2023/02/13 (169) Column

This Year 2023
Will Be Different Than The Past Year 2022


According to Goldman Sachs, Germany and the whole of Europe could fall into a recession in 2023.
At the beginning of 2022, after Russia’s war of aggression against Ukraine, I was already of the opinion in the summer of 2022 that this should have happened in the second half of 2022. But the US economy developed better than I feared. The Gross Domestic Product (GDP) in the United States expanded 1 percent in the fourth quarter of 2022 over the same quarter of the previous year. After growth of 1.9% in the 3rd quarter. That’s why I won’t worry about an impending US recession until we’ve already had a negative quarter. So, until to date, I have recorded everything else as political excitement on the part of the political opposition.

The fact that growth in our so-called West, due to the green economic policy, will not be above average is due to the political nature of a state-organized socialist scarcity economy. Which is why GDP is likely to continue to weaken. And then also in the euro-zone as well as in the United Kingdom. Which the high energy prices make inevitable for us consumers and taxpayers. Because the income of the majority of the population is not increasing at least as much at the same time. I personally expect, if at all, a downturn of up to +1% and/or -1% in the USA, our euro zone, and also in my home country Germany, for the 4 quarters in 2023! If any? GDP is also expected to fall in Great Britain. However, I don’t overlook the current political theater on the island, let alone the even more volatile financial market in London. Which is why I also closed our gbpusd long. And switched to an eurusd long 4XSetUp. And that too, although in the gbpusd pair is an higher profit opportunity incl. a higher political risk. Because our German liberal green federal government, under the leadership of a social-democratic chancellor, has so far mastered the lack of Russian gas imports without putting too much strain on the economy. And relieves us as far as it can without putting too much strain on the federal budget.

Global growth slowed through 2022 on a diminishing reopening boost, fiscal and monetary tightening, China’s Covid restrictions and property slump, and theRussia-Ukraine war. We expect global growth of just 1.8% in 2023, as US resilience contrasts with a European recession and a bumpy reopening in China.

The US should narrowly avoid recession as core PCE inflation slows from 5% now to 3% in late 2023 with a ½pp rise in the unemployment rate. To keep growth below potential amidst stronger real income growth, we now see the Fed hiking another 125bp to a peak of 5-5.25%. We don’t expect cuts in 2023.

The Euro area and the UK are probably in recession, mainly because of the real income hit from surging energy bills. But we expect only a mild downturn as Europe has already managed to cut Russian gas imports without crushing activity and is likely to benefit from the same post-pandemic improvements that are helping avoid US recession. Given reduced risks of a deep downturn and persistent inflation, we now expect hikes through May with a 3% ECB peak.

This were the statements from the Goldman Sachs Investmentbank back in November 2022. And I’ve more or less followed them since then. Outside of Europe, I expect the global economy to grow, albeit more slowly than in 2022. India will probably have the highest growth of the large nations at around 7 percent. China is likely to miss slightly on its targets at just 4 percent. While in the USA, the euro zone, and or also in Germany, in the 4 quarters of 2023, it should run more or less around zero, up or down. The US, the Eurozone, and also Germany, are most likely avoiding a recession because unemployment figures remain stable. In contrast to other cycles of this type, there is a lack of skilled workers, so that many vacancies have to be filled, which is likely to be reflected in stronger increases in salaries. While China, on the other hand, is likely to remain paralyzed by the current Covid wave until the end of the first half of 2023, our western calendar. And hopefully, from the end of June 2023, beginning of July 2023, the Corona Virus disaster will finally finally be over…
DEVISE 2 DAY 48h
– Last News About What Drives The News Media

Merciless battle for Bachmut rages
Wagner Group reports success

Fierce fighting is raging in the north of the Ukrainian city of Bakhmut, which has been fought over for months. The situation in the suburb of Paraskowijwka is difficult, the Ukrainian presidential office said on Monday. Russian forces covered the area with heavy artillery and assault attacks. Wuhledar, which is even further north, is also under heavy fire. In the Donbass region of Donetsk, invading forces shelled a dozen towns and villages, Governor Pavlo Kyrylenko said. A rocket hit a hospital in Druzhkivka. Seven houses and a kindergarten were hit in Pokrovsk. The shelling intensified, the Russians were massing troops. “We are experiencing a very tough fight in which the Russians spare neither themselves nor us,” said Kyrlenko. In the neighboring region of Luhansk, according to Governor Serhiy Hajday, the Russians retreated after days of heavy fighting near Kreminna.

