Morning Brew July 27 2021
Senior Relationship Manager
Hopes US Inflation may have peaked lets US rates decline, weigh on the USD and boosts shares ahead of the ECB meeting and press conference. 10 Year yields fell by 20 Basis points letting the USD Index fall to below 1 again, EURUSD rose to 1.0913, GBPUSD to 1.3130 and USDJPY fell to 125.40 after rising above 126 yesterday. Gold and Silver rise to 1973 and 25.75. USDCAD fell 100 BPS after the BoC hikes rates by 0.5% yesterday.
US PPI grew by 11.2% as announced yesterday but it seems the market had expected worse, Equities can close friendly with the S&P and the Dow up 1% and the Nasdaq 2%. Overnight, gains can continue by app. 0.3%.
For the ECB the most likely stance is no hike with a probability or 82% and a 0.1% hike with 18%, the main expectation is a firmer roadmap for the end of QE and beginning hikes. Inflation is at 7.54% but eh war in Ukraine has eaten up economic growth – putting the ECB in a tough spot. According to the Taylor Rule, the Central Bank rate is almost 7% too low.
Today there are 3 important data points, the ECB, the Turkish Central Bank Rate and US Retail Sales. We are also heading into the long Easter Weekend and could see some position reduction before, over the Easter Weekend many markets are closed and where trading is open, liquidity can be expected to be worse than usual.
Please find our holiday schedule on this page, just scroll down to the “Holiday Overview”. We will be back in the office on Tuesday.
China's race to stop the spread of COVID-19 is putting strain on global supply chains but it seems markets are more focused on the Chinese effort to stabilize markets.
Germany continues to struggle with the handling of the Ukraine war and is forcing unwelcome decisions on politicians. Several Greens are willing to extend Coal usage for energy and supplying heavy weaponry to Ukraine and the SPD is forced to confront the Russia dependency it allowed Germany to run into.
The Korean and Singaporean central banks tightened monetary conditions.
JP Morgan reported a 42% drop in profits, investment banking driving an overall revenue decline of 5%.
- Thursday: China Northern Rare Earth Group, Fast Retailing, Ericsson, UnitedHealth, Wells Fargo, Morgan Stanley, Goldman Sachs, Citigroup, US Bancorp, PNC Financial Services, Coinbase, State Street
- Friday: Hangzhou Hikvision Digital
- Thursday: Sweden CPI, Turkey Rate decision, EU Rate decision and US retail sales
- Friday: French and Italian CPI , NY Fed and Industrial Production
Latest Market Insights
Outrageous Predictions 2023: The War Economy
- The constantly growing global need for energy drives the world's richest to huddle up and launch a R&D project in a size the world hasn't seen since the Manhattan Project gave the US the first atomic bomb.
French President Macron resignsThe political stalemate in France and the rise of Marie Le Pen following the 2022 elections corners President Macron, forcing him to give up on politics and resign from his position. At least for now.
Gold rockets to USD 3,000 as central banks fail on inflation mandateAs markets and central banks realise that the idea that inflation is transitory is wrong, and that prices will remain higher for longer, gold is sent through the roof, hitting a price tag of USD 3,000
EU Army forces EU down path to full unionWith continued challenges in the region and a US military that isn't aggressively enacting its former role as global policeman, the European Union agrees to create its own armed forces, bringing the whole region closer.
A country agrees to ban all meat production by 2030In an effort to become one of the global leaders on the path to net-zero emissions, one country decides to not only put a heavy tax on meat, but to ban domestic production entirely.
UK holds UnBrexit referendumFollowing a recession and domestic pressure, the United Kingdom is thrown into political turmoil that will end with a vote to wind back Brexit.
Widespread price controls are introduced to cap official inflationHistory tells us that with the war economy comes rationing and price controls. And this time is no different, as policymakers introduce strict price controls that lead to a range of unintended consequences.
OPEC+ & Chindia walk out of the IMF, agree to trade with new reserve assetSanctions against Russia have caused widespread turmoil due to US Dollar moves in countries across the globe that don't consider the US an ally. To relieve themselves from this, they leave the IMF and create a new reserve asset.
USDJPY fixed to the USD at 200 as Japan overhauls financial systemFollowing the challenges that faced the Japanese Yen in 2022, the Bank of Japan attempts to keep the currency from sliding. Unsuccessful on the long-term, Japan will launch a reset of its entire financial system.
Tax haven ban kills private equityWith the war economy comes an increased focus on national interests and sovereign nations' ability to assert themselves. In that regard, the OECD countries turn their attention on tax havens and pull the big guns out, banning them altogether.