Morning Brew January 27 2022
Senior Relationship Manager
Summary: Yields soar, Equities sell off and USD strengthens after Powell turns more hawkish than hoped in the press conference after the rate decision in line with expectations..
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The initial reaction to the FOMC was friendly yesterday, late in the press conference where Powell appeared more Hawkish than the market had hoped, most of the gains evaporated, rates jumped and the USD gained.
The number of implied rate hikes increased from 4 to 4.3 on Powel stating the Feds course remained open and flexible. That was initially interpreted as a dovish loophole but on his statement that inflation has gotten worse in the last month and that the policy would have to be adjusted if it rises further. : THERE IS QUITE A BIT OF ROOM TO RAISE INTEREST RATES, THIS IS GOING TO BE A YEAR IN WHICH WE MOVE STEADILY AWAY FROM HIGHLY ACCOMMODATIVE POLICY
Over night Equities fall further, Futures show the current levels: S&P500 -1.4% @ 4280, Dow -1% @ 33700, Nasdaq –1.7% 13900. The Dax and Eurostoxx are down 2.6% and 3% but bear in mind that that is calculated against the Index close at 17:30.
10 year rates rise to 1.84 after hitting 1.88 yesterday, the USD Index rises to 96.67. EURUSD falls to the lower end of the range at 1.1215 and GBPUSD 1.3425. Gold and Silver come under pressure and fall to 1812 and 23.20. Bitcoin rose to above 37k yesterday but retreats to 35500.
Oil gained yesterday with the broader market but also receded somewhat late in the day.
Today I expect some seesaw movement until the meeting has been digested then the US GDP and Durable goods will come into focus
Shares of Tesla fell about 5% in the aftermarket on news that the company would not reach max capacity in 2022 due to supply-chain limitations. Results were above expectations and Elon Musk sees growth of more than 50% for 2022.
Deutsche Bank this morning exceeded expectations with a net profit of €145 million against an expected loss of €130 million
China weighs breaking up Evergrande to contain property crisis acc to Bloomberg News.
Key Economic Data:
Thursday: US Durable Goods orders and GDP
Friday: Swiss KOF, EU Business Climate, Personal Income, US PCE, University of Michigan Consumer Confidence.
Thursday: Diageo, Danaher, Apple, Visa, LVMH, Mastercard, Comcast, McDonald's, SAP SE, Blackstone,
Friday: Charter Communications, Chevron Caterpillar
Quarterly Outlook Q2 2022
Quarterly Outlook Q2 2022: The End Game has arrived
- Shocks from covid and the war in Ukraine have forced the global financial and political world to change, but what will the end game be?
Productivity and innovation have never been more importantAs the world economy hits physical limits and central banks tighten their belts, could equities be facing a 10-15% downside?
The great EUR recovery and the difficulty of trading itIf the terrible fog of war hopefully lifts soon, the conditions are promising for the euro to reprice significantly higher.
Tight commodity markets – turbocharged by war and sanctionsWith supply already tight, commodities keep powering on. But will it last for yet another quarter?
Between a rock and a hard placeGeopolitical concerns will add upward price pressures and fears of slower growth, while volatility will remain elevated.
The Great ErosionInflation is everywhere and central banks try to combat it. But will they get it under control in time?
Australian investing: Six considerations amid triple Rs: rising rates, record inflation and likely recessionWhile global financial markets are struggling in an uncertain world, the commodity-heavy Australian ASX index is poised to keep a positive momentum.
Cybersecurity – the rush to catch up with realityWith the invasion of Ukraine, governments and private companies are rushing to reinforce their cyber defenses.