Senior Relationship Manager
Summary: Hawkish Powell and Oil keep Indexes on edge
Good Morning,
A hawkish Powell and worries about a further deterioration in Ukraine / Russia caused a small degree risk off sentiment yesterday. Equities fell slightly but all three indexes less than 1%.
Oil rose on an increased likelihood that there may be sanctions on Russian energy. Russia issued a warning that oil prices of 300 were likely should such sanctions be introduced…
Jerome Powell said the FED must move "expeditiously" and maybe even "more aggressively" to combat inflation. The probability of a 50 basis point hike for both he May as well as the June meeting rose to above 50% and (60 in May, up 8% from yesterday Morning)
Powell expects inflation to decrease to "near 2%" until 2024 and that "The economy is very strong and is well-positioned to handle tighter monetary policy. He does not expect a recession this year.
Interestingly, Interest Rate futures already expect a rate cut between December 23 and December 24.
The USD gains against most currencies and the USD Index rises to 98.87, EURUSD is trading at 1.0967, GBPUSD at 1.3122. USDJPY continues to rise, breaching the 120 for the first time since 2016
The UK May Oil Contract rose 20% off the low last week and is trading at 118.60, Gold rises to 1934 abd Silver to 25.30.
S&P500 tested the 200 Daily SMA and resistance at 4,475 but failed initially. A break above 4,490 is needed for further upside, 4400 is the key support.
The Dax failed to break above 14475/14500, the key resistance area, key support is 14080.
Please find more technical insights by Kim Cramer Larsson here: https://www.home.saxo/insights/news-and-research/authors/kim-cramer-larsson
Goldman lowers it`s GDP outlook significantly in the re recent weeks, the estimate is now a full percentage point lower at 3.25%.
Alibaba announces es to increase share buybacks.
After the crash of a Boeing 737-800 in China that killed 132 people BA:xnyse lost 3.6%.
As yesterday, there is little on the economic agenda for today, focus will remain on Ukraine and energy prices in my view, I continue to expect fast markets and would suggest considering optionality when taking speculative positions.
Trade safely.
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