National Bank in Bucharest End of the tightening cycle is close With inflation stubbornly inching higher into this year-end, we believe that a rate hike at the 8 November meeting is a done deal. We currently favour a 50bp hike to 6.75% and an “open-end” press release, with little to no forward guidance. While we narrowly opt for the scenario of no more hikes into 2023, another 25bp increase to 7.00% in January cannot be ruled out. This decision will be data-dependent and – if taken – should mark the end of the hiking cycle. +50bp ING's call Change in the NBR key rate   At the 8 November meeting, the NBR will also approve its latest inflation report and we should see another upwardly revised inflation forecast. The year-end estimate could flirt with the 17.0% area, though our own estimate currently sits closer to the 16.0% handle. Nevertheless, upside surprises in inflation prints versus estimates are still persistent, and forecasts should be taken – as usual lately – with a lot more than a pinch of salt. Perhaps more important than the rate hike itself will be any hint of an alteration in the tight liquidity management stance. We see little to no chance of this being changed for now, though we still have questions about how the NBR will offset the traditional year-end spending spree of the government. Our view Given the expected inflation profile and the very likely economic slowdown or even contraction from 4Q22/1Q23, we believe that the end of the tightening cycle is close. Whether it will be in November at 6.75% (our view) or in January 2023 at 7.00% is probably less relevant for local rates which – as usual lately – tend to corroborate more with the liquidity conditions rather than the key rate. As mentioned before, we believe that the policy rates versus market rates imbalance could persist, and it is not imperative for the key rate to catch up with money market rates. 10y ROMGBs premiums versus CEE peers Source: Refinitiv, ING What to expect for rates and FX markets To some extent, the current leu appreciation might be related to the abovementioned issue of accelerated year-end spending. Though rather small by most standards, the move of the EUR/RON has been rather eye-catching lately. Unlike in August when the pair marked a pronounced V-shaped pattern, the appreciation of the leu seems to be more sustainable this time. Resistance levels that are forming at lower levels could be indicative of official offers. This likely suits the NBR’s circumstantial objectives regarding inflation and firm liquidity management. A year-end FX rate closer to 4.90 rather than 4.95 looks plausible. On the bond side, we saw yields peak in the second half of October and have since seen relatively decent demand for Romanian government bonds (ROMGBs), outperforming Central and Eastern Europe peers. This confirms our earlier assumption that Romania is well-positioned regionally against the current geopolitical risks and fiscal challenges. Premium versus Polish government bonds (POLGBs) have shrunk below 100bp since the July peak of around 300bp and we see similar developments versus other peers, pushing ROMGBs to near their most expensive levels this year. On a global level, we expect the sell-off to continue in the coming weeks, which in this mix we think will push ROMGBs more sideways at the moment. Read this article on THINK TagsNBR Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
The ECB Interest Rate Hike Of 50bp Has Already Been Taken Into Account Investors Await Guidance About March Meeting

Eurozone: confidence and spending power in the current status don't paint a rosy picture

ING Economics ING Economics 08.11.2022 15:56
Eurozone retail sales grew by 0.4% month-on-month in September, rounding out a disappointing quarter for sales. We see a continued cloudy outlook for retail as spending power remains under pressure and confidence is still near record lows A modest increase in retail sales in September rounded out a disappointing third quarter in terms of consumer spending. While there were some upside surprises to be noted, the consumer in general has started to reign in spending as the cost-of-living crisis continues and reopening effects from the pandemic fade. The effect of inflation is very apparent in retail sales as consumers bought -2.6% lower volumes in September than in June of last year but have spent 8.1% more. Netherlands and Germany led the way with 1.3 and 0.9% month-on-month increases respectively, while France, Italy and Spain all saw more or less stable retail trade compared to last month. The outlook for retail remains bleak, with ongoing inflation eating into consumer spending power and uncertainty about the economy increasing. This has resulted in record-low consumer confidence over recent months. While that is not necessarily a strong predictor of household consumption, movements as pronounced as this have always been associated with a contraction in consumption. We expect consumption to contract in the current and coming quarter, followed by a very modest recovery. Read this article on THINK TagsRetail sales GDP Eurozone Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Euro to US dollar - Ichimoku cloud analysis - 21/11/22

European Comission began working on "Stability and Growth Pact"

ING Economics ING Economics 09.11.2022 23:47
On Wednesday, the European Commission started a new round of intense discussions on yet another reform of the EU’s fiscal rules, aka the Stability and Growth Pact (SGP)   The SGP has always been the official implementation of the 3% GDP deficit and 60% GDP debt criteria of the Maastricht Treaty, setting up the foundations of the monetary union. It was the instrument to monitor and coordinate national fiscal and economic policies to enforce the deficit and debt limits. established by the Maastricht Treaty. Since its signing in 1997, there have been several reviews, amendments and changes, shifting from a fully rules-based system to longer-term orientations, prevention and more precise correction of excessive public finances. However, the right mix between rules and discretion, short-term and long-term orientation, investment needs and sustainable public debt has never really been found. Currently, for example, the fiscal rules have basically been suspended since the start of the pandemic in March 2020. It is important to remember that in all the previous changes, the 3% deficit and 60% debt thresholds have never been subject of discussion as these limits are laid down in the European Treaties and cannot easily be changed. A new approach with carrots and a powerful stick The European Commission on Wednesday did not propose a new set of fiscal rules but rather presented a new approach and framework to fiscal policy surveillance in the EU. In Eurocrat terms, the Commission presented a communication and not a proposal for a regulation, directive or a change in the EU Treaties, nor a communication which lays out how the European Commission will re-interpret the current rules. Therefore, the European Commission’s proposals are a starting point for what can still be a very long discussion but not the final version of any new set of fiscal rules. The Commission’s new framework keeps the 3% deficit and 60% debt targets untouched but introduces greater flexibility and more adjustments to country-specific situations. EU countries will have to present four-year plans on how to reduce debt, whereas highly indebted countries can be granted an additional three years. These plans will then have to be negotiated with the European Commission and then approved by the European Council. This is very similar to the national reform programmes governments had to present in order to qualify for money from the European Recovery Funds. The debt reduction pace will no longer follow the 1/20th rate of annual debt reduction in excess of 60% of GDP but will be replaced by country-specific formulas, which would also include a debt sustainability analysis. According to the European Commission’s paper, there will be a clear shift towards focusing solely on government expenditures as the relevant policy indicator. In this regards, interest rate payments and cyclical unemployment spending should be excluded from the measurement of an expenditure path. Contrary to what some experts had called for, the European Commission did not propose a new ‘golden rule’, excluding certain public expenditures from deficit and debt calculations. Instead, the European Commission chose a more indirect approach, allowing countries more time to reduce government debt if they commit to growth-friendly reforms and investments. By giving more time to reduce government debt and by opening the door for more flexibility and investments, the European Commission has clearly offered several carrots to the fiscal doves. At the same time, however, the European Commission also emphasized that it actually is willing to use a very powerful stick: the so-called Excessive Deficit Procedure (EDP) on too high government debt. Up to now, governments have only been reprimanded and sanctioned for having budget deficits higher than 3% GDP but the Treaties also foresee an EDP for debt in excess of 60% of GDP. By activating an EDP on debt, any high-debt country would de facto be put under strict surveillance by the European Commission almost forever. Very powerful but politically also highly explosive. It's only the start of a long discussion All in all, the European Commission has finally made the first move in what will probably still be a very long discussion to agree on yet another reform of the fiscal rules. The intentions are clear: the European Recovery Funds and the national reform programmes were a kind of blueprint for a framework which opens the door to country-specific developments and plans and also gives the European Commission more discretionary power. However, while the European Recovery Funds is a source of money for governments, providing an automatic incentive to comply with any rules, the ‘only’ upside for governments to comply with these debt reduction paths is to avoid sanctions. A very different approach. It will only work if the new flexibility and more room for investments is rightly balanced with fully committed and strict enforcement. In any case, it will still take a long while before European governments will find an agreement on any reform of the fiscal rules. Until then, it will rather be financial markets disciplining governments than any new set of rules. Read this article on THINK TagsGovernment GDP Fiscal policy Eurozone Debt Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
FX: The Gap Versus The FX spot Rate In Poland Is Already The Largest In The CEE Region

