Senior Relationship Manager
Summary: ECB Hawkish, HK Shares under pressure, TRY falls, Indexes nervous
Good Morning,
The ECB was surprisingly hawkish, there must have been a good amount of pressure from the Bundesbank to take a tougher stance on inflation. While no action was taken on rates, the reduction of bond purchases has been moved forward. German 10 Year Yields rise to 0.3%.
The US CPI came as expected at 7.9% - a 40 year high. US 10 year yields rise to above 2% and the USD Index to 98.55, EURUSD drops to 1.1020 and GBPUSD to below 1.31 again.- Gold is at 1985 and silver 25.75. Oil fell to 111 in the UK Line.
USDJPY rose to 116.55 a 5 year high.
The Turkish Lira is approaching 15 on worries of the impact of the Ukraine war and rising inflationary pressure.
Equities closed lower overall but the large Indexes all fell less than 1%, the GER40 fell to 13270 but could since regain to 13535.
The United States, together with the Group of Seven nations and the European Union, will move on Friday to revoke Russia's "most favoured nation" status over its invasion of Ukraine, this would allow tariffs to be imposed.
A dispute between the US and China on the auditing of US listed Chinese companies is tensioning causing pressure on Hong Kong stocks, Yum Brands falls 10% as it may be forced to delist in the US if an agreement is not reached.
The economic agenda is thin today with the University of Michigan Consumer Confidence at 16:00 CET the most interesting but we are in a news driven environment and there can be sharp moves at any point in time.
Trade safely.
AI: The good, the bad, and the bubble
While a deep recession may not be iminent thanks to central bank policy, interest rates will have to stay high for longer, and this will be accompanied by volatility risk from the unwinding of bubbles, especially within AI.
Steen Jakobsen,
Chief Investment Officer
The emergence of advanced AI systems is by far the most surprising event this year, turning everything upside down, while risks and benefits are debated. AI will also become an arms race between the US and China.
Peter Garnry,
Head of Equity Strategy
As China navigates global fragmentation, its cycle of technology application, productivity enhancement, and growth is threatened by US breakthroughs in generative AI, limited computing power, and geopolitical tensions.
Redmond Wong,
Market Strategist
Japan’s expertise in semiconductors and robotic integration could be the foundation of AI dominance. Combining two of this year's themes, Japanese equities and artificial intelligence, brings a wave of opportunities.
Charu Chanana,
Market Strategist
The AI fever has turned the technology into a darling, pushing crypto further into no-man’s-land. There are striking similarities between AI and crypto, and if these are to come full circle, AI won't be spared for bubbles.
Mads Eberhardt,
Cryptocurrency Analyst
Stocks related to artificial intelligence (AI) have appeared on investors' radars. Expectations are high, but it may be necessary to consider how to get exposure to AI in a diversified way.
Hans Oudshoorn,
Trainer Academy
The USD is on its back foot as markets celebrate an eventual Fed rate peak and steady long US yields. The stakes are even higher for the Japanese yen if longer major sovereign yield curves have to price in economic acceleration.
John J. Hardy,
Head of FX Strategy
While commodities, broadly speaking, have faced some tough months, a partial reversal during June could signal that the asset class is getting back on its feet with energy holding up and precious metals with upside potential.
Ole S. Hansen,
Head of Commodity Strategy
As inflation remains high central banks face hard decisions about whether they should keep hiking interest rates or stop. Meanwhile, the rise of AI creates bubble-like conditions that only make the decision harder.
Althea Spinozzi,
Senior Fixed Income Strategist