Early Morning Call: renewed recession fears hit equity markets while USD climbs
Concerns about the outlook for growth hit markets on Tuesday with some global indices down at three-week lows.
Equity markets were down overnight following the lead of US session yesterday. The mood dampened as top bankers from JPMorgan, Bank of America and Goldman Sachs said they were gearing up for a potential recession next year.
According to JPMorgan CEO, Jamie Dimon, American consumers are still supporting the US economy with consumer spending, but that may change in 2023. He told CNBC yesterday that consumers have $1.5 trillion in excess savings from pandemic stimulus programs, but are now spending 10% more than they did in 2021.
Australia's economy expanded in the third quarter (Q3), for the fourth quarter in a row, but at its slowest pace in the sequence. GDP rose 0.6% in the third quarter, compared with 0.9% the previous quarter and just under forecasts of 0.7%. Annual growth rose by 5.9% year-on-year (YoY), compared to expectations of 6.2%.
China trade surplus missed expectations as exports and imports shrank at a much steeper than expected pace in November. Exports contracted 8.7% in November from a year earlier, the worst performance since February 2020, and well below analysts' expectations for a 3.5% decline. Imports fell by 10.6%. Economists expected a 6% fall.
In Europe, Germany industrial production fell less than expected in October. Industrial output was down 0.1% on the previous month. Expectations were for a 0.6% decrease.
And Halifax house price index showed the sharpest month-on-month (MoM) decline in the UK in 14 years, down 2.3% in November. Year on year, the index rose 4.7%, nearly half the pace recorded the previous month.
At 10am, market awaits the final estimate of eurozone GDP in the third quarter. Economists anticipate a 0.2% fall compared to the previous quarter.
Later this afternoon, the Bank of Canada (BoC) will unveil its last rate decision in 2022. The market expects a 50 basis point (bp) increase to 4.25%. At its last meeting in October the Bank hiked its rate by 50 basis points to 3.75%, which was lower that the 75 bp expected.
Its governor, Tiff Macklem reiterated last week that "If we don't do enough, Canadians will continue to endure the hardship of high inflation. And they will come to expect persistently high inflation, which will require much higher interest rates and, potentially, a severe recession to control inflation," adding that "If we do too much, we could slow the economy more than needed. And we know that has harmful consequences for people's ability to service their debts, for their jobs and for their businesses."
On the equity market, Moonpig Group posted an adjusted profit of £18.9 million in the first half (H1), after £24.1m a year ago. Revenue rose 115.4% to £142.8m. The group indicated that trading conditions have become progressively more challenging through October and November.
Mitchells & Butlers the owner of Harvester and All Bar One, posted a full year (FY) operating profit of £124m, compared to £81m a year earlier. The pub group flagged challenges arising from surging energy and labour costs.
Airbus announced yesterday that it was abandoning its delivery target of "around 700" aircraft in 2022. Airbus has delivered a net total of 563 aircraft between January and November, which led to analyst estimates of a total of 680 potential deliveries this year.
Brent has fallen below $80, nearing 2022 lows.
Yesterday, API inventories followed the same pattern as last week: crude oil stock dropped, while refined product stocks increased. Crude oil stocks fell for a fourth week in a row by nearly 6.5 million barrels, while gasoline stocks increased by 5.93 million barrels and distillate stocks by 3.55 million barrels.
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