2023/02/28 (180) Column

Recession 2023!?
How Could We Still Benefit?!


I cannot and will not rule out possible recessions in the various leading economies in the world.
However, since there has hardly been a significant negative quarter yet, I still don’t assume it. And should we actually fall into a recession, it will probably be weak and/or without much pain. Because the worst, in the form of high inflation, may already be behind us.

As you can see, I’m realistically optimistic that we won’t experience a recession in 2023.
And if we do, it should be flat, in a historical context! What do I mean? GDP growth in the 4 quarters of 2023 compared to the same quarter of the previous year between +1% & -1%. However, this can be worse in some regions, such as the United Kingdom, as well as in individual countries in the euro zone. As the combination of lower growth, simmering inflation and/or even limited public spending poses challenges for both people and governments. Nevertheless, as a conservative, freedom-loving Catholic, with a Croatian immigration background, I am to the best of my knowledge and belief more than optimistic for my home country Germany, that our non-denominational, social democratic Chancellor Scholz, with the help of the liberal and green will support, our German economy, in this year 2023.
 
The greatest risks for the economy and markets remain, not only in Germany but also in the euro zone, as well as in the USA, the United Kingdom, and/or the rest of the world, old familiar ones, such as the pandemic and geopolitical ones conflicts. There is (still) no solution for an end to the Ukraine war in sight – and thus no solutions for its consequences; which I have been commenting on personally every week since this year, in every DEVISE 2 DAY Affiliate Financial Market Online Newspaper Edition. The economic consequences in the form of trade relations with the remaining states, with Russia and/or Ukraine, can be read in the trade balance; such as the supply of fossil fuels and food. Meanwhile, even in the Far East, new troubles may loom if tensions between North and South Korea, let alone between China and Taiwan, escalate. But I don’t assume that’s the case – but many colleagues on radio, TV, and or even the Internet, always bring this up as a topic. From a purely economic point of view, the latter conflict is particularly important, since Taiwan is the world’s largest manufacturer of semiconductor chips. That´s why the US is hysterically dealing with respiratory issues with Taiwan. I personally don’t – and I’m not commenting on it (yet).

Nevertheless, the chances for long-term investments throughout 2023 are not bad in the new year.
Because bonds are yielding returns after the central banks have raised interest rates, stocks are no longer without an alternative – and were already punished accordingly in 2022. However, since the FED reacted promptly to the upcoming US inflation last year 2022 with a fast and high interest rate hike cycle, the US dollar should run out of air in this year 2023. That’s what I actually thought until a few days and weeks ago. But the latest US inflation data proved me wrong. So I haven’t had a long 4XSetUp on the DOW Future since 34,000 points. Since the FED will probably be the first of the leading central banks to lower interest rates again next year 2024, willy-nilly. But that was by far not as early as previously thought. Because the US Dollar Index turned up again at more or less 101 points, including an expensive US Yield Cruve. Therefore, a reassessment is due for this year 2023. Which, however, is not to be understood as a signal from my humble person, because of this column, to now liquidate all long positions in shares. While I don’t think 2023 will be great for stocks, I still expect solid double-digit percentage gains for individual stocks.

But as far as the overall market on US Wall Street is concerned, I’ve become pessimistic again for New York. Since there are returns in Chicago – and without risk. More or less 4% for the next 6 months! Can the Dow Jones do that in New York? That`s why I declared the 15,000 points in the DAX Future as our current front line. Although I still assume that we will trade new all-time highs in the DAX Future as well as in the Dow Future in the coming year 2024. But with a weaker eurusd in 2023, that should unexpectedly happen later than previously thought! Or? In addition to technology stocks from the NASDAQ, European stocks should be particularly exciting because they were sold off particularly hard, as well as Asian stocks, which could benefit from a recovery in the Chinese economy. Like TESLA, which I don’t current long 4XSetUp Trading Capability; but always keep an eye on this stock…
DEVISE 2 DAY 48h
– Last News About What Drives The News Media

The commander of the Ukrainian land forces, Olexander Syrskyj, described the situation around the embattled town of Bakhmut in the east of the country as “extremely tense”. “Regardless of noticeable losses, the enemy throws the best prepared units of the Wagner mercenaries into the attack,” said the colonel general on Tuesday, according to the army. The Russian units tried to break through the defense lines to encircle the city. Only a few thousand people live in Bachmut today. Russia has the mercenary troop Wagner deployed there.

