Morning Brew March 3 2022
Senior Relationship Manager
Summary: Dovish Powell supports Equities while Oil rises.
Equities rose off the lows and closed in the green with app 1.5% for the US Indexes
The war in Ukraine continues and Russia entered the town Kherson while government sanctions and corporate boycotts are being stepped up against Russia.
Japanese car manufacturers joined the ranks of companies halting sales to Russia, including Toyota, Honda and Mazda, Mercedes and BMW announced a halt of exports and Maersk as well as MSC stopped deliveries to and from Russia.
Fitch and Moody¨s cut Russia’s rating to Junk and Russian companies are being dropped by Index providers.
Jerome Powell said to raise rates carefully in the tense market conditions making an initial hike by 25 basis points on the 16th of March likely – that is now priced in with a 95% probability. In Europe, no action remains almost certain. Despite yesterdays 5.8% reading of the Harmonized Consumer Inflation Interest Rate Futures imply no change on the 10th of March.
FX is consolidating a little with the USD Index at 67.50, EURUSD remains near 1.11, EURCHF at 1.0210 and USDCHF to 0.92. GBPUSD rises to 1.34 on Inflation fears. Implied vol in the EUR 1 month TM falls to 9%.
Gold and Silver remain high at 1927 and 25.40, Bitcoin is taking a breather and trading at 43500. a rise above 45k is required for any further potential
Oil continues its rise and is is trading at 114 in the CL contract.
We are watching a number of international PMI today with the European at 10:00 and the US at 15:45 the most important, the Swiss CPI at 8:30, the EU PPI at 11 and US Employment Data at 14:30 are also significant.
The key focus will remain on any development in Ukraine though.