Morning Brew February 4 2022
Senior Relationship Manager
Summary: ECB starts a paradigm shift - Stocks jump on earnings, Facebook suffers the largest loss ever
Next week I will be on the slopes, trade carefully and be safe in this volatile time.
Christine Lagarde was much more hawkish than I had expected, driving yields higher and giving strength to the EUR. Lagarde acknowledged that inflation was higher than desired and did not state that rate hikes in 2022 were extremely unlikely. This means that the so called most dovish central bank is looking at tightening and will mean much more interesting FX markets as interest rate differentials are likely to reappear as a driver. The Bank of England considered hiking by 50 bps rather than the 25 expected. EURUSD rose to 1.14160 and GBPUSD to 1.3580 and the USD Index falls to 95.2. EURCHF rose above 1.0550 again.
From now it is worth taking note of EU data again, the general assumption that the ECB will not take action may not hold anymore.
The Stock market also continues it`s volatility. Facebooks Meta suffered the biggest loss in market cap ever recorded, the stock price fell by 26% and eliminated 200 billion USD in market cap. While tech overall and Social Media companies in particular were dragged along Twitter -5% and Snapchat -23%, Snapchat had a spectacular rebound after the bell up more than 50%.
Amazon fell 7% during normal trading but gained 17 in the after market on good results.
Overall Futures fell Dow 1.45%, S&P 2.44%, Nasdaq 3.74%, this morning, a bit more than half of the losses have been recovered.
Today we are expecting the Nonfarm Payroll at 14:30 as the key event, with an expectation of 150k added jobs but it seems that after the low ADP number on Wednesday, a lower number is not unlikely.
Next week it thin in terms of economic data, key is likely to be the US CPI on Thursday – after the webinar with Steen.
Friday: Germany Industrial Orders, EU retail sales, US Nonfarm Payroll
Friday:: Bristol-Myers Squibb, Sano FP
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.