During the night, Ukrainian Deputy Defense Minister Hanna Maljar spoke of a “difficult situation” at the front. The Russian army is attacking more intensively near Bakhmut in particular. “The enemy uses the tactics of attrition and total destruction in its offensive actions,” she wrote in the Telegram news service. Despite their numerical inferiority, the Ukrainian units engaged in “active defense”.

Ukraine has been defending itself against the Russian invasion for more than a year. The city of Bakhmut, which once had around 70,000 inhabitants in the Donetsk region, has been the subject of fighting since late summer. According to Ukrainian military observers, a hose just over four kilometers wide west of the city is being controlled by its own troops. Through these go the heavily shelled connections to the west. In all other directions, Russian units are pressuring the Ukrainians.
DEVISE 2 DAY Another 48h
– Last News About How Drives The Price Action

TDespite US department store giant Target sharply lowering earnings and margin prospects, the stock is up about 4 percent on the results, with Wall Street futures also on the winning side. According to J.P. For Morgan, the range from 3940 to 3950 is important for the S&P 500, i.e. the mark around the 200-daily line. Below this level, and towards the 100-day moving average (at 3920), $50bn of selling could be activated through quantitative trading models. The focus today is primarily on the results reported since last night. Zoom Video can significantly beat revenue targets and revenue prospects thanks to savings. Norwegian Cruise Line shares are under pressure on an inflated loss, falling around 7%. Chevron benefits from today’s analyst day. Management confirms most of the key points and increases the pace of the share buybacks. Goldman Sachs will also be in focus for today’s Analyst Day.

Forex 10Y Bond Yield Commodities Stock Markets

USDMXN around 5Y high Italian 10Y rises Oat hits low Asian Stocks rise
USDCAD edges lower Indian 10Y rises Gold extends losses Euopean Stocks waver
USDINR at record lows German 10Y tops highs Brent Crude risesd FTSE 100 closes lower
GBPUSD up for 2nd day WallStreet books monthly drop

Forex
Mexican Peso Hits Near 5-year High
Canadian Dollar Edges Lower on Weak GDP Performance
Indian Rupee Holds Rebound from Record Low
Sterling Edges Up for 2nd Day

Mexican Peso Hits Near 5-year High
USDMXN decreased to a near 5-year low of 18.287

Canadian Dollar Edges Lower on Weak GDP Performance
The Canadian dollar weakened to approach $1.36, the lowest level since January 3rd, after fresh economic data painted a mixed picture. The GDP unexpectedly stalled in Q4 last year but preliminary estimates point to a rebound in January. At the same time, annual inflation fell to 5.9%, the lowest in near a year and the core rate unexpectedly eased to 5%, compared to market forecasts it would go slightly up to 5.5%. Recent data reinforced expectations the BoC will pause its tightening cycle in March.

Indian Rupee Holds Rebound from Record Low
The Indian rupee has been hovering around 82.6 per USD and holding the rebound since the currency equaled its record low of 83 on February 24th as investors assessed key growth data and its impact on future monetary policy decisions. The Indian GDP added 4.4% year-on-year in the quarter ending December, missing expectations of a 4.6% expansion and underscoring the significant slowdown in the national economy. Still, growth estimates for the current financial year were left unchanged at 7%.

Sterling Edges Up for 2nd Day
The British pound edged up to $1.208, following a 1% gain in the previous session lifted by the announcement of a deal between the UK and the EU over post-Brexit trading arrangements for Northern Ireland. Sunak’s government will now have to get politicians from Northern Ireland’s Democratic Unionist Party and an influential group of pro-Brexit lawmakers from his own party to back the deal.