National Bank of Poland keeps the interest rate unchanged

ING Economics ING Economics 09.11.2022 23:52
The main reference rate was left at 6.75%, against the consensus of a 25 basis point hike. The Monetary Policy Council argued that the expected economic slowdown and monetary tightening, local and elsewhere, should gradually bring inflation back to target   After the MPC decision, tomorrow's conference by National Bank of Poland President Glapiński is even more important. Thus far, Glapiński has clearly held back on declaring the end of the tightening cycle and that should remain so tomorrow. Otherwise, the Polish zloty may suffer even more. The MPC's decision doesn’t help to rebuild investor confidence in Polish government bonds. In our view, the strong weakening of Polish debt, with 10-year yields peaking at 9% in October, was not only due to investor concerns about the high borrowing needs of the budget in 2023, but also was caused by the belief that inflation will remain persistently high, necessitating future hikes. The MPC statement sounded more hawkish and CPI projections were revised up The tone of the November post-meeting statement is relatively hawkish given the lack of a decision on a rate hike. In the passage on inflation, attention was drawn not only to commodity shocks, but in first instance the second-round effects (the transmission of high corporate costs to final prices) and demand pressures are mentioned as CPI drivers. Both of these factors increase core inflation. The second important change is in the projections. The NBP's expected economic growth in 2023-2024 has been slightly lowered, while the inflation path was revised up, above the July scenario. It is worth bearing in mind, however, that the July projection assumed the expiration of the Anti-Inflation Shield (VAT and excise tax cuts on electricity, gas, heating, fuel and food, among others) in October of this year. According to NBP Deputy Chairman M. Kightley, the November projection assumes the freezing of energy prices announced by the government and the maintenance of the Inflation Shield in 2023. Despite such assumptions and lower GDP growth, the inflation path went up. Still, the MPC's conclusion has not changed. The Council believes that the rate hikes made so far, as well as the slowdown of the economy, should support a decline in inflation, towards the NBP's inflation target. The MPC also hopes that low inflation should be supported by an external slowdown and rate hikes by major central banks. At the same time, it acknowledged that inflation should remain high in the short term, with a gradual return to the target. Comparison of NBP projections   We do not know the quarterly backdrop of the CPI projections, but the average of the ranges for the annual data suggest that inflation will not approach the target until 2025, so an extended period of elevated inflation lies ahead. The fact that inflation is unlikely to return to the NBP's target within the monetary policy horizon (4-7 quarters) suggests that there is still room for tightening. NBP rates remained unchanged for the second consecutive month, but this does not look like the formal end of the hike cycle. In its statement, the MPC said that further decisions should depend on incoming information on inflation and economic activity. At tomorrow's conference, the NBP president should rather refrain from declaring the end of the tightening cycle. Our inflation and rates view Inflation risks remain high, and the peak in inflation is still ahead of us. In our view, it will occur in February 2023 at around 20%. Also, the NBP is no longer talking about inflation stabilisation in the second half of 2022, but sees CPI peaking in early 2023, as do we. Over the course of 2023, CPI is expected to drop from 20% year-on-year to below 10%, but in 2024, inflation should remain stubbornly high. Our models indicate that even a slowdown in GDP to around 1-1.5% YoY in 2023 will not bring inflation even close to the NBP's target of 2.5% YoY. We see strong second-round effects (easy pass-through of corporate costs to retail prices), high inflation expectations of companies and households. The experience of other countries where inflation expectations were "deanchored" and the price spiral was set in motion shows that in order to combat stubbornly high inflation, a decisive tightening of the policy mix, i.e. monetary and fiscal policy, was necessary. Therefore, either further rate hikes or strong fiscal tightening await us in 2024. The ultimate cost of fighting long-term high inflation will be higher than if the tightening of the policy mix were greater today. The post-meeting statement indicates that the NBP rather targets a reversal of the inflation trend and want to facilitate a soft landing for the economy rather than bring inflation down to 2.5% as quickly as possible. Such a strategy raises the risk of perpetuating high inflation expectations, and this could entail higher costs of containing CPI in the future. Read this article on THINK TagsPoland rates Poland central bank Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Eurozone industrial production: a meaningful boost in September

Eurozone industrial production: a meaningful boost in September

Alex Kuptsikevich Alex Kuptsikevich 14.11.2022 21:52
According to the latest estimates, Eurozone industrial production added 0.9% for September and 4.9% y/y. The figures are much better than the expected +0.1% m/m and 2.8% y/y, showing that the euro-region economy is in no hurry to slip into recession despite high energy prices. The seasonally adjusted index was at its highest level in almost five years, remaining within the framework of multi-year global stagnation. The apparent reason for the sector's resilience is the massive backlog of orders formed on the back of the easing of pandemic restrictions. There are two sides to the solid industrial production figures in the Eurozone. The strong figures for September create a high base from which a further decline may seem particularly deep and painful. On the other side, they show the relative vitality of the European economy and its positive reaction to the collapse of the euro. In absolute terms, the Eurozone recession may not be as deep as feared a few months ago, despite high energy costs and a sharp rise in the ECB rate. We note that commodity prices have fallen significantly in recent months. A relatively strong economy by the start of the extreme hike cycle forms more room for an ECB rate hike, which is suitable for the euro. The EURUSD will likely face a few obstacles for the upside up to the area of 1.0400-1.0430, where the 200-day MA and the support of the pair in May-June are concentrated. Here, the pair could face local profit-taking, and there will be a fierce tug-of-war between the dollar bulls and the bears in the markets.
Dutch utilities: Addressing the capex and opex challenges

Netherlands: economy contracted by 0.2% meeting expectations

ING Economics ING Economics 15.11.2022 18:54
Dutch GDP declined in the third quarter of 2022 by a mild -0.2% compared to the second quarter, in line with expectations. The contraction was driven by a decline in investment and is expected to develop into a mild recession The third-quarter GDP figure for the Netherlands signals the start of a mild technical recession -0.2% GDP growth rate 3Q22 (QoQ) As expected GDP decline mainly caused by a fall in investment The decline in Dutch GDP was in the ballpark of ING forecasts. Investment was the biggest drag on growth, with gross capital formation falling by -1.7% compared to the second quarter. Expenditure volumes fell due to fewer purchases of transport equipment (-11.3%). Investment in housing (-2.7%), non-residential buildings (-1.7%), infrastructure (-1.7%) and intangible assets (-0.4%) also fell. While demand for (the construction of) housing is generally strong in the Netherlands and the government is ambitious with investing in several types of infrastructure, environmental regulations and insufficient administrative capacity limit the number of building permits. Investment in ICT equipment (3.8%) and machinery and other equipment (2.6%) still expanded. Government consumption dropped by a minor 0.1%, while the consumption of households stagnated – rising by just 0.1%, somewhat better than expected. While the consumption of services, durable and other non-food goods fell in an environment of higher prices and record low consumer confidence, the consumption volumes of food and tourism abroad rose. Accelerating wages, a tight labour market with low unemployment, high amounts of deposit savings among wealthy households (mostly built-up during Covid-induced lockdowns), the certainty provided by the announcement of fiscal support for households in light of the energy crisis, and an eagerness to go on holiday abroad with few Covid-restrictions may explain why consumption volumes of households have not yet collapsed. Dutch exports continue to perform surprisingly well given the worsening international trade environment, with growth of 0.9%. Goods exports expanded by 0.5%, with both domestically-produced goods exports and re-exports showing a positive development. Service exports expanded by 2.3%, at least partially driven by increases in incoming foreign tourism. Imports (1.0%) showed similar growth as exports. Imports of services increased by 1.9%, while goods imports expanded by 0.8%. The overall net contribution of international trade to GDP growth was close to zero (0.05%-point) in the third quarter. Decline in the financial sector, retail and construction are the main reasons for the economic contraction From a sectoral perspective, value-added fell in the financial sector (-2.6% quarter-on-quarter growth), water utilities (-2.2%), energy supply sector (-1.9%), construction (-1.1%) and trade, transport & hospitality (-0.8%). The latter includes retail, of which sales volumes declined by more than 1% in line with low consumer sentiment. Taking into account the size of sectors as well, it was the financial sector, retail and construction that provided the largest drag on total value-added. Semi-public services (-0.2%) and manufacturing (0.0%) stagnated, while value-added still expanded in mining & quarrying (i.e. oil & gas, 3.9%), agriculture & fishery (1.9%), ICT (1.1%), business services (1.1%) and real estate (0.9%). The stagnation of manufacturing stands out positively, as this is despite the fact it has reduced the use of gas strongly (-39% in 3Q22 compared to 3Q19) and some firms were shut down partially or completely, such as those in aluminium, zinc and fertilisers. Manufacturers of pharmaceuticals, cars and trailers, clothing and electrical equipment performed particularly well in terms of production growth in the third quarter. Momentum worsens, but indicators and fiscal plans suggest only a mild recession The third-quarter figure for GDP is the start of a mild technical recession that we projected for the Dutch economy. We see sentiment indicators based on surveys declining further, in line with a weakening global business cycle. Today’s quarterly business sentiment indicator as released by Statistics Netherlands also points in the direction of further worsening of momentum in the market sector, as it dropped across all main sectors. The overall economy-wide indicator fell into negative territory for the first time since 1Q21. Investment expectations for the current year and next year fell but remained net positive. Business expectations for foreign turnover over the next three months also came down but remained positive on balance. So, there is less optimism, but not total gloom about the economy. Still, the situation is one of high capacity utilisation. Staff shortages are still the key factor limiting production and sales for the majority of businesses (34%). The share of firms reporting it as the main issue is, however, falling. Although the share of businesses seeing a lack of demand as their main issue has started to rise along with the share of firms claiming financial constraints (at 5%) as the main issue, it is still quite low at 11%. This is a confirmation that the economy is at a turning point of worsening momentum from a high level, and there is no reason for us to project a long and deep recession. What’s also important going forward is the fact that the Dutch government has announced huge support for households in the form of an energy price cap in 2023 and a €190 tax cut on the energy bill of households and some small firms for November and December 2022. It is also providing financial support to energy-intensive small and medium-sized enterprises (although less so than for households) of up to €160,000 per firm. Dutch budget for 2023: a big bazooka firing at high energy inflation Read this article on THINK TagsSentiment Investment GDP Exports Consumption Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Analysis Of The Natural Gas Futures: The Downside Movement Remains

