Marketmind: The Next Three Days

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

Remember that 2010 movie starring Russell Crowe and Elizabeth Banks with a nail-biting end? Well, the Bank of England’s Andrew Bailey has crowed, sort of making clear the Liz Truss government can’t bank on it defending markets from the fallout of an ill-conceived economic revival plan for more than three days.

“You’ve got three days left now. You’ve got to get this done,” Bailey said on Tuesday, referring to the pension funds.

Either they call Bailey’s bluff or UK pension funds scramble to raise cash within that deadline, to fund their hedges after finance minister Kwasi Kwarteng’s tax proposals sparked a bond rout and rattled global markets last month.

Adding to the confusion, the Financial Times meanwhile reported its sources say the BoE is prepared to extend its emergency bond-buying programme beyond the Friday deadline, if market conditions demand it.

That’s unsettling for an already battered gilts market. UK monthly GDP data will also give investors clues on the health of the nation at a time when shoppers stock up on electric blankets and energy-sufficient cookers ahead of a tough winter.

Meanwhile, the U.S. dollar is up, yen is at 24-year lows, yields are soaring, sterling is wobbling and oil is slipping. And all this as investors anxiously await U.S. inflation data this week that will likely portend more interest rate hikes by the Fed.

With yen at 146.21 per dollar, surpassing the levels that saw Japanese officials stage their first yen-buying intervention since 1998 on Sept. 22, the country’s Chief Cabinet Secretary Hirokazu Matsuno said Japan was closely watching foreign exchange moves with a high sense of urgency.

Not all is lost for the chip industry that has been hammered in the past few days after a Reuters report on Tuesday that the U.S. government has allowed at least two non-Chinese chipmakers operating in China to receive restricted goods and services without their suppliers seeking licenses.

That comes days after a sweeping set of export controls published by the Biden administration aimed at cutting China off from certain semiconductor chips made anywhere in the world with U.S. equipment.

Key developments that could influence markets on Wednesday:

Economic events: UK monthly GDP, euro zone industrial production, US PPI and Fed minutes

Speakers: ECB’s Christine Lagarde, Federal Reserve Bank of Cleveland President Loretta Mester, BOE’s Andrew Bailey and Huw Pill set to speak at different events

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