The U.S. economy’s recovery from the COVID-19 pandemic was much stronger than initially thought amid massive fiscal stimulus, according to revisions on Thursday, which also showed the gap between the two measures of growth narrowing sharply in 2021. Gross domestic product increased 5.9% in 2021, the Commerce Department said in its annual revision of GDP data. That was revised up from the previously reported 5.7% growth.
U.S. stock indexes slipped on Thursday as worries of a global economic downturn from aggressive central bank rate hikes and risks of potential contagion from a turmoil in UK markets turned investors risk averse. Out of the 11 S&P sector indexes, six dropped more than 2%. The Nasdaq fell over 1% due to losses in megacap companies such as Amazon.com Inc , Apple Inc, Microsoft Corp , Meta Platforms Inc and Tesla Inc.
Pound Sterling fell as much as 1% on Thursday before cutting losses and turning positive as the dollar wavered and British Prime Minister Liz Truss defended the government’s economic plans. Truss said big tax cuts were the right path for Britain and refused to consider reversing the so-called “mini budget” laid out last week, which triggered chaos in markets. The pound was up 0.7% to $1.09660 after rebounding from a session low of $1.0764. The euro was down 0.73% against sterling at 88.81 pence.
The 6M Euribor increased with 1 basis point to 1.86% compared to previous business day. The 10Y Swap increased with 4 basis points to 3.14% compared to previous business day.
In the attachment, today’s market data on money and capital market rates as well as other rates are presented.
The Bank of England stepped into Britain’s bond market on Wednesday to stem a market rout, pledging to buy 65 billion pounds ($69.4 billion) of long-dated gilts after a government fiscal statement triggered the biggest sell-off in decades. Citing potential risks to UK financial stability, the BoE also said it would delay the start of a program to sell its 838 billion pounds ($891 billion) of government bond holdings, which had been due to begin next week.
The average interest rate on the most popular U.S. home loan climbed to its highest level since August 2008, data from the Mortgage Bankers Association (MBA) showed on Wednesday. Rising mortgage rates are increasingly weighing on the interest-rate-sensitive housing sector as the Federal Reserve pushes on with aggressively lifting borrowing costs to curb high inflation. The average contract rate on a 30-year fixed-rate mortgage rose by 27 basis points to 6.52% for the week ended Sept. 23, a level not seen since the financial crisis.
The Dow and the S&P 500 indexes gained in volatile trading on Wednesday as easing Treasury yields gently lifted rate-sensitive growth stocks, while losses in Apple Inc after it dropped plans to boost iPhone production weighed on the Nasdaq. The 6M Euribor increased with 5 basis points to 1.85% compared to previous business day. The 10Y Swap decreased with 6 basis points to 3.10% compared to previous business day.
In the attachment, today’s market data on money and capital market rates as well as other rates are presented.
Substantially more new single-family homes were sold in the United States in August than a month earlier. This was revealed on Tuesday by figures from the US Department of Commerce. The number of new single-family homes sold rose 28.8% month-on-month to 685,000 units. The figure for July was revised up, from 511,000 to 532,000. Economists’ expectation for August was at 550,000 new homes. The number of homes sold was almost the same as that August of the previous year.
Oil prices rose on Tuesday, a day after closing at their lowest level in nine months in New York. A November futures for a barrel of West Texas Intermediate crude oil closed 2.3% higher at $78.50 on the New York Mercantile Exchange.
Consumer confidence in Germany also fell for October, to a new low. This was revealed on Wednesday by recent readings from research firm GfK, which measures a month ahead. The confidence index came in at 42.5 negative, down from a slightly downwardly revised 36.8 negative for September. Economists had been counting on an index of 38.5 negative.
The 6M Euribor is unchanged at 1.80% compared to previous business day.
The 10Y Swap increased with 14 basis points to 3.16% compared to previous business day.
In the attachment, today’s market data on money and capital market rates as well as other rates are presented.
The State Secretary for the Extractive Industries announced Monday that as of October 1, the gas field in Groningen will go on the pilot light. As a result, from October onwards only a small amount of gas may be extracted from the gas fields. This is expected to amount to 2.8 billion cubic meters of gas in the coming gas year. Currently, all 11 sites are still open, but a decision will be made before April 1st, 2023 whether sites can be closed. Due to the impact of earthquakes in the region, the government wants to stop gas production in Groningen as soon as possible.
