Senior Relationship Manager
Summary: That did not age well
Good Morning,
Despite the Feds strong indication that a June hike of 75BPS was off the table, the market feels differently. The probability of a hike by 75 BPS is priced in at 79% after the high increase of labor costs.
This sparked a huge waive of risk aversion. Indexes fall massively, with the Dow -3.12%, S&P -3.56%, and the Nasdaq -4.99%. Big tech lost heavily and the Nasdaq lost the most since June 2020, the 10 day realized Vol in the S%P500 is at the highest since early 2020 near 40%.
The MSCI Asia gave up 2.5%.
GBP Lost heavily to 1.2360 and EURUSD to 1.0526, the USD Index is at the highest level since 2003 at 103.62.
Gold and Silver gave up the FOMC gains and are currently trading at 22.50 and 1875 and Bitcoin confirms it is not traded as a save haven but a risky asset, giving up 10%.
US 10 years yields rose to 3.1% high and now gave up 0.05%.
The SEC names over 80 firms to a list of entities facing possible delisting from American exchanges
Oil rises on fears of a European Embargo against Russia and reports that US intelligence agencies are supporting Ukraine in identifying high value targets may fuel further aggression.
Today, US Labor data including the non-farm payrolls and the average earnings at 14:30 will be the key event, at 15:15, 17:00 and 21.20 Fed-speakers will be speaking at different events and will be in focus for hints on the stance of the Fed.
Remain cautious and expect sharp moves at any time.
Expiries
Physically Settled Futures:
CK2 will expire on 6th May at 09:00 GMT.
FPK2 will expire on 11th May at 15:00 GMT.
Expiring CFDs:
GASOILUKMAY22 will expire on 10th May at 15:00 GMT.
OILUSJUN22 will expire on 18th May at 15:00 GMT.
Bond. Long Bond(s)
With real rates being too positive, we see three scenarios: Opportunity to lock in rates at cycle high, government overreach to keep the economy afloat or a complete reset of the economy.
Steen Jakobsen,
Chief Investment Officer
Is a bond bull market ahead? Inflation still poses a risk for investors, but the moment for increasing duration to your portfolio may be approaching towards the end of the year, when central banks might be forced to cut interest rates.
Althea Spinozzi,
Senior Fixed Income Strategist
The furious rate hike cycle has brought gains in the US dollar, but with stagflation risks in Europe and the UK and weakness in the Chinese economy, USD may have more room to run. But a strong dollar could also have repercussions for US growth, emerging markets and commodity prices.
Charu Chanana,
Market Strategist
With the cost of capital rising painfully, stagflation fears are back, illuminating the fragile state of the green transformation, while giving a tailwind to nuclear power, and threatening the growth of AI-related stocks.
Peter Garnry,
Head of Equity Strategy
With supply tightness not only in energy but all commodities, the momentum in commodity prices may continue, pressuring central banks to lower real rates. That could be a good setup for precious metals, including gold, silver and potentially platinum as well.
Ole S. Hansen,
Head of Commodity Strategy
As the pandemic showed, even the US Treasury can experience seismic shifts. With the government increasing the pace of issuing bonds to support fiscal spending, the complex Treasury market and regulatory constraints could spark a liquidity event.
Redmond Wong,
Market Strategist
The tide has turned for bonds. Given the current yields, bonds have become an attractive investment, with added benefits including lower risk than stocks, increased diversification and a steady stream of income unaffected by economic changes.
Peter Siks,
Investment Coach