Morning Brew March 22 2022
Senior Relationship Manager
Summary: Hawkish Powell and Oil keep Indexes on edge
A hawkish Powell and worries about a further deterioration in Ukraine / Russia caused a small degree risk off sentiment yesterday. Equities fell slightly but all three indexes less than 1%.
Oil rose on an increased likelihood that there may be sanctions on Russian energy. Russia issued a warning that oil prices of 300 were likely should such sanctions be introduced…
Jerome Powell said the FED must move "expeditiously" and maybe even "more aggressively" to combat inflation. The probability of a 50 basis point hike for both he May as well as the June meeting rose to above 50% and (60 in May, up 8% from yesterday Morning)
Powell expects inflation to decrease to "near 2%" until 2024 and that "The economy is very strong and is well-positioned to handle tighter monetary policy. He does not expect a recession this year.
Interestingly, Interest Rate futures already expect a rate cut between December 23 and December 24.
The USD gains against most currencies and the USD Index rises to 98.87, EURUSD is trading at 1.0967, GBPUSD at 1.3122. USDJPY continues to rise, breaching the 120 for the first time since 2016
The UK May Oil Contract rose 20% off the low last week and is trading at 118.60, Gold rises to 1934 abd Silver to 25.30.
S&P500 tested the 200 Daily SMA and resistance at 4,475 but failed initially. A break above 4,490 is needed for further upside, 4400 is the key support.
The Dax failed to break above 14475/14500, the key resistance area, key support is 14080.
Please find more technical insights by Kim Cramer Larsson here: https://www.home.saxo/insights/news-and-research/authors/kim-cramer-larsson
Goldman lowers it`s GDP outlook significantly in the re recent weeks, the estimate is now a full percentage point lower at 3.25%.
Alibaba announces es to increase share buybacks.
After the crash of a Boeing 737-800 in China that killed 132 people BA:xnyse lost 3.6%.
As yesterday, there is little on the economic agenda for today, focus will remain on Ukraine and energy prices in my view, I continue to expect fast markets and would suggest considering optionality when taking speculative positions.
Latest Market Insights
Q4 Outlook 2022: Winter is coming
- Winter is coming to the financial markets as central banks are tightening their grip. How spring will look is still a question.
European energy crisis: it will get worse before it gets betterThe winter in Europe will be tough, but whether the result is political chaos or sustainable, innovative solutions is still undecided.
A difficult and volatile quarter awaitsAs the year draws to an end, commodities continue to be at centre stage of the world with growth pockets political uncertainty.
The bright side: crises drive innovationThe positive spin on crises is that they come with solutions. It is worrisome that deglobalisation may be a response to this crisis.
Green transformation in China: renewable energy and beyondGoing green, China needs to span numerous energy sources to ensure stability, as every source comes with a challenge.
Asia: Intermittent solutions, but a faster renewable adoption curveAsian energy supply is being squeezed. This and the adoption of renewables may change the investment sentiment in the region.
FX: A Fed thaw needed to deliver a sustained USD turn lowerThe US Dollar can keep momentum when the Federal Reserve continues to tighten, leaving the rest to play to their drum.
Autumn can become ugly for equities and bond holders. Comfort for Dollar longsTechnical analysis suggests that equities could face a tough Q4 as could fixed income. US Dollar positions could provide some upside.
The next stock market sector to watch, with stocks going nuclearAs the world scrambles to find affordable, sustainable energy, nuclear is getting attention from politicians and investors alike.
The crypto space is getting cold when the hype disappearsCryptocurrencies face a winter of their own as retail investors and governments are asking tough questions.