• richard evans

Risk sentiment dented

Good morning


It was a healthy day for European and US stocks yesterday but Asian markets turned negative overnight. Perhaps the rising number of Covid cases in Beijing is partly responsible, I was also a little alarmed that Biden said US would intervene to defend Taiwan from any attack by China. China retaliated by saying their resolve in defending national sovereignty should not be underestimated. Biden has said things before that needed a bit of back tracking, I wonder if we’ll see his comments toned down. A couple of warnings on earnings also has to take some of the blame for the move lower.


There seems to be a feeling among some Fed officials that rates could reach 2% by August but that a pause in September is possible in order to assess the impact on inflation. France’s Villeroy has said there is a growing consensus that an ECB rate rise in both July and September is pretty much a done deal.


EURUSD is firmer, trading up to 1.0720 as I type, with the next major level up at 1.0935. GBPUSD is 1.2590, leaving GBP weaker against the single currency, EURGBP up at 0.8515 (GBPEUR 1.1745).


NZD is a little lower ahead of the RBNZ rate announcement due tonight, after some disappointing retail sales numbers overnight. NZDUSD had traded up to 0.6490 yesterday but now sits at 0.6445, not a massive move but the bout of negative risk sentiment seen overnight is taking its toll. AUDNZD is a few points higher at 1.1005. A 50bps raise to 2% is still expected although CITI are looking for just a 25bps rise, the uncertainty contributing to the slightly lower NZD.


The World Economic Forum is taking place in Davos. The worlds powerful and wealthy come together to offer their thoughts on the world as they see it. Obviously the Russian invasion of Ukraine will be high on everyone’s agenda. I’d expect some talk on high energy prices and high general cost of living but to be frank we rarely see anything truly meaningful come from the event. Maybe when I get my invitation I’ll look upon it differently.


Today marks the day the Elizabeth line opens although only from Paddington to Abbey Wood, and not every station is operational. As I type though, BBC report Paddington station is actually being evacuated, no further details known at this time.


That’s about all for now, the calendar today is filled with PMI data, otherwise we wait for speakers at Davos.


- 09.00 EU S&P manufacturing, services PMI

- 09.30 UK S&P manufacturing, services PMI

- 14.45 US S&P manufacturing, services PMI

- 15.00 US new home sales

- 17.20 Feds Powell speaks

- 19.00 ECBs Lagarde speaks

- 00.45 RBAs Ellis speaks

- 03.00 RBNZ rate announcement

- 04.00 RBNZ press conference

- 07.00 German GDP, GfK consumer confidence


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