Morning Brew February 25 2022
Senior Relationship Manager
Summary: Mild Western Response Calms Markets
Markets stabilized yesterday after western sanctions against Russia came less severe than feared and the initial sell of was taken as an opportunity to buy the dip. US Equities closed green with the Dow up 0.3%, S&P 500 up 1.5%, Nasdaq up 3.3%. Over night they are giving up some of the gains again, futures are a little more than 0.5% below the close. Dax traded as low as 13800 yesterday but could recover along with US Indexes and is currently at 14250.
Sanctions so far do not exclude Russia from the SWIFT system or prohibit natural gas sales completely.
EURUSD is at 1.1200 and GBPUSD at 1.3414, Bitcoin could recover from 34k to 38k again.
Gold rose to a high of 1973 and Silver hit 25.60 before retreating to currently 19149 and 24.46,
Oil traded as high as 100 yesterday and retreated to 95.
Today all eyes will be focused on developments in Ukraine and western reactions. Trade carefully and balance risk reward. Any comments on of central banks on the war, it`s impact on inflation and their view will be watched closely.
In the afternoon we are expecting expiries in many futures contracts, pls monitor your positions.
Comment by Althea on Fixed Income:
The bond market is signaling that the recent invasion of Ukraine will bring higher inflation and slower growth, increasing stagflation probabilities. Meanwhile, the cost to insure Russian bonds has risen to the highest since the 2008 global financial crisis, weighing on emerging markets' cost of funding, particularly in hard currency. Escalation of tensions in Eastern Europe challenges the corporate bond space on both sides of the Atlantic as credit spreads widen to the highest level since the 2020 pandemic.
Physically Settled Futures:
STFH2 will expire 25th February at 02:00 GMT.
EMAH2 will expire 25th February at 10:00 GMT.
HGH2, KEH2, RRH2, SIH2, SILH2, TNH2, UBH2, XCH2, XKH2, XWH2, ZBH2, ZCH2, ZFH2, ZLH2, ZMH2, ZNH2, ZSH2, ZTH2, ZWH2 will expire 25th February at 16:00 GMT.
Key Events this Week:
Friday: German GDP, EU Consumer Confidence, Durable Goods Orders
Saturday: Berkershire Hathaway.
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.