Morning Brew March 8 2022
Senior Relationship Manager
Summary: Nervousness prevails
Volatility remains, coupled with risk off and severe deleveraging. Equities recovered initially yesterday but dopped in the late afternoon on no progress in talks between Ukraine and Russia as well as surging energy prices. US Indexes closed lower the Dow -2.37%, S&P -2.95%, Nasdaq -3.62%, the Dax had closed the opening gap yesterday and rose 600 points to 13100 only to fall back to currently 12560.
EURUSD fell to 10850 and GBPUSD to 1.3080, the USD Index settled above 99 for now.
Gold and silver remain in strong demand with Gold at above 2000 USD at 2010 and Silver at above 26 USD
Rising energy prices basically have the same impact as rate hikes in lowering overall inflation as it drains liquidity and curbs demand. This could incur dovish tones at the ECB and Fed meetings Thursday and next week.
Russia is threatening to halt Natgas deliveries to Europe in retaliation to the sanctions.
There is significant danger of exploding vehicle prices on the sanctions against Russia as a large percentage of various metals is being mined in Russia. In the US, the average car is already 18% more expensive than last year due to the chip shortage, now with
Coinbase announced it blocked 25000 Russian wallets.
As the fallout from the sanctions becomes clearer, expect severe nervousness to prevail in either direction and adjust your risk.
Physically Settled Futures:
FBTPH2, FGBLH2, FGBMH2, FGBSH2, FGBXH2, FOATH2 will expire 7th March at 16:00 GMT.
CH2 will expire 8th March at 10:00 GMT.
GASOILUKMAR22 will expire 8th March at 16:00 GMT.
Latest Market Insights
Outrageous Predictions 2023: The War Economy
- The constantly growing global need for energy drives the world's richest to huddle up and launch a R&D project in a size the world hasn't seen since the Manhattan Project gave the US the first atomic bomb.
French President Macron resignsThe political stalemate in France and the rise of Marie Le Pen following the 2022 elections corners President Macron, forcing him to give up on politics and resign from his position. At least for now.
Gold rockets to USD 3,000 as central banks fail on inflation mandateAs markets and central banks realise that the idea that inflation is transitory is wrong, and that prices will remain higher for longer, gold is sent through the roof, hitting a price tag of USD 3,000
EU Army forces EU down path to full unionWith continued challenges in the region and a US military that isn't aggressively enacting its former role as global policeman, the European Union agrees to create its own armed forces, bringing the whole region closer.
A country agrees to ban all meat production by 2030In an effort to become one of the global leaders on the path to net-zero emissions, one country decides to not only put a heavy tax on meat, but to ban domestic production entirely.
UK holds UnBrexit referendumFollowing a recession and domestic pressure, the United Kingdom is thrown into political turmoil that will end with a vote to wind back Brexit.
Widespread price controls are introduced to cap official inflationHistory tells us that with the war economy comes rationing and price controls. And this time is no different, as policymakers introduce strict price controls that lead to a range of unintended consequences.
OPEC+ & Chindia walk out of the IMF, agree to trade with new reserve assetSanctions against Russia have caused widespread turmoil due to US Dollar moves in countries across the globe that don't consider the US an ally. To relieve themselves from this, they leave the IMF and create a new reserve asset.
USDJPY fixed to the USD at 200 as Japan overhauls financial systemFollowing the challenges that faced the Japanese Yen in 2022, the Bank of Japan attempts to keep the currency from sliding. Unsuccessful on the long-term, Japan will launch a reset of its entire financial system.
Tax haven ban kills private equityWith the war economy comes an increased focus on national interests and sovereign nations' ability to assert themselves. In that regard, the OECD countries turn their attention on tax havens and pull the big guns out, banning them altogether.