Early Morning Call: another day of losses for indices while GBP under more pressure

Equity overview

Asia-Pacific equity markets fell overnight, following the lead of the US, as investors continue to assess the Federal Reserve’s (Fed) latest decision and comments.

Australia’s S&P/ASX 200 dropped 1.87% as trade reopened after a holiday on Thursday.

After Goldman Sachs Group Inc (All Sessions) earlier this week, Nomura Holdings Inc lowered its forecast for China's 2023 annual growth to 4.3% from 5.1%.

Forex

The yen is on track to post its first weekly gain against the dollar following five weeks of decline, after Japanese authorities intervened in foreign exchange markets yesterday. USD/JPY (大口） fell as much as 1% yesterday, down to ¥140.3, before rising again and settling above ¥142.

This government intervention, the first since 1998, came only hours after the Bank of Japan (BoJ) decided to maintain its ultra-low interest rates.

In the UK, GfK Consumer Confidence fell to a new all-time low of -49 in September, largely beating expectations of -42. Gfk’s Joe Staton said: “consumers are buckling under the pressure of the UK's growing cost-of-living crisis driven by rapidly rising food prices, domestic fuel bills and mortgage payments.”

Alongside its decision to raise interest rate by 50 basis points, the Bank of England (BoE) indicated yesterday it expected inflation to peak at 11% in October.

Later this morning, the market will get further indication of how the economic slowdown is shaping up, with the publication of manufacturing and services PMI flash for the month of September. Investors will be particularly attentive to France's manufacturing PMI, expected to join Germany and UK in contraction territory, and UK services PMI, expected to fall to 50, from 50.9 the previous month.

The new chancellor of the exchequer, Kwasi Kwarteng, is expected to deliver a budget that will promise a "new era for Britain". Despite being billed as a mini-budget, expectations are that it will deliver a significant package of measures to turn the 'vicious cycle of stagnation into a virtuous cycle of growth".

Corporate overview

Elsewhere on the corporate front, FedEx Corp published its quarterly earnings in session yesterday evening, and confirmed what it had announced last week. It posted earnings of 3.44 per share on revenue of $23.20 billion. For the current quarter, FedEx sees revenue between $23.5bn and $24bn.

FedEx also announced a cost cutting plan of up to $2.7bn in full-year (FY) 2023

In the UK, Made.com Group PLC has decided to withdraw its FY forecast due to “challenging” market conditions and will conduct a strategic review which includes a formal sale process.

Smiths Group PLC reported a rise in full-year profit and revenue and added it expects moderate margin improvement next year.

Meanwhile the Porsche IPO is scheduled for next week.

Commodities

On the commodity market, lumber is back to testing support after Fed chairman, Jerome Powell, singled out the housing market as a persistent source of rising consumer inflation: "What we need is supply and demand to get better aligned ... We probably in the housing market have to go through a correction to get back to that place."

WTI and Brent are on track to post a fourth straight week of losses, ahead of Baker Hughes data. Last week, total rig count rose by four to 763, as the number of oil rigs in operation increased by eight to 599.