However, the attackers have not run out of breath, Hajdaj said on television. According to the presidential office, the Russians shelled more than 20 towns and villages in the Kherson region in the south. Two people were killed when their car hit a mine. In the Dnepropetrovsk region there was one dead and two injured. The British Ministry of Defense said on private broadcaster TV N24 that Russian forces are strengthening their defenses in southern Ukraine and are bringing additional forces there despite the attacks in Donbass. Kremlin spokesman Dmitry Peskov assured that Russia was not facing a second wave of mobilization.

Images of bitter battles have been seen more frequently on diverse TV Broadcasts here in Germany in the last few days. For us, who want to earn money on the financial market, that doesn’t mean anything good – regardless of the humanitarian disaster that costs lives in eastern ukrain (on both sides).

Because without a retreat from leftist ideological green politics, under the guise of democracy, here in the West. Let alone without a Russian military withdrawal from eastern Ukraine it is unlikely to bring inflation back – quite the opposite! And US WallStreet, the isolated stock markets distributed around the globe, seems to feel it more and/or less.
DEVISE 2 DAY Another 48h – Last News About How Drives The Price Action

With almost every economic indicator pointing to a temporary pause in the disinflationary trend, market participants are eagerly awaiting (and worryingly) Tuesday’s consumer prices. Bonds are already pricing in a higher interest rate peak, as well as a longer period at elevated interest rates. As long as inflation is slightly above expectations, the bond market should be able to digest it. Be that as it may, such a scenario has hardly been priced in on the equity side so far. This is because the growth picture has improved globally. Even if the stock market sees a positive reaction, a surge above 4200 in the S&P 500 should only be possible if there is a surprise fall in consumer prices. My motto remains to use exit rallies to establish shorts. I expect a difficult summer.

Forex 10-Year Government Bond Yields Stock Markets

Dollar Firms Up Ahead of Inflation Data Italy 10-Year Government Bond Yield Edges Higher China Shares Rise as Growth Stocks Lift
Yen Weakens on Dovish Ueda Remarks China 10-Year Government Bond Yield Hovers at 2.9% FTSE 100 Clinches Another Record High
Chinese Yuan Falls as US Inflation Data Looms French 10-Year Bond Yield Back to Over 1-Month High European Stocks Start Week on Positive Note
US Stocks Hold onto Gains Ahead of CPI Report
Forex
Dollar Firms Up Ahead of Inflation Data
Yen Weakens on Dovish Ueda Remarks
Chinese Yuan Falls as US Inflation Data Looms

Dollar Firms Up Ahead of Inflation Data
The dollar index rose toward 104 on Monday, inching closer to its highest levels in five weeks as investors geared up for Tuesday’s key US inflation data that may support the case for more Federal Reserve interest rate hikes. Last week, a chorus of Fed officials reaffirmed their commitment to bring down inflation with further rate increases. Fed Chair Jerome Powell also noted that rates could peak higher than anticipated if the jobs market remains robust and inflation numbers do not abate, thus, dashing hopes for the tightening cycle termination. Meanwhile, US consumer sentiment jumped to a 13-month high in February, exceeding market estimates. Also, the University of Michigan survey showed a one-year inflation outlook of 4.2%, higher than the final number in January. The biggest selling activity was reported against the Japanese yen as investors were coming to terms with the fact that new BoJ governor Ueda won’t be as hawkish as initially expected.

Yen Weakens on Dovish Ueda Remarks
The Japanese yen weakened past 132 per dollar, sliding back to its lowest levels in five weeks following the surprise nomination of Kazuo Ueda as the next Bank of Japan governor. The official stated that the central bank’s current ultra-easy policy “is appropriate” and “needs to be continued”, having dashed the previous speculations about nearing adjustments. The BOJ maintained its ultra-low interest rates and left its yield control policy unchanged at its January meeting. Governor Haruhiko Kuroda reiterated that the 2% inflation target must be achieved in a sustainable fashion, one that is accompanied by a healthy rise in wages. Meanwhile, the yen also came under pressure ahead of US inflation data, which could reinforce the case for more Federal Reserve interest rate hikes.