Natural gas is the third most important energy resource in the world – XTB’s report

XTB Team XTB Team 23.11.2022 13:47
Introduction Natural gas is the third most important energy resource in the world. For years, the gas market has been dependent on long-term supply contracts, which is why gas prices have been relatively stable. Everything has changed by increasing the supply of liquefied LNG gas. Russia is one of the largest players in the global gas market, using its resources as an economic and political weapon against European countries. The pandemic, the desire to further cut emissions and the war in Ukraine have made gas one of the key instruments on global financial markets. In this report, we will show what is responsible for the massive increase in gas prices in Europe and the US, and what the future of the natural gas market may look like. Why is the topic of gas popular? Gas is considered the least emitting fossil fuel in the world. What's more, unlike coal or nuclear power plants, gas-fired power plants can be turned on and off very quickly, which allows for great flexibility in building the energy mix in individual countries. That is why gas power plants became very popular in Europe and in the United States when coal power plants began to be abandoned. At the same time, gas is the most popular raw material for heating houses. The topic of gas is currently very popular - mainly due to Russia's aggression against Ukraine and the ongoing war. Due to the fact that European countries were heavily dependent on Russian gas supplies, gas prices immediately "shot up" because supporting Ukraine in this conflict could end up "turning off the tap", which eventually happened anyway. Read next: Wealthy clients are withdrawing assets from Credit Suisse accounts| FXMAG.COM However, the beginning of this situation took place much earlier. Germany's decision to build the Nord gas pipeline Stream has led to a significant drop in gas production across the European Union. Production has been reduced by up to half compared to the peak levels before the financial crisis of 2008-2009. This has led to an increase in the dependence of European Union countries on Russian gas supplies by almost 40%. Interestingly, when the EU countries reduced their production and increased gas imports from Russia, the shale revolution began in the United States, which clearly changed the energy mix in this country. Meanwhile, Germany, wanting to become even more dependent on Russian gas and be able to resell the raw material to other European countries, decided to build the second branch of the Nord system streaming . Even despite the annexation of Crimea by Russia in 2014, this project has not been suspended. The hard winter during the pandemic led to low stock levels The next stage of this story is the pandemic and the reduction of gas imports due to the decline in economic activity in Europe. What's more, the hard winter during the pandemic led to low stock levels. At the same time, Russia stopped selling gas on the spot market in Europe and limited the filling of its own warehouses in Germany, which was most likely a preparation for the possibility of blackmailing Europe at the time of aggression against Ukraine. Russia finally invaded Ukraine in February 2022, and although it initially honored its long-term supply contracts, at one point demanded payment for gas in rubles. Moscow suspended deliveries to countries that did not agree to these conditions (including Poland, the Netherlands, Denmark and Bulgaria), and then, citing technical problems, reduced and finally suspended deliveries also to Germany. In the fourth quarter of 2022, Russia maintains only limited supplies via the Ukrainian gas pipeline and the Turkish gas pipeline. At the end of September 2022, three gas pipelines were probably intentionally damaged The last act of the story is sabotage related to the Nord system streaming . At the end of September 2022, three gas pipelines were probably intentionally damaged, which was supposed to further destabilize the situation in the region. As a result of sabotage, 3 lines of the Nord Stream can be turned off even for several years. Heavy dependence on Russian gas and other raw materials such as oil and coal led to the fact that Europe faced the biggest energy crisis in history, associated with high prices and unavailability of raw materials. The level of gas in storage facilities in the European Union at the beginning of this year was below the average for the last five years. The specter of the crisis encouraged EU leaders to fully fill their warehouses before the winter. In the chart above, we can see the forecast of warehouse filling, assuming a complete suspension of supplies from Russia and the absence of new sources of supply and consumption in line with the five-year average. As you can see, in such a scenario, there will be no shortage of gas in Europe throughout the heating period. Source: Bloomberg, XTB
EUR/USD Pair May Have A Potential For The Further Rally

Eurozone: Unemployment rate decreases to 6.5%. What may it mean for ECB

ING Economics ING Economics 01.12.2022 11:27
The unemployment rate dropped from 6.6% to 6.5% in October, showing that the labour market remains resilient despite the slowing economy. This will keep the European Central Bank on high alert in its fight against inflation Unemployment in the eurozone is at a record low Another upside surprise from the labour market. Despite an economy moving into recession, unemployment continues to trend down to new records. While German unemployment seems to have bottomed, southern Europe is still experiencing declining unemployment. Spain, Greece and Italy all saw the rate drop in October. The current rate of 6.5% is a new historic low since the series began in 1998 and is consistent with rising nominal wages. From here on, the labour market is set for a slowdown given our expectations of a winter recession. Surveys indeed suggest that the pace of hiring is slowing at the moment, which is set to come with a modest runup in unemployment. Given labour shortages, however, we don’t expect unemployment to increase much. Read next: Poland: Purchasing Managers' Index reached 43.4. The coming months will see a marked slowdown in industrial production growth says ING| FXMAG.COM When we hear ECB president Christine Lagarde say that a mild recession will not be enough to sustainably bring inflation down, this is likely a large part of the mechanism she is referring to. The question is whether that is the case when many supply-side factors are turning disinflationary – but that’s another matter. Expect the ECB to remain on high alert in its fight against inflation, although we do believe that it will opt for a slower pace of rate hikes in the coming months: we're expecting a 50 basis point rise for December. Read this article on THINK TagsGDP Eurozone Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Fed's Nael Kashkari called the deliberation of a pivot "premature". Eurodollar trading close to 1.00.

