Senior Relationship Manager
Summary: ECB starts a paradigm shift - Stocks jump on earnings, Facebook suffers the largest loss ever
Good Morning,
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.
Economic Data:
Friday: Germany Industrial Orders, EU retail sales, US Nonfarm Payroll
Earnings:
Friday:: Bristol-Myers Squibb, Sano FP
Bond. Long Bond(s)
With real rates being too positive, we see three scenarios: Opportunity to lock in rates at cycle high, government overreach to keep the economy afloat or a complete reset of the economy.
Steen Jakobsen,
Chief Investment Officer
Is a bond bull market ahead? Inflation still poses a risk for investors, but the moment for increasing duration to your portfolio may be approaching towards the end of the year, when central banks might be forced to cut interest rates.
Althea Spinozzi,
Senior Fixed Income Strategist
The furious rate hike cycle has brought gains in the US dollar, but with stagflation risks in Europe and the UK and weakness in the Chinese economy, USD may have more room to run. But a strong dollar could also have repercussions for US growth, emerging markets and commodity prices.
Charu Chanana,
Market Strategist
With the cost of capital rising painfully, stagflation fears are back, illuminating the fragile state of the green transformation, while giving a tailwind to nuclear power, and threatening the growth of AI-related stocks.
Peter Garnry,
Head of Equity Strategy
With supply tightness not only in energy but all commodities, the momentum in commodity prices may continue, pressuring central banks to lower real rates. That could be a good setup for precious metals, including gold, silver and potentially platinum as well.
Ole S. Hansen,
Head of Commodity Strategy
As the pandemic showed, even the US Treasury can experience seismic shifts. With the government increasing the pace of issuing bonds to support fiscal spending, the complex Treasury market and regulatory constraints could spark a liquidity event.
Redmond Wong,
Market Strategist
The tide has turned for bonds. Given the current yields, bonds have become an attractive investment, with added benefits including lower risk than stocks, increased diversification and a steady stream of income unaffected by economic changes.
Peter Siks,
Investment Coach