Senior Relationship Manager
Summary: Evergrande calms markets ahead of the FOMC
Good Morning
China Evergrande Group stated it would manage to meet a coupon payment on its domestic bonds on tomorrow, calming international markets ahead of the FOMC rate decision later today.
There is no rate change expected with a probability of 99.8%, the real question is the outlook or announcement of any reduction in asset purchases.
Since the last FED meeting, data has been mixed with rising inflation, disappointing employment data and a slowing growth in services sector and high corona numbers, and it is not clear which will win out. The overall framework seems to be a winding down of the asset purchases in the first half of next year.
Yesterday, US Indexes closed basically unchanged and over night could recover further on the positive news on Evergrande. The US39 trades above 34k, the US500 at 4366, Germany 40 at 15400 and the US tech 100 at 15070. The USD Index is at 93.27 and the 10 year yield at 1.33.
Gold could recover to 1780 and silver to 22.80, EURUSD 1.1720 and GBPUSD 1.3650. GBPUSD will be worth watching with both central banks meeting in the next two days, Implied 1 week vol is at 6.3 while EURUSD is at 5.5.
U.S. President Joe Biden promised a USA back in international diplomacy and promised an era of vigorous competition without a new Cold War. He announced military restraint and a robust fight against climate change an helping to resolve crises from Iran to the Korean Peninsula to Ethiopia.
The EU has delayed trade talks with the US after France had lost the contract for the Australian Submarine contracts.
Our Crypto expert Mads Eberhard wrote a very interesting article on the relation between Bitcoin-Ethereum:
For several years it has been an ongoing discussion whether Ethereum will overtake Bitcoin in terms of market capitalization. The discussion has recently been amplified as users are settling more value and paying more fees on Ethereum than Bitcoin. On the other hand, the intense competition and technological challenges for Ethereum speak against a flipping.
The only significant data release besides the US Rate decision is the EU consumer confidence and that will have to be a real surprise to gain any real interest. I basically expect a calm – if not boring - day until 20:00 CET.
Trade safely.
2024: The wasted year
Markets are driven by election optimism, overshadowing growing debt and liquidity concerns. The 2024 elections loom large, but economic fundamentals and debt issues warrant cautious investment.
As US economic slowdown hints at a shift away from exceptionalism, USD faces downside with looming Fed cuts. AUD and NZD set to outperform as their rate cuts lag. JPY gains on carry unwind bets and BOJ pivot.
Amid AI and obesity drug excitement, equities see varied prospects: neutral on overvalued US stocks, negative on Japan due to JPY risks, positive on Europe. European defence stocks gain appeal.
With the economic slowdown, quality assets will gain favour, especially sovereign bonds up to 5 years. Central banks' potential rate cuts in Q2 suggest extending duration, despite policy and inflation concerns.
Commodities poised for rebound. The "Year of the Metal" boosts gold and silver, copper awaits rate cuts. Grains may recover, natural gas stabilises. Gold targets $2,300-$2,500/oz, copper's breakout could signal growth.
Markets are driven by election optimism, overshadowing growing debt and liquidity concerns. The 2024 elections loom large, but economic fundamentals and debt issues warrant cautious investment.
As US economic slowdown hints at a shift away from exceptionalism, USD faces downside with looming Fed cuts. AUD and NZD set to outperform as their rate cuts lag. JPY gains on carry unwind bets and BOJ pivot.
Amid AI and obesity drug excitement, equities see varied prospects: neutral on overvalued US stocks, negative on Japan due to JPY risks, positive on Europe. European defence stocks gain appeal.
With the economic slowdown, quality assets will gain favour, especially sovereign bonds up to 5 years. Central banks' potential rate cuts in Q2 suggest extending duration, despite policy and inflation concerns.
Commodities poised for rebound. The "Year of the Metal" boosts gold and silver, copper awaits rate cuts. Grains may recover, natural gas stabilises. Gold targets $2,300-$2,500/oz, copper's breakout could signal growth.