Morning Brew March 17 2022
Senior Relationship Manager
Summary: Markets shrug off hawkish Fed - Despite 7 hikes in 2022, equities soar
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.
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
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.
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.
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.