Senior Relationship Manager
Summary: Risk off on Fed Speakers and looming taper
Good Morning
Risk sentiment came under pressure and remained so over night, Indexes are lower, the USD index gains and Gold and Silver give up even more ground. Crypto seems to stabilize a little more than 10% off recent highs.
The Dow Jones lost -0.20% yesterday and additional- 0.4 over night, the S&P 500 -0.13% and -0.42% over night and the Nasdaq -0.57% and a similar percentage since then. The Dax opening is indicated below support at 15532 with the next target at 15250 we do not reverse.
Gold is trading below the 1790 and has room to 1770, XAG is at 23.90 with some support in the 23.45-50 area.
The driver behind the nervousness is the fear of central banks tapering to combat inflation while at the same time growth seems to slow down globally. In the US the JOLTS Job opening report came at 10.9 mio against an expectation of 10 mio and Chinese PPI is at 13 year high at 9.5%
"The big picture is that the taper will get going this year and will end sometime by the first half of next year," St. Louis Fed Bank President James Bullard stated, while Robert Kaplan of the Dalas Fed said he sees Inflation fear weighing on demand.
As expected yesterday, commentary seems to make the market and today we are expecting the ECB rate decision at 13:45 CET and the press conference at 14:30. Based on the Futures Curve, the probability of no rate change is 96% but there seems to be an overall agreement we will see a small degree of tapering by €10 or €20 bio per month to leave the PEPP at €60 or €70 Bio. Interesting will be any statement Lagarde makes on the future inflation expectation and if she addresses the worries of the Bundesbank in particular.
US Initial Jobless claims will be released at 14:30 CET as well.
Watch out for nervous markets.
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.