October 31, 2022 8:08:59
Asian equity markets are mostly higher this morning in line with a rise in the US market on Friday. Reports attribute the move to optimism about profit reports. Markets also continue to anticipate that central banks will soon slow the pace of their interest rate increases. In China the manufacturing and non-manufacturing PMIs for October both fell below the 50 level signalling a contraction in activity.
The earlier release of our Lloyds Business Barometer showed that UK business confidence weakened in October. The overall reading only fell by 1% point but that was the lowest since March 2021 and represented a fifth successive decline in confidence about the economy as a whole. Firms’ feelings about their own trading prospects and staffing levels, in contrast, improved this month, but they both remained weaker than in the first half of the year. Confidence in manufacturing fell for a fifth month in a row and continued to trend lower in other sectors, including retail and services, while six of the twelve UK regions and nations reported lower confidence.
Potentially of most interest in today’s UK money supply data may be September mortgage approvals and bank lending secured on dwellings. Give the ongoing rise in mortgage rates concerns are growing about activity in this area, so it will be interesting to see if that is reflected here.
What were seen as ‘dovish’ comments last week by European Central Bank President Lagarde, following the ECB’s latest 75 basis points interest rate hike, boosted hopes that the pace of rate increases will soon slow. However, today’s data for CPI inflation and GDP seem set to show the dilemma that the central bank still faces.
On the inflation front, outturns for October in some of the biggest countries in the Eurozone, most notably Germany and Italy, point to upside risks compared with today’s consensus. That suggests inflation could post another new high for the year pointing to the need for further tightening. In contrast, today’s GDP is likely to show that activity is close to stagnating. On a positive note, German GDP unexpectedly rose in Q3, which lowers the risk that output will have fallen in the region as a whole. However, activity is still very sluggish and PMI data point to the risk of a Q4 contraction.
Early Tuesday, the Australian central bank will give its last monetary policy update of the year before its summer break. Another rate hike is expected and in the wake of last week’s higher than expected Q3 CPI inflation some economists are now expecting a 50bp rise. However, the majority are still looking for a second successive rise of just 25bp.
Global bond yields rose on Friday and US Treasuries have continued to sell-off overnight. However, yields are still well below their levels of a week ago. Sterling is a touch lower against the US dollar but up against the euro this morning.
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.
