Squawk Box Europe Express

Global markets are in the green, anticipating earnings in the U.S. and Europe as well as key meetings at the ECB and the BoJ. U.S. President Joe Biden has received criticism following his meeting with Saudi Crown Prince Mohammed bin Salman. Biden hailed security ties between the two nations but failed to achieve progress on reducing oil prices. In aviation news, Boeing issues stable demand forecasts for the next 20 years ahead of the Farnborough Airshow. Europe is in the grip of a heatwave which has sparked devastating wildfires across several Mediterranean nations.

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Italy’s President Sergio Mattarella has rejected Prime Minister Mario Draghi’s resignation following a split in the coalition government caused by the Five Star Movement. We are live in Rome for the latest. China’s economy contracts by 2.6 per cent in Q2, casting doubt over Beijing’s ability to hit its full-year targets. In the U.S., JPMorgan and Morgan Stanley miss on both the top and bottom lines. Weaker investment banking activity and increased provisioning have weighed on both lenders’ quarterly data. Global inflation and the conflict in Ukraine remain the focus of G20 finance ministers and central bankers in Bali, Indonesia. The OECD Secretary-General Mathias Cormann says the world must remain united to ‘soften’ the impact of the downturn. We are also live in Jeddah, Saudi Arabia, where U.S. President Joe Biden is due to arrive today as oil drops below $95 a barrel for the first time since the invasion of Ukraine.    

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U.S. inflation hits its highest level in 41 years to 9.1 per cent. A 100bps rate hike is expected from the Federal Reserve this month. The inversion between the 2- and 10-year Treasury yields widens furthest since 2000. In Italy, Giuseppe Conte’s Five Star Movement has said it will boycott a spending vote today, threatening the ruling coalition government it is part of. And U.S. President Joe Biden embarks on a 4-day Middle East tour, landing in Tel Aviv. Iranian nuclear ambitions is the largest topic on his agenda. And in crypto news, lender Celsius files for Chapter 11 bankruptcy a month after cancelling withdrawals.

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Markets await key U.S. inflation data which is expected to reach a 40-year high. However, Richmond Fed President Thomas Barkin countered negative sentiment, saying that some commentators are ‘talking ourselves into a recession’. The IMF again cuts its U.S. GDP forecast for the year by more than 0.5 per cent. The euro is hovering about parity against the dollar – its lowest level in 20 years. We hear from Dutch Finance Minister Sigrid Kaag who says a compounding of effects have caused the current low in the exchange. In the Asia-Pacific region, the central banks of South Korea and New Zealand are the latest to hike interest rates by 50bps in a bid to rein in rampant inflation. And in corporate news, Twitter sues Elon Musk for backing out of his $44bn takeover of the social media giant.

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Asian equities hit their lowest levels in two years following tech weakness on Wall Street ahead of key inflation data and the start of earnings season. Increased recession fears in Europe pushes the euro close to parity with the dollar which is strengthened by further expected rate hikes by the Fed. In corporate news, Twitter is preparing to file a lawsuit against Elon Musk after the billionaire dropped his $44bn takeover bid. Eurogroup finance ministers meet in Brussels with gas prices top of the agenda. This as the Nord Stream 1 pipeline shuts down for scheduled maintenance.  

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Twitter vows to take Tesla CEO Elon Musk to court after he sought to cancel his $44bn acquisition of the social media company. Tory contenders jostle to replace Boris Johnson as UK Prime Minister but one early favorite, Defence Secretary Ben Wallace, pulls out of the leadership race. In Germany, troubled utility giant Uniper completes its bailout application. We hear from French Finance Minister Bruno Le Maire who says that the EU must brace for a shutdown of Russian gas. Japan’s ruling coalition increases its majority in upper house elections, two days after the assassination of former Prime Minister Shinzo Abe.

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Following yesterday’s dramatic resignation, Boris Johnson stays on as caretaker prime minister until a new leader is selected. This, despite numerous calls for him to leave Downing Street immediately. We are live from Westminster for the latest. Former Japanese Prime Minister Shinzo Abe is shot while on the campaign trail for upper house elections. Japan’s current Prime Minister Fumio Kishida has said Abe is in a ‘grave’ condition. U.S. markets are in the green ahead of today’s non-farm payroll numbers. We are also live in Berlin where the German lawmakers have given the green light to further state intervention to secure the energy sector. There are reports that Chancellor Olaf Scholz’s government will seek to take a stake in excess of 30 per cent to prop up beleaguered gas utility Uniper.

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UK Prime Minister refuses to step down despite senior cabinet ministers urging him to quit late yesterday afternoon. More than 40 Conservative MPs have now left government roles. WE are live in Downing Street for the latest. June’s FOMC minutes signal more restrictive policies are being lined up in a bid to rein in U.S. inflation. French Prime Minster Elisabeth Borne announces plans to nationalise beleaguered energy firm EDF to secure ‘full control’ of the nation’s electricity. And we are live in Berlin where the Bundestag has been debating new energy security rules with the prospect of a bailout for gas utility Uniper now on the cards.  

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The 2- and 10-year Treasury yields briefly invert for the third time this year sparking fresh recession fears. Concerns of a global economic slowdown prompt crude prices to tumble 10 per cent before recovering. UK Prime Minister Boris Johnson’s government is in turmoil following the resignations of Chancellor of the Exchequer Rishi Sunak and Health Secretary Sajid Javid over continued political scandals. The pound plunges to its lowest level since the start of the Covid pandemic as a result. We are live in Downing Street for the latest. And we are also live in Düsseldorf, Germany, where the government is reportedly set to take on a 25 per cent stake in Uniper – the country’s largest importer of Russian gas – in order to keep the company alive following a sharp decline in supply from Moscow.   

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Beijing and Washington hold ‘pragmatic and frank’ trade talks with suggestions that the U.S. may cut tariffs in a bid to suppress inflation. The RBA raises rates by 50 bps – its third such hike in three months. Germany’s Uniper sees shares plunge by 30 per cent on reports of a government bailout. German politicians are to draft a new bill to allow Berlin to nationalize struggling gas importers. In Norway, oil and gas workers stage a two-day walkout which could cut supply by up to 89k bpd, rising to 292k bpd. And in the crypto sector more ongoing volatility forces two platforms to implement transaction restrictions.

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