Senior Relationship Manager
Summary: FOMC and Earnings
Good Morning,
Wallmarts results weighed on the Retail sector yesterday and caused risk off sentiment to gain traction. Wallmart itself lost 7.6%, Amazon 5.2% and Target 3.6%
The Dow Jones lost 0.7% the S&P 500 1.2% and the Nasdaq 1.9%. positive results came from 3M, Coca Cola, Mc Donalds, and GE. Microsoft and Alphabet reported after the bell and while Microsoft is slightly down while Alphabet could gain. This boosts overnight sentiment. Traded Volumes were again below the average.
In the FX Market, the Euro gave up ground on Russian Gas sanctions and the political mess in Italy. It is trading at 1.0140 against the USD and 0.9750 against the CHF. The USD Index gains to 107
Gold, Silver and Bitcoin are fairly stable at 1720, 18.65 and 21200. Coinbase shares fell 21% on an SEC Probe and the news that ARK sold 1.4 mio shares.
Credit Suisse is restructuring and appointed Ulrich Koerner as its new chief executive as the bank reported a loss of CHF 1.59 bio against an expectation of CHF -206
Deutsche Bank reported a higher than expected Q2 profit, Danone raises it`s outlook
The International Monetary Fund cut global growth forecasts again from a global 3.6% to 3.2%.
The German consumer confidence fell to the lowest level ever on worries over Russian gas deliveries and how Germany may be affected.
Today, the US rate decision is key but the US Durable goods orders at 14:30 will also be significant.
The Rate decision is at 0:00 CET and Powell`s speech scheduled 30 minutes later. From the FOMC a 75bp hike is expected with a probability of 87%, to 2.25%–2.50%, The remaining 13% call for 100bp Further 75bp of hikes are expected this year before before reversing to cuts next year.
That the market has reverted to pricing in cuts next year emphasizes growing concern that the global economy is already rolling over. If nothing else, consider 2s/10s Treasuries already trading 25bp inverted
Bloomberg reports a huge 67,000 contracts hawkish bet on Secured Overnight Financing Rate Futures. December 2022 contracts were bought and December 2023 contracts were sold in a bet that the gap between the two will widen as the swaps market prices in fewer Fed rate cuts. The trade is worth app. 1.7 mio per basis point.
Key earnings:
AI: The good, the bad, and the bubble
While a deep recession may not be iminent thanks to central bank policy, interest rates will have to stay high for longer, and this will be accompanied by volatility risk from the unwinding of bubbles, especially within AI.
Steen Jakobsen,
Chief Investment Officer
The emergence of advanced AI systems is by far the most surprising event this year, turning everything upside down, while risks and benefits are debated. AI will also become an arms race between the US and China.
Peter Garnry,
Head of Equity Strategy
As China navigates global fragmentation, its cycle of technology application, productivity enhancement, and growth is threatened by US breakthroughs in generative AI, limited computing power, and geopolitical tensions.
Redmond Wong,
Market Strategist
Japan’s expertise in semiconductors and robotic integration could be the foundation of AI dominance. Combining two of this year's themes, Japanese equities and artificial intelligence, brings a wave of opportunities.
Charu Chanana,
Market Strategist
The AI fever has turned the technology into a darling, pushing crypto further into no-man’s-land. There are striking similarities between AI and crypto, and if these are to come full circle, AI won't be spared for bubbles.
Mads Eberhardt,
Cryptocurrency Analyst
Stocks related to artificial intelligence (AI) have appeared on investors' radars. Expectations are high, but it may be necessary to consider how to get exposure to AI in a diversified way.
Hans Oudshoorn,
Trainer Academy
The USD is on its back foot as markets celebrate an eventual Fed rate peak and steady long US yields. The stakes are even higher for the Japanese yen if longer major sovereign yield curves have to price in economic acceleration.
John J. Hardy,
Head of FX Strategy
While commodities, broadly speaking, have faced some tough months, a partial reversal during June could signal that the asset class is getting back on its feet with energy holding up and precious metals with upside potential.
Ole S. Hansen,
Head of Commodity Strategy
As inflation remains high central banks face hard decisions about whether they should keep hiking interest rates or stop. Meanwhile, the rise of AI creates bubble-like conditions that only make the decision harder.
Althea Spinozzi,
Senior Fixed Income Strategist