Jing Ren talks macroeconomic indicators across the globe

Jing Ren Jing Ren 01.12.2022 09:54
Risk appetite got a bit of a boost overnight despite disappointing Chinese NBS PMI figures. Health authorities in the world's second largest economy promised to revise the way in which zero-covid policies would be enacted, and touted progress in vaccinations for the elderly. The latter is seen as a key point in finally getting China in a position where restrictions can be lifted. Chinese factory orders hit the lowest level in seven months. But that was for the larger, government-run companies that are surveyed by the National Bureau of Statistics. The private measure of smaller, more export-oriented business is carried out by Caixin, which could moderate the current outlook What could move the markets Meanwhile, focus is on the rest of the world as PMIs are expected to repeat the upbeat tone seen during the preliminary results published two weeks. Here are some of the major factors to watch out for: China: China Caixin Manufacturing PMI is forecast to come in at 48.9, down from 49.2 previously. But given the result out of the official survey, the market is likely to be not surprised if the measure is closer to 48. On the other hand, a smaller drop than expected could add to the current positive momentum and buoy commodity currencies. Europe: German flash PMI was the standout, coming in well above expectations and breaking a multi-month slide. It stayed well into contraction, but could be shining a light at the end of the tunnel. Particularly when taken in combination with the surprise drop in inflation in the largest economy in Europe. Although it doesn't appear to be enough to shake the perception that the ECB will act quite aggressively at their final meeting for the year. Eurozone PMI is expected to repeat the flash reading of 47.3, which was a substantial improvement over the 46.4 of October. But, it's still below the 50 level, which separates contraction from expansion. Europe continues to contract, but not as much as expected. This also can be seen in the context of Eurozone inflation also coming in below expectations, just like with Germany. But, it should be pointed out that core CPI stayed steady, suggesting the improvement in inflation reading is due more to easing energy prices than a structural change in the shared economy. United States The final reading for S&P Manufacturing PMI is expected to be the same as the flash reading at 47.6, which was significantly down compared to 50.4 in the prior month, and well below the technical contraction of 49.9 expected. But this could be due to methodological differences. This is because the ISM Manufacturing PMI for November came in broadly speaking within expectations, at 50.2 compared to 50.0 expected. A couple of decimal points isn't a major difference this close to the line between contraction and expansion. But, it's expected that ISM will revise their measure down to 49.8, meaning both PMI measures will move into contraction, if expectations are met.
BMW Was Fined 30,000 Pounds By CMA, Google Wants To Become More Productive

BMW Was Fined 30,000 Pounds By CMA, Google Wants To Become More Productive

Kamila Szypuła Kamila Szypuła 08.12.2022 12:57
German luxury automobile firm BMW was fined 30,000 pounds ($36,519) plus a daily penalty of 15,000 pounds by UK's anti-trust regulator. Google has taken action and believes the restructuring will reduce overlapping mapping work in Waze and Maps. BMW AG was fined The Competition and Markets Authority (CMA) is the competition regulator in United Kingdom. It is a non-ministerial government department responsible for strengthening business competition and preventing and reducing anti-competitive activities. In March this year, the CMA launched an investigation into a number of vehicle manufacturers and trade associations over suspected breaches of competition law. This investigation is to focus in particular on the use of recycled materials in cars. Read next: The Euro Benefited From The Weakening Of The US Dollar, A Potential Downside Risk For The Australian Dollar Over The Next Few Weeks| FXMAG.COM The CMA suspects that BMW AG, based in Germany, or other companies of the BMW Group based outside of the UK, have information that the CMA believes is important to its investigation. The CMA therefore formally requested information from the BMW Group. Requests for information may include a wide range of documents and information, such as copies of emails, meeting minutes, and/or information about internal roles and responsibilities. The wider BMW group did not fully comply with the CMA's legal request, and BMW UK did so. For this reason, the CMA has imposed a fine of £30,000 plus a daily penalty of £15,000, in addition, daily penalties will continue to accrue until BMW Group provides the required information. The European Commission is also running a parallel investigation into the issue. Like most companies, BMW shares also fell significantly after Russia's aggression in Ukraine. In the second and third quarters, it managed to make up for the losses. It seems that the last quarter of the year looks optimistic for BMW prices. Since the beginning of December, the traffic has been directed downwards. The last time it traded this low was November 17. Google and its plans to connecting Waze with Geo The search giant is under pressure to streamline operations and cut costs. This is why, Google CEO Sundar Pichai was looking for areas where efficiency could be improved. Google wants to become 20% more productive. There was a suggestion that the company could combine teams working on overlapping products. For this reason, Google plans to connect more than 500 Waze employees with the company's Geo organization, which oversees Maps, Earth and Street View products. Google acquired Waze in 2013 for $1.1 billion. Waze counts 151 million monthly active users for its crowdsourced mapping service, which is known for maintaining detailed traffic data. The service operated largely independently of Google Maps after the acquisition, and Google says it will stay that way. The overall situation of Alphabet Inc (GOOG) for the year is in a downward trend. The current quarter looks the weakest, so any action can be beneficial. Currently, the share price is trading around 95.00 and still falling. This could mean a drop to the November lows. Source: gov.uk, finance.yahoo.com, wsj.com
ECB cheat sheet: Wake up, this isn’t the Fed!

ING Economics call contraction in eurozone economy 'likely mild'

ING Economics ING Economics 16.12.2022 11:45
Some good news for once, with the eurozone PMI ticking up in December. Inflation pressures continue to fade due to lower demand and moderating supply chain problems. For the ECB, the latter adds to doubts about yesterday’s hawkish tone The composite PMI improved from 47.8 to 48.8 in December. This still signals contraction, but as the quarter comes to a close, we can conclude that the contraction in the eurozone economy was likely mild. The easing of contraction was noted in both the manufacturing and services survey. For manufacturing, output fell less in part because the drop in new orders also eased a bit. Very importantly though, delivery times improved for the first time since the start of the Covid-19 pandemic. This indicates that supply chain problems are quickly fading at the moment due to a combination of low demand for inputs and improvements in production. For services, new business continued to contract at a similar pace to last month but recreation saw an uptick in activity again. For price growth, the easing of supply problems is adding to disinflationary pressures. Businesses reported a significant improvement in input cost inflation as they rose at the slowest pace since May 2021. Selling prices still increased at a fast pace, but the pace has been slowing. This is related to the declining need to price through higher costs to consumers and because of discount sales related to lower demand, according to the survey. For the ECB, this must be quite a difficult survey to interpret. Yesterday, the central bank revealed a particularly hawkish take on the economic situation and ECB President Christine Lagarde noted that a mild recession is unlikely to be enough to tame inflation. While the downturn seems to be easing according to the survey, we also see that inflationary pressures continue to cool. For the doves on the governing council, the latter will likely fuel concern that the ECB could end up doing too much. Read this article on THINK TagsInflation GDP Eurozone ECB Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Key events in EMEA next week

Central bank of Turkey is expected to keep policy rate at 9%

ING Economics ING Economics 16.12.2022 12:33
A flurry of central bank meetings in Central and Eastern Europe next week mark the last major events before the festive season gets underway In this article Hungary: Central bank unlikely to deliver changes to 'whatever it takes' stance Czech Republic: Last CNB meeting of the year to confirm a dovish majority Turkey: Central bank to keep policy rate unchanged The Central Bank of Turkey is expected to keep the policy rate unchanged Hungary: Central bank unlikely to deliver changes to 'whatever it takes' stance The National Bank of Hungary (NBH) has made it clear on several occasions that the temporary and targeted measures, introduced in mid-October, will remain in place until there is a material and permanent improvement in the general risk sentiment. Although we’ve seen some progress here, we don't think enough has changed to trigger an adjustment in the monetary policy’s hawkish “whatever it takes” setup. See our preview here. Regarding the current account balance, we expect a significant deterioration compared to the second quarter. We see the deficit widening on energy items, considering the country’s energy dependency combined with significantly higher prices paid in hard currency. Czech Republic: Last CNB meeting of the year to confirm a dovish majority The Czech National Bank (CNB) will hold its last meeting of the year on Wednesday. We expect it to be a non-event, with rates and FX regimes unchanged. The new forecast will not be released until February, so it is hard to look for anything interesting at this meeting. Board members have been very open in recent days and hence there is minimal room for any surprises. The traditional dovish majority has publicly declared that interest rates are high enough and continue to choose the "wait and see" path. As always, we have heard warnings that interest rates could go up if necessary. However, the near-zero market reaction shows that the dovish view here is clear. The governor also confirmed this week that the central bank will continue to defend the koruna. At the same time, another board member confirmed that the CNB has not been active in the market for some time. So hard to look for anything new here either.   Turkey: Central bank to keep policy rate unchanged We expect the Central Bank of Turkey (CBT) to keep the policy rate unchanged at 9% in December, having confirmed last month that it had reached the end of the easing cycle by stating that the current level of the policy rate is adequate. However, there are continued expectations for some easing in the current banking sector regulations, along with targeted credit stimulus measures such as Credit Guarantee Fund (CGF) loans. Given the CBT’s signal of strengthening the macro-prudential framework, the release of the “2023 Monetary and Exchange Rate” document will also remain in focus. Key events in developed markets Source: Refinitiv, ING Key events in EMEA/LATAM next week Source: Refinitiv, ING TagsTurkey Hungary EMEA Czech Republic Read the article on ING Economics Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Eurozone: Germany - annual GDP growth is forecasted to reach 1.8%

