9 August 2022
Brief
Investors in a wait and see mood, expecting US Consumer Price Index tomorrow. A print above the expected 8.7% would affect both equities and bonds, and will send yields higher.
Agenda
Tues: US Nonfarm Productivity.
Wed: US CPI (Consumer Price Index).
Thurs: US PPI (Producer Price Index), US Initial Jobless Claims.
Fri: EU Industrial Production, UK GDP, UK Industrial Production.
Bonds
US consumers’ expectations of future inflation decreased from 6.8% to 6.2% in a win for the FED. CPI tomorrow will mark the way going forward: if weaker, from the expected 8.7% or below, it will prove that rate hikes work, so yields will retrace, and prices will rise. If not, bonds will be sold in anticipation of further hikes. Today, 64.50% of the traders believe the FED will hike by +0.75% at the Sept meeting.
Other regions, the Gilt and the Bund, follows the same pattern: prices rise today but with little conviction.
Currencies
The USD follows inflation expectation+rates: in anticipation of a falling price pressure, and then no need of higher rates in the close future, the USD falls today to the higher end of its trading channel against the EUR at 1.0240.
Stocks
The class keeps under pressure, despite it opened at new highs during the session, but failed to keep the strength. For some analysts, it points to further weakness in the next sessions.
US tech names impacted by the 15% tax imposed on climate change and healthcare actions passed by the Senate over the weekend. The Bill’s excise tax on share buybacks and dividend payouts.
Commodities
Crude bottomed at USD 93 for the Brent and goes to 95.50.
Indeed, another new weight in the price of oil: the progress in talks to revive the 2015 Iran nuclear accord, would clear the way to boost crude exports. The EU put forward a final text and now awaiting approval from US and Iran. It could add 1.5% of global supply in no less than 6 months.
Gold crossed up the 1,800 mark to 1,808 in expectations of a weaker USD. Interesting to note that the USD will fall on a weaker inflation, which at the same time should affect the price of Gold, as traditional inflation hedge.
Best regards
Strong job data in the US on Friday make investors believe that the FED could hike again without affecting economic power: inflation on Wed will confirm this view.
Indeed, except for the USD, equities, and bonds, continue in bullish mood.
The GBP retraces in a classic buy the rumor, sell the news after recent rate hike last week.
Agenda
Mon: EU Sentix Investor Confidence.
Tues: US Nonfarm Productivity.
Wed: US CPI (Consumer Price Index).
Thurs: US PPI (Producer Price Index), US Initial Jobless Claims.
Fri: EU Industrial Production, UK GDP, UK Industrial Production.
Bonds
BoE chief economist thinks it going to take time but inflation will finally come back to target and expects inflation volatility in the months to come. GDP on Friday will confirm if growth falls from 8.7% to 2.8%, as expected. The Gilt future moves without clear direction: dropping (in price terms) after recent hike, from 120% to 117%, the paper is bought today, capping the yield at 2%-ish.
The Bund moves in sympathy with international papers, bottoming after last week weakness and recovering today, but without clear conviction.
US payrolls increased in July by +528k, much more than the +250k expected, pointing the strength of the job market. Unemployment printed a 3.5%, while 3.6% was priced-in
It puts the FED back into the hiking rates race, with Bowman considering “similarly size” hikes in the next future; it means +0.75% at the next meeting.
The UST yield come from 2.70% to 2.83%, but still far from the top at 3.50% visited in June and the trend is still pointing down. Inflation on Wed will confirm the other part of the equation: it is expected that it eases from 9.1% to 8.7%; if it happens, it will confirm that higher rates work in capping inflation while economy continues strong, despite recession fears a week ago.
Emergings
China’s trade surplus in July rose to USD 101 billion versus 98 billion in June, the highest in 35 years as the economy continues to rebound from pandemic-related restrictions: exports rose 18% against expectations.
Oman posted a budget surplus of USD 2 billion for the first half of the year, due to higher revenues from oil and natgas. Despite the news, the 7% 2051 bond falls 1% to a yield of 7.40%.
Ghana’s sovereign rating has been downgraded by S&P from B- to CCC+ with negative outlook on widening fiscal and external imbalances. The country recently approved a USD 740 loan from Afreximbank and in talks with the IMF for a 1.5 billion loan. 2023 bond trades at a yield of 21%.
