Senior Relationship Manager
Summary: Markets are trying to digest the FOMC and the US GDP
Good Morning
Markets remain nervous and swing rather wildly as traders are trying to make sense of the FOMC meeting and trying to position themselves. The US GDP came the highest in 38 years and sparked further rate hike fears. Interest rate futures show an expectation of almost 5 hikes this year. This boosted the USD, weighed on equities and hurt precious metals.
Rate sensitive stocks lost most, indexes lost minutely in the blue chip sector (Dow Jones -0.02) and much stronger in growth (Nasdaq -1.4%) The Russel 2000 is 20% off it`s high.
EURUSD fell below the 1.12 and could find support at 1.1090 and at 1.100 if the USD continues stronger, GBPUSD remains at 1.34, Gold fell to below 1800 and Silver 22.70. The USD Index rose above 97. The Bank of England and the ECB will announce rates next week. The BOE is expected to hike with 90% probability and the ECB not to with 97%.
Oil remained strong on expectations that Chinas imports will increase by 6-7%.
Apple beat expectations and is seeing the ship shortage becoming less painful, shares jump USD 9 after the close, Intel stated the Chip shortage was weighing on earnings and stocks fell 7%. Tesla closed almost 12% lower. Netflix rises more than 7% on news that the company could gain Bill Ackman as investor.
The Expiry of the Natgas Future caused severe price jumps, temporarily the price rose by 80%.
Watch for week- and month end nervousness today and stay nimble.
Key Economic Data:
Friday: Swiss KOF, EU Business Climate, Personal Income, US PCE, University of Michigan Consumer Confidence.
Companies: ,
Friday: Charter Communications, Chevron Caterpillar
Trade safely.
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