Senior Relationship Manager
Summary: Yields - Risk off
Good Morning
Yields remain in focus – causing the classic risk off move with the USD strong, Stocks lower and Vix higher.
The Dow lost 1.19%, the S&P 500 1.4% the Nasdaq 1.48% and the GER 40 broke to below 15300. The Vix rose to almost 19% and volumes were decently high at 10.2 billion shares. The USD Index surged to 106.28 with EURUSD at 1.0560, USDJPY above 149 and Cable at 1.2150. USDCHF is at 0.9170, Gold is at 1898 and Silver 22.78. Gold and Silver are currently driven by the strong USD and less by fear.
The Equity Risk Premium, calculated as the dividend yield of the S&P 500 minus the 10 year bond yield is at the lowest level since the end of the global financial crisis.
Amazon came under additional pressure as the FTC sues the company.
In other headlines, US President Biden told the UAW to fight for a 40% pay raise, Donald Trump is found liable for Fraud in a NY court.
Today, the German GFK Consumer Confidence could be of interest, the US Durable Goods orders definitely will.
Main driver will be yields and the question at which point the USD is at least temporarily overbought and stocks oversold. At least EURUSD has the RSI in oversold territory, many of the Indexes are near.
Upcoming Events:
Wednesday
- Data US Durable Goods,
Thursday
- Data Australia Retail Sales, EU Consumer Confidence, DE CPI, US GDP, Initial Jobless Claims,
Friday
- Data Japan CPI, UK GDP, Swiss KOF; DE unemployment, EU HICP, US PCE, University of Michigan
Expiries
Physically Settled Futures
Expiring CFDs
Erik
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