Germany: Ifo index increased slightly. According to ING, economy is expected to go back to average quarterly growth rates by mid-2023

ING Economics ING Economics 19.12.2022 11:04
Germany’s most prominent leading indicator, the Ifo index, staged a strong rebound, increasing to 88.6 in December, from 86.4 in November. The index is now back at a level last seen during the summer. Both the current assessment and the expectations components improved in December Shoppers in Lubeck, Germany New optimism still lacks solid fundamentals At the end of what has once again been a challenging year for the German economy, hope has returned: hope that the economy might even avoid a winter recession or at least hope that it will only be a mild one. Indeed, implemented and announced government fiscal stimulus packages and the lockdown-related backlogs have prevented the economy from falling off a cliff. At the same time, however, the cold winter spell of the last days has shown how quickly filled national gas reserves and gas consumption reductions can disappear again. In the week ending 11 December, for example, gas consumption was only some 5% below the historical average, far away from the 20% reduction that is needed to get safely, and without energy supply disruptions, through the winter. Looking ahead, the fact that the economy has avoided the worst does not automatically mean that the only way is up from here. On the contrary, the downsides still outweigh the upsides: new orders have dropped since February and inventories have started to increase again, a combination that never bodes well for future industrial production. Despite some relief in global supply chain frictions, early leading indicators from Taiwan and Korea point to a weakening of global trade in the winter. The next chapter of the pandemic in China will also weigh on trade and supply chains again. Finally, high energy prices are only gradually being passed through to consumers, a trend which will continue throughout 2023, therefore gradually weighing on private consumption.   Looking beyond the short term, the next question will be whether the economy can actually avoid a double dip in the winter of 2023/24. Currently, many official forecasts expect the German economy to return to average quarterly growth rates by mid-2023. We are more cautious and think that the series of structural changes and adjustments will keep the recovery subdued, with a high risk of a double dip. For now, the winter of 2023/24 is still far away. Today’s Ifo index gives a strange feeling of hope and comfort at a time when none of the crisis drivers and fear factors have really disappeared. So the question is whether the risks and fears were overdone previously or whether we have all just got used to these risks and fears, which subjectively make these drivers look less risky. With just a few more days to go before Christmas, we wish that the current optimism is ultimately justified. However, it would not be the first time that in the midst of a structural crisis, early optimism proved to be premature. Read this article on THINK TagsIfo index Germany GDP Eurozone Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Saxo Bank Podcast: Crude Oil Plunging To New Lows, Focus On Bank Of Canada Meeting And More

According To The Economist Intelligence Unit (EIU), Cities In Europe And Canada Are The Best To Live In

Kamila Szypuła Kamila Szypuła 23.12.2022 10:24
Cities are constantly developing, whether as a result of the actions of authorities, entrepreneurs, or as a result of economic effects, e.g. urbanization. There are cities that are very attractive in every respect and are assessed annually by The Economist Intelligence Unit (EIU). They will also sort out the cities that are the least attractive. Also, before the end of the year, it is worth taking a look at your finances, as well as familiarizing yourself with tax guidelines. In this article: IMF in Argentina The list of Most Liveable Cities Partnership agreement Tips for tax bill The activities of the IMF in Argentina are bearing fruit Argenty not only has a reason to be happy because of winning the World Cup in football, but also an economic one. The macroeconomic policy tightened since July is beginning to bear fruit – inflation is falling, the trade balance is improving, and reserve coverage is gradually strengthening. The Board of the International Monetary Fund today completed the third review of Argentina's 30-month EDF agreement. Argentina's agreement for a 30-month EFF, with access of SDR 31.914 billion (equivalent to USD 44 billion, or approximately 1,000 percent of the amount), was approved on March 25, 2022. The government's programme, supported by the IMF, provides Argentina with balance-of-payments and budget support assistance, which is linked to the implementation of policies to strengthen public finances, combat persistently high inflation, improve reserve coverage and lay the foundations for sustainable and inclusive growth social. The IMF Executive Board completed today the 3rd review of 🇦🇷 #Argentina’s Extended Fund Facility arrangement, which allows for an immediate disbursement of ~US$6 billion. https://t.co/vkQ4lS9vb5 — IMF (@IMFNews) December 22, 2022 Read next: The GBP/USD Pair Is Trading Just Above 1.20, The Australian Dollar Is The Strongest Today| FXMAG.COM The list of Most Liveable Cities The Economist Intelligence Unit (EIU) released their Global Liveability Index ranking of the top 10 best and 10 worst places to live in the world in 2022. The index scored 172 cities in five categories: culture, health care, education, infrastructure, and entertainment. Access to health care, safety, infrastructure, access to culture and entertainment, as well as the opportunities offered by the city are important. According to this ranking, European and Canadian cities dominate the list of Most Liveable Cities European and Canadian cities dominate the list of best places to live, according to the Global Liveability Index released by the Economist Intelligence Unit (EIU). https://t.co/uHmyOgVDNG (via @CNBCMakeIt) pic.twitter.com/ZpLXhtabvr — CNBC (@CNBC) December 23, 2022 Credit Agricole and partnership agreement with the Italian Banco BPM In order to become more articulating, the bank undertakes various cooperation. This year there was a lot of turbulence in various banks around the world, as well as a lot of collaborations. On Friday, the French bank Credit Agricole signed a long-term bancassurance partnership agreement with the Italian Banco BPM French bank Credit Agricole strikes bancassurance deal with Italy's Banco BPM https://t.co/4dFD2Ypmkr pic.twitter.com/02kIq8yKmy — Reuters Business (@ReutersBiz) December 23, 2022 Tips for tax bill Taxes are very complicated, so it is very important to manage this bill in order not to expose yourself to bigger and unnecessary losses. Tax Day may still be a few months away, but there are many actions you can take before that date to help manage your tax bill. In fact, some jobs shouldn't - or in some cases can't - wait until next year so as not to miss important tax opportunities. Charles Schwab Corp's tips can help you manage your tax bill. The end of the year is a great time for a portfolio review—and to evaluate your overall approach to saving and investing. Consider these five tax-smart steps now. https://t.co/FSoeEaJOHl — Charles Schwab Corp (@CharlesSchwab) December 22, 2022
Italy: ING Economics expect quarter-on-quarter GDP in the fourth quarter may contract by 0.2%

Italy: ING Economics expect quarter-on-quarter GDP in the fourth quarter may contract by 0.2%