10Y Bond Yield
Italian 10-Year Bond Yield Rises to 2-Month High
Indian 10-Year Bond Yield Rises to 3-Month High
German 10-Year Bond Yield Tops Fresh 2011-Highs

Italian 10-Year Bond Yield Rises to 2-Month High
The yield on the Italian 10-year BTP rose to the 4.5% level in late February, hovering at its highest since the start of the year, as expectations of insistent monetary tightening from the ECB continued to pressure European bonds. Inflation prints for France and Spain were above market forecasts in February, strengthening the Council’s rhetoric about the prevalent upside risks of price growth. On top of that, stronger-than-expected PMI data in the currency bloc added leeway for incoming rate hikes.Indian 10-Year Bond Yield Rises to 3-Month High
The yield on the Indian 10-year government bond rose above 7.46% at the end of February, the highest since early November, as concerns about aggressive monetary tightening from major central banks hampered demand for government debt. Unsustainable price growth drove the RBI to consider extending its tightening path into the April meeting, even though the latest data pointed to slower-than-expected growth.

German 10-Year Bond Yield Tops Fresh 2011-Highs
Germany’s 10-year bond yield rose for a third straight session to above 2.64% on Tuesday, a fresh high since July of 2011, after preliminary inflation figures for France and Spain came in higher than expected. Inflation accelerated for a second straight month in both countries, prompting bets of higher interest rates. The peak rate for the benchmark deposit facility is now seen at 4% in February 2024, compared to 3.9% seen on Monday and 3.5% in July 2023, projected a few weeks ago.

Commodities
Oat Hits 6-week Low
Gold Extends Losses, Poised for Biggest Monthly Drop Since June 2021
Brent Crude Rises, Still Poised for Another Monthly Decline

Oat Hits 6-week Low
Oat decreased to a 6-week low of 345.25 USd/Bu

Gold Extends Losses, Poised for Biggest Monthly Drop Since June 2021
Gold extended its downward trend towards the $1,800 an ounce mark, the lowest since December 2022, as hotter-than-expected economic data fanned concerns about hawkish central bank policies. In a speech to an economics class at Harvard University, Federal Reserve Governor Philip Jefferson defended the central bank’s 2% inflation target, warning that changing it could destabilize inflation expectations. Money markets have now priced at least three more 25 basis point rate hikes this year and see interest rates peaking at around 5.5% by June.Brent Crude Rises, Still Poised for Another Monthly Decline
Brent crude futures rose over 1% to above $83 per barrel on Tuesday, underpinned by optimism that China’s economic recovery will spur fuel demand. Investors expect China’s oil imports to hit a record high in 2023 amid rising demand for transportation fuel and as new refineries come online. On the supply side, Russia revealed its plans to cut oil exports from its western ports by up to 25% in March, exceeding its announced output curbs of 500,000 barrels per day.

Stock Markets
Asian Stocks Rise
Russian Equities Extend Rebound
European Stocks Waver, Still Post Monthly Gains
FTSE 100 Closes Lower, Still Posts Second Monthly Gain
Wall Street Falls, Books Monthly Drop

Asian Stocks Rise
Asian equity markets rose on Tuesday, taking cues from a positive lead on Wall Street as investors continue to assess the outlook for growth, inflation and monetary policy. Investors also digested a raft of economic data across the region, headlined by Japanese and Australian retail sales data which rose more than expected in January. In Hong Kong, Chief Executive John Lee announced that the city state will drop its mask mandate starting March 1. Shares in Australia, Japan, South Korea, Hong Kong and mainland China all advanced.

Russian Equities Extend Rebound
The ruble-based MOEX Russia index extended early gains to close 0.5% higher at 2,253 on Tuesday, nearly recovering from the sharp losses in the previous week as Russian companies rebuild supply chains to recover from Western sanctions. Oil shares jumped over 1% on average, trimming year-to-date losses to below 0.4% as Lukoil, Tatneft, and Surgut added between 1.6% and 3.7%. Fresh data showed that seaborne Urals oil exports to China rose sharply in February amid lower freight costs and higher demand, limiting the impact of Western sanctions on the vital sector for Moscow. Oil producers also booked gains following the export cuts from western ports set to start tomorrow.

