Morning Brew March 15 2022
Senior Relationship Manager
Summary: Heading towards the FOMC, rate fears rise.
Stocks seem to be driven by a focus on tomorrows FOMC, oil and commodities give up some ground on ceasefire talks in Ukraine and fears that shutdowns in China might halt demand.
WTI fell below USD100 for the first time in March, Gold dropped to 1930 and Silver 24.70. Fears of a 50bps hike by the Fed tomorrow added weight to the precious metals.
In Equities, the Dow remained unchanged and the more rate sensitive S&P and Nasdaq lost 0.7% and 2%. This morning we are little changed in US and European Indexes vs the Futures close.
The Hang Seng remains under severe pressure, giving up 4.4% today, the Index in trading at a discount of 25% to before the Ukraine invasion while the Dax is down 10%.
The 10year yield rose to 2.14 as QE has been halted in the US for the first tine since Ben Bernanke was heading the Federal Reserve.
India may buy crude oil and other commodities from Russia at a discount
The United States warned China against providing military or financial help to Moscow
China released better than expected economic data during the night, Retail sales at 6.7% vs 3% Industrial Output +7.5% vs 3.9% and Fixed Asset Investment 12.2% vs 5%. Markets seem to be focused on the rising Corona Cases rather than the good news.
Barclays announced to suspend sales of two ETNs affected are called iPath Pure Beta Crude Oil ETN and iPath Series B S&P 500 VIX Short-Term Futures ETN .
Althea published a Fixed Income Outlook in a week where rates may be the thing:
Last week ECB's meeting changed the rule of the game: monetary policies will now focus on inflation while fiscal policies will have to take care of growth. That is even more true for the Federal Reserve, which is well behind the curve in tightening monetary policy while inflation expectations continue to soar. That's why the market is positioning for a hawkish FOMC meeting this Wednesday, which might combine a rate hike with an announcement concerning the runoff of the Fed’s balance sheet or an aggressive dot plot. Investors will also look at the BOE and BOJ for signs of hawkishness. In the meantime, interest payments of Russian eurodollar bonds are approaching, and the market is wondering whether the country could default.
Mads Wrote on Cryptos:
Since Bitcoin launched in 2009, Bitcoin and almost every cryptocurrency launched since has been inflationary and external miners received the fees provided for validating the transactions - including freshly minted crypto. By summer, however, Ethereum might turn into the first large deflationary cryptocurrency which furthermore compensates holders with newly minted cryptos instead of miners. This will likely make Ethereum more appealing for holders. https://www.home.saxo/content/articles/cryptocurrencies/ethereum-becoming-more-attractive-for-holders-09032022
Bitcoin is little changes this morning at 38750.
Today we are expecting UK Employment data at 8:00 CET, German ZEW at 11 along with the EU Industrial Production and the US OOI at 13:30.
Latest Market Insights
Outrageous Predictions 2023: The War Economy
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Gold rockets to USD 3,000 as central banks fail on inflation mandateAs markets and central banks realise that the idea that inflation is transitory is wrong, and that prices will remain higher for longer, gold is sent through the roof, hitting a price tag of USD 3,000
EU Army forces EU down path to full unionWith continued challenges in the region and a US military that isn't aggressively enacting its former role as global policeman, the European Union agrees to create its own armed forces, bringing the whole region closer.
A country agrees to ban all meat production by 2030In an effort to become one of the global leaders on the path to net-zero emissions, one country decides to not only put a heavy tax on meat, but to ban domestic production entirely.
UK holds UnBrexit referendumFollowing a recession and domestic pressure, the United Kingdom is thrown into political turmoil that will end with a vote to wind back Brexit.
Widespread price controls are introduced to cap official inflationHistory tells us that with the war economy comes rationing and price controls. And this time is no different, as policymakers introduce strict price controls that lead to a range of unintended consequences.
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USDJPY fixed to the USD at 200 as Japan overhauls financial systemFollowing the challenges that faced the Japanese Yen in 2022, the Bank of Japan attempts to keep the currency from sliding. Unsuccessful on the long-term, Japan will launch a reset of its entire financial system.
Tax haven ban kills private equityWith the war economy comes an increased focus on national interests and sovereign nations' ability to assert themselves. In that regard, the OECD countries turn their attention on tax havens and pull the big guns out, banning them altogether.