Morning Brew January 14 2022
Senior Relationship Manager
Summary: Equities AND the Dollar weak Watch Ukraine situation
After Lael Brainard hinted at a rate hike in March yesterday, markets showed some signs of nervousness and an interesting divergence between FX and Equities. Indexes lost overall with the Dow strongest at -0.5% the S&P at -1.4% and the Nasdaq at -2.5%. The Dax fell below the 16000 again.
Big Tech fell strongly with Apple, Meta and Alphabet down app 2%, Tesla -6% and Nvidia -5%.
The USD Index remained under pressure and is nearing the support line at 94.50, currently at 94.65. EURUSD 1.1470 and GBPUSD 1.3730. The Turkish Lira has come under increasing stress due to increased political uncertainty and rising rates of inflation experienced in the domestic economy. This has resulted in large swings in TRY exchange rates relative to other currencies and elevated volatility in the market which poses a risk to clients.
We plan to reduce exposure limits to 200K USD on all TRY FX pairs and increase margin requirements which would require clients to hold more collateral on their accounts and prevent them from opening new exposure above 200K USD on January 21.
Going into the earning season S&P 500 companies were expected to be lower in the fourth quarter compared with the first three quarters but still strong at 22.4%, according to IBES data from Refinitiv.
Technical comment on the Dax by Kim: DAX closed below the support at around 15,834 and below the 55 SMA Monday but rebounded strongly the following day i.e. a false break. Same occurred on the RSI breaking the rising trend line. The rebound has taken RSI back above meaning the uptrend is intact.
With no divergence on RSI a new high is not unlikely.
Support level at Monday’s low at around 15,724 is a bit congested with the 55 and 200 SMA’s quite close to each other and both slightly rising which is good news for bulls
The 30 Year Bond future rose to 206.2, the 10 year at 170.65
Ukraine is reporting a cyberattack on government agencies while the Russian military buildup seems ongoing.
Economic Events today: 08:00: United Kingdom GDP Services Trade Balance at 8:45 the France CPI, at The Swedish CPI at 09:30 10 the German GDP, 10:30 The UK labor productivity, at 14:30 US retail sales, at 15:15 Industrial Production and Capacity Utilization and at 16:00 the University of Michigan sentiment.
All in all, none of these would normally move the markets too much but any strong surprise could cause a spike as the market seems rather uncertain of where to go.
JPMorgan Chase will kick off the reporting period today in earnest along with Citigroup and Wells Fargo
Physically Settled Futures:
CLG2 will expire 20th January 2022 at 16:00 GMT.
ECOG2 will expire 23th January 2022 at 10:00 GMT.
NGG2G2 will expire 27th January 2022 at 10:00 GMT.
GCG2, MGCG2 will expire 28th January 2022 at 16:00 GMT.
OILUSFEB22 will expire 18th January 2022 at 16:00 GMT.
NATGASUSFEB22 will expire 25th January 2022 at 16:00 GMT.
INDIA50JAN22 & TAIWAN95JAN22 will expire 27th January 2022 at 02:00 GMT.
GASOLINEUSFEB22, GOLDFEB22 & HEATINGOILFEB22 will expire 27th January 2022 at 16:00 GMT.
CHINA50JAN22, HK50JAN22 & SINGAPOREJAN22 will expire 28th January 2022 at 02:00 GMT.