US stocks are rallying after several banks boosted their dividends and China pivoted away from its strict COVID policy. ? Wall Street seems to be close to figuring out how high central banks may take rates over in the short-term and that is supportive for long-term investors to scale into positions. ? We will see if the peak of inflation is in place, but for now some traders are comfortable with the idea that the ECB will bring rates to positive territory and as Fed easily has a couple more massive rate hikes on the table. ? US banks pass stress tests A lot of the major US banks celebrated stress test results with a strong boost with their respective dividends. ? Morgan Stanley, Goldman … [Read More...]

I think we’ve all earned a weekend break in the sun after a quite extraordinary week in the markets that saw plenty of central bank action, even from those not scheduled to meet. Stock markets are ending the week on a positive note, not that anyone is getting carried away with today’s price action after turbulent trading conditions in recent days. Triple witching may also be a factor in today’s moves which is another reason not to get excited. Recessions are increasingly likely as central banks race to dramatically raise rates before inflation spirals out of control. It is better than the alternative though; stagflation. A term that’s been thrown around way too much in recent months which perhaps highlights the trepidation around … [Read More...]

Central banks continue hawkish stance Wall Street was quick to fade yesterday’s post-FOMC rally as the other major central banks are turning very hawkish with their respective inflation battles. Traders paid special attention to a surprise rate hike by the SNB, which paved the way for more increases in the foreseeable future. ? The BOE also took rates to the highest levels since 2009 and will likely not be easing up anytime soon with their tightening cycle. US economic data is showing a deceleration in activity, which is making Wall Street bring forward its recession calls. ? Jobless claims remained steady, but everyone is focusing on a steady stream of layoff announcements from companies across housing and crypto markets. ? The housing market is cooling quickly after … [Read More...]

Equity markets jittery, US dollar soars Things didn’t improve from Friday overnight in New York, as the market scrambled to price in a 0.75% by the FOMC, whose two-day meeting starts today. Among the biggest casualties were the bond market, where yields soared, and the 2/10-year tenor spent part of the day inverted. 20+ basis point increases across the curve were the norm. Equities had another awful session, led by the Nasdaq and S&P 500, home to some of the most pimped-up valuations from the pandemic largesse. With the risk-free 10-year yield at 3.38% now and growth forecasts sure to be reigned in as the Fed moves harder on inflation, it’s hard to see that outlook improving this week. The crypto space has … [Read More...]

Inflation jitters boost US dollar Pre-US inflation nerves triggered a wave of risk aversion in equity markets overnight, which translated into haven inflows to the US dollar, which booked gains in the DM and EM space. The dollar index leapt 0.74% higher to 1.0330 overnight, although the rally’s scope was flattered by the euro sell-off, the index’s largest component. How the euro performs today will dictate whether we have seen a low put in place or not. Higher US inflation tonight should lift the US dollar, with a lower print seeing renewed selling as Fed hiking expectations are pared. The index is almost unchanged in Asia, and has resistance at 104.00, with support at 1.0285. EUR/USD slumped by 0.91% to 1.0620 post-ECB, adding a modest 0.13% … [Read More...]

The Canadian dollar has extended its losses today. USD/CAD is trading at 1.2743, up 0.35% on the day. Thursday saw the US dollar gives its Canadian cousin a spanking, as USD/CAD jumped 1.13%, its highest daily gain this year. A rise in US Treasury yields helped boost the US dollar, as the 10-year yield remains above 3%. As well, US unemployment claims disappointed, rising to 229 thousand. This was higher than the previous release of 202 thousand and above the estimate of 210 thousand. The rise in claims was not massive, but nonetheless has fed into the market’s nervousness over the US economy, and the result was a drop in risk appetite which sent the Canadian dollar tumbling lower. It could be a busy end to the trading … [Read More...]

Oil steady as fresh Shanghai restrictions halt rally Oil prices are steady on Thursday after surging once more in recent days. Fresh restrictions in Shanghai may be behind the rally losing steam, with China’s Covid-zero strategy the primary downside risk as far as crude is currently concerned. UAE Energy Minister Suhail al-Mazrouei alluded to this when he effectively referred to the reopening in China as being an upside risk for prices given the substantial shortfalls in OPEC+ production targets which currently amount to around 2.6 million barrels per day. ? With the EIA warning of further hits to Russian supply over the next 18 months as a result of sanctions and an EU embargo amounting to around 18% of its first-quarter output (or two million … [Read More...]

US stocks declined as global bond yields rose after the ECB prepared markets for a rate hiking cycle and on growing nervousness that tomorrow’s CPI data will clearly show inflation isn’t near peaking. ? ? The outlook is darkening and that might be how the argument for the Fed to pause in September begins. Warning signs about the economy are emerging as weekly jobless claims are starting to rise, China’s COVID situation will prove troublesome for supply chains over the next couple of quarters, and as inflationary pressures broaden and show no sign of easing. It seems reductions in global growth forecasts will become a steady theme over the next few months and that should complicate how much more tightening we see from central banks. ? It … [Read More...]