26 October 2022
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There is little to cheer in recent data

By Daniel Richards

  • High inflation and rising interest rates appear to be taking their toll on US consumer confidence, with the Conference Board measure falling materially on the month. The index fell to 102.5 in October from 107.8 in September, well below consensus expectations of 105.9. The fall in the headline index was largely driven by a decline in the current conditions index, which dropped a sizeable 11.3 points to reach 138.9 in October, although there was also a small fall in the forward looking expectations sub-component. There was also some tentative evidence of changes in the labour market, with a smaller share of respondents citing that jobs were plentiful.
  • US house price data was also weaker than expected in August, with the Case-Shiller index down -1.3% m/m. Annual price growth slowed to 13.1% y/y from 15.6% y/y in July. Separately, the Richmond Fed manufacturing index pointed to a decline in factory activity in October on the back of declining new orders, echoing the flash PMI survey released earlier this week.   
  • German business sentiment remained at historically low levels in October, but recorded only a small decline on the month. The business climate index fell to 84.3 in October from 84.4 in September, markedly higher than economists’ expectations of 83.5. Firms reported feeling marginally less satisfied with current conditions, but slightly more optimistic about future conditions. The change in sentiment was mixed when looking at the sectoral level, with the business conditions index deteriorating in the manufacturing and construction sectors but ticking up fractionally in services and trade.   
  • Inflation in Australia accelerated to 1.8% q/q and 7.3% y/y in Q3, up from 6.1% y/y in Q2 and above the median forecast. Consumer inflation in Australia is now at a 32-year high with housing, gas and furniture costs being the main contributors in Q3. The RBA expects inflation to peak at 8% in Q4 2022 and has signalled it will continue to raise rates, with another 50bp expected before the end of this year.    

Today’s Economic Data and Events

  • 18:00 Bank of Canada rate decision; forecast +75bp to 4.0%
  • 18:00 US new home sales (Sep) forecast 580k (-15.3% m/m)

Fixed Income

  • US Treasuries rallied overnight after a poor consumer confidence measure in the US suggested that rate hikes were starting to have an impact on the private sector. Yields on the 2yr UST dropped from more than 4.5% to less than 4.4% at one point, ultimately settling the day at 4.4771%, down about 3bps. The 10yr UST yield showed much wider moves, falling from more than 4.2% to about 4.05% briefly, settling the day at 4.1021%, down 14bps.
  • Gilts continued to advance following the official appointment of Rishi Sunak as prime minister in the UK and the naming of his cabinet, including keeping Jeremy Hunt on as chancellor. The 10yr gilt yield fell 11bps to 3.619%. European bonds also closed stronger a day ahead of the ECB meeting with the 10yr bund yield down 16bps to 2.164%.
  • Emerging market bonds were relatively mixed though there were strong gains for South African 10yrs: yields dropped 12bps to 11.391% while Turkish 10yr bonds dropped.  


  • Currency markets turned sharply against the dollar overnight on the back of the appointment of a ‘restoration’ cabinet in the UK. GBPUSD soared 1.7% to 1.1472, its strongest close since mid-September. Sterling will remain under pressure from the economic challenges affecting the UK but markets do appear to be giving the Sunak cabinet some measure of confidence that they will be able to restore credible policymaking in the UK.
  • EURUSD also strengthened, up by 0.9% to 0.9966 ahead of tomorrow’s ECB decision. A second 75bps hike in a row is projected by markets at this point while commentary in the run up to the decision had been tilting more hawkish. USDJPY dropped by 0.66% in favour of the yen, closing at 147.93.
  • Commodity currencies rallied across the board. USDCAD fell by 0.7% to 1.3608 with eyes to today’s Bank of Canada meeting where a 75bps hike is two-thirds priced in. AUDUSD added 1.3% to 0.6394 and NZDUSD added 0.8% to 0.574.


  • There were further strong gains in US equities yesterday, bolstered by bets that rate hiking may ease as weak consumer confidence data indicated a deteriorating growth outlook. The NASDAQ gained 2.4%, followed by the S&P 500 (1.6%) and the Dow Jones (1.1%). However, weak earnings results in the tech sector (impacted by the strong dollar) are weighing on futures on the NASDAQ in particular, which is down -2.0% this morning at the time of writing.
  • Locally the major indices closed almost flat with the DFM down -0.02% and the ADX -0.08% yesterday. The Tadawul saw greater losses as it dropped -0.8% while Egypt’s EGX 30 bucked the trend and added 1.5%.
  • The UK’s FTSE 100 closed flat as a resurgent pound weighed on multinationals, meaning it did not enjoy the gains seen elsewhere in Europe – the DAC gained 0.9% and the CAC 1.9%.


  • Oil prices settled higher overnight with no major catalyst in markets. Brent futures added 0.3% to USD 93.52/b while WTI added almost 0.9% to USD 85.32/b. The head of the IEA said that OECD members still had “huge amounts” of inventories they could release on to markets to help lower oil prices and called the OPEC+ decision to cut output “unfortunate.” However, he also warned that natural gas markets were still not “out of the woods.”
  • Saudi Arabia’s energy minister, Prince Abdulaziz bin Salman, warned that running down inventories “may become painful in the months to come” and said that the slowdown in the global economy justified the OPEC+ decision to trim output.

Click here for charts and tables




Written By

Daniel Richards Senior Economist

Edward Bell Head of Market Economics

Jeanne Walters Senior Economist

Khatija Haque Head of Research & Chief Economist

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