ING Economics ING Economics 23.12.2022 13:54
The last batch of confidence data for 2022 points to extra resilience in fourth quarter GDP. We are still pencilling in a small contraction, but a flat reading cannot be ruled out Source: Shutterstock The latest batch of confidence data for 2022 shows that both consumer and business sentiment has improved, with the sole exception of manufacturers. Consumers more upbeat and less concerned by future unemployment The consumer confidence index posted the second consecutive substantial improvement in December, reaching back to the level seen in May. The drivers of the four-point gain were sharp increases in the economic conditions and future climate components, reflected in a clear improvement in unemployment expectations. In our view, two factors can explain the surprisingly strong resilience of consumer spirits, irrespective of the ongoing erosion of real disposable incomes caused by the inflation spike. The first is a favourable development in the labour market, with an improving employment rate and a falling unemployment rate. Whilst a possible side effect of demand/supply mismatch and of unfavourable demographic developments, these are nonetheless positive short-term factors. The second is the fact that the Meloni government has prioritised providing continuous fiscal support to households to weather the energy inflation shock, refinancing most of the measures until the end of March 2023 in the budget. Interestingly, for the second month in a row, consumers express an increasing willingness to purchase durable goods. Manufacturers confirm they're not immune to external developments The business front looks more diversified, with manufacturers more pessimistic and builders, retailers, and, importantly, service providers, more upbeat. The fall in manufacturing confidence, more pronounced among producers of investment and consumer goods, reflects softening orders and increasing stocks of finished goods, consistently mirrored in declining production plans. Italian industry, still outperforming its big eurozone peers, is apparently not immune to recent unfavourable developments in global trade nor to growing uncertainty about the risk of renewed supply chain issues related to Covid developments in China. Services likely benefiting from stronger-than-expected reopening effects Perhaps the biggest surprise comes from the fourth consecutive confidence improvement in the service sector, notwithstanding an expected setback in the tourism component. The reopening effect seems to be lasting longer than expected, with a possible bearing on 4Q22 GDP developments.   Still pencilling in a negative 4Q22 GDP change, but a flat reading cannot be excluded All in all, the end-of-year confidence data release adds upside risks to 4Q22 GDP developments. We continue to believe that manufacturing will confirm a supply-side growth drag in the quarter, but acknowledge the risk that services might fare better than expected. The demand side counterpart might have a smaller negative correction in consumption than previously anticipated. We are currently pencilling in a 0.2% quarter-on-quarter GDP contraction in 4Q22, but a flat reading could be a distinct possibility.      Read this article on THINK Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
LNG Stocks Are Depleted And Will Need To Be Replaced From February Onwards

LNG Stocks Are Depleted And Will Need To Be Replaced From February Onwards

ING Economics ING Economics 24.12.2022 07:40
Liquidity issues still in the background The volatility of commodity prices, namely natural gas and power requires European utilities to have extra liquidity available to meet margin call requirements. The needed additional cash collaterals have created a difficult environment where most utilitie need to extend and increase credit lines or loans all at the same time. With banks having limited room to increase their available capital, finding liquidity on the market has become a challenge. While natural gas prices appear to be coming down from th eir highs, volatility might be difficult to keep under control, especially once stored LNG stocks are depleted and will need to be replaced from February onwards. We would expect the EU proposal for a new TTF gas wholesale market mechanism gover nments’ liquidity support plans to increase stability. As of today, as well as Germany has earmarked a budget of €68bn available to utilities needing extra liquidity to meet margin call requirements. The United Kingdom is willing to dedicate €46bn and Sweden €23bn. liquidity needs at €10bn. Finland and France have thus far both evaluated EU proposals to tackle the energy crisis should not be disruptive From September 2022 onwards, the European Commission has worked on different actions that could be adopted to mitig ate the impact of high energy prices Read the article on ING Economics   Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
The Drop In German Inflation Is Welcome News, But It Is Mean That Can We Say That Inflation Has Peaked?

The Drop In German Inflation Is Welcome News, But It Is Mean That Can We Say That Inflation Has Peaked?

Kenny Fisher Kenny Fisher 04.01.2023 12:52
After a dreadful showing on Tuesday, EUR/USD has rebounded today. In the European session, the euro is trading at 1.0618, up 0.66%. Investors eye German CPI German CPI was lower than expected in December. CPI slowed to 9.6%, down sharply from 11.3% in November and below the consensus of 10.7%. This marked the first time that German inflation has fallen into single digits since the summer. Spanish inflation, released last week, also slowed in December. The next test is the release of eurozone inflation on Friday. Inflation is expected to fall to 9.7%, down from November’s 10.1%. The drop in German inflation is welcome news, but two caveats are in order. First, the German government enacted a price cap for electricity and gas in December, which meant that energy inflation slowed in December. However, services inflation, which is a more accurate gauge of price pressures, rose to 3.9% in December, up from 3.6% a month earlier. Second, inflation remains at unacceptably high levels. Germany’s annual inflation in 2022 hit 7.9%, its highest level since 1951. If eurozone inflation follows the German lead and heads lower, can we say that inflation has peaked? Some investors may think so, but I wouldn’t expect ECB policy makers to banter around the “P” word. The central bank reacted very slowly to the surge in inflation and has been playing catch-up as it tightens policy. Lagarde & Co. will therefore be very cautious before declaring victory over inflation. If eurozone inflation drops significantly in the upcoming release, it will provide some relief for the ECB in its battle with inflation. The ECB has adopted a hawkish stance, and the markets are still expecting a 50-bp hike at the February 2nd meeting. In the US, the markets are back in full swing after the holidays. Today’s key events are ISM Manufacturing PMI and the minutes from the Fed’s December meeting. In October, the PMI contracted for the first time since May 2020, with a reading of 49.0 (the 50.0 threshold separates contraction from expansion). Another weak reading is expected, with a forecast of 48.5 points. The Fed minutes will make for interesting reading, providing details about the Fed’s commitment to continue raising rates, which surprised the markets and sent the US dollar sharply higher.   EUR/USD Technical EUR/USD is putting pressure on resistance at 1.0636. Next, there is resistance at 1.0674 There is support at 1.0566 and 1.0487 This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.  
The Market May Continue To Buy The Pound (GBP) This Week

ISM manufacturing PMI and JOLTS job opening can, according to Craig Erlam, can mix things up

Craig Erlam Craig Erlam 04.01.2023 23:02
Equity markets are pushing higher on Wednesday, buoyed by softer yields and some promising PMI revisions in Europe. It would appear investors are increasingly coming around to the idea that central banks will be forced into cutting rates earlier than previously anticipated in order to support the economy. That would also suggest they anticipate inflation will subside faster than previously thought which would be welcome if true after a year of overshoots. I’m sure this is a position that will change a lot in the coming months just as it has in those passed but it’s seemingly boosting risk appetite in the first week of the year. You just have to wonder how much resilience economies have in the interim to weather the cost-of-living storm. This is where the other data points will become increasingly influential. The PMIs this morning, for example, were largely contractionary but only marginally so and the upward revisions for Germany, France, Italy, Spain, and the bloc as a whole will offer some encouragement. Read next: Exxon And Chevron Abandon The Global Market And Focus On The Americas| FXMAG.COM I feel we’ll have a lot more clarity by the end of the first quarter in a number of ways from the path of inflation, terminal rates, and the ability of economies to continue to withstand those pressures. It will no doubt be a whirlwind quarter but one after which the rest of the year could look more promising. Or maybe this optimism is just a hangover from all of the festivities. Fed minutes eyed There’s plenty more to come today that could potentially dampen the mood, most notably the Fed minutes from the December meeting. The central bank is determined to reinforce its hawkish stance on investors and prevent an unwanted loosening of financial conditions and the minutes could be another opportunity to do so. Whether investors will be in the mood to listen is another thing. And then there are the ISM manufacturing PMI and JOLTS job openings, both of which have the potential to shake things up during such an uncertain period. It promises to be a very interesting second half of the week. Cautiously higher There isn’t much to add on the bitcoin front. It remains in consolidation, buoyed slightly by better risk appetite in the market but still in the $16,000-$17,000 range. A move above here is possible if risk appetite remains positive but I’m not sure traders will get too carried away. Headwinds remain significant for cryptos and it may take some time for traders to get back on board. For a look at all of today’s economic events, check out our economic calendar: www.marketpulse.com/economic-events/ This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds. Growing Optimism? - MarketPulseMarketPulse
The Current War Between China And The United States Over Semiconductor Chips Is Gaining Momentum

The Current War Between China And The United States Over Semiconductor Chips Is Gaining Momentum

