Morning Brew September 26 2022
Senior Relationship Manager
Summary: GBP Collapses, Markets in extreme fear
Extreme nervousness dominates markets with Equities under pressure, oil falling, the British Pound basically collapsing and the Euro trading lower.
The Dow lost 1.62%, the S&P 1.72%, and the Nasdaq 1.8%. It was the second week the Nasdaq fell more than 55. The GER40 fell to 12200.
All 11 sectors in the S&P500 closed lower on Friday, with Energy falling the most at 6.8% due to falling oil prices. Friday was one of the busiest day in US Options ever and over the last four weeks money managers have spent US$34 billion purchasing put options, which provides protection against a further fall in stock markets (according to the Financial Times). US$9.6 billion was spent in the last weeks alone on options protecting against downside risks,.
A bleak economic outlook and less then convincing statements out of the UK government caused Sterling to fall to a record this morning , prompting speculation of an emergency response from the Bank of England. The 5 Year yield soared to above 5% GBPUSD fell to 1.0580, a 37 year low. Tax cuts and the energy plan are not set up to combat inflation in the markets view.
The USD Index rose to 113.80, EURUSD fell to 0.9635, a 20 year low. One Month volatility in EURUSD Options rose to 13%. Gold and Silver dropped to 1638 and 18.57.
US 2-year yields soared to 4.2%, the highest since 2007 Calls for the USD Index to hit 120 are no longer seeming outlandish
The victory of right wing parties in Italy is worrying the EU, and the referendums Russia is conducting in the occupied areas of Ukraine are adding worries.
China's central bank announced fresh steps to slow the pace of the yuan's recent depreciation
Germany is looking to limit Gas prices but so far the re is no agreement on how to finance that move.
Atlanta Fed`s Bostic stated the U.S. central bank could tame inflation without substantial job losses given the economy's continued momentum.
The market needs some good news to find a reason to turn around and that is hard to see right now, caution is in order and traders as well as investors need to have their risk under control to not get overrun.
Key events this week are listed below, in addition I would expect at least verbal interventions from politicians, bureaucrats and central bankers.
Monday, Sep 26
US: Chicago Fed National Activity Index (Aug)US: Dallas Fed Manufacturing Activity (Sep)
Germany: IFO Survey (Sep)
UK: Rightmove House Prices (Sep)
Singapore: Industrial Production (Aug)
Japan: PMI Manufacturing (Sep)
US: 2-year note auction (USD43 billion)
Tuesday, Sep 27
US: Durable Goods Orders (Aug)
US: New Home Sales (Aug)
US: Conference Board Consumer Confidence (Sep)
US: 5-year Note Auction (USD44 billion)
China: Industrial Profits (Aug)Eurozone: ECB M3 Annual Growth Rate (Aug)
Wednesday, Sep 28
US: MBA Mortgage Applications (weekly)
US: Advance Goods Trade Balance (Aug)
US: Wholesale Inventories (Aug)
US: Pending Home Sales (Aug)
US: 2-year FRN Auction (USD22 billion)
US: 7-year Note Auction
Japan: BoJ Monetary Policy Meeting Minutes (July 20-21)
France: Consumer Confidence (Sep)
Italy: Consumer Confidence (Sep)
Italy: Manufacturing Sentiment (Sep)Italy: Economic Sentiment (Sep)
Thursday, Sep 29
US: Jobless claims (weekly)US: GDP (Q2, 3rd
Germany: HICP (Sep, flash)
Eurozone: Economic, Industrial & Services Confidence (Sep)
UK: Mortgage Data (Aug)
HK: Trade data (Aug)
)Spain: HICP (Sep, flash)
Friday, Sep 30
US: Personal Income & Spending (Aug)
US: PCE & Core PCE
US: Chicago PMI (Sep)
US: U of Michigan Consumer Sentiment (Sep, final)
US: U of Michigan 5-10-year Inflation Expectations (Sep, final)
Japan: Unemployment Rate (Aug)
Japan: Industrial Production (Aug)
Japan: Retail Sales (Aug)
Japan: Housing Starts (Aug)
Japan: Consumer Confidence Index (Sep)
China: NBS Manufacturing & Non-manufacturing PMIs (Sep)
China: Caixin China Manufacturing PMI (Sep)
HK: Retail Sales (Aug)
India: RBI Policy Meeting (Sep)UK: GDP (Q2, 2ndEurozone: HICP (Sep, flash)
Germany: Unemployment (Sep)
France: HICP (Sep, flash)
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.