Morning Brew July 27 2021
Senior Relationship Manager
Hopes US Inflation may have peaked lets US rates decline, weigh on the USD and boosts shares ahead of the ECB meeting and press conference. 10 Year yields fell by 20 Basis points letting the USD Index fall to below 1 again, EURUSD rose to 1.0913, GBPUSD to 1.3130 and USDJPY fell to 125.40 after rising above 126 yesterday. Gold and Silver rise to 1973 and 25.75. USDCAD fell 100 BPS after the BoC hikes rates by 0.5% yesterday.
US PPI grew by 11.2% as announced yesterday but it seems the market had expected worse, Equities can close friendly with the S&P and the Dow up 1% and the Nasdaq 2%. Overnight, gains can continue by app. 0.3%.
For the ECB the most likely stance is no hike with a probability or 82% and a 0.1% hike with 18%, the main expectation is a firmer roadmap for the end of QE and beginning hikes. Inflation is at 7.54% but eh war in Ukraine has eaten up economic growth – putting the ECB in a tough spot. According to the Taylor Rule, the Central Bank rate is almost 7% too low.
Today there are 3 important data points, the ECB, the Turkish Central Bank Rate and US Retail Sales. We are also heading into the long Easter Weekend and could see some position reduction before, over the Easter Weekend many markets are closed and where trading is open, liquidity can be expected to be worse than usual.
Please find our holiday schedule on this page, just scroll down to the “Holiday Overview”. We will be back in the office on Tuesday.
China's race to stop the spread of COVID-19 is putting strain on global supply chains but it seems markets are more focused on the Chinese effort to stabilize markets.
Germany continues to struggle with the handling of the Ukraine war and is forcing unwelcome decisions on politicians. Several Greens are willing to extend Coal usage for energy and supplying heavy weaponry to Ukraine and the SPD is forced to confront the Russia dependency it allowed Germany to run into.
The Korean and Singaporean central banks tightened monetary conditions.
JP Morgan reported a 42% drop in profits, investment banking driving an overall revenue decline of 5%.
- Thursday: China Northern Rare Earth Group, Fast Retailing, Ericsson, UnitedHealth, Wells Fargo, Morgan Stanley, Goldman Sachs, Citigroup, US Bancorp, PNC Financial Services, Coinbase, State Street
- Friday: Hangzhou Hikvision Digital
- Thursday: Sweden CPI, Turkey Rate decision, EU Rate decision and US retail sales
- Friday: French and Italian CPI , NY Fed and Industrial Production
Latest Market Insights
Q4 Outlook 2022: Winter is coming
- Winter is coming to the financial markets as central banks are tightening their grip. How spring will look is still a question.
European energy crisis: it will get worse before it gets betterThe winter in Europe will be tough, but whether the result is political chaos or sustainable, innovative solutions is still undecided.
A difficult and volatile quarter awaitsAs the year draws to an end, commodities continue to be at centre stage of the world with growth pockets political uncertainty.
The bright side: crises drive innovationThe positive spin on crises is that they come with solutions. It is worrisome that deglobalisation may be a response to this crisis.
Green transformation in China: renewable energy and beyondGoing green, China needs to span numerous energy sources to ensure stability, as every source comes with a challenge.
Asia: Intermittent solutions, but a faster renewable adoption curveAsian energy supply is being squeezed. This and the adoption of renewables may change the investment sentiment in the region.
FX: A Fed thaw needed to deliver a sustained USD turn lowerThe US Dollar can keep momentum when the Federal Reserve continues to tighten, leaving the rest to play to their drum.
Autumn can become ugly for equities and bond holders. Comfort for Dollar longsTechnical analysis suggests that equities could face a tough Q4 as could fixed income. US Dollar positions could provide some upside.
The next stock market sector to watch, with stocks going nuclearAs the world scrambles to find affordable, sustainable energy, nuclear is getting attention from politicians and investors alike.
The crypto space is getting cold when the hype disappearsCryptocurrencies face a winter of their own as retail investors and governments are asking tough questions.