European Stocks Waver, Still Post Monthly Gains
European bourses ended Tuesday’s session mostly lower, with the regional STOXX 600 down roughly 0.2% and the domestic DAX 40 finishing virtually flat, as losses in the healthcare sector offset gains in financials. Investors digested CPI figures for Spain and France, which showed inflation accelerated for a second month in both countries in February. It was the latest sign that inflationary pressures could be entrenched, adding to concerns that the ECB must continue raising interest rates to get inflation under control. Among single stocks, Ocado Group plunged more than 10% to be among the top losers in the STOXX 600 after reporting flat revenue and widened full-year losses. For February, the STOXX 600 and the DAX 40 added roughly 1.9% and 1.5%, respectively, with both indexes recording a second consecutive monthly gain.

FTSE 100 Closes Lower, Still Posts Second Monthly Gain
Equities in London came under renewed pressure on Tuesday, the last trading day of February, with the benchmark FTSE 100 down almost 1% at around 7,870 points, dragged by losses in the healthcare sector. Disappointing earnings results from online grocery company Ocado rattled investor sentiment while some of the optimism about the new Brexit deal started to fade. On the data front, retail data from Kantar showed grocery inflation hit a record high of 17.1% in the four weeks to 19 February. Among single stocks, Ocado Group plunged more than 10% to be among the top losers in the FTSE 100 after reporting flat revenue and widened full-year losses.

Wall Street Falls, Books Monthly Drop
The Dow closed 234 points lower on Tuesday, while the S&P 500 and Nasdaq 100 lost 0.3% and 0.1%, respectively, as investors digested a slew of economic and earnings releases. Meantime, The yield on the 10-year US Treasury note ticked up to 3.94%, its highest level since November. US single-family home prices in December increased at their softest pace since July 2020, while the Chicago PMI contracted for a sixth consecutive month in February, highlighting the impact of higher interest rates on the economy. On the earnings side, Target rose 0.9% after the big box retailer posted quarterly results that surpassed estimates as consumer spending shifts away from discretionary categories. The three US averages are now heading for a monthly decline as stronger-than-expected US economic data seen earlier this month reinforced the case for further monetary tightening. For the month of February, the blue-chip was down 4.2%, while the S&P 500 and Nasdaq lost 3.6% and 3%.DEVISE 2 DAY 48h
– Where I Was Wrong, Where I Was Right

The Market is under pressure since two, three weeks!
The Market? Yes, the US WallStreet, in New York – the stock market.
But not the US Yield Curve, in Chicago, which is more expensive than years; than decades! At that is the crucial point; why the stock market is breathing out; last days, last weeks.

However,
we stay long in EURUSD, long in the DAX Future, and/or also (since the beginning of last week before) now long in the ADIDAS share & BITCOIN. And since last thursday, even last week, we`re back short in UKOIL also.

Nevertheless it itches me again to formulate a new 4XSetUp in the DOW Future. And that because i don`t realize a bullisg technical chart, right now. That`s why i will write a new long Technical Analysis 4XSetUp only if at least the technical picture looks bullish again. Because currently, at least in my personal subjective individual opinion, it still looks rather bearish in the short term. And that just before the upcoming US labor market data next week and/or much more the US inflationnumbers in the calendar week after next week. So I prefer to wait a little longer. Because going anti-cyclically long in the DOW Future, let alone in the NASDAQ Future, only because of the hope of worse than expected US labor market figures and/or lower than expected inflation numbers, is too speculative for me. That`s why the motto for this week, in relation to the DOW chart, is observe, analyze, and/or evaluate. And if you dare, you can get long in the DOW Future this week again. But at least I want to have a weekly candle in the plus in my back to go long again. That’s the minimum; even if it smells and/or tastes old school…