Investors await ECB rate decision
With inflation in the Eurozone expected to reach at least 10% in the coming months, a “giant” rate hike of 75 basis points is certainly on the cards.
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The euro rose against the dollar and the pound on Wednesday morning as the European Central Bank prepared for a crucial policy meeting on Thursday.
The ECB is expected to anticipate a series of rate hikes and sacrifice growth in the region in an effort to rein in inflation of 9.7%, which is expected to rise further.
A “jumbo” rate hike of 75 basis points is a possibility and has been widely priced in by markets, Berenberg analysts said.
Sterling struggles as new Prime Minister takes office
The pound was down against the US dollar and the euro on Wednesday morning as new Prime Minister Liz Truss began her first full day in office.
The pound traded at $1.1495 at 8.30am London time, down 0.17% from the previous day, keeping it at the lowest level it has traded since the 1980s .
ING analysts said traders would deal with reports on Tuesday that Truss planned to freeze energy bills at a cost of £130billion and provide billions more in business support, which would likely have an impact on the UK’s growth outlook and debt position.
The euro was up 0.17% against the pound at 0.8611, ahead of Thursday’s policy meeting of the European Central Bank, when it is expected to announce a rate hike of 50 or 75 basis points.
The base currency of the EU rose 0.02% against the greenback to $0.9902 after falling below the 99 cent level on Monday.
Nomura cuts Chinese GDP forecast again
Nomura lowered its forecast for China’s full-year GDP to 2.7%, another downward revision from its 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 tech hub Shenzhen, have tightened Covid controls in recent weeks after reporting new local infections. Chengdu also ordered people to stay at home while authorities conduct mass virus testing.
Read the full story here.
CNBC Pro: Tensions between Russia and Europe could cause a ‘bullish shock’ in oil markets
Oil and gas inventories are expected to be boosted by heightened tensions surrounding Russian gas supplies to Europe, an analyst said.
Kenny Polcari, chief market strategist at SlateStone Wealth, told CNBC’s “Street Signs Asia” that investors should focus 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’s more “wiggle room.”
Pro subscribers can learn more here.
Oil prices fall on expectations of further rate hikes and weaker demand growth
Oil prices fell on Wednesday following new Covid restrictions in China and expectations of further interest rate hikes around the world.
US West Texas Intermediate futures fell 1.45% to $85.62 a barrel, while Brent crude futures fell 1.14% to $91.77 a barrel , erasing earlier gains after the last OPEC+ meeting and its decision to cut production.
A Reuters forecast expects WTI to extend its downtrend to $83.17 a barrel.
—Lee Ying Shan
CNBC Pro: This chip stock has convincingly beaten its peers this year — and analysts think it can go higher
After years of outperforming the market, semiconductor stocks have sold off strongly this year. But one stock emerged relatively unscathed from the market carnage. Not only did it outperform its peers, it beat the S&P 500 by a country mile.
And analysts believe that the title can still go up.
Pro subscribers can learn more here.
— Zavier Ong
US Treasury yields at highest since mid-June
A bond sell-off has propelled U.S. Treasury yields to their highest levels since mid-June as investors weigh what strong economic data means for future Federal Reserve rate hikes.
The 10-year US Treasury yield rose 3.353%, the highest level since June 16, when the yield hit 3.495%. Returns are inverse to prices.
The 30-year US Treasury yield hit a high of 3.484% and the 5-year US Treasury yield hit 3.334%, also the two highest levels seen since mid-June.
The 2-year yield also hit a daily high of 3.535%, but that’s only the highest yield for the note since Friday.
European markets: here are the opening calls
According to IG data.
The data releases include preliminary eurozone unemployment data for the second quarter as well as gross domestic product for the second quarter. The latest UK inflation figures for July will be released along with the preliminary Dutch Q2 GDP.
Revenue comes from Uniper, Carlsberg, Persimmon, Balfour Beatty, BAT and National Grid.