Morning Brew July 27 2021
Senior Relationship Manager
Summary: Calming down or the Quiet before the storm?
Markets traded very nervously yesterday and volatility spiked across the board – from equities to FX and risk was sold off. Into the US Close we saw buyers come in and overnight, Index futures can recover. This could imply that the sell off is widely interpreted as an opportunity to buy the dip rather than as a longer term sell off.
Near term the main three causes for nervousness are
- Evergran4293 in the future before de with two coupon payments due Thursday. If they are not payed within 30 days, the company would be in default on USD 300 bio of debt. The Chairman and largest shareholder issued an optimistic statement while the Chinese Government was rather quiet, it seems doubtful that after the recent policy moves to put pressure on prominent entrepreneurs, that there will be an effort unless the economy really needs it desperately.
- The FOMC rate decision tomorrow where traders are hoping for a delay in tapering and the continuance of the status quo and any clear announcement of near term tapering would be the surprise.
- The US debt ceiling where an agreement needs to be reached before month end to increase the debt ceiling and the stances between democrats and republicans seem to be fairly apart.
US indexes closed sharply lower , the Dow lost 1.8%, the S&P 500 1.7%, and the Nasdaq 2.2% the lows had been app a full % lower. The S&P fell to 4293 before rising to a close of 4348. The USD Climbed to 93.48 before receding to 93.17, EURUSD tested the 1.1700 now 1.1732 cable traded as low as 1.3640 now 1.3670. Interestingly Gold and Silver were quite stable – it seems they had preempted the move on Friday. Gold is trading at 1762 and seems to have found decent buyers in the 1750-60 area.
Bitcoin fell to 40k before rising to the important 43000 level.
Lufthansa is looking to raise €2 bio to rid itself of most sstate ownership.-
The United States will reopen to air travelers from 33 countries including China, India, Brazil and most of Europe in November .
Trade safely and watch for nervousness.
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.