Morning Brew August 4 2022
Senior Relationship Manager
Summary: Bank Of England up today and Earnings boost equities
The strong bullish sentiment in Equities continued after the brief pause after the End of July and the Nasdaq could add 2.6%, the S&P 1.56 and the Dow 1,29%. Earnings by Paypal and a buyback program by Moderna boosted sentiment along with a strong non-manufacturing PMI. Apple, Amazon and Meta added more than 4%. Teg GER40 rose to 13650.
China launched live-fire military drills around Taiwan after Nancy Pelosi’s visit. They are scheduled to last until Sunday and introduced sanctions against Taiwan but so far the reaction is more moderate than feared, let us hope that remains.
Yields are trading nervous on Data and the hawkish Fed Speakers, the 2 year traded a 20 basis point range and is now near the middle at 3.08.
The USD Index is near yesterday’s morning level at 106. 42, EURUSD at 1.0170 and GBPUSD at 1.2150. Gold and Silver see-sawed and are now just above the 20 and 1772. USDJPY seems to take a breather at 133.90.
The Bank of England is expected to raise interest rates by the most since 1995, a hike of 50 basis points is priced in with a probability of 85% based on rate futures.
The newest FX poll by Reuters. 70% of the questioned analysts believe the USD has not yet peaked but most believe that to happen in the next six months.
Key driver for the overall sentiment are the strong earnings and strong fundamental data, hawkish Fed speakers cannot dampen the strong sentiment for long – it seems to be a bit of a FOMO rally. Watch the BOE today and the FOMC tomorrow will be the event of the week. Alibaba earinigs will be closely watched and our Strats team in Asia commented Mega cap platform companies are facing multiple headwinds, including the amended Anti-Monopoly Law in China
Key Economic Data this week:
Thursday DE Industrial Orders, Bank of England Rate Decision, US Jobs data,
Friday: DE Industrial Output, US Nonfarm Payroll
Thursday: Novo Nordisk, Credit Agricole, Merck, Bayer, Adidas, Beiersdorf, Toyota, SoftBank, Glencore, ING Groep, Eli Lilly, Alibaba, Amgen, ConocoPhillips, EOG Resources, Air Products and Chemicals, Block, DoorDash, Twilio
Friday: Canadian Natural Resources, Suncor Energy, Allianz, Deutsche Post, Naturgy Energy Group
Physically Settled Futures:
Live Cattle - Aug 2022 will expire 5th Aug at 15:00 GMT
LIVECATTLEAUG22 will expire 4th Aug at 15:00 GMT.
Latest Market Insights
Quarterly Outlook Q3 2022: The Runaway Train
- Central banks' attempts to kill inflation is a paradigm shift, which could end in a deep recession.
Tangible assets and profitable growth are the winnersWith US equities officially in a bear market, the big question is where and when is the bottom in the current drawdown?
Understanding the lack of investment appetite among oil majorsThe everything rally seen in recent quarters has become more uneven, as its strength is driven by commodities in short supply.
The pressure is on as the wind leaves the sailsWith cryptocurrencies in sharp decline, are we entering a crypto winter or is the bear market a healthy clean-up of the crypto space?
Why the Fed can never catch up and what turns the US dollar lower?Many other central banks are set to eventually outpace the Fed in hiking rates, taking their real interest rates to levels higher than the Fed will achieve.
Bank of Japan: Swimming against the tideThe Japanese economy has gone from the age of deflation to rapidly rising prices in no time, leaving the Bank of Japan in a pickle.
Green transformation detour and bear market hibernationWith the impending risk of global econonomic derailment, we share the five things investors need to consider in this new half year.
Crisis redux for the eurozone?Whether there's going to be a recession in Europe or not, the path towards a stable economy will be agonizing.
Technical Outlook: Gold, Oil and a remarkable multi-decade perspective on EquitiesThe Nasdaq bubble pattern, USDJPY resistance, crude oil uptrend losing steam and the technical outlook for USD.
China: the train of new development paradigm left the station two years agoChina is transiting to a new development paradigm, as they are hit by deteriorating terms of trade, a slower global economy and an uncertain future while continuing attempts to contain the pandemic.