Credits
German insurer Allianz reported a 23% fall in consolidated net income to 1.8 billion to a 6 times jump in non-operating expenses, including restructuring costs. The 3.5% perpetual is traded at 89%, ie a yield of 7.40%.
Amazon acquires maker of Roomba vacuum for USD 1.7 billion.
Macquarie to buy Suez’s UK waste unit for USD 2.5 billion. Macquarie 2030 bond trades at 88%, yielding 5.50%.
Russian Luckoil is offering a discount of more than 20% as it seeks to repurchase USD 6.3 billion of its outstanding bonds to avoid any block in payments. Bonds rallied 9% after the announcement.
Indian state-owned refiner HPLC reports a loss of USD 1.3 billion in the last quarter compared to a profit of USD 240 million in the previous one: crude imports weighted in the numbers. 2026 is priced at 94%, yield of 7.20%.
Chinese developer Seazen transferred funds for the payment of capital and coupon of its 5% USD bond due today. Next bond to mature is on 22nd Sept and trades at 94%.
Currencies
Friday’s job data benefit the USD, which goes to its recent support at EUR 1.02, but seems unable to break it out today. Against the GBP, it strengthens close to 1.20.
The BoE rate hike last week end fears and the GBP retraces in a classic buy the rumor, sell the news. FED in the focus.
Cryptos up again after having found support in its moving average levels. This class should be creating a solid uptrend now.
Stocks
The class back in bearish mood after strong jobs in the US keeps FED in hiking mode. Indeed, investors are in buying mood and futures point up today.
Commodities
Crude price broke out recent support and extend the drop, on fears of a weakening demand, while Russia oil products exports continue to flow despite the embargo. Also, the price is affected by the US bill injecting USD 430 billion in the clean energy sector. Bill passed the Senate on Sunday.
Gold is stuck at around USD 1,800 mark. Strong US job market did not convinced investors to continue buying, as more aggressive rate hikes would benefit USD investments.
Best regards
f
The +0.50% hike from the BoE was priced-in, so left the GBP unchanged, but comments of recession and booming inflation sent bond prices down.
Equities ignored data and live a rosy momentum. Crude down to pre-Russia crisis levels of fears of waning demand.
Agenda
Fri: UK Halifax House Price index, US Unemployment.
Bonds
BoE didn’t disappoint hiking 0.50% to 1.75%, just in line with expectations and already priced in. More important the warning that the economy will slip into recession by year-end and will continue in 2023, with inflation expected at 13% by October. On top, the Bank will be selling GBP 40 billion worth of treasuries in purchased during the QE. The Gilt future fell in price.
Cleveland’s FED suggests rates above 4% by mid-2023
US jobless claims rise to 260k vs 254k in the previous period and forecasted 259k.
Emergings
Turkey’s bond prices rally on news that its net forex reserves jumped about USD 2.4 billion to above 9 billion the last week, the highest level in 2 months, and it contrast to the sharp drop in Dec, when billions of USD were sold to stem the fall in the lira. For the moment, the lira remains weak at EUR 18.35, lowest of the year.
Credits
Standard Chartered raised USD 1.25 billion via a AT1 perpetual callable after 5.5 year at 7.75%
Meta-Facebook raised USD 10 billion via a 4 tranche debut bond at 5, 10, 30 and 40 year at 3.54%, 3.85%, 4.46% and 4.66%. Rating is A1.
HSBC raised USD 4.75% via a 2 tranche at 6 and 11 year at 5.21% and 5.40%. Rating A3.
Lloyds raised USD 2.5 billion via a 2 tranche at 4 and 11 year at 4.72% and 4.98%. Rating A3.
The Monetary Authority of Singapore raised USD 1.74% green bond at 3.04%.
Currencies
The move of the BoE failed to move the GBP, as the +0.50% was widely priced in. Traders expect the ECB will move cards now, so the EUR strengthens from GBP 1.1990 two days ago, to 1.880 today.
Against the USD, the trend is not so clear. The GBP remains unchanged at 1.2150 with traders monitoring US unemployment before deciding if the FED will act soon or not.
Cryptos seem willing to follow technical theories and rebounds today after a retracement to its moving average after a clear break out of important resistances. To be seen.
Stocks
After a volatile session, markets ended flat. Futures open heading high on no news which would justify such optimism but surfing the positive momentum.
