Morning Brew November 18 2022
Senior Relationship Manager
Summary: Consolidatoin mode
Markets are clearly looking for direction and did not find it yesterday. Stocks swung and closed a little lower in low volumes, the USD Index continued to trade around 106.50 and the 10 year yield 3.75.
EURUSD trades near the 1,04 at 1.0378 USDJPY at 139.80 and GBPUSD at 1.39. Gold and Silver recovered off yesterday’s lows to trade 1765 and 21.15.
The US yield curve remains firmly inverted, hinting at a recession, the probability of a hike by only 50 basis points in December has risen to 87% but the terminal rate expectation n May/ June has risen to 5% from 4.9 earlier in the week.
Today’s calendar contains little of note, there can be comments out central banks and politics at any time though.. One of the key events today will be might be the ECB which is beginning the biggest withdrawal of cash from the euro zone's banking system in its history, as it gives banks a first chance to repay hundreds of billions of euros in ECB loans. As this is the first time this is being undertaken, the market impact is not fully clear. It could give an indication of the state of the European economy.
The next really huge day to already pencil into the calendar is the 14th nd 15th of December, where the Fed, the SNB, the BoE and the ECB will set rates, up to then, economic indicators confirming inflation and strenght of the labor market will be wathed.
James Bullard of the St. Louis Fed President stated the Fed needs to keep raising rates given that its tightening so far "had only limited effects on observed inflation."
Cisco rose 5% after the company raised it`s forecast
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.