Daily Market Commentary 1st September 2022

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Inflation numbers, cost-of-living and the energy crises continue to dominate markets. EU inflation hit yet another record all-time high (9.1%), while German inflation has hit 8.8% and Spain has joined the UK in double figures. The ECB has completely missed the monetary boat, with interest rates and balance sheet reduction. They are now talking 75 basis point rises, but from zero, it is a long way to taming double digit inflation. The key also is killing QE and reducing the size of the balance sheet, but this will be extremely difficult in these dark times of massive fiscal imbalance. The energy crises is negatively impacting business and cost-of-living, destroying disposable income and demanding fiscal assistance. Political upheaval scares politicians more than inflation. The GBP has continued to fall, plunging to 1.1600, while the EUR edges back above parity.

Australian, Japanese, European and US Manufacturing PMI data will be released in the coming 24 hours and markets will be hoping for some improvement on recent weak numbers. The US ADP Private Sector Jobs Report revealed continued weakness in the Non-Farming sector, hinting at weaker numbers for the US Non Farm Payrolls for Friday. The AUD has once again slipped below 0.6850, while the NZD dipped towards 0.6100, following yet another dismal Business Confidence Report.

Markets will continue to watch inflation and Central Bank monetary policy as we head into the all important Non Farm Payroll number, set to be released Friday.

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