Saxo Bank Saxo Bank 09.01.2023 13:19
Summary:  The semiconductor industry was negatively impacted last year by rising interest rates pushing down equity valuation and pricing pressures in certain segments such as memory chips. In the first week of trading the industry is off to a better start and Taiwan has just passed a law that will allow local semiconductor companies to get tax credits up to 25% of their R&D spending in an attempt to increase the industry's competitiveness against the US and European measures to set up their own supply chains. The Chip War is on and we expect more policy headwinds with tax incentives as the key driver which will end up being positive for shareholders. Semiconductors are off to a good start The recent book Chip War: The Fight for the World’s Most Critical Technology by Chris Miller is a great historical journey and perspective on the current semiconductor chip war between China and the US. The book is highly recommended and one can get a taste for the content in Chris Miller’s interview on the Top Traders Unplugged podcast. We have written extensively on semiconductors last year and highlighted that the US CHIPS Act is the biggest industrial policy since WWII paving the way for creating a domestic supply chain of semiconductors with tax credits provided to foreign chip companies if they stop engaging with Chinese firms on the most advanced chips. Europe is also building out its semiconductor supply chains. It is all about controlling the key ingredients in military equipment and all other important applications in a modern society from computers, smartphones, cars etc. Read next: Incorporating Slack And Other Apps Into The Salesforce Platform Can Actually Put Buyers Off| FXMAG.COM At the centre of this conflict sits Taiwan which is key nexus in the global supply chain of semiconductors and with China openly aiming to integrate Taiwan into China, the risks are too high for the US and Europe because China is becoming a strategic competitor that does not share the same values hence the US CHIPS Act. Taiwan is feeling the pressure and has just passed a new law that will allow local semiconductor companies to get tax credits for up to 25% of their R&D expenses in a bid to remain competitive and offset the subsidies in the US and Europe. It will boost earnings of Taiwanese semiconductor companies but also increase the competition further. Since an integrated domestic supply chain of semiconductors is existential for Europe and the US the two regions will continue to add incentives to accelerate the reconfiguration of this supply chain. If Taiwan provides incentives and subsidies, the US and Europe will just top it. There is no alternative. This has ramifications for the industry as it means a more attractive investment and tax setup which will be positive for shareholders longer term. Semiconductors are off to a good start this year up 3.7% after being down 27% last year. Taking a closer look at our theme basket we can see that the best performing stocks have been Samsung Electronics, ASML, Intel, Micron Technology, and STMicroelectronics.   Source: The Chip War kicks into gear | Saxo Group (home.saxo)
After 8 rate hikes, National Bank of Romania interest rate amounts to 7%

After 8 rate hikes, National Bank of Romania interest rate amounts to 7%

Pawel Zapolski Pawel Zapolski 11.01.2023 14:22
The main interest rate in Romania just went up by 25 bps to 7%. And just a moment ago it was at the same level as in Poland... Is this an announcement of interest rate hikes in Poland? Perhaps. A country from our region raised interest rates today. It's about Romania. The main rate went up by 25 bps to 7%. Read next: Bill Ackman's fund buys stocks of Howard Hughes, real estate developer| FXMAG.COM Is this the last price hike in Central Europe? The main interest rate in Romania is 7% from today. It went up from 6.75%. In 2022, the National Bank of Romania raised it 8 times, from 1.75%. Inflation in the country with the capital in Bucharest exceeds 16% y/y. Main interest rate in Romania Source: Trading Economics Generally, analysts polled by Reuters expected a 25 bp hike. “We believe that this is the last meeting of the central bank in the Central European region with a rate hike,” even ING group analysts stated. Fundamentals were in favor of an increase Erste Group analysts assumed that interest rates in Romania would not change. “We expect the interest rate to remain unchanged at 6.75%. It will be a difficult choice, however, given the recent inflation figures that surprised to the upside, as well as solid economic performance. Moreover, the ECB's hawkish tone, which has led to an overestimation of the eurozone's interest rate outlook, is another argument for the hawks. In our opinion, however, a hike of 25 bp . would bring little benefit and would be inconsistent with the recent easing of monetary conditions. In addition, the dovish wing of the Romanian bank will be looking at other central banks in the region, especially in Poland. On the other hand, a sizeable current account deficit should require higher real interest rates in Romania. Overall, economic fundamentals favor another rate hike, while technical considerations favor a no change decision. As you can see, "fundamental considerations" won out in Romania. Romania - inflation Source: Trading Economics Main rates in the CEE region Source: Erste Group
Solid Czech koruna and central bank's plan to keep rates elevated stay in contrary to a 185bp rate cut prediction

Czech Republic: CPI inflation hits 15.8%, noticeably less-than-expected

Pawel Zapolski Pawel Zapolski 11.01.2023 15:34
December brought a decline in the CPI in the Czech Republic compared to November. The reading turned out to be much lower than forecasts. CPI inflation in the Czech Republic in December 2022 amounted to 15.8% y/y, and the forecast assumed 16.4%, in November it was 16.2%. In m/m terms, the index reached 0%, while the forecast was 0.5%, and in November it amounted to 1.2%. As Bartosz Sawicki from Cinkciarz.pl pointed out, Poland will not be the only country in the CEE3 region with a decrease in inflation in December 2022. Inflation in the Czech Republic Source : Trading Economics   Czech CPI like a roller-coaster Let us remind you that in November 2022 inflation on the Vltava River was 16.2%, while in October it was 15.1%. The reading was a negative surprise as analysts' consensus assumed 15.8%. The local inflation peak was recorded in the Czech Republic in September at 18%. The behavior of the CPI index in the Czech Republic was explained by PKO Research economists . “In the last two months, inflation was fueled by energy prices. In October it fell due to government subsidies, and in November it increased due to base effects related to the 2021 VAT cut.   The Czech National Bank started to raise interest rates quite early, significantly ahead of the National Bank of Poland, but earlier it also decided to suspend the cycle of increases. Currently, the main rate in the Czech Republic is at the level of 7%. Read next: InPost delivered 44% more parcels year-on-year. Stock price increased significantly| FXMAG.COM The main rate in the Czech Republic Source: Trading Economics
If German Numbers Remain Weak, The ECB Will Have To Consider Easing Up On Rates