Commodities
Crude price extends losses even reaching prices pre-Russia invasion as demand will weaken on bad economic data and the conviction that OPEC stand ready to deliver a significant increase in supply should the word face a crisis in winter.
Gold finally manages to break out the USD 1,800 mark reaching one month high on safe haven role in the case of recession.
Best regards
ief
The BoE in the focus today between expectations of a +0.50% move on rates. Less will be bad taken.
Equities are living a bullish momentum and rebound after two weak sessions and ignoring rising yields.
The forex market is unmoved today with the USD unable to take off with conviction. It makes investors to move to gold, which resume its uptrend, while other currency alternatives, like the Bitcoin, crossing down its moving average; indeed, this class is in recovery mood.
Agenda
Thurs: UK BoE Interest Rate decision, US Initial Jobless Claims.
Fri: UK Halifax House Price index, US Unemployment.
Bonds
BoE’s today: less than a +0.50% will be badly taken and it is fully priced in, after several +0.25%’s failed to succeed. The Gilt yield goes to 1.92%, but note it is coming from 2.70% by mid June, so still far from highs.
Mixed data in Euroland, with the PMI higher than expected (35.8 vs 35.7), but retail sales down from -1.7% to -3.7%. The Bund does not know how to take and, as a result, traders decide to follow the Gilt and yield reverses its uptrend and goes to 0.87%, but with lack of conviction.
US PMI rose from 55.3 to 56.7; ISM’s measure of new orders received by business have gone up to 59.9 versus 55.6 a month ago as a rise in exports was reported. The UST future found support and start to rise in price, in the 10 year maturity, and sent the curve to inversion in the 2-10 year range, pointing to economic problems in the near future.
Emergings
S&P cuts Belarus from CC to D following its default on a USD 23 million coupon payment on its USD denominated 2027 bond due in June: the nation tried to pay in Belarusian rubles, a currency not stipulated by the original terms. The bond trades now at a price of 12.50%.
Brazil hiked the selic rate by 0.50% to 13.75% and guided for a possible 0.25% in Sept, and will be given more emphasis on early 2024 inflation forecast due forex movements.
El Salvador’s bonds rallied 26% on debt buyback announcement.
Pakistan’s bonds inched up along with a 4% jump in the Pakistani rupee yesterday on news that the nation halved its trade deficit to USD 2.6 billion and making progress in receiving a bailout from the IMF.
Credits
Societe General withdrawal from Russia send the results into the red, with a loss of EUR 1.48 billion related to the sale of Rosbank and insurance business in the county.
Westepac raised USD 1 billion via a 11 year bond at 5.40%, with a rating of BBB.
Danyang Investment issued USD 205 million via a 3 year bond at 6.40%. Unrated.
Suzhou City Construction raised USD 200 million of a 3 yar bond at 6%. Rating is BBB- and proceeds will be used to refinance offshore debt.
Indian Future Retail downgraded from RD to D after bankruptcy proceedings against the company were set into motion. 2025 bonds trade at a price of 8.5%.
Ukranian DTEK Energy, the largest private electricity and coal producer, intends to fork out USD 30 million to pay out its coupon on its 7% 2027 issue: this will be the second consecutive quarter where it has made a full coupon payment, in contrast to other Ukrainian companies which are seeking debt freezes. Price of the bond rose to 21.50%.
Currencies
The FED’s suggestion of higher rates in the horizon support the USD at EUR 1.02, but interesting to note it refuses to go deeper than this, while it traded below parity back in mid-June.
The GBP is the star of the day, between expectations of higher rates so a higher currency. Indeed, it is paused right now at USD 1.2170 and EUR 1.1950.
Cryptos cross below its MA, a classic support, but nothing to worry about: the uptrend is still intact, and more weakness would be needed to consider another leg down. For the moment, the Bitcoin is at buy level.
Stocks
The class rallied snapping two days slide. The S&P made +1.6% and the Nasdaq a +2.6%. Bullish momentum seems to be strong as investors even ignored higher yields.
Commodities
Crude price down 5% (WTI) after the OPEC+ decided an increase in the output target, equal to 0.1% of global demand, somehow following US request to boost output.
Gold resumed its uptrend after 2 days paused at 1,770. Traders view on US yields: if bond prices fall and rates are up, it will benefit the USD and penalize gold and other currency alternatives. For the moment, the absence of clear trend on rates benefits the metal.
