Investors breathed a sigh of relief as government borrowing costs across the eurozone soared to multi-year highs this week – amid rising expectations for a sharp rise in US interest rates later today and concerns about the ECB’s lack of a plan to address signs of pressure on eurozone bond markets. The yield on Italy’s 10-year bond fell 20 basis points to 4% from its eight-year high this week. Yields on Spanish, Portuguese and Greek bonds also fell sharply in early London. The euro rose in the news and is currently trading 0.6% higher at $ 1.0477 against the dollar. Frederik Ducrozet, head of macroeconomic research at Pictet Wealth Management, told Reuters: We need to get a statement on the same line that reflects the willingness to act and then maybe also commission committees to work on options, that was missing from last week [when the ECB had a scheduled meeting]. ECB’s board member Isabel Schnabel, head of the central bank’s market operations, said yesterday that the ECB was “closely monitoring” the situation and was ready to develop both existing and new tools if it found that market movements were “unstable”. ». We can receive a @ecb statement according to @Isabel_Schnabel’s speech. Some details on PEPP reinvestments would be welcome. And they could instruct the relevant committees to work on policy options for a backstop, which they did not do at the June meeting. – Frederik Ducrozet (@fwred) June 15, 2022 We will see if and when we get more details, but the main message is that the Board takes this seriously. The big disappointment of last week was that they obviously did not talk much about fragmentation. https://t.co/417KkGsg3h – Frederik Ducrozet (@fwred) June 15, 2022 Updated at 08.24 BST
Eurozone trade deficit doubles, industrial production increases
The eurozone’s trade deficit with the rest of the world almost doubled in April from the previous month, following a record expansion in March, while industrial production rose, according to official figures. The 19 euro-sharing countries posted a trade deficit of 32.4 billion euros in April, up from 16.4 billion euros in March, according to the EU statistical office Eurostat. Compared to a surplus of 14.9 billion euros in April 2021. Exports increased by 12.6% compared to the previous year, but imports increased by 39.4%, due to the increase in energy imports. Meanwhile, industrial production in the eurozone rose 0.4% in April from March, a modest increase. Whitbread is among the top performers in the FTSE 100, as the owner of the Premier Inn and pub restaurants traded above expectations in the UK and Germany. The shares rose 4.7%. The Premier Inn is the largest budget hotel chain in the UK and mainly competes with Travelodge. It is finding it difficult to hire more staff and is investing up to 30 30 million in salary increases, IT and hotel renovations this year. CEO Alison Brittain said: The strength of the Premier Inn recovery in the UK continues to be above expectations with a particularly strong first quarter performance that is well above pre-pandemic levels and we continue to significantly outperform the market. The supply of labor remains limited in the hospitality sector and if consumer demand and occupancy remain strong, we expect some additional costs due to targeted wage increases. We are also taking the opportunity to boost our investment in renovation and maintenance projects, as well as accelerate some additional IT costs that will support our market leadership and lead to future profits. WH Smith is just as optimistic, as its third-quarter revenue rose for the first time above pre-pandemic levels, with more people traveling for business and tourism rising. The UK retailer, which has its main shops, airports and train stations, and sells a wide range of items – from stationery, books, magazines and sandwiches to Bluetooth headsets – expects its year-round performance to reach at the highest level of analysts’ forecasts. Revenues for the 15 weeks to June 11 were above 2019 levels for the first time at 107%. Neil Shah, director of research at Edison Group, said: This is a consistent and promising trading update from WHSmith, with the retailer trading ahead of 2019 revenue with a particularly strong return from its travel division, reflecting the lifting of Covid-19 restrictions. As the number of passengers recovers around the world, WHSmith will strive to improve its health, beauty and technology lines to take advantage of post-lockdown opportunities. A WH Smith branch in London. Photo: May James / Reuters In other news, Bloomsbury reported a record year in sales, as publisher Harry Potter said the pandemic rise in reading had become “permanent” following the easing of lockdown measures. The company actually benefited from Covid’s restrictions when home