Early Morning Call: GBP remains volatile - will BoE extend its bond-buying programme?

Equity markets overview

European equity markets show no real direction this morning, after a negative session yesterday.

In the UK, traders are left in the dark after Bank of England (BoE) governor, Andrew Bailey said yesterday he had no intention to extend the bank's bond purchases beyond 14 October as initially planned.

But the Financial Times reveals this morning that according to three different sources the central bank has told lenders it is prepared to extend its bond-buying programme if needed.

Meanwhile, GDP contracted by 0,3% in August. Economists had expected it to remain flat. The three-month average us down 0.3%, against expectations of -0.2%.

Industrial production surprisingly fell by 5.2% in August year-on-year (YoY). Economist anticipated a rise of 0,.6%.

In the US at 1.30pm, producer price index (PPI) is expected to rise by 0.2% in September month-on-month (MoM), +8.4% YoY.

Forex

The yen continues to weaken. USD/JPY (大口） rose overnight to ¥146.35, a level not seen since August 1998 during the Asian financial crisis, and crucially moving above levels that triggered intervention by Japanese authorities last month.

Finance Minister, Shunichi Suzuki reiterated to the press that there was no change in the country's stance at all and they were ready take necessary steps in the foreign exchange market.

Last month, Japanese authorities intervened in the currency market for the first time in 24 years, selling dollars and buying ¥2.8 trillion to slow the fall of the Japanese currency.

Earnings overview

Elsewhere on the equity market, PageGroup reported a 18.6% increase in quarterly gross profit to £270.5 million, while Barratt Developments, Britain's largest homebuilder, warned this morning of lower private reservations, adding that its annual outlook looks "less certain" as homebuyers face rising mortgage rates in a worsening cost-of-living crisis.

Philips warned this morning that its third quarter (Q3) core profit will fall by about 60% as supply chain problems are expected to continue to hit sales throughout the year. It also announced a non-cash charge on €1.3bn in Q3, linked to the recall of machines used to treat sleep apnoea.

Yesterday after the close of the European market, LVMH Moet Hennessy Louis Vuitton SA posted better-than-expected sales in the third quarter. They came to €19.8bn, up 19% on a comparable basis from a year earlier, beating analyst expectations of a 13% increase. The French luxury goods giant has seen its sales in Europe, the United States and Japan rising sharply since the start of the year, benefiting from solid demand from local customers and the recovery in international travel.

The strength of the dollar also incited Americans to splash out in Europe, and business improved in China as Covid curbs eased.

Bloomberg News reported yesterday that Credit Suisse Group AG (CH) is under investigation by the US Justice Department, to find out whether the bank continued helping some of its US clients hide assets from authorities, eight years after the Swiss bank paid a $2.6-billion tax evasion settlement. "Credit Suisse does not tolerate tax evasion," the bank told Reuters in a statement yesterday, adding that it was "cooperating extensively with US authorities, including the US Senate and Department of Justice.

Uber Technologies and Lyft shares tumbled yesterday after the US Department of Labor proposed a rule that would make it more difficult for companies to treat workers as independent contractors. If the new proposal were to become rule, workers would be considered as employees, entitled to more benefits and legal protections than contractors. A 45-day public comment period will begin on Thursday, and the final ruling is expected next year.

Bloomberg reported yesterday that Intel is planning thousands of job cuts in the face of a slowdown in the personal computer market. According to people close to the matter, the layoffs will be announced this month. The chipmaker declined to comment on the job cuts.

Intel is set to report its quarterly earnings on October 27. Last July, it cut its annual sales and profit forecasts after missing estimates for second quarter results.

PepsiCo is scheduled to report earnings before market open today. Analysts expect earnings of $1.84 per share on revenue of $20.78bn. Investors want to know how much of an impact the strong dollar has had on the group's sales. Forecasts for the current quarter will also be scrutinised, as it is normally the highest revenue-producing quarter of the year.