Against expectations, the German business climate deteriorated further in September, according to figures published by the research institute ifo. The index for the German business climate fell from 88.6 in August to 84.3 for this month. This brings the index to its lowest reading since May 2020.
Britain’s central bank announced yesterday that it would not hesitate to raise interest rates further if it appears necessary to bring inflation back further to the targeted 2%. This pronouncement came yesterday after the British pound went into free fall.
The 6M Euribor increased with 4 basis points to 1.80% compared to previous business day. The 10Y Swap increased with 17 basis points to 3.02% compared to previous business day.
Last week was dominated by central banks that adjusted interest rates. The central banks of the United States, the United Kingdom, Sweden and Switzerland raised interest rates. The Bank of Japan chose to keep interest rates unchanged. In Turkey, on the other hand, interest rates were lowered despite an inflation rate of over 80 percent. This week, no central bank meetings have been planned.
The pound reached an all-time low against the dollar after the UK’s finance minister Kwasi Kwarteng announced new budget plans. He aims to cut taxes significantly. Some describe the all-time low as a flash-crash, the markets are bracing for more declines.
In a letter, Milieudefensie (Friends of the Earth Netherlands) informs that accountancy firms should check more closely for climate risks at large companies in The Netherlands. Climate risk should become a key focus of controls. This mainly concerns the large polluting companies that, according to the organization, are doing too little to achieve the climate goals set in Paris.
The 6M Euribor decreased with 1 basis point to 1.76% compared to previous business day. The 10Y Swap increased with 8 basis points to 2.85% compared to previous business day.
The Bank of England raised interest rates for the sixth time in a row on Thursday. This was revealed in the UK central bank’s delayed interest rate decision on Thursday. The central bank raised interest rates by 50 basis points from 1.75% to 2.25%. This is in line with market expectations. The Bank of England has been raising interest rates since December, high inflation is forcing the central bank to continue with it.
Global steel production also fell in August, but at a slower pace as production rose slightly in China. This was revealed on Thursday by figures from industry body World Steel Association. In total, the 64 steel-producing countries produced 150.6 million tonnes of steel in August. That is 3.0% less than August 2021. In July, production was still down 6.5% year-on-year.
Yesterday, Japan intervened to strengthen the Yen for the first time since the late 1990s, after the currency tumbled to a 24-year low on pledges by the central bank to stick with its ultra-loose policy. Masato Kanda, the country’s top currency official, said the government had “taken decisive action” to address what it warned was a “rapid and one-sided” move in the foreign exchange market. It was the first time Japan had sold dollars since 1998, according to Japanese government data.
The 6M Euribor increased with 3 basis points to 1.77% compared to previous business day. The 10Y Swap increased with 8 basis points to 2.77% compared to previous business day.
US stock markets closed lower on Wednesday after the Fed again aggressively raised interest rates. Everything on Wednesday was dominated by the Federal Reserve’s interest rate decision. In line with expectations, the US central bank raised its key interest rate, the federal funds rate, by 75 basis points to a range of 3.00% to 3.25%. The leading S&P 500 index fell 1.7% to 3,789.89 points, the Dow Jones index lost 1.7% at 30,183.71 points and the Nasdaq was 1.8% lower at 11,220.19 points.
Governments in Europe have earmarked nearly 500 billion euros in the last year to cushion citizens and companies from soaring gas and power prices, according to research published by think-tank Bruegel on Wednesday. Months of surging prices have seen governments roll out measures to curb retail power prices, slash energy taxes and give subsidies to bill-payers. The EU’s 27 countries have collectively allocated EUR 314 billion for measures to ease the pain, while Britain has set aside EUR 178 billion, according to Brussels-based Bruegel.
U.S. natural gas futures jumped about 4% to a near one-week high on Wednesday, on forecasts for stronger U.S. gas demand this week than previously expected and renewed worries about a possible U.S. rail strike. A rail strike could boost demand for gas by threatening coal supplies to power plants.
The 6M Euribor is unchanged at 1.74% compared to previous business day. The 10Y Swap is unchanged at 2.69% compared to previous business day.
