Morning Brew May 5 2022
Senior Relationship Manager
It is indeed a strange market where a 50 BPS hike by the Fed causes one of the best days in the equities markets since 2020.
The Fed hiked 50 BPS as expected and will reduce the balance sheet from June at an initial combined monthly pace of $47.5 billion but he fact that Powell took a 75BPS hike off the table sparked risk on sentiment and weakened the USD.
The Dow gains 2.81% the S&P 500 3%, Nasdaq up 3.2%, Silver gained a full USD and is now at 23.10, Gold is testing the 1900 and EURUSD and GBPUSD are trading higher at 1.0596 and 1.2540.
Shell reported on Thursday a record first-quarter profit of $9.13 billion, BMW also exceeds expectations. UniCredit announced a buyback of 1.6 Bio. Starbucks gained 10% on strong income,
This morning the German Industrial Orders came much worse than expected at -4.7% vs -1.1% expected.
The Bank Of England Rate decision in likely the Event of the day, a 25 Basis Point hike is expected with a probability of 100%, US Labor data at 14:30 will also be watched closely for hints at the Nonfarm Payroll number tomorrow.
Physically Settled Futures:
CK2 will expire on 6th May at 09:00 GMT.
FPK2 will expire on 11th May at 15:00 GMT.
GASOILUKMAY22 will expire on 10th May at 15:00 GMT.
OILUSJUN22 will expire on 18th May at 15:00 GMT.
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.