Best regards
Brief
No expectations of a rate cut from the BoE on Thursday push the Gilt up, while the GBP take a breather in its way up.
Stock futures point to a red day today, after the big rally seen at the end of the month, while crude suffer from bad economic data, suggesting a slowing demand and with traders expecting the outcome of the OPEC+ tomorrow.
Agenda
Tues: UK HPI, US JOLSTs Job Openings.
Wed: EU, UK and US PMIs, EU PPI, EU Retail Sales, US Factory Orders.
Thurs: UK BoE Interest Rate decision, US Initial Jobless Claims.
Fri: UK Halifax House Price index, US Unemployment.
Bonds
Italian 10 years yield broke out the 3% mark to the downside on hopes that the election campaign and the new government will not challenge fiscal, and reforms made by Draghi. The Bund fell to 0.68% in sympathy with peers.
Gilt price strongly up from 118% yesterday to 119% today, in a clear indication that traders do not expect any action from the BoE on Thursday.
UST future yield drops another 12 bp to 2.54%, in a clear trend that could take it down below 2%. US economic reading pointed to a slowdown with manufacturing slowing at 52.8 and construction spending falling 1.1%
Emergings
Luxembourg-based banks have freeze all Equatorian assets after a settlement charge of USD 391 million to Anglo-French oil company Perenco remains unpaid. Treasuries maturing in 2040 dropped to a price of 40%, yielding 6%.
South Korea consumer prices rose 6.3%, in line with estimates. Pakistan inflation goes to 25%, highest in 14 years. Food rose 29% and transport prices did a +65%.
Credits
Mexican state-owned oil PEMEX remains with negative free cash flow in the 2nd quarter due to working capital, while British BP boosts dividend as profits jump on high crude price.
Barclays raised USD 2 billion via a perpetual at 8%.
UBS issued USD 5 billion of a 3 trancher at 2, 4 and 10 year call at 4.49%, 4.70% and 4.99%. Rating is A.
Apple raised USD 5.5 billion via a 4 trancher at 7, 10, 30 and 40 years at 3.27%, 3.36%, 3.99% and 4.12%. Rating AA+.
Chinese developer Central China Real Estate bought back USD 27 million of its 6.875% bond due in August 2022, which represents 5.27% of the total outstanding amount, in order to reduce its financial gearing level. The rest of the bond trades at a price of 97%.
Bonds of Macau’s casino operators inched up with Studio City and Melco Resort leading the pack, as easing covid-related restrictions
Currencies
The EUR finally break out the USD 1.027 to 1.030, as weak US indicators suggest the FED will avoid rising rates in the short term.
The GBP takes a breather expecting the message of the BoE in two days.
Cryptos failed to break out to the upside and resistances work with the Bitcoin below 24k and the Ethereum unable to break the 17k mark. A chunk of 11 Ponzi schemes allegations from the SEC does not help the sector.
Stocks
Equities paused after end of the month’s rally. Hong Kong’s Hang Seng down 3% today.
Commodities
Oil price drops a bit lower with investors worried about global demand after weak manufacturing data in several countries. Brent comes to its important mark at USD 99, a level which work as support 7 times in the year. If broken, the next stop is at 80. Probably the outcome of the OPEC+ meeting tomorrow will mark a new trend or push the existing one.
Gold hit a 4-week high on weaker USD and lower bond yields. The metal also works as haven against economic slowdown.
Best regards
EU inflation posted an all-time high of 8.9% against expectations of 8.7%. The Bund yield rises but very little from 0.80% to 0.84%. Note yields are coming from 1.30% a week ago.
The BoE decides on rates this Thursday, with traders expecting the bank to do leave it unchanged at 1.25% after 5 hikes, and the Bank seems willing to accept an inflation between 9% and 11% during the next few months, while its target is 2%. Indeed, the Gilt future drops in price sending the yield from 1.90% to 1.9150% creating a bottom and could rise in the next few sessions.
US inflation, preferred FED’s indicator, at highest level since 1982. Indeed, traders ignore it and continue looking at weakening growth: he UST future yield eases to 2.66% in the morning, extending its way down.
Emergings
Oman raises repot rate by 0.75% to 3%, given its peg to the USD.