The euro was still trading around parity on Tuesday ahead of the Federal Reserve’s (Fed) interest rate decision, to be announced Wednesday evening. With a possible 100 basis point rate hike on the horizon, it remains to be seen whether that level can be maintained. “It looks like that for now,” currency trader Stéphane van der Meer of currency broker Ebury told ABM Financial News on Tuesday. “To start with, only 20% of the market believes the Fed will raise interest rates by 100 basis points. We keep it at 75 basis points. In addition, the market is initially still looking forward to European Central Bank President Christine Lagarde’s lecture, which could hardly ignore the pressure to adopt a ‘hawkier’ tone. If the president heeds that, it could mean support for the euro,” according to Van der Meer.
Dutch consumer confidence decreased further in September. This was revealed on Wednesday by figures from the Central Bureau of Statistics (CBS). Consumer confidence was at -59 in August, down from -54 in July. At -59, consumer confidence in September was well below the 20-year average of -9. “Consumers have never been so negative about the economy and their financial situation,” CBS stated. The sub-indicator economic climate decreased from -74 to -79. Not since measurement began in 1986 have consumers been so gloomy about the economy. Consumers were both more negative about the economy in the past 12 months and about the economy in the next 12 months. Willingness to buy decreased to -46 in September, from -41 in August. Consumers have never been so negative about making major purchases.
Market interest rates are rising rapidly. In the Netherlands, the effective yield on 10-year government bonds increased to over 2.24% on Tuesday. This passed the peak in June. The yield is now at a level not seen the since summer of 2013. The ECB is expected to raise the deposit rate to at least 2.5% by the end of the first quarter of 2023. Currently, Frankfurt is still applying a rate of 0.75%. The money market has now priced in eight steps of 25 basis points between now and mid-March. On Tuesday, the Swedish central bank already set an example by implementing a one-full percentage point rate hike in one go.
The 6M Euribor increased with 7 basis points to 1.74% compared to previous business day. The 10Y Swap increased with 11 basis points to 2.69% compared to previous business day.
New figures published today by the German statistical office, Destatis, show that producer prices rose further in August. Prices rose 45.8% in August compared to a year earlier. The increase in July was still at 37.2% and 32.7% in June.
Bread prices in the European Union rose by almost 20% in August compared to a year earlier, according to the European statistics office Eurostat. In The Netherlands, the increase was still relatively low at 10% but the price in Hungary saw an increase of 66%. The increase is mainly due to the ongoing conflict between Russia and Ukraine who are the largest exporters for the grain and corn they use in Europe.
Inflation in Japan rose further in August to 3.0% year-on-year, new government figures show. This puts inflation above the Bank of Japan’s desired 2% for the fifth month in a row. However, the monetary policy body recently announced that it sees no reason to adjust interest rate policy. Coming Friday, the Bank of Japan will announce the new interest rate decision.
The 6M Euribor increased with 6 basis points to 1.67% compared to previous business day. The 10Y Swap increased with 5 basis points to 2.58% compared to previous business day.
On Wednesday, the US Federal Reserve will convene to decide upon interest rate policy. It already seems clear that interest rates will be raised, an increase of 75 basis points seems to be the minimum, the capital market is considering an increase of 100 basis points.
Volkswagen wants to value Porsche at 70 to 75 billion euros. This will make it one of the largest IPOs ever in Europe. Volkswagen says that there is a lot of interest in the IPO, including government funds from Qatar, Abu Dhabi and Norway.
Germany’s federal minister of finance, Christian Lindner, said inflation ”cannot be fought with borrowed money like we did with the corona pandemic”. German inflation reached 8.8% last month, a record high since the introduction of the euro.
The 6M Euribor increased with 6 basis points to 1.61% compared to previous business day. The 10Y Swap decreased with 3 basis points to 2.53% compared to previous business day.
Eurozone exports rose by double digits in July, however imports increased much more. This was revealed on Thursday by figures from Eurostat, the European statistical office. Year-on-year, exports rose 13.3% to EUR 235.5 billion in July. Imports even rose with 44.0% up to EUR 269.5 billion. As a result, a trade deficit of EUR 34.0 billion was reported. On the contrary, a year earlier there was a surplus of EUR 20.7 billion.
US import prices fell slightly less than expected in August, according to the figures of the US Department of Labour. Import prices fell 1.0% month-on-month, following a 1.5% drop in July. A 1.2% decline had been expected.
