Senior Relationship Manager
Summary: Markets shrug off hawkish Fed - Despite 7 hikes in 2022, equities soar
Good Morning,
The Fed hikes by 25bps for the first time since 2018 and is expecting six more hikes this year. Equities gain strongly nevertheless. The Dow gains 1.5%, the S&P 500 2.2%, and the Nasdaq 3.8%, Banks gain across the board. The GER40 rises to 14500, the Hongkong 50 adds another 5.4% bitcoin rises to above 40k.
EURUSD rises to 1.1030, GBPUSD to 1.3165 and Gold and Silver to 1932 and 25.15.
US 10 Year Yields rose to as much as 2.24 before receding to 2.16. the USD Index fell to 98.3. The implied Volatility of a 1 month ATM Option fell to below 10% to 8.57%. Markets now price in 50 BPS hike by the ECB by year end.
Driver behind the somewhat counterintuitive move were comments by Jerome Powell in the press conference that the economy was strong enough to withstand rate hikes and that he wasn't concerned by the possibility of a recession"
Almost exactly 4 years after the last larger earthquake in Fukushima, that causes the nuclear power plant to be flooded by the Tsunami, the area is hit by a 7.3 quake again killing people.
Today the Bank of England as well as the Central Bank of Turkey will announce rates, both are expected to hike by 25 basis points.
Progress in the negotiations in Ukraine also serve to calm markets, President Zelenskiy said negotiations were becoming more realistic and the Russian Foreign Minister Sergei Lavrov also sounded somewhat optimistic.
The market looks a little complacent to me.
Todays Data:
11:00 EU HICP Final expected at 5.8% YoY
12:00 Turkish Rate decision
13:00 BoE rate decision
13:30 Philly Fed and US Employment data
14:15 Industrial Production
Expiries
Physically Settled Futures:
CLJ2 will expire 22nd March at 15:00 GMT.
PLJ2 will expire 23rd March at 15:00 GMT.
NGJ2 will expire 28th March at 7:30 GMT.
Expiring CFDs:
OILUSAPR22 will expire 18th March at 15:00 GMT.
PLATINUMAPR22 will expire on 22 March at 15:00 GMT.
NATGASUSAPR22 will expire on 25 March at 15:00 GMT.
GASOLINEUSAPR22 and GOLDAPR22 will expire on 29 March at 15:00 GMT.
Trade Safely`
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