consumers turned to new hobbies, such as reading, to spend their time, says my colleague Kalyeena Makortoff. Bloomsbury CEO Nigel Newton said it was clear that people who started reading during the pandemic continued to buy books, helping to increase annual sales by 24% to a record high of 230 230 million for the year to at the end of February. . A rare first edition, signed by the author, a copy of “Harry Potter and the Philosophers Stone” by British author JK Rowling, has been auctioned at Christie’s in London. Photo: Henry Nicholls / Reuters The International Energy Agency has warned that higher oil prices and fears of a recession will keep global oil demand in check – and predict that demand will return to pre-pandemic levels next year as China’s economy recovers. The Paris-based agency said in its monthly report: Financial fears persist, as various international institutions have recently published negative outlook. Similarly, the tightening of central bank policy, the impact of the rising US dollar, and rising interest rates on the purchasing power of emerging economies mean that the risks to our outlook are concentrated on the downside. Higher oil prices and weaker economic outlook continue to dampen our expectations for rising oil demand. But in 2023, a resurgent China will stimulate demand growth outside the OECD, offsetting the OECD slowdown. Global oil demand is projected to reach 101.6 million barrels per day in 2023, surpassing pre-pandemic levels. Wilson added: The ECB is stealing the thunder from the Fed today, but the US Federal Reserve is still the most important event in the market. Many banks have changed their forecasts to 75 bps and market prices have moved aggressively in this direction. However, I still prefer a 50 bps move with the Fed retaining the option of making more 50 bps increases for the rest of the year – a strong message for one in September. Prior to the meeting, the 10-year US yield rose to almost 3.5%, the highest level in 11 years, while the 2-year yield rose to 3.45%, a 15-year high. Neil Wilson, chief market analyst at Markets.com, commented on the ECB’s surprise meeting to discuss the recent sell-off in government bond markets: Since there was a scheduled meeting last week, it smells like panic and lack of control, but the market is happy to see it happen. Shares of European banks rose and the euro also rallied, while Italian yields fell again. The ECB is clearly concerned that the yields on “regional” bonds are rising too much … but all this is a bit of a mess coming so soon after the scheduled meeting last week. Here we come to the risk of fragmentation and a possible new tool that we thought they could signal last week, but they did not. The gap between 10-year Italian and German yields widened to more than 240 basis points, the largest since March 2020, as Italy’s 10-year BTP climbed more than 4%. However, Italian yields fell sharply after the ECB briefing this morning. Italian stocks also marked a particular rally. What could the ECB do? This is the big question. The ECB could probably reassure the market first that it will do “whatever it takes” to prevent fragmentation, but since this meeting was convened abruptly, it may consider it necessary to intervene with a new tool – perhaps a top one. yield difference of some kind. Or it could reinvest cash from bonds that expire in those government bond markets that need it. This would undoubtedly pose a political risk and will be challenged in German courts, as will any new tool. Or it could just be QE forever … difficult when you are supposed to be on tighter financial terms. For today it may be enough to say in the market that he is working on a new tool / plan in this regard – the lack of detail last week means that the Board has not discussed so much and therefore it may be too early for a particular tool / policy to be announced – as well as the political and legal dimension to be considered. Isabel Schnabel, ECB’s Policy Officer, said: “Our commitment to the euro is our tool against fragmentation. “This commitment has no limits.” For second time, [ECB president Christine] Lagarde needs to make sure the market knows the ECB is here to close ze spreads. The fact that the ECB did not address this last week is a mystery and shows that it is still too complacent and reluctant to move forward. Updated at 09.18 BST
Gas prices are rising due to problems with Gazprom
In commodity markets, gas prices are rising while crude oil prices have changed little. Wholesale British gas for next day delivery has risen more than 8% to 180 p per heat. Yesterday, Russia’s state monopoly Gazprom said it was reducing gas supplies to Europe via the Nord Stream 1 pipeline by 40%, according to Interfax. She said her ability to supply gas was limited by the delayed …
