Investors await ECB interest rate decision
With Eurozone inflation forecast to rise to at least 10% in the coming months, a “jumbo” rate hike of 75 basis points is certainly a possibility.
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The euro rose against the dollar and the British pound on Wednesday morning as the European Central Bank prepared for a key policy meeting on Thursday.
The ECB is expected to front-load a series of rate hikes and sacrifice growth in the region in a bid to curb inflation at 9.7%, which is forecast to rise further.
A “jumbo”[ads1]; rate hike of 75 basis points is a possibility and has been largely priced in by markets, Berenberg analysts said.
Sterling struggles when the new prime minister takes office
The British pound was down against the US dollar and euro on Wednesday morning as new Prime Minister Liz Truss began her first full day in office.
Sterling was trading at $1.1495 at 08:30 London time, down 0.17% from the previous day, holding it around the lowest level it has traded at since the 1980s.
Analysts at ING said traders will process reports published on Tuesday that Truss plans to freeze energy bills at a cost of £130 billion and provide billions more in business support, likely to affect Britain’s growth outlook and debt position.
The euro rose 0.17% on the pound to 0.8611, ahead of the European Central Bank’s policy meeting on Thursday, when it is expected to announce a rate hike of 50 or 75 basis points.
The EU’s central currency rose 0.02% against the dollar to $0.9902 after falling below the 99 cent level on Monday.
– Jenny Reid
Nomura cuts its GDP forecast for China – again
Nomura has cut its forecast for China’s full-year GDP to 2.7%, another downgrade from the previous estimate of 2.8% set in August.
The new outlook is based on Nomura’s analysis which found that 12% of China’s GDP is affected by Covid controls on a weighted basis, up from 5.3% last week.
Several cities, including the technology hub of Shenzhen, have tightened Covid controls in recent weeks after reporting new local infections. Chengdu has also ordered people to stay at home while authorities conduct mass virus testing.
Read the whole story here.
CNBC Pro: Tensions between Russia and Europe could spur a ‘bullish shock’ for oil markets
Oil and gas shares are set to get a boost from increased tensions over Russian gas supplies to Europe, according to an analyst.
Kenny Polcari, market strategist at SlateStone Wealth, told CNBC’s “Street Signs Asia” that investors should zoom in on big U.S. energy names that are also good dividend payers.
One stock he named is up 125% this year, and he says there is more “room to run.”
Pro subscribers can read more here.
— Weizhen Tan
Oil prices fall due to expectations of further interest rate increases and lower demand growth
The oil price fell on Wednesday after several Covid mitigations in China and expectations of more interest rate increases globally.
US West Texas Intermediate futures fell 1.45% to settle at $85.62 a barrel, while Brent crude futures fell 1.14% to $91.77 a barrel, erasing earlier gains following the latest OPEC+ meeting and its decision to to reduce production.
A Reuters forecast expects WTI to extend its downtrend to reach $83.17 a barrel.
– Lee Ying Shan
CNBC Pro: This chip stock has convincingly beaten its peers this year — and analysts think it could go higher
After several years of market returns, semiconductor stocks have sold off sharply this year. But one share has emerged relatively unscathed from the market carnage. Not only has it outperformed its peers, it has beaten the S&P 500 by a country mile.
And analysts believe the stock could still go higher.
Pro subscribers can read more here.
— Zavier Ong
US Treasury yields reached their highest levels since mid-June
A bond selloff has lifted U.S. Treasury yields to their highest levels since mid-June as investors weigh what strong economic data means for the Federal Reserve’s future rate hikes.
The US 10-year Treasury yield rose as much as 3.353%, the highest level since June 16, when the rate reached 3.495%. Yield is inversely related to prices.
The yield on the US 30-year Treasury note hit a high of 3.484% and the US 5-year Treasury yield hit 3.334%, also both the highest levels seen since mid-June.
The 2-year yield also rose to a daily high of 3.535%, but that’s only the highest yield for the note since Friday.
– Carmen Reinicke
European markets: Here are the opening calls
European shares are expected to open cautiously higher on Wednesday with Britain’s FTSE index seen 18 points higher at 7,560, Germany’s DAX 33 points higher at 13,944, France’s CAC 40 up 18 points at 6,616 and Italy’s FTSE MIB up 42 points at 2029, according to data from IG.
Data releases include preliminary unemployment data for the eurozone for the second quarter as well as gross domestic product for the second quarter. The latest UK inflation figures for July will be released alongside provisional Dutch GDP for the second quarter.
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