October 13, 2022

Daily Report 13/10/2022

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The Bank of England reiterated after the European open that the emergency bond-buying programme would end on October 14th. UK bond yields moved higher again amid an underling lack of confidence and confusion over the Bank of England policy on the emergency bond-buying programme. The latest YouGov consumer confidence survey declined sharply to 97.7 from 98.8 with a significant impact from fears surrounding higher interest rates. Bank of England Chief economist Pill stated that he was still inclined to believe that a significant monetary response will be required at the next policy meeting due to significant macro and market news of the past few weeks. He added that government policies must ensure that tax cuts and higher spending do not threaten public finances or the effectiveness of the Bank of England over the medium term. MPC member Mann stated that it was better to front-load rate hikes when inflation expectations are drifting. Comments from bank will continue to be monitored very closely in the short term. There was a recovery in bond markets later in the session which helped stabilise Sterling

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Euro-Zone industrial production increased 1.5% for August after a 2.3% decline previously with year-on-year growth of 2.5% after a 2.5% decline previously. The German economy Ministry warned that there would be negative GDP growth at least until the first quarter of 2023, but gas prices have moderated. ECB President Lagarde stated that discussion of quantitative tightening has started and will continue, but markets do not expect that there will be any near-term move given global bond-market turbulence.

Key Data

7.00 German Harmonized Index of Consumer Prices (YoY) (Sep) Act. 10.9% Exp. 10.9% Prev. 10.9%

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US producer prices increased 0.4% for September after a 0.2% decline previously with the annual rate slowing to 8.5% from 8.7% and slightly above forecasts of 8.4%. Underlying prices increased 0.3% for the second successive month and in line with expectations with the year-on-year rate slightly lower at 7.2% from 7.3%. The US consumer prices data on Thursday will be extremely important for market direction. Consensus forecasts are that the headline annual rate will edge lower, but that the underlying rate will increase. Strong data would risk further dollar gains on expectations of an even more aggressive Fed stance.

Key Data

13.30 Consumer Price Index ex Food & Energy (MoM) (Sep) Exp. 0.5% Prev. 0.6%
13.30 Consumer Price Index ex Food & Energy (YoY) (Sep) Exp. 6.5% Prev. 6.3%