Senior Relationship Manager
Summary: Risk off and strong USD dominate
Good Morning,
Tomorrow I will not be in the office and not updating the report.
The USD continues to gain, up a full point from yesterday looking at the USD Index – now near the 20 year high.
EURUSD is testing parity at 1.0015. GBPUSD broke below the 1.19 and hit a 2year low. USDJPY is trading at 137.45, Bitcoin falls below 20k again. Gold and Silver fall to 1729 and 18.90 Gold fell to a fresh nine-month low.
Indexes closed lower yesterday and continue the slide, the Dow ended down 0.52%, the S&P 1.15%, and the Nasdaq 2.26%, at the moment, they loose another 0.8%. That is also the case for the European Indexes. Twitter lost 11% and Tesla 6.5% . Volumes in Equities were about 25% below the average.
Today there is little on the economic agenda, only the German ZEW at 11 is of real interest.
The German IG Metall is demanding wages to rise by 8% given the high inflation while German Economy is struggling with the weak Euro and high inflation.
For next weeks ECB rate decision the sentiment has shifted to expect a hike of 0.3% with a probability of 85%, nevertheless EUR remains weak.
Crude Oil is down 2% on growth worries.
Watch for political news and comments to move markets today rather than economic data so sharp moves could come at any point in time.
Tomorrow the US CPI Will be the key event at 14:30, besides that, the UK GDP and the German CPI at 8:00 as well as the EU industrial production will be watched closely.
Trade cautiously!
Bond. Long Bond(s)
With real rates being too positive, we see three scenarios: Opportunity to lock in rates at cycle high, government overreach to keep the economy afloat or a complete reset of the economy.
Steen Jakobsen,
Chief Investment Officer
Is a bond bull market ahead? Inflation still poses a risk for investors, but the moment for increasing duration to your portfolio may be approaching towards the end of the year, when central banks might be forced to cut interest rates.
Althea Spinozzi,
Senior Fixed Income Strategist
The furious rate hike cycle has brought gains in the US dollar, but with stagflation risks in Europe and the UK and weakness in the Chinese economy, USD may have more room to run. But a strong dollar could also have repercussions for US growth, emerging markets and commodity prices.
Charu Chanana,
Market Strategist
With the cost of capital rising painfully, stagflation fears are back, illuminating the fragile state of the green transformation, while giving a tailwind to nuclear power, and threatening the growth of AI-related stocks.
Peter Garnry,
Head of Equity Strategy
With supply tightness not only in energy but all commodities, the momentum in commodity prices may continue, pressuring central banks to lower real rates. That could be a good setup for precious metals, including gold, silver and potentially platinum as well.
Ole S. Hansen,
Head of Commodity Strategy
As the pandemic showed, even the US Treasury can experience seismic shifts. With the government increasing the pace of issuing bonds to support fiscal spending, the complex Treasury market and regulatory constraints could spark a liquidity event.
Redmond Wong,
Market Strategist
The tide has turned for bonds. Given the current yields, bonds have become an attractive investment, with added benefits including lower risk than stocks, increased diversification and a steady stream of income unaffected by economic changes.
Peter Siks,
Investment Coach