The price of a barrel of crude oil closed lower on Thursday, due to investor concerns about oil demand, as the Federal Reserve prepares for what is expected to be another aggressive interest rate hike next week. The market expects the Federal Reserve to raise the Fed Funds rate by at least 75 basis points, fueling fears of an economic downturn.
The 6M Euribor increased with 1 basis point to 1.55% compared to previous business day. The 10Y Swap increased with 2 basis points to 2.56% compared to previous business day.
World stocks declined on Wednesday as markets braced for an even more aggressive U.S. Federal Reserve to tame inflation. The yen jumped as Japan gave its strongest signal yet that it could act to shore up the weak currency, subsequently the yen rallied over 1%, pulling away from recent 24-year lows versus the dollar.
The average interest rate on the most popular U.S. home loan rose above 6% for the first time since 2008 and is now more than double the level it was one year ago, Mortgage Bankers Association (MBA) data showed on Wednesday. Rising mortgage rates are increasingly weighing on the interest-rate sensitive housing sector. The Federal Reserve pushes on with aggressively lifting borrowing costs to tame high inflation.
The European Union’s executive outlined plans on Wednesday to raise more than $140 billion from energy firms to help shield households and businesses from soaring prices that threaten economic recession and insolvencies. European gas and power prices have rocketed this year as Russia cut fuel exports to retaliate for Western sanctions over its invasion of Ukraine, leaving many struggling to pay bills and utilities grappling with a liquidity crunch.
The 6M Euribor increased with 5 basis points to 1.54% compared to previous business day. The 10Y Swap decreased with 1 basis point to 2.54% compared to previous business day.
US stock markets declined sharply on Tuesday after four days of gains following an unexpected rise in consumer prices in August. The S&P 500 index lost 3.3% to 3,979 points, technology exchange Nasdaq fell 4.5% to 12,189 points and the Dow Jones index lost 3% to 31,452 points. US consumer prices rose 0.1% in August, bringing year-on-year inflation to 8.3%.
The European Central Bank’s deposit rate may be raised to 2.00 % by the end of this year, according to revised expectations provided by ABN AMRO. The ECB raised key interest rates by 75 basis points last week, bringing the deposit rate to 0.75%. In the new forecast, ABN AMRO’s economists also count on a rate hike of 75 basis points in October and another 50 basis points in December.
OPEC expects the same oil demand growth for 2022 and 2023 as a month ago. This was revealed on Tuesday by the oil cartel’s monthly report for September. Oil demand will grow by 3.1 million barrels per day in 2022, OPEC said, and by 2.7 million barrels per day in 2023.
The 6M Euribor increased with 5 basis points to 1.49% compared to previous business day. The 10Y Swap increased with 9 basis points to 2.55% compared to previous business day.
According to new forecasts by the IFO research institute, the German economy will rapidly decline and fall into recession early next year. German gross domestic product is expected to decline by about 0.2% in the fourth quarter of this year and by 0.4% in early 2023. For 2022 IFO expects the German economy to grow by 1.6%, which will be followed by a contraction in 2023. The main reason for this is the decline in private spending. Particularly due to the expensive energy, an inflation of 11% is expected at the beginning of next year.
Yesterday, the price for a barrel of WTI oil rose again to a price of USD 87.78. Last week, the price for a barrel of oil had fallen to its lowest level since January.
British unemployment has continued to fall in recent months, according to figures published by the UK’s ONS statistical office. In the period from May to July, the unemployment rate fell to 3.6%. This figure is 0.2% lower than a quarter earlier and even 0.4% lower than what the unemployment level was before the corona outbreak.
The 6M Euribor increased with 9 basis points to 1.44% compared to previous business day. The 10Y Swap decreased with 7 basis points to 2.46% compared to previous business day.
Last week’s interest rate increase by the European Central Bank (ECB) will only provide temporary support to the euro. After the increase of 75 basis points by the ECB, the euro/dollar exchange rate went to 1.01 dollar, however it is suspected that this will be temporary. Furthermore, the ECB is expected to raise interest rates again in October.