Chinese Yuan Falls as US Inflation Data Looms
The offshore yuan depreciated past 6.82 per dollar, hitting its weakest levels in five weeks ahead of key US inflation data that could reinforce the case for more Federal Reserve interest rate hikes. Investors also monitored geopolitical developments after the US shot down an unidentified object over Michigan. It’s been the fourth time in eight days that such an incident occurred, starting from the targeting of a Chinese balloon over the Atlantic Ocean. Meanwhile, the yuan remained up more than 7% from its October lows as strong domestic data reflected China’s ongoing economic recovery following the rapid dismantling of strict Covid restrictions. The country also posted robust holiday spending and tourism data during the week-long Lunar New Year celebrations. On the monetary policy front, the People’s Bank of China kept its key lending rates unchanged for the fifth straight month at its January meeting.

10-Year Government Bond Yields
Italy 10-Year Government Bond Yield Edges HigherChina 10-Year Government Bond Yield Hovers at 2.9%
French 10-Year Bond Yield Back to Over 1-Month High

Italy 10-Year Government Bond Yield Edges Higher
The yield on Italy’s 10-year government bond was around 4.2%, higher than 3.9% from February 2nd, as investors expect the ECB to raise interest rates further and hopes for the pause in current tightening cycle fade away. Meanwhile, Italian Prime Minister Giorgia Meloni recently said the government wanted to reduce its dependence on foreign creditors by increasing the number of Italians and Italian residents that hold the national public debt. To do so, they are considering several measures and instruments dedicated to domestic savers, including the anticipation of retail bond issuance.

China 10-Year Government Bond Yield Hovers at 2.9%
The yield on China’s 10-year government bond fell back to 2.9% in February after approaching 3% in late January as traders monitored the country’s reopening. China lifted its borders, moved away from the strict zero-COVID policy, and took measures to support the property sector late last year. The economy is expected to rebound in 2023, although a big boost has yet to materialize. The IMF revised China’s growth outlook sharply higher for 2023, to 5.2% from 4.4% in October. Meanwhile, foreigners sold roughly CNY 616 billion worth of bonds in 2022, taking their holdings down to CNY 3.4 trillion, with the trend strengthening this year, according to Reuters. Some foreign investors are preparing for monetary tightening, while others see more RRR cuts from the PBOC in 2023.

French 10-Year Bond Yield Back to Over 1-Month High
France’s 10-year government bond yield rose back above 2.8%, moving closer towards Wednesday’s over one-month high of 2.859%, as hawkish remarks by several European Central Bank policymakers dashed hopes of a quick end of the monetary tightening cycle. ECB’s Joachim Nagel reaffirmed his call for more interest rate increases, saying the bloc’s central bank must act decisively to prevent inflation expectations from rising far above its 2% target, while board member Isabel Schnabel said earlier in the week that the rate hikes delivered by the bank so far were having little impact on inflation. The ECB has raised interest rates by 50bps at its February meeting, pushing up borrowing costs to the highest level since late 2008, while markets have priced in 100 bps of further rate hikes, implying a deposit rate above 3.5% by August 2023. On the data front, France’s inflation rate picked up slightly to 6% in January, remaining close to a four-decade high of 6.2% seen in October and November.

Stock Markets
China Shares Rise as Growth Stocks Lift
FTSE 100 Clinches Another Record High
European Stocks Start Week on Positive Note
US Stocks Hold onto Gains Ahead of CPI Report

China Shares Rise as Growth Stocks Lift
The Shanghai Composite rose 0.72% to close at 3,284, while the Shenzhen Component jumped 1.14% to 12,114 on Monday, hitting their highest levels in over a week as an improved economic outlook prompted investors to scoop up shares of growth-oriented Chinese stocks. However, traders remained cautious about the prospect of further policy tightening from the Federal Reserve ahead of key US inflation data on Tuesday. Markets also monitored geopolitical developments after the US shot down an unidentified object over Michigan, making it the fourth time in eight days such an incident occurred, starting from the targeting of a Chinese balloon over the Atlantic Ocean. High-growth technology stocks led the advance, including Inspur Electronic (10%), Tianyu Digital (10%), Kunlun Tech (12.9%), 360 Security Technology (3%), and Zhonghang Electron (20%). Other index heavyweights also gained: Kweichow Moutai (2.5%), Sany Heavy Industry (10%), and Contemporary Amperex (3.2%).

