October 4, 2022 9:16:19
Asian equity markets are mostly up sharply this morning. That follows a big rise in US stocks yesterday and somewhat smaller gains in Europe. Some reports have said that the moves were supported by weak US economic data boosting expectations that interest rates may not have much further to climb. The Australian central bank hiked interest rates by 25 basis points at its latest policy update below expectations for another 50bp increase. Meanwhile, media reports suggest that the UK government may bring forward the date for the release of its medium-term fiscal plan currently scheduled for 23rd November.
There is no UK economic data of note today. The Conservative Party Conference continues but the next big event is PM Truss’s speech tomorrow. In the meantime, topics other than monetary policy may be discussed.
In the Eurozone, producer price data for August will provide an update on pipeline inflationary pressures. The latest consumer price data for the single currency area showed a further rise in inflation as energy and food prices, and indeed prices more generally, continued to increase rapidly. Today’s update is expected to show that cost pressures remain intense.
US factory orders are expected to have grown modestly in August. Already released data for durable goods orders showed a small fall due to a decline in the volatile transport sector. However, other orders rose and it is predicted that will also be the case for non-durable orders.
European Central Bank President Lagarde is scheduled to speak at an event for students, and so seems unlikely to reveal anything new about the ECB’s plans for monetary policy. There are no scheduled speeches from Bank of England policymakers, but several US Federal Reserve officials are set to speak and markets will watch for clues on how much further interest rates will be raised at the upcoming November meeting.
Early tomorrow, New Zealand’s central bank is expected to hike interest rates. Most forecasters are expecting a fifth successive 50bp rise taking the official cash rate to 3.5%. Looking further ahead, the consensus expectation amongst economists is that rates will peak at around 4.0-4.5% next year, while markets are priced for rates to reach 5% by May.
US bond yields fell sharply yesterday helped by the weaker US data. UK gilt also slipped with 10-year yields falling back below 4% for the first time in over a week. Chancellor Kwarteng’s decision not to remove the 45% tax band may also have supported the market. In currency markets, sterling rose against both the euro and US dollar after that news.
Although Moneta Markets aims to ensure that the information/material is accurate, it cannot be held responsible for any omissions/miscalculations or mistakes as it does not warrant the accuracy of such material. Any material and/or content provided herein is intended for educational purposes only and does not constitute investment advice on how clients should trade as it does not take into consideration your personal objectives, financial circumstances or needs. Please seek independent advice before making any trading decisions. Reliance on such material is solely at your own risk and Moneta Markets cannot be held responsible for any losses resulting directly or indirectly from such reliance. Any reference to figures/statistics or numbers refers to the group of companies of Moneta Markets. Please refer to the legeal documents should you require more information.
