Morning Brew December 16 2022
Senior Relationship Manager
Summary: Bad Data is Bad
A combination of hawkish central banks and bad US economic data drove equities lower and boosted the USD. Interestingly the disappointing retail sales and the extremely disappointing NY Fed Manufacturing Index did not spark hopes of faster rate cuts but raised worries on strength of the economy.
All central banks hiked in line with expectations yesterday but the ECB surprised by tightening earlier than previously expected, as inflation remains high.
The Dow lost 2.25%, the S&P 500 down 2.5%, and the Nasdaq 3.23%. on a high volume day. Volume was 20% above the average. Netflix and Nvidia were significant losers at -8.6% and -4%. The German Dax fell 400 points to 14000 a significant support level as the August high.
The USD Index had a volatile day, 103.50 was the low, 104.80the high and we are now at 104.40. EURUSD is trading at 1.0646 after severe swings up to above 1.07 on the hawkish ECB, GBPUSD fell from 1.2434 to below 1.22. Gold and Silver remained weak at 1779 and 22.95.
Today we are expecting the UK retail sales at 8:00 and PMI data from across the world with France at 9:15, Germany at 9:30, the EU at 10:00, the UK at 10:30, Italy 11:00 and the US at 15:45. At 11 we will see the release of the EU HICP expected at 10%.
The Public Company Accounting Oversight Board (PCAOB) said it has full access firms in China for the first time ever, averting a trading ban in the US, the US also authorized a record $858 billion in defense spending.
The quarterly expiry could also be relevant today as the shift in levels has been significant. Sharp moves around the cutoff times are not unlikely as levels could be defended of the defense being given up after the event.
Next week, there is little top tier economic news (US GDP on Thursday and Durable Goods Friday the exception) so I except today to be the last high trading volume day unless we see significant surprises. Many traders and investors are still hoping for year end rally to let their performance look better but after yesterday that seems less likely – it would have to start today or Monday.