UK Inflation Hits 11% – Forex Action
US stocks extended their rally yesterday as the unexpected easing in producer prices bolstered optimism that the Federal Reserve (Fed) would ease monetary tightening and the better-than-expected New York Empire State Manufacturing Index rose. hinted that the US economy is holding up well.
The news that Russian missiles fell on Poland kind of killed some of that optimism of resilient growth and falling inflation. But escalating tensions have been averted so far, with US President Joe Biden saying the missile was “unlikely” fired from Russia.
At the index level, geopolitical fears remained short-lived, and the S&P500 eventually rebounded to close the session up 0.87%, a touch below the psychological 4000 mark, and the Nasdaq jumped 1 .45%, and flirted with his 100-DMA for the first time. time since mid-September.
On an individual level, TSM was one of the biggest winners of the session. Shares jumped more than 10% on news that Warren Buffet’s Berkshire Hathaway has taken a roughly $5 billion stake in the company. Investors concluded that Buffet thinks the selloff may have bottomed out after a nearly 60% year-to-date plunge that wiped out $250 billion in value.
And that’s not all
The sun continues to shine for TSM, as Apple has said it will source chips for its devices from a factory in Arizona that will be managed by TSM.
We also saw Apple jump over 1% to $150 per share yesterday, but that was mostly thanks to broad Fed optimism.
Elsewhere, Walmart beat expectations for profit and revenue in the third quarter as the company managed to pass inflation on to its customers. Sales rose almost 9% and inventories rose only 13%, compared to 25% a quarter earlier. Icing on the cake, Walmart announced a $20 billion buyout. Shares of Walmart jumped 6.5% yesterday and entered the positive trend that was building between March 2021 and May 2022.
Last midterms in the United States
US midterms moved closer to clarity yesterday. Republicans are just one seat away from controlling the House, while Democrats have a majority in the Senate, and the Dec. 6 runoff will tell how tight the majority will be.
What does it mean? That means Republicans will likely block Democrats’ hefty spending packages, and Biden’s one-off taxes targeting oil and gas companies may never see the light of day.
Oil on geopolitical worries, US inventories drop
U.S. crude gained on geopolitical concerns after the attack on Poland and a drop of more than 5 million barrels in U.S. oil inventories last week. More official data from the EIA is expected today, and a drawdown of 2 million barrels is expected.
The US dollar softens
In FX, the US Dollar eased after the mix of weak PPI and strong Empire Manufacturing revived dovish Fed expectations.
The EURUSD briefly traded above its 200 moving average near 1.0420 on the back of a broadly weaker greenback. The better than expected improvement in Germany’s ZEW economic sentiment index gave the single currency an additional boost.
In Britain, Cable hit 1.20 for the first time since this summer. On the data front, UK inflation data showed that UK inflation rose to 11.1% in October from 10.7% reported by analysts. That, combined with wages that have risen at the fastest pace in more than a year, has revived hawkish expectations from the Bank of England (BoE), although the BoE has insisted that rate hikes will not would not be as aggressive as those of the Fed due to less than ideal macroeconomic conditions.
Rishi Sunak will announce the UK budget this Thursday and may have to press Britons to close the budget gap. According to a Bloomberg survey, Britain needs £185bn to fund its budget.
But because Liz Truss’ tax cuts have backfired, Rishi Sunak will be relatively comfortable announcing tax hikes, including windfall taxes on the eye-popping profits of energy companies.
Today we’ll be watching US retail sales, Canadian inflation, BoE monetary policy report hearings, Andrew Bailey testifying in Parliament, Christine Lagarde speaking, Siemens, Cisco and another US retailer Target publish their earnings.