Morning Brew September 22 2021
Senior Relationship Manager
Summary: Evergrande calms markets ahead of the FOMC
China Evergrande Group stated it would manage to meet a coupon payment on its domestic bonds on tomorrow, calming international markets ahead of the FOMC rate decision later today.
There is no rate change expected with a probability of 99.8%, the real question is the outlook or announcement of any reduction in asset purchases.
Since the last FED meeting, data has been mixed with rising inflation, disappointing employment data and a slowing growth in services sector and high corona numbers, and it is not clear which will win out. The overall framework seems to be a winding down of the asset purchases in the first half of next year.
Yesterday, US Indexes closed basically unchanged and over night could recover further on the positive news on Evergrande. The US39 trades above 34k, the US500 at 4366, Germany 40 at 15400 and the US tech 100 at 15070. The USD Index is at 93.27 and the 10 year yield at 1.33.
Gold could recover to 1780 and silver to 22.80, EURUSD 1.1720 and GBPUSD 1.3650. GBPUSD will be worth watching with both central banks meeting in the next two days, Implied 1 week vol is at 6.3 while EURUSD is at 5.5.
U.S. President Joe Biden promised a USA back in international diplomacy and promised an era of vigorous competition without a new Cold War. He announced military restraint and a robust fight against climate change an helping to resolve crises from Iran to the Korean Peninsula to Ethiopia.
The EU has delayed trade talks with the US after France had lost the contract for the Australian Submarine contracts.
Our Crypto expert Mads Eberhard wrote a very interesting article on the relation between Bitcoin-Ethereum:
For several years it has been an ongoing discussion whether Ethereum will overtake Bitcoin in terms of market capitalization. The discussion has recently been amplified as users are settling more value and paying more fees on Ethereum than Bitcoin. On the other hand, the intense competition and technological challenges for Ethereum speak against a flipping.
The only significant data release besides the US Rate decision is the EU consumer confidence and that will have to be a real surprise to gain any real interest. I basically expect a calm – if not boring - day until 20:00 CET.
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.