October 26, 2022
Daily Report 26/10/2022
Overall Sterling volatilities eased slightly on Tuesday as immediate political turbulence eased. The CBI industrial orders index edged lower to -4 for October from -2 previously, but stronger than consensus forecasts of -12. Companies reported that output had declined further in the latest three months, but expect a recovery over the next three months. There were still important inflation pressures with price increases still substantially above the long-term average. Bank of England chief economist Pill criticised the Truss government for a lack of co-operation with other institutions including the central bank. Sterling secured slight gains into the New York open before posting a strong advance amid hopes that Sunak’s government can restore financial stability. Sunak retained Hunt as Chancellor which helped underpin market confidence. Risk appetite also strengthened with a notable advance on Wall Street which also helped underpin Sterling confidence. Markets will focus on fiscal policy with Sunak due to hold talks with Chancellor Hunt ahead of the planned fiscal statement next week, although this timetable could be changed.
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The German IFO index declined marginally to 84.3 for October from a revised 84.4 previously, but significantly above consensus forecasts of 83.3. There was a small decline in the current conditions component to 94.1 from 94.5, but the expectations component rallied slightly to 75.6 from 75.3 and both figures were above forecasts. The IFO remained cautious with comments that a winter recession is coming with the economy likely to contract 0.6% for the fourth quarter. It also reported that retail expectations had hit a new record low, but industry expectations had improved slightly while 50% of companies are expecting to increase prices in the next three months.
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US consumer confidence dipped to 102.5 for October from a revised 107.8 previously and well below consensus forecasts of 106.5. There was a sharp decline in the current assessment and smaller retreat for the expectations index. Confidence in the labour market declined and there were renewed concerns over inflation trends. The US Philly Fed non-manufacturing index dipped sharply to -14.9 for October from 2.5 previously with a dip in orders. Employment trends remained firm for the month and there was stronger upward pressure on prices. Companies were notably less confidence over the outlook, maintaining expectations of weaker demand. The Richmond Fed manufacturing index dipped to -10 for October from a reading of unchanged in September with a sharp decline in new orders with order backlogs also much weaker. The employment indicators were mixed while there was a fresh increase in inflation pressures on the month.
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