Morning Brew July 27 2021
Senior Relationship Manager
Summary: Market Overly complacent
Equities continue to grind higher despite hawkish tones from various fed speakers, James Bullard believes the Fed needs to be more aggressive, Mester sees rates at 2.5% by year end, Mary Daly also sees higher rates as necessary. The Dow gained 0.7%, the S&P 500 1.1%, and the Nasdaq closed up 2%
President Zelenskiy is cautiously optimistic on negotiations: "It's very difficult, sometimes confrontational," he said. "But step by step we are moving forward." (Reuters) and further sanctions on Russia and Russian individuals are expected in the week when Joe Biden visits Europe.
The Vix Index is declining and the cost for put options has fallen significantly. The cost of an option that insures a 10% or more drop in the S&P 500 is 30% cheaper than just one week ago so it might be a good opportunity to stock up on protection. A 4050 put until June is trading at 65 per Index. According to Reuters the need for protection has declined as large investors have moved to the sidelines.
The Market seems overly complacent at the moment.
The GER40 is trading just above the resistance mentioned yesterday at 14515.
US 10 Year rose as bonds sold off and hit 2.4% up from 2.20 yesterday, the German rose to 0.5%.
FX in unimpressed and trading calmly, the USD index at 98.50, EURUSD back above 1.10 at 1.1025 and GBPUSD 1.3260. Gold and Silver recede to 1918 and 24.80 USDJPY is 121.
Oil prices turned higher again after U.S. crude stocks fell last week, underlining how tight global supplies amid sanctions.
ZTE Corp completed five years of probation in the United States and shares soar as much as 60% in Hong Kong
The First Tesla was finished in the new Berlin Gigafactory.
The UK CPI was just released 0.3% higher than expected,
At 15:00 CET we are expecting the US New Home Sales and at 16:00 CET the EU Consumer Confidence
Physically Settled Futures:
PLJ2 will expire 23rd March at 15:00 GMT.
NGJ2 will expire 28th March at 7:30 GMT.
NATGASUSAPR22 will expire on 25 March at 15:00 GMT.
GASOLINEUSAPR22 and GOLDAPR22 will expire on 29 March at 15:00 GMT.
Futures can be rolled online via the Futures Spread Trade Ticket. Any open positions will be closed after the mentioned times.
Latest Market Insights
Quarterly Outlook Q3 2022: The Runaway Train
- 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.