Saudi Arabia grew by 11.8% in the second quarter on high energy prices.
Sri Lanka indicated that an agreement with the IMF is pushed back to Sept due to the ongoing unrest in the country. Inflation rose to 61%.
Argentina launched a “superministry” to coordinate economic policy, headed by veteran politician Sergio Massa: he is expected to kick-start a series of policy shocks to regain the trust of the markets. USD bonds gained 4% in price on Friday to 25%.
Credits
Air France-KLM affords to reduce its debt by EUR 3 billion in the second quarter 2022, thanks to higher demand and capital increase action.
Britain’s Standard Chartered reported a 10% rise in net profits this quarter. Perpetuals yield 6.23%. French BNP Paribas posted a 9% growth in net income. Perpetuals at 6.88%.
Credit Suisse legal turmoil continues as client and ex-Georgia PM Ivanishvili sues CS Singapore for USD 800 million after he successfully claimed USD 600 million against CS Bermuda. Perpetuals trades sat 6.23%.
American cruiser Royal Caribbean reported a net loss of 0.5 billion, narrowing last year’s 1.3 billion. 2025 bond trades at a yield of 8.76%.
Defaulted Chinese developer Evergrande failed to make good on its promise to deliver a preliminary restructuring plan to its offshore investors by end of July. Adding to its woes, the company announced that its subsidiary Nanchang had been ordered to pay USD 1.08 billion to an unnamed guarantor for breaching the terms of an agreement. Bonds trade at a price of 5%.
Currencies
Following the movements in the bond market, the USD trades weak against the EUR at 1.02, a resistance it tries to break for 10 sessions now.
The GBP benefits from the far possibility of the BoE deciding finally to hike again: an unexpected move but still possible: it goes to USD 1.22 and EUR 1.1950.
Cryptos suffer a technical retracement: the Bitcoin found a strong resistance at 24k and fails so far to break it out.
Stocks
The class rallied on Friday to notch its best month since 2020; futures open in green today.
Commodities
Oil dropped 0.6% to USD 103 (Brent) as investors braced for this week’s OPEC+ meeting, between data that suggest demand will weak on higher rates and soaring inflation: UK gasoline demand remains below its 5 year average: a modest increase in Sept production would be discussed at the meeting.
Gold rose almost 4% in the last 3 sessions of weakening USD, heading the important 1,800 mark.
Not sure how it will affect the price, but India, the world’s second biggest gold consumer, launched its first international bullion exchange, trying to bring transparency to this market.
Best regards
ef
Bad news are good news: a US GDP at -0.9% while +0.5% was expected reduced risks of higher rates in the short term: equities and bonds rally and the USD falls.
At the same time, good earnings from tech giants Apple and Amazon, help to push equities up.
Agenda
Fri: EU CPI, EU GDP, UK M4 Money Supply, US Michigan Consumer Expectations.
Bonds
US GDP fell 0.9% for the second straight decline, a strong signal of recession, even though Powell trusts solid employment will save corporate America. A +0.5% was estimated.
Data would convince the FED to wait before continuing increasing rates. The UST 10 years future rose from 120 to 121, with the yield coming from 2.76% to 2.68% and seeming to heading to 2% area.
In the EU, consumer confidence posted an expected -27, from -24 a month ago. As in the US, data made yields to retrace from 1.00% to 0.80%. Italian paper continues hovering around at 3.30%-ish, with traders expecting a resolution of the political mess.
The UK Gilt is well bid as refuge against the doubts on the future of the country presidency and with the BoE out of the game after having rising rates 5 times to 13 years high.
Emergings
China GDP slowed to 2.5% in the first half of the year, while target for 2022 is +5.5%.
The People Bank of China is lining up a USD 148 billion lifeline for its distressed property sector in the form of loans at low interest: 1.75% for state commercial banks.
Argentina treasuries climbed after news that House speaker Massa was poised to be named as new economy minister. 2029 USD bond rose to a price of 22%. Massa would be the 3rd economy minister in less than a month in a country with an inflation of 64%.
Credits
Apple and Amazon both beat estimates on revenue and profits.
General Motors raised USD 2.25 billion via a two trancher: a 7 year green bond at 5.42% and a 10 year green at 5.63%. Expected rating is BBB.
Teva Pharma bonds rally on news of USD 4.35 billion opioid crisis settlement, following years of negotiation. Stock up 21% and bonds +6% in price.
