STATE OF THE MARKETS
Dollar rebounds as stocks tumble . US stocks erased earlier gains on Wednesday on moderate cashes out that sent the Dollar higher, back to the 113 handle, as no bonds buying were evident, sending yields higher across the board. The small cap Russell (-1.72%) fell the most, followed by Nasdaq (-0.85%), S&P (-0.67%) and Dow (-0.33%) while the 10Y benchmark jumped to 4.14%.
In the commodity markets, crude oil pushed higher after fears of new sanctions on Russia would squeeze supply. As at writing, the black gold has pierced the $86.20/bl barrier and is pulling back to the $86 handle. Fears of aggressive hikes from the Federal Reserve has sent gold reeling lower to $1,627.65/oz while iron ore continues to flirt around $94.85/tn waiting for the next catalysts.
In the FX space, short and medium term accounts continue to be bullish as Kiwi, Sterling and Loonie lead the demand while Swiss and Yen continue to be offered. Long term accounts were unchanged, signaling movement in the short and medium term accounts could be mere rebalancing.
On Thursday, markets expect to remain cautious as investors shift focus to the jobless claims number, manufacturing index and leading indicators to gauge the health of the US economy and Fed’s plan for rate hikes. Earnings to watch include Danaher (DHR), Phillip Morris (PM), Union Pacific (UNP), AT&T (T), BlackStone (BX), Marsh & McLennan (MMC), CSX Corp (CSX) and Freeport-McMoRan (FCX).
OUR PICK – EUR/GBP
On medium term pullback. We see current political turmoil in the UK will continue to weigh the Sterling against the Euro as the ECB continues to tame inflation while the Bank of England in a tug of war with its Treasury. Sentiments model point to medium term pullback as long term remains bullish while short term has turned mildly bullish.
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