Senior Relationship Manager
Summary: Selloff and Rebound on Rates and Ukraine
Good Morning
Another massive selloff with a rebound at the end into the green for the US Indexes: The Dow Jones gains 0.29%, the S&P 0.28% and the Nasdaq 0.63%. The S&P recovered 4.3 percentage points from low to close. Dax recovered from yesterday’s low of 14829 to currently 15180. Volumes on the US Exchanges was 80% above average. Big Tech closed mixed but overall off the lows.
Our CIO Steen Jacobsen points out:
In 2022 FED is busy reversing the policy mistake of 2021 keeping financial condition to easy: All time high stock markets, house prices, full employment and FED is still doing QE to the tune of 100 bn. a month! Remind me of definition of insanity by Einstein!..Inflation is SO HIGH that risk is higher-for-longer….. consensus is corridor of 200-300 bps inflation. We are at 350-450 bps.. end 2022 into 2023
This means FED will have to do more on “terminal rate (where FED ends hiking cycle) – market is at 3-4 interest hikes from FCI point of view we need 5-6 hikes… ie terminal rate at 250 bps.. not 200 bps.
Nevertheless, there is no rate change expected for tomorrows FOMC announcement, Futures price a hike at 5% probability.
The USD gained strength with the USD Index at 96, US 10 year Yields are at 1.76.
EURUSD is trading at 1.1310 and GBPUSD 1.3480, USDJPY at 113.80. EURCHF fell to below 1.03 yesterday only to recover to 1.0360. Singapore's Central Bank tightened monetary supply in an unscheduled move. USDRUB traded near 79.50 yesterday.Gold and Silver reversed last weeks roles with Silver down at 23.80 and Gold up at 1842. Bitcoin can rise to 36000.
Tensions around Ukraine remain high as NATO sends reinforcements to Eastern Europe and the US puts troops on alert.
Credit Suisse announced app. 500 million in legal provisions, that will eliminate Q4 pre-tax profit. International Business Machines gained more than 6% on strong numbers.
Here some Key levels from our technical analyst Kim Larsen
S&P 500 closed Friday below the 200 SMA fast approaching the support area 4,363-4,300. If Index closes below 4,300 it can fuel a massive sell off since there is not much support before around 3,700.
The future/ US500 CFD is pointing to a much lower opening. -1.00% at the time of writing. The strong support at around 4,262 is likely to be tested this week.On the Weekly time period S&P500 closed well below the longer term rising trend line confirming the bear trend. 4,300 area cou8ld be crucial for the performance for the rest om 1H 2022.
Nasdaq 100 closed a few points below its strong support at 14,481. The Nasdaq future/USNAS100 CFD points to an open 1.50% lower, trading around 14,196 at the time of writing. No support before 13,838
DAX closed Friday below the minor support at 15,724 (15,722 on the GER40 CFD). Both Index and CFD/future is now trading below the 200 SMA.
Bollinger Bands are expanding and RSI is at the time of writing below 40 indicating more selling is likely. Next support is 15,100 and 14,804 (support level at around 15,044 on the GER40 CFD).
For the current bearish picture to be neutralized a close above 15,913 is needed 14,816 is the medium to longer term crucial support. See weekly time period chart. A close below that support there is not strong support before around 13K. Minor support around 14,025
SMI has been in short term down trend for a couple of weeks after break out of Rising Wedge pattern. The Index is close to test strong support at around 12,145-12,071 (12,047 on the SWISS20 CFD). RSI is below 40 confirming the down trend.
A close below that support area is likely to fuel further selling towards October 2021 lows. For SMI to neutralize the down trend a daily close above 12,658 is needed.
AEX Amsterdam is testing strong support at 755. A daily close below will confirm down trend which could result in heavy selling down to next support at around 714.
Friday CAC40 closed below short the support at 7,105 and selling has continued this morning. The leading French Index is still trading above the rising trend line but with Bollinger Bands expanding the trend line is likely to come under pressure. A break below is likely to lead toa test of support at around 6,750. To reverse the bearish scenario a close above 7,211 is needed.
Key Economic Data:
Tuesday: German IFO, Case Shiller, Consumer Confidence
Wednesday: Canada Rate decision, US Rate decision
Thursday: US Durable Goods orders and GDP
Friday: Swiss KOF, EU Business Climate, Personal Income, US PCE, University of Michigan Consumer Confidence.
Companies:
Tuesday: Texas Instruments, Johnson & Johnson, Verizon, American Express, Microsoft., NextEra, Raytheon, General Electric, Lockheed Martin
Wednesday: Christian Dior, Boeing, Anthem, , Tesla, Intel, Abbott Laboratories, AT&T,
Thursday: Diageo, Danaher, Apple, Visa, LVMH, Mastercard, Comcast, McDonald's, SAP SE, Blackstone,
Friday: Charter Communications, Chevron Caterpillar
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.