Mexican state owned Pemex posed a 9x growth in net income. 2031 bond trades at 77%, yield of 10%.
Indian metal giant Vedanta reported a 6% rise in net profits. 2024 bonds go to a price of 86%, yielding 26%.
Barclays’s profits decline by 43% on higher operating expenses, mainly the impact of litigation costs. Perpetuals in USD yield 7.4%. Santander posted a 7.7% growth in net consolidated profits. USD perpetuals yield 6.9%.
Currencies
The USD weakens to the higher end of its trading channel against the EUR at 1.025 and against the GBP at 1.22. If the levels are broken, it could have created a bottom and reverse its trend to previous levels.
It benefits USD alternatives: the Bitcoin get close to 24k and open the gate to 32k.
Stocks
Equities rally above 1% after weak GDP discard imminent rate hikes. Sectorial gains were led by Real Estate, thanks to stabilizing rates, ie mortgages.
Commodities
Crude price gains about USD 1 on traders attention turning to the OPEC+ meeting next week: it will be key as the producers have now unwound the record 9.7 million bpd supply cut agreed in 2020, when the pandemic slammed demand. It seems that the group will consider keeping oil output unchanged, but modest increases would be discussed. It will disappoint US.
Precious metals continue its rally pushed by weakening USD and high inflation. Gold reached 1,760, after bottoming at 1,680 a week ago. Silver came from19 to 20 just yesterday.
Best regards
A +0.75% rate increase from the FED is expected this afternoon, to a multiyear record of 2.50%, but it is priced-in so it is not expected any significant move nor in equities nor bonds. Probably the USD will rally on the confirmation of the rise.
Agenda
Wed: EU M3 Money Supply, EU Private Sector Loans, US Durable Goods Orders, FED interest rates decision.
Thurs: EU Consumer Confidence, UK HPI, US GDP.
Fri: EU CPI, EU GDP, UK M4 Money Supply, US Michigan Consumer Expectations.
Bonds
Germany GFK Consumer Confidence index posted a -31 while a -29 was expected. The news supports the idea that the central bank cannot afford to rise rates aggressively, as it probably wants to fight inflation, without affecting the economy in the region. The Bund future yield drops below 1% for the first time since May. The exception is Italy, thanks to its political mess: the Italian bond keeps hovering around a yield of 3.40%.
FED’s today with wide expectations of rates to go from 1.75% to 2.50%, in its 4th consecutive rate hike to combat price pressure.
UST 10 years yield inched 1bp to 2.81%, coming from 2.71% yesterday. The 2 years future, more sensible to rates, comes from 2.90% to 3.07% in the last days.
Emergings
Inflation in Brazil came in at 11.39% for mid-July, lower than expectations of 11.41% and versus 12.04% in mid-June: transportation and housing costs fell while food rose. In the last month and a half, the country has aggressively hiked the rate from 11.25% to 13.25%, and the move seems to work, although modestly.
Fitch downgraded 25 Turkish Banks from B to B- on the back of Turkey’s downgrade to B two weeks ago: feeling of uncertainty around the authorities’ policy efficacy was mentioned.
Ukraine seeks USD 20 billion loan from IMF by year end. The country faces a USD 5 billion monthly fiscal shortfall and is highly dependent on Western partners for financing. State owned Naftogaz is on track to default on international bonds after creditors rejected its debt moratorium proposal. Grace period ended on Tuesday. Ukraine USD bonds trade at a price of 20%.
Credits
Microsoft misses on top and bottom lines. Alphabet also misses earnings and revenue in the 2nd quarter.
Deutsche Bank beats expectations to post a 8th straight quarter of profits. UBS posted USD 2.1 billion of net profits in the quarter, short of analysts expectations of 2.4 billion. Julius Baer first half net profit sunk 26%, due to lower client activity: perpetuals yield 7%.
Chinese developers:
Kaisa made progress on its onshore restructuring and entered into agreements with some onshore financial institutions to extend the term of some existing borrowings. USD bonds trade at 10% (price).
Country Garden intends to raise USD 360 million by issuing 870 million new shares at discounted price. 2026 bond trade at a price of 36%.
Currencies
The USD gains from EUR 1.025 to 1.014m on rate differential.