The number of bankruptcies in the Netherlands has remained stable last month, according to numbers from Centraal Bureau voor de Statistiek (CBS). In recent years, the number of bankruptcies has fluctuated between 110 and 200 per month, with a peak in May 2020 when the corona pandemic started in the Netherlands. Since this peak, the number of bankruptcies has remained relatively low.
Dutch exports continue to grow, but at a lower pace. This is apparent from the figures of the Centraal Bureau voor de Statistiek (CBS) for the month of July. Exports rose 1.3 percent year-on-year in July, after a gain of 3.9 percent in June and 2.9 percent in May. The CBS states that conditions for exports in September are even less favourable than those in July.
The 6M Euribor decreased with 1 basis point to 1.35% compared to previous business day. The 10Y Swap decreased with 1 basis point to 2.53% compared to previous business day.
The European Central Bank raised the official interest rate by 75 basis points on Thursday in response to skyrocketing inflation in the eurozone, which reached 9.1% in August. According to its latest estimates, the ECB expects inflation to reach 8.1% in 2022. In 2023, inflation will fall to 5.5%. The European Central Bank will do whatever it takes to bring inflation back around the 2% target, so interest rates will continue to be raised in next policy meetings. This was the message of President Christine Lagarde on Thursday in her explanation of the interest rate decision of the ECB.
The oil price rose on Thursday. At a settlement of USD 83.54, the price of a barrel of West Texas Intermediate increased almost 2%.
Consumer prices in China unexpectedly slowed in August. This was shown Friday by figures from the Chinese statistical office. On an annual basis, prices rose by 2.5%, after a rise of 2.7% in July and 2.5% in June.
The 6M Euribor increased with 2 basis points to 1.36% compared to previous business day. The 10Y Swap increased with 10 basis points to 2.54% compared to previous business day.
The Bank of Canada hiked interest rates by 75-basis points to a 14-year high on Wednesday, as expected. The BOC states the policy rate would need to go higher still given the fight against raging inflation. The central bank increased its policy rate to 3.25% from 2.5%, matching analyst forecasts.
Germany’s relief package to help citizens and companies cope with soaring inflation will amount to 13 billion euro ($12.86 billion) this year, of which the federal government will contribute 12 billion euro, the finance ministry said on Wednesday. With year-on-year inflation running at 7.9% in August, Berlin has been under pressure to provide further aid for consumers and businesses hit by a surge in energy prices.
The dollar increased to a fresh 24-year peak on the yen and retested multi year highs on the euro and sterling as economic problems in Europe contrasted with a strong U.S. economy. The dollar soared as high as 144.99 yen , up 1.5%, hitting the level for the first time since August 1998.
The 6M Euribor increased with 4 basis points to 1.34% compared to previous business day. The 10Y Swap decreased with 11 basis points to 2.44% compared to previous business day.
The UK contemplates a substantial support package as Europe battles the energy crisis. Britain’s new prime minister is working on what looks set to be Europe’s biggest energy crisis support package so far as countries scramble to protect households and businesses from soaring bills and shore up struggling suppliers. Liz Truss, who took over from Boris Johnson on Tuesday, is planning to freeze household energy bills at the current level for this winter and next, paid for by government-backed loans to suppliers, the BBC reported, adding the scheme could cost 100-130 billion pounds ($116-151 billion).
Wall Street’s main indexes fell on Tuesday as a stronger-than-expected reading on services sector activity fed into expectations that the Federal Reserve will keep raising interest rates to bring down surging inflation. The tech-heavy Nasdaq was set for its seventh consecutive day of losses in what could be the longest such losing streak since November 2016.
The U.S. services industry picked up again in August for the second straight month amid stronger order growth and employment, while supply bottlenecks and price pressures eased, reinforcing the view that the economy was not in recession despite output sinking in the first half of the year. The Institute for Supply Management said its non-manufacturing PMI edged up to a reading of 56.9 last month from 56.7 in July, the second consecutive monthly increase after three months of declines.
The 6M Euribor increased with 1 basis point to 1.30% compared to previous business day. The 10Y Swap increased with 4 basis points to 2.55% compared to previous business day.
Statistics Netherlands announced today that inflation in the Netherlands rose to 12.0% year-on-year in August. In July, the inflation rate was still 10.3%. The largest contributor to this increase is energy, which was 151% more expensive than a year earlier. The price of motor fuels saw a slight decline to a higher price of 16.7% compared to a year earlier, where in July this was still a price increase of 24.6%.
