UK inflation rises to double digits again – Daily Market Brief, October 19, 2022

      UK CPI rose to 10.1%, ahead of forecasts and over 5 times the BoE’s target 2% target. The data adds pressure to the BoE to continue hiking interest rates to tame runaway prices. GBP/USD falls on USD strength, and the FTSE rises.

·         USD/CAD rises ahead of Canadian inflation data, which is expected to cool to 6.8% YoY in September

·         Netflix jumps 14% after reporting 2.4 million subscribers were added in Q3

·         Tesla has risen 7.5% ahead of earnings due after the close today

European bourses closed higher for the second straight session yesterday, with the DAX booking gains of close to 1%. Meanwhile, the FTSE closed just 0.2% higher, dragged down by resource stocks after China announced that it would not release key Q3 GDP, retail sales, or trade balance data, raising concerns among market players that the figures will be disappointing.

US indices also managed a stronger close, with the S&P500 booking gains of over 1% thanks to more solid US earnings and despite hawkishness from the Federal Reserve. For now, the glow of earnings is overshadowing growing financial threats and recession fears.

The stronger close on Wall Street sees Europe set to rise on the open.

UK inflation

UK inflation jumped by more than expected to 10.1% YoY in September, a 40-year high, up from 9.9% in August and ahead of the 10% forecast. The jump in inflation, driven mainly by food and drink, highlights the intensifying cost-of-living squeeze on household incomes. The data comes as investors had pared back aggressive BoE rate hike bets yesterday in light of the Chancellor scrapping most of the mini-budget. GBP/USD is falling, partly due to USD strength. EUR/GBP is holding steady.

Canadian inflation

Inflation data is also due from Canada, where it is expected to slow for a fourth straight month to 6.8% YoY in September, down from 7.0% in August and 7.6% in July. The data comes ahead of the BoC interest rate decision next week and rising expectations that the central bank could dial down the size of rate hikes. So far, the BoC has matched the Fed’s 300 basis point hikes since March. However, the central bank is expected to pare back to a 50-basis point hike again next Wednesday. USD/CAD trades at 1.3750 at the time of writing, up from 1.31 at the start of September.

Netflix

The streaming giant reported better-than-expected earnings after the close sending the share price soaring. EPS rose to $3.10, ahead of the $2.12 forecast, and revenue rose to $7.93 billion, ahead of the $7.84 billion forecast. 2.1 million subscribers were added in the period, well above the 1 million forecast, whilst also reversing the loss of subscribers seen in H1. Netflix expects 4.5 million subscribers to be added in the final three months of the year, above the 3.9 million estimated. Netflix trades 14.5% higher pre-market.

Tesla

The UK economic calendar is quiet again today so attention will be firmly on earnings and the release of Tesla’s quarterly report. Tesla reported 343,000 deliveries in Q3, a record number but also a number which missed estimates. EPS is expected to come in at $1.01 on revenue of $22 billion, a 60% YoY increase. Guidance is likely to be more important as recession fears rise, which could impact demand. Tesla has risen 7.5% so far this week ahead of earnings.

Disclaimer: This article is not investment advice or an investment recommendation and should not be considered as such. The information above is not an invitation to trade and it does not guarantee or predict future performance. The investor is solely responsible for the risk of their decisions. The analysis and commentary presented do not include any consideration of your personal investment objectives, financial circumstances, or needs.

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