Morning Brew March 2 2022
Senior Relationship Manager
Summary: Ukraine and sanctions drive the market but Inflation is the elephant in the room
The war in Ukraine and the sanctions are the main driver in the market at the moment. Driven by the sanctions, Oil rose to USD 110 per barrel and overall risk off sentiment prevailed.
Indexes closed app 1.5% lower in the US and more in Europe, Gold and Silver jumped higher to 1950 and 25.54, this morning they give up some ground. EURUSD falls to 1.1110 and GBPUSD to 1.33.
The Bund Future rises to 170 again and yields drop accordingly, the German 10 Year is negative again at -0.097. The Swiss Franc appreciates to 1.0210 against the EUR and 91.86 against the USD. Bitcoin can hold at 44k.
Volatility it the 1 month ATM Option hits 10%
Putin has managed to unite the western world in a way that I cannot recall with governments, companies and private individuals joining against Russia and against Ukraine. In his state of the Union address Joe Biden managed to unite US Lawmakers against Russia "While he may make gains on the battlefield – he will pay a continuing high price over the long run," "He has no idea what's coming."
Google is banning certain apps from the play store, Apple discontinuing the sale of iPhone in Russia, Oil companies are pulling out of investments and joint ventures and other companies are also pulling out. Russia announced it was suspending coupons on its Bonds and preventing outflows
Sberbank announces it`s withdrawal from the European Market after outflows.
In the short term, I expect news around the direct developments in Ukraine to drive markets and risk sentiment, soon inflation and stagflation that seems to be developing will make headlines again and will need to be addressed.
On a technical note, the Dax bounced off the minor 13800 support again, key levels remain the 14800 and 13310.
Economic data today are the releases of the German unemployment data, the EU HICP and the BoC rate decision at 16:00 CET.
Stay save and trade safely.
Latest Market Insights
Outrageous Predictions 2023: The War Economy
- The constantly growing global need for energy drives the world's richest to huddle up and launch a R&D project in a size the world hasn't seen since the Manhattan Project gave the US the first atomic bomb.
French President Macron resignsThe political stalemate in France and the rise of Marie Le Pen following the 2022 elections corners President Macron, forcing him to give up on politics and resign from his position. At least for now.
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.
OPEC+ & Chindia walk out of the IMF, agree to trade with new reserve assetSanctions against Russia have caused widespread turmoil due to US Dollar moves in countries across the globe that don't consider the US an ally. To relieve themselves from this, they leave the IMF and create a new reserve asset.
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.