EXANTE Macro Insights

EXANTE Macro Insights

Markets upbeat on positive earnings, but geopolitical risks rising.

  • The Fed’s challenge
  • A seasonal glow 
  • The UK is recession bound
  • Could a new partnership save crypto?
  • Key data for the coming week
  • Upcoming Corporate earnings

US:
S&P 500 ↑ 9.68% QTD and ↓ 12.89% % YTD
Nasdaq 100 ↑ 15.70 % QTD and ↓ 18.45% YTD
Dow Jones Industrial Average ↑ 6.62% QTD and ↓ 9.70% YTD
NYSE ↑ 5.08% QTD and ↓ 11.3% YTD 

Europe:
Stoxx 600  ↑ 7.82% QTD and ↓10% YTD
DAX  ↑ 6.88% QTD and ↓14%YTD 
CAC 40 ↑ 10% QTD and ↓8.94% YTD 
IBEX35 ↑ 0.77% QTD ↓ 6.34% YTD 
FTSE MIB  ↑ 6.35% QTD and ↓17.19% YTD
FTSE 100 ↑ 3.89% QTD and ↑ 0.86% YTD

Global:
MSCI World Index ↑ 7.08% QTD and ↓15.35% YTD
Bitcoin ↓ 51.39% YTD

Note: As of 5:30 pm EST 4 August 2022

Is it mission impossible for the Fed? The big questions facing the Fed are whether peak inflation has been reached and how much its rate hikes are hitting employment and growth. On Friday markets will be looking at employment data; although a slowdown for July is expected, it probably will not be enough to really impact the unemployment rate. All eyes will be focused on Wednesday’s inflation data as Fed policymakers this week continued to support aggressive rate rises to tame inflation, calling for at least a 50 bps raise and even a possible 75 bps. According to  Cleveland Fed President Loretta Mester, "Interest rates should continue to rise this year and into next year through the first half and maybe by then we can pause and we can start bringing them back down." 

We’re all feeling positive. Despite the ongoing warnings of a global slowdown, uncertainty around central banks ability to contain inflation, and rising geopolitical risks that threaten global supply chains, i.e. half of the global container fleet and 88% of the world’s largest ships by tonnage passed through the Taiwan Strait this year, according to data reported by Bloomberg, the most recent reporting season has seen tech stocks like Apple, Meta Platforms, AmazonAlphabet, PayPalNortonLifeLockMicrosoft, and Uber Technologies all up.  Energy companies have also benefited from the ongoing energy supply shock including Chevron Corporation, Exxon Mobil, Occidental Petroleum Corporation, and Marathon Oil Corporation. Healthcare and associated stocks such as Centene Corp, G1 Therapeutics Inc, Novocure limited, Envista Holdings and Biolase, are also seeing better performance. 

Recession or stagflation for the UK? On Thursday the Bank of England’s Monetary Policy Committee voted 8-1 for a 50 bps rise in the Bank Rate to 1.75%, the highest level since late 2008. The BoE warned that Britain was facing a recession from Q4 this year throughout all of 2023, with a peak-to-trough fall in output of 2.1%. It now forecasts that the UK will  have 13.3% inflation by October and that it will still be at 9.5% by Q3 2023. This means that UK households are facing the biggest squeeze on disposable income since 1964. In addition, there are significant doubts about promised tax cuts from Tory candidates seeking to replace Prime Minister Boris Johnson following his resignation in July and the effect these would have on the economy. The GBP has fallen over 10.2% this year against the USD. 

Is Crypto on its way back? The world’s largest asset management company, BlackRock. announced that it is partnering with Coinbase Global to make it easier for institutional investors to manage and trade Bitcoin. Coinbase said in May that institutional investors accounted for about three-quarters of its $309 billion in trading volume in Q1. The SEC is still looking into whether Coinbase  let Americans trade digital assets that should have been registered as securities. This potential boost for Bitcoin comes as CME Group Inc. announced on Thursday that it will introduce Bitcoin and Ether Euro futures on Aug. 29.

Key data to look out for this coming week 

In Europe: On Friday there is On Wednesday the German Harmonised Index of Consumer Price Data, a good indicator of Eurozone price stability.  There is also Italian CPI data.

In the US: On Friday there’s average hourly earnings data, labour force participation rate data, nonfarm payrolls and unemployment rate data.  On Tuesday is nonfarm productivity data and unit labour costs. On Wednesday is critical CPI data as markets continue to see if inflation has peaked or if the Fed will be more likely to continue its aggressive stance in September. On Thursday is CPI Core data, initial and continuing jobless claims, and PPI data.

In the UK: On Tuesday is the BRC like-for-like retail sales data showing the strength of the retail sector. 

Upcoming Corporate Earning Reports:

Monday:Palantir Technologies, Viatris, Dominion Energy, Softbank Corp.
Tuesday: Coinbase GlobalPeloton, Unity Software, Roblox Corporation, Emerson Electric.
Wednesday:Walt Disney Company, Honda Motor Co.
Thursday:Deutsche Telekom, Siemens, Illumina, Rivian Automotive.

DISCLAIMER: While every effort has been made to verify the accuracy of this information, EXT Ltd. (hereafter known as “EXANTE”) cannot accept any responsibility or liability for reliance by any person on this publication or any of the information, opinions, or conclusions contained in this publication. The findings and views expressed in this publication do not necessarily reflect the views of EXANTE. Any action taken upon the information contained in this publication is strictly at your own risk. EXANTE will not be liable for any loss or damage in connection with this publication.

This article is provided to you for informational purposes only and should not be regarded as an offer or solicitation of an offer to buy or sell any investments or related services that may be referenced here.

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