Senior Relationship Manager
Summary: Very Nervous Market on Middle East, Inflation and Risk willingness
Good morning,
The attack by Iran against Israel, the interpretation and the consequences will be key at the start of the week.
For now the situation seems to normalize somewhat, schools in Israel have reopened and global efforts to calm the situation are underway. Here is the G7 statement on the attack
Into the weekend, equities lost massive ground on geopolitical worries, inflation worries and profit taking The Dow lost 1.25%, the S&P 1.5% and the Nasdaq 1.6%. For the week, the Dow lost 2.4% the S&P 500 1.55% and the Nasdaq 0.45%. Banks mostly lost after earnings, JP Morgan lost 6.5%, Citi 1.7% and Wells Fargo 0.35%.
This morning, we are seeing a slight recovery or stabilization, the US 500 is 5140, the US 30 38085 the US Tech 1000 NAS 18080. The GER40 17925.
Defense stocks (see Saxo’s defence theme basket) will very likely be in focus, especially European names and those that are market leaders in air defense systems such as Elbit (collaborator on Israel’s Iron Dome system in the view of our strats.
On Friday Precious Metals were the most interesting in my view, both rising dramatically, and then selling off massively into the European close in huge volumes. Silver rose 3% to almost 30 before selling off to end the day 2% lower – this reminds of the selloff early December of last year and shows the importance of risk management at all times. While many call for lower levels after Friday, Goldman Sachs raised it`s gold forecast for the yearend to 2700. Gold is trading 256 and Silver 28.22.
Bitcoin it is trading at 65k or 10% below last week, ETH lost 15%. US Yields remain high, the 10 year is 4.55%. The USD Index is near 106. EURUSD, 1.0650 after testing 1.0620 Friday, GBPUSD 1.2460 USDJPY 153.80.
The two key topics this week will be the Middle east and any hint on Inflation, there is a good amount of fundamental data this week and some important earnings as well as many speakers.
Listening to Fed speakers and economists, one hears everything from 2-3 cuts this year but also voices that the next step the Fed takes may be a hike.
In the middle east, there are hopes that the attack was sufficient for Iran to have proven they have taken action while the impact was so little, Israel can basically shrug it off. That is the best possible scenario. If there are any indications things may escalate, expect sharp risk off moves.
The Volatility we saw on Friday and are the reason I always point out to trade safely and ensure proper risk management.
Monday
- Data US Retail Sales, Daly and Logan speak,
- Earnings:Goldman Sachs, Charles Schwab
Tuesday
- Data China Retail Sales, UK Labormarket, EU Trade Balance, DE ZEW, Canada CPI; US Industrial Production, BoE Baily, US Powell, Willianms & Barkin speak
- Earnings: Johnson&Johnson, Bank of NY Mellon, Bank of America, Morgan Stanley, Interactive Brokers.
Wednesday
- Data Japan Trade, UK CPI, EU Inflation, EU-US Forum with many speakers.
- Earnings: ASML Volvo. CSX Kinder Morgan, Abott Laboratories, US Bancorp, Travelers
Thursday
- Data AU Labormarket, US Initial Jobless Claims, Philly Fed, Bostic, Lindner & Nagel speak
- Earnings: Nordea, ABB, Investor AB. Elevance Health, Netflix, Blackstone.,
Friday
- Data Japan CPI, UK Retail Sales, Golsbee & Joachim Nagel speak
- Earnings: American Express, Schlumberger, Procter & Gamble
2024: The wasted year
Markets are driven by election optimism, overshadowing growing debt and liquidity concerns. The 2024 elections loom large, but economic fundamentals and debt issues warrant cautious investment.
As US economic slowdown hints at a shift away from exceptionalism, USD faces downside with looming Fed cuts. AUD and NZD set to outperform as their rate cuts lag. JPY gains on carry unwind bets and BOJ pivot.
Amid AI and obesity drug excitement, equities see varied prospects: neutral on overvalued US stocks, negative on Japan due to JPY risks, positive on Europe. European defence stocks gain appeal.
With the economic slowdown, quality assets will gain favour, especially sovereign bonds up to 5 years. Central banks' potential rate cuts in Q2 suggest extending duration, despite policy and inflation concerns.
Commodities poised for rebound. The "Year of the Metal" boosts gold and silver, copper awaits rate cuts. Grains may recover, natural gas stabilises. Gold targets $2,300-$2,500/oz, copper's breakout could signal growth.
Markets are driven by election optimism, overshadowing growing debt and liquidity concerns. The 2024 elections loom large, but economic fundamentals and debt issues warrant cautious investment.
As US economic slowdown hints at a shift away from exceptionalism, USD faces downside with looming Fed cuts. AUD and NZD set to outperform as their rate cuts lag. JPY gains on carry unwind bets and BOJ pivot.
Amid AI and obesity drug excitement, equities see varied prospects: neutral on overvalued US stocks, negative on Japan due to JPY risks, positive on Europe. European defence stocks gain appeal.
With the economic slowdown, quality assets will gain favour, especially sovereign bonds up to 5 years. Central banks' potential rate cuts in Q2 suggest extending duration, despite policy and inflation concerns.
Commodities poised for rebound. The "Year of the Metal" boosts gold and silver, copper awaits rate cuts. Grains may recover, natural gas stabilises. Gold targets $2,300-$2,500/oz, copper's breakout could signal growth.