Note the volatility of the Turkish lira on the back of Fitch downgrade of main banks: yesterday it moves in a wide channel from 17.80 and 18.30 and will probably loss value today.
Stocks
The class sunk yesterday and close at session lows, dropping from 1% to 2%. Futures open today recovering, while expecting the FED’s decision.
Commodities
Crude: US plans to sell additional 20 million barrels from strategic reserve, the day it was known inventories were notable lower than expected. The news offer a support to crude with the Brent at 100 and WTI at 95, after a fall of 25% since highs seen in June.
Precious metals found support at 1,700 and 18 for Gold and Silver, but expectations of higher rates put a cap to a clear take off, which would come hand to hand with picking inflation. A stop on the race of rates would be needed for this class to start shining.
Best regards
27 July 2022
Brief
A +0.75% rate increase from the FED is expected this afternoon, to a multiyear record of 2.50%, but it is priced-in so it is not expected any significant move nor in equities nor bonds. Probably the USD will rally on the confirmation of the rise.
Agenda
Wed: EU M3 Money Supply, EU Private Sector Loans, US Durable Goods Orders, FED interest rates decision.
Thurs: EU Consumer Confidence, UK HPI, US GDP.
Fri: EU CPI, EU GDP, UK M4 Money Supply, US Michigan Consumer Expectations.
Bonds
Germany GFK Consumer Confidence index posted a -31 while a -29 was expected. The news supports the idea that the central bank cannot afford to rise rates aggressively, as it probably wants to fight inflation, without affecting the economy in the region. The Bund future yield drops below 1% for the first time since May. The exception is Italy, thanks to its political mess: the Italian bond keeps hovering around a yield of 3.40%.
FED’s today with wide expectations of rates to go from 1.75% to 2.50%, in its 4th consecutive rate hike to combat price pressure.
UST 10 years yield inched 1bp to 2.81%, coming from 2.71% yesterday. The 2 years future, more sensible to rates, comes from 2.90% to 3.07% in the last days.
Emergings
Inflation in Brazil came in at 11.39% for mid-July, lower than expectations of 11.41% and versus 12.04% in mid-June: transportation and housing costs fell while food rose. In the last month and a half, the country has aggressively hiked the rate from 11.25% to 13.25%, and the move seems to work, although modestly.
Fitch downgraded 25 Turkish Banks from B to B- on the back of Turkey’s downgrade to B two weeks ago: feeling of uncertainty around the authorities’ policy efficacy was mentioned.
Ukraine seeks USD 20 billion loan from IMF by year end. The country faces a USD 5 billion monthly fiscal shortfall and is highly dependent on Western partners for financing. State owned Naftogaz is on track to default on international bonds after creditors rejected its debt moratorium proposal. Grace period ended on Tuesday. Ukraine USD bonds trade at a price of 20%.
Credits
Microsoft misses on top and bottom lines. Alphabet also misses earnings and revenue in the 2nd quarter.
Deutsche Bank beats expectations to post a 8th straight quarter of profits. UBS posted USD 2.1 billion of net profits in the quarter, short of analysts expectations of 2.4 billion. Julius Baer first half net profit sunk 26%, due to lower client activity: perpetuals yield 7%.
Chinese developers:
Kaisa made progress on its onshore restructuring and entered into agreements with some onshore financial institutions to extend the term of some existing borrowings. USD bonds trade at 10% (price).
Country Garden intends to raise USD 360 million by issuing 870 million new shares at discounted price. 2026 bond trade at a price of 36%.
Currencies
The USD gains from EUR 1.025 to 1.014m on rate differential.
Note the volatility of the Turkish lira on the back of Fitch downgrade of main banks: yesterday it moves in a wide channel from 17.80 and 18.30 and will probably loss value today.
Stocks
The class sunk yesterday and close at session lows, dropping from 1% to 2%. Futures open today recovering, while expecting the FED’s decision.
Commodities
Crude: US plans to sell additional 20 million barrels from strategic reserve, the day it was known inventories were notable lower than expected. The news offer a support to crude with the Brent at 100 and WTI at 95, after a fall of 25% since highs seen in June.
Precious metals found support at 1,700 and 18 for Gold and Silver, but expectations of higher rates put a cap to a clear take off, which would come hand to hand with picking inflation. A stop on the race of rates would be needed for this class to start shining.
Best regards