Many European sectors will suffer from a weak economy in 2023

ING Economics ING Economics 31.01.2023 11:38
In 2023, many EU sectors will see diminishing growth due to a weak economy. Manufacturing, staffing and construction are likely to face a small decline though not all sectors will shrink. While the Technology, Media & Telecom (TMT) and transport sectors should see lower growth than last year, the outlook remains positive Robotic arms operate in a welding hall of the Suzuki manufacturing plant in Hungary Sluggish developments in many industries Development production (volume value added) EU sectors (Index 2018=100) Source: Eurostat, ING Research (2022 Estimate & 2023 Forecast) Energy prices still a drag but gas and power markets have eased Given the circumstances, European companies could not have hoped for a better situation during the first half of the heating season. Demand destruction, milder-than-usual weather and continued LNG supply have ensured that storage levels are still at record-high levels. Day-ahead TTF gas prices have fallen as much as 83% from the peak in August 2022 and APX power prices by 75%. This leaves Europe in a better-than-expected position for the remainder of this winter and the same is true for the 2023 filling season of gas storages. However, it is still vital that the region is cautious through the remainder of this winter, as Europe needs to try to end the current heating season with storage as high as possible as gas flows from Russia could still be reduced further, both in terms of pipeline flows and LNG shipments. Futures markets currently expect TTF gas prices to trade between 55 and 65 euro/MWh throughout 2023 and carbon prices to remain within their trading band of 75 to 100 euro per ton CO2. Hence, markets currently expect APX baseload power prices to trade between 140 and 175 euro/MWh throughout 2023. That is a lot lower compared to the future prices before the start of the winter, but still three to four times higher than pre-crisis levels. Hence, energy prices will continue to weigh on European sectors in 2023. European gas storage levels are at record high levels EU gas storage levels Source: ING Research based on Refinitiv and Gas Infrastructure Europe Manufacturing: Still cloudy, but gradually clearing up In recent months, the outlook for European industry has improved somewhat thanks to a mild winter and governments bolstering producer confidence by dampening the extreme energy prices. Given the fact that the sector has encountered a growing number of persistent problems, production held up well in 2022. Average growth was around 2%, but sectoral differences were large, ranging from sharp contractions in energy-sensitive basic materials such as chemicals (-5.5%) and base metals (-3.5%), to strong growth in consumer goods such as pharmaceuticals (+14%) and clothing (+5%). Production interruptions have been greatly reduced, but like the high energy prices, are not yet a thing of the past. In addition, a post-Covid consumption shift from products to services and stagnation in the US will most likely continue to weigh on demand in the first half of 2023. The reopening of the economy in China provides some counterweight on the demand side. Manufacturers’ expectations for the near future have become less pessimistic. In addition, automakers clearly continue to benefit from the more reliable supply of semiconductors and other electronic components, which is enabling them to eliminate the large production backlogs. In that respect, it is also encouraging that the Ifo index, Germany's most prominent indicator, rose for the fourth time in a row in January. Still, don’t expect a full-blown industrial upswing in 2023. The more bearish factors dominate for now, and some renewed but subdued growth in the second half of 2023 seems the most realistic scenario. Food manufacturing: Slight decline after two years of strong growth Growth in production volumes in food manufacturing has been particularly strong over the last two years, partially because of a Covid rebound. Over the past 20 years, there are three periods in which production volumes decreased in line with a general economic downturn, namely 2008-‘09, 2012-‘13 and 2020. We believe 2023 could mark a decline in the range of 0.5% to 1% for food makers as the general economy balances between contraction and stagnation. While the inflation peak seems to have passed, there are still many food manufacturers that plan to raise sales prices in the months ahead. However, since December, this group is no longer in the majority. Food inflation came in at 12.2% in 2022 which has likely caused shifts in consumer demand as more households look to save money when shopping for groceries or eating out. For food producers, this could mean that companies that primarily focus on making private-label products and supplying discounters fare a bit better in terms of sales volumes compared to branded food makers. Still, the latter have more pricing power in general and are in a better position to defend margins. Construction: Order books still well-filled In November 2022, EU construction production decreased a bit (-0.4%) compared to October but was still above the volume of a year earlier. Higher interest rates and a weaker economy are making home buyers and firms more reluctant to invest in new residential and non-residential buildings. In addition, higher building material costs have made new investments more expensive although some building materials prices have decreased in the last few months. That said, EU construction firm order books are still well filled with 9.0 months of ensured works at the beginning of 2023. The EU construction confidence indicator declined in the first half of 2022, but since then, has hovered around neutral. So, the developments are certainly not bad in every subsector. High energy prices are creating additional demand for energy-saving construction works in the installation and maintenance market. All in all, we expect only a very slight decrease (-0.5%) in total EU construction volumes in 2023. Increase in sentiment indicator retail and manufacturing sector in January 2023 European Union Sentiment indicators Source: Eurostat, ING Research Retail: Weak start to the year but some recovery expected 2023 is likely to be another interesting year for retail. Last year saw people spend more money than ever at the store and online, although volumes have been on a declining trend since late 2021. This is a clear sign that consumers are suffering from high prices. We also note that pre-pandemic preferences are now returning with consumers once again spending more on services and less on goods. Slowing volumes and easing supply chain problems have led to fast growth in inventories, which could prove problematic early in the year given that consumers are becoming more cautious about spending on goods. The big question mark is how purchasing power will recover over the course of the year as inflation is expected to drop. Wage growth is set to increase, but not to the extent that purchasing power will improve in the first half of the year. Still, with unemployment expected to remain low, there seems to be potential for recovery in sales volumes in the second half of the year. TMT: Growth will slow but remain strong We estimate that growth in the information and communication sector was 5.8% in 2022 and we forecast 3.5% growth for 2023. This is a composite figure that reflects growth above 3.5% in the sub-sector “Computer programming, consultancy, and information service activities”, while growth should be more subdued in the telecom sub-sector. Our expected growth for the information and communication sector is below the historic average, in line with the expected economic slowdown. The sector has been growing much faster than the overall economy over the years. According to European Commission survey data, managers of the largest subsectors of the information and communication sector have a neutral view about the near-term business prospects. They do not think that there are specific factors which will restrain growth, although some managers report it is a challenge to find personnel. Interestingly, the sector is experiencing a lot of price pressure, which is favourable for customers. Nominal growth will therefore be more subdued than volume growth in 2023. Read next: Samsung Demand For Semiconductors And Smartphones Remains Weak| FXMAG.COM Transport & Logistics: Rebound of passenger travel outweighs headwinds for freight The European transport and logistics sector is entering a new phase of reality after the unprecedented impact from the pandemic and the Russian invasion of Ukraine. Unlike 2022, this year starts with (nearly) all travel restrictions removed. With European interest in (leisure) travel continuing to resume, the aviation sector is set to proceed on a low double-digit recovery track. Public transport networks are also expected to see higher occupancy rates. On the dominant freight side, the outlook is bleaker, with consumers spending more on services and demand for goods faltering amidst economic weakness and sanctions. German road transport traffic on motorways – a relevant indicator - ended last year in slight negative territory. But freight logistics could pick up over the course of the year as the European manufacturing sector shows signs of improvement, and China’s Covid policy U-turn could benefit airlines as well as trade (and the ports- and shipping sector). On balance, we expect the transport and logistics sector to grow by 1.5% in 2023. Staffing: Hiring freezes seen due to EU recession fears After two years of buoyant market growth, the outlook for the European staffing sector is darkening for 2023. With economic activity in most European economies expected to slow down, market volumes in the European Union are likely to decline by 1% in 2023. A combination of lower economic growth forecasts and rising costs will likely soften demand for temporary agency workers, especially in certain energy-intensive and/or consumer-oriented industries. Although unemployment will rise slightly, the labour market remains tight in most European economies. Hence, clients are more likely to turn to temp agencies since they are better equipped to find candidates than the clients themselves. However, at the same time, the tight labour market will limit the growth potential of temporary employment agencies, as it becomes more difficult for them to recruit new employees. Read this article on THINK TagsTransport TMT Manufacturing Forecasts Food EU Construction Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
NOK (Norwegian Krone): Norges Bank Hiked The Interest Rate!

The Government Pension Fund Global Suffers Losses

Kamila Szypuła Kamila Szypuła 31.01.2023 12:53
War in Europe, high inflation and rising interest rates were behind the poor performance of The Government Pension Fund Global. In contrast, the quick service restaurant industry in India has enjoyed a strong track record. In this article: Building a budget Westlife Foodworld Ltd reported good after-tax net profit A record loss Building a budget The year 2022 brought major changes in the main macroeconomic indicators. Overall, inflation has become a sore spot and in an attempt to combat it, the central bank has tightened monetary policy by raising interest rates and restricting liquidity. Entering another fiscal year, many economies face challenges as to how best to allocate their finances. Building a budget is not easy, you should consider whether saving or spending/investing is more important. Countries face an even greater challenge as growing fears of a global recession make it difficult to assess the situation. "In this year’s India budget, government faces a delicate balancing act between expenditure priorities and fiscal prudence.” Read an article by Santanu Sengupta, our India Economist, to know more: https://t.co/YJZvmAoOeN — Goldman Sachs (@GoldmanSachs) January 31, 2023 Read next: Samsung Demand For Semiconductors And Smartphones Remains Weak| FXMAG.COM Westlife Foodworld Ltd reported good after-tax net profit Fast food restaurants as well as the entire service market have been suffering in recent times as a result of growing economic problems, inflation and interest rates, and fears of recession. The fear of low profits was justified. But despite the current economic environment, demand for fast food restaurants has remained solid, especially in India. Westlife Foodworld Ltd- The company, which franchises McDonald's Corp (MCD.N) in West and South India, reported a consolidated after-tax net profit for the December quarter of INR 363.5 million (US$4.43 million) vs. 208.2 million rupees a year earlier. According to analysts, fast food restaurants saw an increase in demand in brick-and-mortar stores and takeaways during the holiday season, especially in October and December. Such positive results are a good signal for this industry. McDonald's India franchisee Westlife's profit soars on dine-in demand https://t.co/4tx7ER9C8O pic.twitter.com/TiqExbSgPN — Reuters Business (@ReutersBiz) January 31, 2023 A record loss The Government Pension Fund Global, one of the world's largest investors, reported a record loss of NOK 1.64 trillion ($164 billion) for the entire 2022 on Tuesday. According to the general director of Norges Bank Investment Management, this situation was influenced by the economic situation, as well as by the Ukrainian state. The $1.3 trillion fund was created in the 1990s to invest excess revenues from the Norwegian oil and gas sector. To date, the fund has invested in over 9,300 companies in 70 countries around the world. The foundation of the fund's wealth is the huge reserves of oil and natural gas in the North Sea. Interestingly, the fund's previous biggest loss was 633 billion crowns in 2008 due to the global financial crisis. Norway's gigantic sovereign wealth fund loses a record $164 billion, citing 'very unusual' year https://t.co/ZotXXO9NXp — CNBC (@CNBC) January 31, 2023

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