The value of the euro against the U.S. dollar fell yesterday to below 0.99 which is the lowest point in 20 years. One of the main factors of this decline is the announcement that the Russian Gazprom will indefinitely stop the supply of gas to Europe through the Nord Stream 1 pipeline.
The group of oil exporting countries, OPEC+, has announced that they will cut oil production to 100,000 barrels per day in October. With this they are trying to stabilize the international price after it has been under pressure lately due to the corona measures in China that are depressing demand, among other things. On a weekly basis, the price for a barrel of WTI fell 7% last week.
The 6M Euribor increased with 5 basis points to 1.29% compared to previous business day. The 10Y Swap increased with 10 basis points to 2.51% compared to previous business day.
OPEC and its allies, including Russia, will meet on Monday. The market expects OPEC not to change oil production, according to The Wall Street Journal based on insiders. According to the sources, Moscow is currently not agreeing to cut production as it tries to counter attempts by Western countries to curb Russian oil revenues after the invasion of Ukraine.
Germany is allocating 65 billion euros to a contingency plan to help millions of households cope with rising energy prices, as announced by Chancellor Olaf Scholz. During the press conference in the chancellery in Berlin, Scholz indicated that the measures are a significant step in helping citizens.
Last week, the focus was mainly on US jobs figures, now the focus is shifting from the job market to the interest rate decision of the European Central Bank. There is an increasing chance that the ECB will increase the interest rate by 0.75 percent instead of 0.5 percent to combat historically high inflation. Several ECB board members have recently already hinted at an increase of 75 basis points.
The 6M Euribor increased with 4 basis points to 1.24% compared to previous business day. The 10Y Swap decreased with 4 basis points to 2.41% compared to previous business day.
The German industry has contracted more in August than previously reported. This was apparent from final figures from Markit on Thursday. The index, which measures the activity of the country’s industry, stood at 49.1 in August against 49.3 in July.
The price for a barrel of crude closed lower on Thursday, in response to the latest EIA stocks report and new lockdowns in China. EIA data showed that US implicit gasoline demand has been weak at 8.6 million barrels per day, while distillate demand fell 8% on a weekly basis to 3.6 million barrels per day, the third lowest level in 2022.
Sterling has recorded its steepest monthly decline against the dollar since the wake of the Brexit referendum against a backdrop of intensifying economic and political uncertainty. The pound fell 4.5% in August to USD 1.16 in the biggest monthly drop since October 2016. It also declined by almost 3% against the euro. The currency’s August tumble reflects the deteriorating outlook for Britain’s economy as the energy crisis deals a powerful blow to businesses and consumers.
The 6M Euribor increased with 12 basis points to 1.20% compared to previous business day. The 10Y Swap increased with 3 basis points to 2.45% compared to previous business day.
Eurozone inflation jumped to another record high and will soon hit double-digit territory, increasing expectations of a string of big interest rate hikes even as a painful recession appears increasingly certain. Driven by expensive gas and drought, consumer prices jumped more than expected in August and further rises are already in the pipeline, suggesting more pain for households as they burn through their cash reserves.
Goldman Sachs expects the European Central Bank to raise interest rates by 75 basis points at its policy meeting next week after data on Wednesday showed eurozone inflation hitting a new record high. “Given today’s stronger-than-expected inflation data -together with hawkish commentary and upside risks to near-term growth – we now expect the ECB to hike by 75bp at the September meeting,” the U.S. bank said in a note on Wednesday.
The US stock market closed lower again on Wednesday after a turbulent day. This makes it the fourth time in a row that Wall Street ended in the red. The broad S&P 500 dropped 0.8%, Dow Jones lost 0.9% and technology stocks also dipped: Nasdaq ended 0.6% lower. At stock market opening, the indices were still rising. S&P 500 gained 0.7% and Dow Jones was 0.5% higher. Nasdaq also climbed 0.6%. Possibly a disappointing report on the U.S. labor market briefly reassured investors. If the labor market collapses, this could be a reason for the central bank not to intervene too violently with interest rate increases.
The 6M Euribor is unchanged at 1.08% compared to previous business day. The 10Y Swap increased with 2 basis points to 2.42% compared to previous business day.