Marketmind: Back to basics – double-digit UK inflation

A look at the day ahead in European and global markets from Ankur Banerjee

With investors’ mood perking up this week, leading to a buoyant rally, UK inflation data, due on Wednesday, takes the spotlight.

The reading will likely determine how hawkish the BoE gets in the near term. The consumer price index, already at a decades high, is expected to jump 10% for the month of September.

The cost of living crisis has led to protests and strikes in in European countries, while red-hot inflation has pushed firms eastward in Europe to cut costs.

The move by Britain’s new finance minister to rip up most of Prime Minister Liz Truss’s fiscal policy has raised the prospect of the central bank slowing its interest rate hikes.

Investors will also digest the news that the BoE will start selling some of its huge stock of gilts from Nov. 1, but would not sell this year any longer-duration British government bonds that have been at the center of the market turmoil.

The currency market remains on guard for any sign of another yen intervention as the beaten down currency hovers around the psychological barrier of 150 per dollar.

On the corporate front, Netflix (NASDAQ:) became the latest company to please the market with its earnings report as the streaming bellwether predicted it would pick up 4.5 million customers.

Early U.S. results have brightened up sentiment but a quarterly reading from Europe’s largest tech firm ASML on Wednesday might highlight the challenges companies still face due to supply chain snags and spending cuts by customers.

(UK yield curve shift

Key developments that could influence markets on Wednesday:

Economic events: UK Sep inflation, Euro zone Sep final CPI; U.S. Sep housing starts, Fed Reserve Beige Book of economic conditions and Canada Sep inflation

Auctions: U.S. 20-year bond, 2032 Gilt

Speakers: BoE’s Catherine Mann in London, Fed Reserve Bank of Minneapolis President Kashkari in Minneapolis, Fed Reserve Bank of Chicago’s Charles Evans in Charlottesville

Earnings on the deck: AMSL, Deutsche Boerse (ETR:)

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