Morning Brew February 23 2022
Senior Relationship Manager
Summary: How will the sanctions impact sectors?
Worries on the Ukraine conflict sparked risk off sentiment yesterday and trading was extremely volatile yesterday, initially equities sold off massively but could recover a good deal, at the end of the day, US Indexes closed app 1% below Friday. The S&P 500 ended down more than 10% from the January 3 high and is formally in correction.. Dax has settled down at around 14700 overnight, the USD Index at 96 and US 10 year yields recovered from 1.85 to 1.96.
EURUSD is trading at 1..1320 and GBPUSD at 1.3590, Gold at 1897 and Silver at 24.15. Bitcoin gains to 38k Oil made another 7 year high.
The US, the EU, UK as well as Japan issued sanctions against Russia, mainly targeting oligarchs and Russian businesses, Germany puts the certification for Nordstream 2 on hold.
Russian equities fell severely and we will be placing trading restrictions on a number of instruments to avoid issues.
Today the focus will be on Ukraine on the one hand but also on the impact of the sanctions on businesses. European Banks will be affected at least, more details are to be expected soon.
Peter Garnry wrote a good on equities in the current surroundings:
German equities are the weak spot in Europe which a higher negative sensitivity to the ongoing energy crisis and the Russia-Ukraine conflict. German equities are only 7% above their pre-pandemic level highlighting that something is structurally wrong and Germany has the wrong growth model. The ongoing Russia-Ukraine conflict that escalated to a new level yesterday will continue to put upward pressure on commodities, and thus also inflation, and especially energy markets making the commodity sector a must to have exposure to for equity investors. We also highlight our defence theme basket which is enjoying strong relative performance this year as military budgets could see an increase in the coming years.
Lenovo`s profit jumped 62% to an all-time high of $640 million, Home Depot falls significantly as costs weigh on Q4 earnings.
Physically Settled Futures:
CGBH2 will expire 24th February at 16:00 GMT
SUGARNYMAR22 will expire 24th February at 16:00 GMT
Key Events this Week:
Wednesday: EU HICP
Thursday: US GDP New Home Sales
Friday: German GDP, EU Consumer Confidence, Durable Goods Orders
Wednesday: Rio Tinto, Iberdrola, Stellantis
Thursday: Safran, Anheuser Bush Inbev, Axa, Deutsche Telekom, Royal Bank oc Canada. Alibaba, Moderna, Newmont Mining
Saturday: Berkershire Hathaway.
Latest Market Insights
Q4 Outlook 2022: Winter is coming
- 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.