- Harry Bennett
- November 1, 2022
- 2:38 pm
- 10 min read
The ECB remain committed to hiking interest rates to combat inflation but will the U.S. Federal Reserve pause hikes moving into 2023?
Indices
Futures
Forex
– Last week U.S. Treasury yields climbed on Friday as inflation data and employment figures came in line with estimates. Stronger than expected GDP growth of 2.6% was a positive sign for traders. The 2 year and 10 year treasury yields are currently trading around 4.4% and 4% respectively (10 yr treasury yield chart below)
– The U.S. appeals court has temporarily blocked Biden’s student loan forgiveness initiative. The move would have cost taxpayers $400 billion according to Congressional Budget office.
– The Dow advanced more than 800 points on Friday, and the S&P 500 and the tech heavy Nasdaq was up over 2.25%. Investors welcomed the economic data and positive earnings reports. For the week, the S&P 500, Dow and Nasdaq were up 3.8%, 5.01% and 2.04% respectively.
– The World Bank warns of a global recession next year with subsequent financial crises in emerging markets and developing economies.
– European Central Bank president Christine Lagarde has said the ECB must keep raising rates despite the inflation risks. The ECB’s mandate is price stability and the goal is to bring inflation back to the 2% target.
– Germany may allow China’s Cosco shipping line to take a smaller stake (24.9%) in the Hamburg port terminal. This is despite efforts from foreign ministries to block the deal for political concerns.
– Eurozone inflation climbed to 10.7% in October, energy costs along with other impacts from the Ukraine war will impact European economies over the next 12 months. Consumers will need to cut back on spending. The International Monetary Fund (IMF) reckons the Eurozone area will see growth of 3.1% in 2022 and just 0.5% in 2023.
– The UK continues to battle through its political instability. The UK’s treasury sources has been keen to stress the difficulties that the fiscal package will have on the UK as a whole. Tax rises look likely across the board but the full package will be announced on the 17th November 2022.
– According to the latest PMI data released by S&P Global, the UK’s economic outlook now looks even more gloomy. Business activity fell for its third consecutive month in October at 47.50, marking its steepest decline since the global financial crisis (March 2009), excluding the pandemic.
– GBP continues its attempts to regain lost ground against the Dollar (USD). The weekly close was 1.16155, with the 100 day moving average looking like an area of resistance along with the 61.8% Fibonacci retracement (chart below).
– China’s consumer prices rose in September at their fastest pace in more than 2 years (chart below). Food prices have exploded, in particular prices of pork have soared as some farmers have been reluctant to sell pigs their pigs which has tightened supply.
– In Brazil, President Jair Bolsanaro lost to the left in what was a tight Brazilian election. Economists have warned that inflation will rise as the Brazilian Real (R$) currency will fall.
Conclusion
The global macroeconomic outlook does not look promising as global recessionary fears continue to mount. Inflationary data in the U.S continues to rise and China’s stance on policy offers more economic gloom. Business activity is falling across the globe which is evident by the data prints. Energy crisis’s loom and this is made worse with the extremely fragile Russian – Ukraine war. Hedge funds rebuild their long position across the grain, oilseed and cattle commodity markets.
Written by:
Harry Bennett
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