Senior Relationship Manager
Summary: Build Back Better stalling - Risk Off
Good morning,
US Politics are back in the spotlight as Senator Joe Manchin released a statement accusing his party of pushing for an increase in the debt load that would "drastically hinder" the ability of the country to respond to the coronavirus pandemic and geopolitical threats and stated he would not vote for Joe Biden`s “Build Back Better” this is a significant blow not only to Biden`s political agenda but also to his standing.
In combinations with rising corona fears and restrictions, this weighs on Equities and indexes are down more than 1% across the board. On Friday stocks had already closed lower.
10 year yields lost to 1.3650 and the USD Index rises to 96.60, EURUSD hovers around the 1.1250 GBPUSD at 1.3220.
Turkish President Erdogan stated yesterday that Islam would demand lower – not higher – ratees and pushes the Lira even lower to 17.40 against the USD.
Gold and Silver give up some ground to 1802 and 22.35 and Bitcoin falls 46300.
According to JPMorgan, global bond demand could be reduced by as much as 2 trillion USD due to less purchases by central banks, driving yields higher.
Energy prices keep rising in Europe with the short terms rates above €300 per MW/h and Switzerland as well as France close to 400.
China lowered the lending Benchmark rate by 5 basis points to support the economy.
For today, the economic agenda is void of key events, tomorrows we are expecting the GFK from Germany, the US current account, Canadian retail sales and the EU consumer confidence.
Rather than Economic releases, I expect news around Omicron and US Politics to drive risk sentiment the next few days.
Please bear in mind hat we often see extraordinary financing rates in the FX rollovers over the new year. If you want to be on the safe side, consider forwards or swapping your positions into January.
Trade safely
2024: The wasted year
Markets are driven by election optimism, overshadowing growing debt and liquidity concerns. The 2024 elections loom large, but economic fundamentals and debt issues warrant cautious investment.
As US economic slowdown hints at a shift away from exceptionalism, USD faces downside with looming Fed cuts. AUD and NZD set to outperform as their rate cuts lag. JPY gains on carry unwind bets and BOJ pivot.
Amid AI and obesity drug excitement, equities see varied prospects: neutral on overvalued US stocks, negative on Japan due to JPY risks, positive on Europe. European defence stocks gain appeal.
With the economic slowdown, quality assets will gain favour, especially sovereign bonds up to 5 years. Central banks' potential rate cuts in Q2 suggest extending duration, despite policy and inflation concerns.
Commodities poised for rebound. The "Year of the Metal" boosts gold and silver, copper awaits rate cuts. Grains may recover, natural gas stabilises. Gold targets $2,300-$2,500/oz, copper's breakout could signal growth.
Markets are driven by election optimism, overshadowing growing debt and liquidity concerns. The 2024 elections loom large, but economic fundamentals and debt issues warrant cautious investment.
As US economic slowdown hints at a shift away from exceptionalism, USD faces downside with looming Fed cuts. AUD and NZD set to outperform as their rate cuts lag. JPY gains on carry unwind bets and BOJ pivot.
Amid AI and obesity drug excitement, equities see varied prospects: neutral on overvalued US stocks, negative on Japan due to JPY risks, positive on Europe. European defence stocks gain appeal.
With the economic slowdown, quality assets will gain favour, especially sovereign bonds up to 5 years. Central banks' potential rate cuts in Q2 suggest extending duration, despite policy and inflation concerns.
Commodities poised for rebound. The "Year of the Metal" boosts gold and silver, copper awaits rate cuts. Grains may recover, natural gas stabilises. Gold targets $2,300-$2,500/oz, copper's breakout could signal growth.