FTSE 100 Clinches Another Record High
London equities rallied on Monday, with the benchmark FTSE 100 closing at a fresh record peak of nearly 7,950 points, driven by gains in the consumer staples, industrials, and utility sectors. Investors welcomed headlines suggesting that British employers expect to raise wages for their staff by the most in at least 11 years while remaining cautious ahead of US inflation data that should give clues on the future policy path. Regarding individual share price movement, Spirax-Sarco Engineering and Unilever outperformed their domestic pairs, up more than 3% each. Smiths rallied almost 2% after Goldman Sachs initiated coverage with a “buy” rating.

European Stocks Start Week on Positive Note
European equity markets rose on Monday, with the benchmark Stoxx 600 adding 0.9% to above 460 prompted by gains in household goods while energy shares underperformed. Among single stocks, Swedish Saab jumped almost 10% and other aerospace and defense firms also got a boost after the Indian Prime Minister said India wants to raise its annual defense exports to $5 billion by 2024-25 from $1.5 billion. Meanwhile, the European Commission lifted its economic outlook for both the European Union and the Euro Area, saying the blocs are about to avoid an anticipated recession, helped by falling gas prices, the ease of the energy crisis and a strong labour market. Looking ahead, investors await the highly-anticipated US CPI report due tomorrow. Domestically, the German DAX rose 0.6% to nearly 15,400.

US Stocks Hold onto Gains Ahead of CPI Report
All three major US indexes finished in the green on Monday, and passed the worst week of the year so far, as investors looked for clues on interest rate path in Fed officials’ latest comments while awaited the upcoming US inflation report due tomorrow. The Dow added almost 370 points on Monday, while the S&P 500 and Nasdaq 100 were up 1.1% and 1.4%, respectively. On the one hand, Fed Governor Michelle Bowman was among the latest officials to warn that interest rates would need to keep rising. On the other, Tuesday’s CPI report will likely show that annual inflation slowed to 6.2% in January, the lowest since October 2021, reigniting hopes for a policy pivot despite the persistently tight labor market. On the corporate side, Meta and Twilio added 3% and 2.1%, respectively, after announcements of further layoffs. Coca-Cola, Airbnb, Marriott International, Analog Devices, Shopify, and Cisco Systems are among the companies that have their earnings reports due later this week.DEVISE 2 DAY 48h
– Where I Was Wrong, Where I Was Right

After TESLA stock traded at $202 last week; and we have once again reached our price target, I would like to argue a little more cautiously this week! The risk of disappointment in terms of inflation this week cannot be ruled out. Nevertheless, we remain long in our remaining open positions this week: long 4XSetUps in EURUSD, long 4XSetUps in DOW Future, and/or long in DAX Future. In addition, I formulated a new long 4XSetUps for the ADIDAS share yesterday. And finally let me be persuaded to formulate a 4XSetUp for BITCOIN. Okay guys, as of today we are also long BITCOIN above 20000. Even if I am not a friend of cryptos – quite the opposite! But I don’t write my D2D for me, but for you.

In addition, I am still undecided to formulate a new further 4XSetUp via UKOIL, i.e. a CFD on the Brent future. And this despite the fact that the price of oil made a noteworthy development again today.

Brent crude futures rose to near $87 per barrel on Monday, after falling below $85 earlier in the session, as investors balance supplies from Turkey and Russia while awaiting the US CPI report. Supply concerns eased after a cargo of Azeri crude set sail from Turkey’s Ceyhan port on Monday, the first since a devastating earthquake in the region on February 6. Last Friday, the US oil benchmark jumped more than 2%, after Russia announced its intention to cut output by 500,000 barrels a day in March, or about 5% of total production. Meanwhile, investors await key US inflation data on Tuesday for fresh clues about the Fed’s policy plans after a chorus of Fed officials indicated their commitment to bring down inflation with more rate hikes as the US jobs market remained strong, negating expectations of the current cycle termination.