Senior Relationship Manager
Summary: Earnings & FOMC Looming
Good Morning,
Back after a week in beautiful Italy and markets are still in a quagmire.
The USD remains strong but off the highs mid July with the USD Index now at 106,40 after a high of 109.30 on July 14th, EURUSD is at 1.0220 and GBPUSD at 1.2060.
Equities tried to break out to the upside but had trouble holding the levels. Yesterday was a slow day with volumes almost 20% below the average on a monthly basis. All three US Indexes moved less than half a percent and the S&P500 closed at 3966, the Nasdaq at 11782 and the Dow Jones at 31990. The German Dax is trading at 13192
Gold and Silver remain above key supports at 18.50 and 1722
The US 10 year yield is trading at 2.80 and the yield curve remains inverted with the 2 year trading higher than the 10 year by 22 basis points. The Bund Future rose to 154.80.
WTI gained 1.4% to trade at 98 USD per barrel. This week is driven by 3 things:
EU Energy ministers are meeting today and expected to announce some sort of deal to save gas while Russia announced to cut supply to several countries, supply to Germany is expected to fall by 50%.
This week 170 of the S&P 500 companies report earnings in addition to many international ones, crucial yesterday was a very poor guidance by Walmart which announced higher inflation caused customers to spend more on essentials where margins were smaller. Shares fell as much as 10% in the aftermarket.
UBS posted on Tuesday a smaller-than-expected rise in net profit for the second quarter on lower than expected IB earnings,
Logitech profit falls almost 40% on less home office demand, Unilever raised it`s guidance.
The Rate decision tomorrow and the guidance will be the key economic event of the week, currently a 75 bps hike is priced in with 85% and 1% with 15% probability. The decision itself will be closely watched but also any hint on the future direction. Where does the Fed expect rates to peak? Do they see a recession with the potential for rate cuts looming? The market is looking for these clues to break the current indecision.
Today only the US Consumer confidence at 16:00 should be of real importance and tomorrow the durable goods orders.
On Thursday, German CPI and US GDP and Friday US earning data will be significant.
Key earnings:
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.