Morning Brew December 20 2021
Senior Relationship Manager
Summary: Build Back Better stalling - Risk Off
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.
Latest Market Insights
Quarterly Outlook Q3 2022: The Runaway Train
- Winter is coming to the financial markets as central banks are tightening their grip. How spring will look is still a question.
European energy crisis: it will get worse before it gets betterThe winter in Europe will be tough, but whether the result is political chaos or sustainable, innovative solutions is still undecided.
A difficult and volatile quarter awaitsAs the year draws to an end, commodities continue to be at centre stage of the world with growth pockets political uncertainty.
The bright side: crises drive innovationThe positive spin on crises is that they come with solutions. It is worrisome that deglobalisation may be a response to this crisis.
Green transformation in China: renewable energy and beyondGoing green, China needs to span numerous energy sources to ensure stability, as every source comes with a challenge.
Asia: Intermittent solutions, but a faster renewable adoption curveAsian energy supply is being squeezed. This and the adoption of renewables may change the investment sentiment in the region.
FX: A Fed thaw needed to deliver a sustained USD turn lowerThe US Dollar can keep momentum when the Federal Reserve continues to tighten, leaving the rest to play to their drum.
Autumn can become ugly for equities and bond holders. Comfort for Dollar longsTechnical analysis suggests that equities could face a tough Q4 as could fixed income. US Dollar positions could provide some upside.
The next stock market sector to watch, with stocks going nuclearAs the world scrambles to find affordable, sustainable energy, nuclear is getting attention from politicians and investors alike.
The crypto space is getting cold when the hype disappearsCryptocurrencies face a winter of their own as retail investors and governments are asking tough questions.