Senior Relationship Manager
Summary: Markets shrug off hawkish Fed - Despite 7 hikes in 2022, equities soar
Good Morning,
The Fed hikes by 25bps for the first time since 2018 and is expecting six more hikes this year. Equities gain strongly nevertheless. The Dow gains 1.5%, the S&P 500 2.2%, and the Nasdaq 3.8%, Banks gain across the board. The GER40 rises to 14500, the Hongkong 50 adds another 5.4% bitcoin rises to above 40k.
EURUSD rises to 1.1030, GBPUSD to 1.3165 and Gold and Silver to 1932 and 25.15.
US 10 Year Yields rose to as much as 2.24 before receding to 2.16. the USD Index fell to 98.3. The implied Volatility of a 1 month ATM Option fell to below 10% to 8.57%. Markets now price in 50 BPS hike by the ECB by year end.
Driver behind the somewhat counterintuitive move were comments by Jerome Powell in the press conference that the economy was strong enough to withstand rate hikes and that he wasn't concerned by the possibility of a recession"
Almost exactly 4 years after the last larger earthquake in Fukushima, that causes the nuclear power plant to be flooded by the Tsunami, the area is hit by a 7.3 quake again killing people.
Today the Bank of England as well as the Central Bank of Turkey will announce rates, both are expected to hike by 25 basis points.
Progress in the negotiations in Ukraine also serve to calm markets, President Zelenskiy said negotiations were becoming more realistic and the Russian Foreign Minister Sergei Lavrov also sounded somewhat optimistic.
The market looks a little complacent to me.
Todays Data:
11:00 EU HICP Final expected at 5.8% YoY
12:00 Turkish Rate decision
13:00 BoE rate decision
13:30 Philly Fed and US Employment data
14:15 Industrial Production
Expiries
Physically Settled Futures:
CLJ2 will expire 22nd March at 15:00 GMT.
PLJ2 will expire 23rd March at 15:00 GMT.
NGJ2 will expire 28th March at 7:30 GMT.
Expiring CFDs:
OILUSAPR22 will expire 18th March at 15:00 GMT.
PLATINUMAPR22 will expire on 22 March at 15:00 GMT.
NATGASUSAPR22 will expire on 25 March at 15:00 GMT.
GASOLINEUSAPR22 and GOLDAPR22 will expire on 29 March at 15:00 GMT.
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2024: The wasted year
Markets are driven by election optimism, overshadowing growing debt and liquidity concerns. The 2024 elections loom large, but economic fundamentals and debt issues warrant cautious investment.
As US economic slowdown hints at a shift away from exceptionalism, USD faces downside with looming Fed cuts. AUD and NZD set to outperform as their rate cuts lag. JPY gains on carry unwind bets and BOJ pivot.
Amid AI and obesity drug excitement, equities see varied prospects: neutral on overvalued US stocks, negative on Japan due to JPY risks, positive on Europe. European defence stocks gain appeal.
With the economic slowdown, quality assets will gain favour, especially sovereign bonds up to 5 years. Central banks' potential rate cuts in Q2 suggest extending duration, despite policy and inflation concerns.
Commodities poised for rebound. The "Year of the Metal" boosts gold and silver, copper awaits rate cuts. Grains may recover, natural gas stabilises. Gold targets $2,300-$2,500/oz, copper's breakout could signal growth.
Markets are driven by election optimism, overshadowing growing debt and liquidity concerns. The 2024 elections loom large, but economic fundamentals and debt issues warrant cautious investment.
As US economic slowdown hints at a shift away from exceptionalism, USD faces downside with looming Fed cuts. AUD and NZD set to outperform as their rate cuts lag. JPY gains on carry unwind bets and BOJ pivot.
Amid AI and obesity drug excitement, equities see varied prospects: neutral on overvalued US stocks, negative on Japan due to JPY risks, positive on Europe. European defence stocks gain appeal.
With the economic slowdown, quality assets will gain favour, especially sovereign bonds up to 5 years. Central banks' potential rate cuts in Q2 suggest extending duration, despite policy and inflation concerns.
Commodities poised for rebound. The "Year of the Metal" boosts gold and silver, copper awaits rate cuts. Grains may recover, natural gas stabilises. Gold targets $2,300-$2,500/oz, copper's breakout could signal growth.