Senior Relationship Manager
Summary: Vols at low since before Corona ahead of the FOMC
Good Morning,
US Equities trades friendly yesterday with main Indexes gaining near 1% driven by a decline in import prices hinted that inflation may indeed prove to be transitory.
In the Asian session we saw a little risk aversion after Japan released poor export data and trading in Evergrade bonds was suspended but moves were fairly small.
Treasury yields trade at 1.3% and the USD Index remains at 92.55, EURUSD at 1.1806, XAUUSD at 1786 and XAGUSD at 23.60. holdings of SPDR Gold Trust fell 0.2% yesterday, the 1770 support is in focus for the FOMC meeting next week. If support is broken, it is likely silver will test the USD 22.50.
Canada's YoY inflation rate accelerates to 4.1% in August, the Loony rises by 0.4% against the USD.
Implied volatility is at the lowest levels since before the Corona crisis hit, 1 month EURUSD is at 4.6% and it seems quite cheap now.
Bitcoin is trading at 48300.
On shoes hit NYSE at 35 and also closed there after rising to 38 briefly.
Today, US Data at 14:30 will be released, the initial Jobless claims expected at 330k and Retail Sales expected at -0.8% will be key and the last significant release ahead of the FOMC meeting. Then the question will be the timing of tapering and the interest rate outlook (if any) provided.
Please remember the expiries tomorrow.
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