Senior Relationship Manager
Summary: "Dovish Fed" stabilizes markets
Good Morning,
Next Week I will be off and will be back the 25th with the next Morning Brew on the 26th – Safe trading over the ECB decision and earnings!
High inflation and disappointing numbers and outlooks from JP Morgan and Morgan Stanley spooked the market yesterday, driving the EURUSD below parity and causing a sharp selloff in equities. “Dovish” statements out of the Fed soothed fears of a 1% hike in 2 weeks, letting US Indexes recover. S&P 500 and the Dow closed in the red with 0.3% and 0.5% while the Nasdaq turned green (0.01%)
The earning expectation has declined to an earnings growth of just above 5% from 6.8% 2 weeks ago.
There was quite a shift, this morning the expectation is no longer 70% in favor of a 1% hike but 65% for 75 bps and only 35% for 1% based on rate futures.
This morning, Indexes are trading friendly with the Dax up 0.8% from yesterdays 17:30 close, US Futures are up 0.2%.
EURUSD is at 1.0020, GBPUSD at 1.1825 and USDJPY 139 Bitcoin remains above 20k and Gold and Silver are at 1708 and 18.30.
China's economy contracted sharply in the second quarter but retail sales exceeded expectations.
US PPI was releases at 11.3% vs. 10.7% expected.
Mario Draghi resigned yesterday after he lost support of the 5 star movement but was asked to stay on so Italian politics will remain interesting.
Today US retail Sales will be key at 14:30 followed by production data 15:15 and the University of Michigan at 16:00, also earnings by Citi, Charles Schwab, Wells Fargo and Blackrock
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.