Category Archive: 4.) Marc to Market

Stocks and Bonds Extend Rally

Overview:  The big bond and stock market seen yesterday has continued today.  The Reserve Bank of Australia’s reversion to a quarter-point hike stokes hope that the aggressive tightening cycle more broadly is set to slow.  The UN’s Conference on Trade and Development became the latest to warn that the synchronized tightening risks a global recession and a prolonged period of stagnation.  The large equity markets in the Asia Pacific region rose...

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Monday Blues

Overview: The markets begin October with some trepidation.  Rumors continue to circulate about the health of a large European bank, cross currency swaps are elevated, suggest dollars are more difficult to access.  The S&P 500 settled on new lows for the year at the end of last week.  China and South Korea on closed for national holidays. Chinese market will not open until next week, and Hong Kong markets are closed tomorrow.  While the Nikkei...

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October 2022 Monthly

The historic dollar rally accelerated in September. By some measures, it is as rich as it has been in the half-century since the end of Bretton Woods. Persistent price pressures, a robust labor market in many dimensions, and the Federal Reserve's latest forecasts warn that financial conditions will tighten into next year. However, we suspect that the market may have seen peak Fed hawkishness when it briefly priced in a terminal Fed funds rate of...

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Week Ahead: Macro and Prices

The market has much to digest. The Bank of England's new purchases of Gilts coincided with a reassessment of the trajectory of Fed policy. After the hawkish FOMC decision and forecasts, the market briefly thought the terminal rate could be 5.25-5.50% in the middle of next year. However, by the end of last week, it had returned to around 4.5% at the end of Q1 23.

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Wake Me Up When September Ends

Overview: Benchmark 10-year yields are off 6-8 basis points in Europe and the United States. The panic seen at the start of the week in the UK has subsided considerably, as sterling recovered to almost where it was a week ago, while BOE’s hand has help steady the Gilt market. Equities in Asia Pacific suffered after the losses in the US yesterday. Hong Kong and India were notable exceptions. Europe’s Stoxx 600 is recouping around half of yesterday...

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Semblance of Calm Returns

(Business travel will prevent me from updating the blog for the next couple of days.  Thank you for your patience.  Good luck.)Overview: After extending last week’s moves yesterday, the capital markets are mostly calmer today. Sterling is firmer, as are UK Gilts.

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Sterling Continues to be Pounded

Overview: Sterling’s pounding continued in Asia where it was driven to $1.0350, a new record low before stabilizing. UK rates also continued to rise sharply after the new government promised more tax cuts next year. The right-wing victory in Italy was not surprising but it kept pressure on Italian bonds.

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The Precipitous Moves in the Roller Coaster Known as the Foreign Exchange Market

The dollar surged last week. Sure, the push of the Fed was notable, but the larger move from Sweden's Riksbank failed to impress. In fact, the Swedish krona was the poorest performer among the G10 currencies, tumbling 5% last week.

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Macro: Tell Us Something We Don’t Already Know

As September winds down, three sets of economic reports will draw the most attention. We will review them and then offer a snapshot of the emerging market central bank meetings.

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It will be Enough, even if Too Much

Business travel commitments keep me from updating the blog until the weekend, but I wanted to share a few thoughts post-Fed. First, the Fed was more hawkish, and the median dot sees 125 bp increase in the target rate in Q4.  The hawkish thrust was also evident in projecting that the target rate will remain higher for longer.  Even in 2025 sees the target rate above the longer-term (neutral) level.   Second, the market still does not fully accept...

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Putin and Powell Lift Dollar

Overview: Between Putin’s mobilization of 300k Russian troops and Fed Chair Powell expected to lead the central bank to its third consecutive 75 bp hike later today, the dollar rides high. It has recorded new two-year highs against the dollar bloc and Chinese yuan, while sterling was sent to new lows since 1985. Asia Pacific bourses were a sea of red for the sixth decline in the regional benchmark in the past seven sessions. Surprisingly, Europe’s...

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The Greenback Firms to Start the New Week, Stocks Slide

Overview:  The busy week is off to a slow start as Japan is on holiday and the UK and Canadian markets are closed to honor Queen (Australia will commemorate with a holiday on Thursday). Nevertheless, the sell-off in equities continues and the US dollar is firm. Most of the large markets in Asia fell. India is a notable exception. Its benchmark rose for the first time in four sessions, helped by bank shares and Infosys. Europe’s Stoxx 600 is off for...

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The Dollar may Stabilize Ahead of the FOMC

Verbal intervention proved sufficient to keep the US dollar below JPY145, but the greenback gained broadly. It rose to new two-year highs against the dollar-bloc and Chinese yuan ahead of the weekend and to levels against sterling not seen since 1985.

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No One Wants a Recession, but Central Banks are willing to Take the Risk to Demonstrate Anti-Inflation Resolve

The week ahead is busy. Three G7 central banks meet, the Federal Reserve, the Bank of Japan, and the Bank of England. In addition, Japan and Canada report their latest CPI readings, and the flash September PMI are released.  There are three elements of the Fed's meeting that are worth previewing. First is the interest rate decision itself and the accompanying statement. Ironically, this seems to be the most straightforward. Even before the August...

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The Dollar Heads into the Weekend Well Bid

Overview:  The dollar is well bid. It has risen to new two-year highs against the dollar bloc and Chinese yuan. Aided by worse than expected retail sales, sterling, on its anniversary of leaving the European Exchange Rate Mechanism fell to its lowest level since 1985. This fits into the broader risk-off move. The S&P 500 fell to new two-month lows yesterday, and FedEx warnings after the bell yesterday add to the string of worrisome comments...

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Calmer Capital Markets…for the Moment

Overview: The capital markets are quiet today. Equity markets and bond yields have a slight upside bias, while the dollar is little changed. Despite reports that the lockdown in Chengdu is easing, Chinese equities underperformed in the Asia Pacific region.

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Markets Remain on Edge

Overview: The firmer than expected US CPI set off a major reversal of the recent price action. It is a two-prong issue. The first is about inflation and the squeeze on the cost-of-living.

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Will the Dollar Recover After CPI?

Overview: The US dollar remains offered ahead of today’s CPI report. Most European currencies are outperforming the dollar bloc, and the greenback is holding inside yesterday’s range against the yen. Most emerging market currencies are firmer, as well.

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Careful about Chasing the Dollar Lower in North America Today

The bout of profit-taking on long dollar positions begun last week has carried into the start of this week. Despite the escalating rhetoric, the yen is not participating today and is trading within the pre-weekend ranges. The greenback’s lows have been set in the European morning and have stretched the intraday momentum indicators, suggesting that North American dealers may not follow suit.

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