2023/02/15 (171) Column

Back to basics?!
Back to the (new) future!?


Bank of America has given its full-year outlook a poetic name.
What she means by that is that in 2023 investment areas that have hardly played a role in recent years will become attractive. „In the first half, these are government bonds“, says Michael Hartnett, chief investment strategist at the major US bank. You benefit from the rising key interest rates around the world. “Corporate bonds will become attractive again as soon as we have overcome the greatest fears of a recession,” Hartnett estimates. And if higher investments by corporations lead to more sales and profits again, shares will become attractive again in the second half of the year and stock exchanges will rise worldwide.

Experienced bankers are familiar with such a scenario from previous crises,
but it has hardly come into its own in recent years because key interest rates were low worldwide and shares have outperformed all other asset classes. A second, well-known scenario could celebrate a comeback in 2023: markets outside the US are likely to become increasingly attractive. Hartnett names China, for example, as a promising investment target as soon as the opening after the Covid crisis has overcome the current problems. “Interest rates will fall in China, profits will rise,” says Hartnett – these have always been the two best pieces of news for equity investors.
DEVISE 2 DAY 48h
– Last News About What Drives The News Media

Russian breakthrough at Luhansk?
Brutal battle for Bakhmut rages!

According to Ukrainian President Volodymyr Zelenskyy, the Ukrainian soldiers in the hard-fought town ofBakhmut are holding their positions despite the “most difficult” situation on the ground. It is not without reason that the “Bakhmut Fortress” is mentioned, said Selenskyj on Wednesday in Kiev at a press conference with Swedish Prime Minister Ulf Kristersson. “And our fortress lives.” The situation in Bakhmut in the east of the country is currently “the most difficult” in the country, Zelenskyy admitted and named Wuhledar south of Bakhmut as another critical location. According to their own statements, Russian forces had advanced on both places in the Donetsk region in the past few days.

Many experts agree that conquering Bakhmut, which was badly hit by attacks, would have almost no strategic relevance for the course of the war. It would have a primarily symbolic meaning. Since January, the Russian army, supported by the notorious Wagner mercenary group, has been stepping up its seven-month tenacious offensive on the eastern Ukrainian city. But even the head of the Wagner mercenary group, Yevgeny Prigoshin, admitted on Tuesday that there would be no victory celebrations in Bakhmut in the foreseeable future due to the “violent resistance” of the Ukrainians.

Meanwhile, Sweden’s Prime Minister Kristersson continued to pledge his full support to Ukraine. He did not expressly rule out the delivery of combat aircraft, but emphasized that this would only be possible within the framework of an “international coalition”. The situation has also “deteriorated” in the province of Luhansk, which borders Donetsk, according to governor Serhiy Hajdaj. This applies in particular to the towns of Kreminna and Bilohorivka, on which Russia repeatedly flies airstrikes.

Russia’s war of aggression against Ukraine is a political disaster for us in the West! I don’t want to and can’t sugarcoat anything. It is more or less an even bigger political disaster for Russia. Because there will be a time after the war again! Even if I can hardly imagine it now…DEVISE 2 DAY Another 48h
– Last News About How Drives The Price Action

We are seeing renewed signs that the US economy is gaining momentum. Retail performed far better than expected in January. Along with yesterday’s consumer prices, concerns about excessive inflation in the longer term remain in the market. Be that as it may, the market expectations and the Fed’s previous statements are now on the same wavy line. The warning words of the FED are priced in. The expected interest rate peak is now 5.25% with an interest rate level of 5.05% at the end of the year. Based on the rise in US 2-year Treasury yields, the Nadsaq should trade around 5% lower, estimates J.P. Mogan. As for the S&P 500, systemic selling pressure is likely to increase significantly below 4000 points. Up to $200 billion in selling should be triggered around 3980 to 4000 points. Be that as it may, recent results continue to be robust. Airbnb, Analog Devices, Roblox, Tripadvisor and Upstart tend to be significantly stronger according to the numbers.

Forex
DXY Tops 104
British Pound Falls after Slower-than-Expected Inflation
Chinese Yuan Weakens on Hawkish Fed Outlook
Japanese Yen Weakens on Hawkish Fed Outlook

10-Year Government Bond Yields
US 10-Year Treasury Yield Approaches 3.8%
UK Bond Yields Ease after Fresh Inflation Data
French 10-Year Bond Yield Climbs to 6-Week High

Stock Markets
Turkish Stocks Gain 10% after Reopening
European Stocks Rise on Wednesday
Wall Street Ends in The Green

Forex
DXY Tops 104
British Pound Falls after Slower-than-Expected Inflation
Chinese Yuan Weakens on Hawkish Fed Outlook
Japanese Yen Weakens on Hawkish Fed Outlook

DXY Tops 104
The dollar strengthened sharply against a basket of major currencies, breaking above 104 for the first time since early January, as robust economic data threw some cold water on expectations for the ending of the Fed’s tightening campaign. The latest data showed retail sales rebounded 3% in January, the most since March 2021, highlighting the economy’s strength. At the same time, the annual inflation rate slowed slightly to 6.4% in January, the lowest since October 2021 but above market expectations of 6.2%. Also, the latest Fed commentary showed that policymakers largely backed more rate increases, with Richmond Fed President Barkin and Dallas Fed President Logan stressing the need for a longer period of rate increases should inflation persist above the target or the economic outlook change. This DXY strength was seen across the board, with some of the most pronounced selling activity against risk-sensitive currencies such as the Australian and New Zealand dollars.

British Pound Falls after Slower-than-Expected Inflation
The British pound fell more than 0.5% to $1.2, further retreating from $1.24 touched early in the month, after fresh CPI figures showed inflation in the UK slowed more than anticipated in January to 10.1%. Also, the monthly rate actually turned negative for the first in a year, and annual core inflation eased to the lowest in seven months. The new figures offered some relief that price pressures may be finally easing, raising bets the Bank of England will not need to pursue a more aggressive policy stance. Money markets are now pricing a 4.55% interest rate peak by September compared to 4.69% before the CPI report.

Chinese Yuan Weakens on Hawkish Fed Outlook
The offshore yuan weakened past 6.87 per dollar, hitting its lowest levels since early January as stronger-than-expected US economic data and hawkish remarks from policymakers bolstered expectations the Federal Reserve would keep raising interest rates to tame inflation. The currency also came under pressure after the People’s Bank of China injected more liquidity into the financial system and kept the one-year medium-term lending facility rate unchanged at 2.75%. China’s central bank is keen to maintain sufficient liquidity to support an economic recovery after the country exited its strict zero-Covid regime. Meanwhile, the yuan remains supported by robust domestic economic data and fresh pro-growth policies from Beijing.

Japanese Yen Weakens on Hawkish Fed Outlook
The Japanese yen weakened toward 135 per dollar, hitting its lowest levels in nearly two months as stronger-than-expected US economic data and hawkish remarks from policymakers bolstered expectations the Federal Reserve would keep raising interest rates to tame inflation. Investors also continued to assess the implications of Kazuo Ueda’s nomination as the next Bank of Japan governor. Kazuo will be the first academic economist to run the central bank in post-war Japan. He has already stated that the central bank’s current ultra-easy stance “is appropriate” and “needs to be continued,” countering speculations about normalizing policy. The BOJ maintained its ultra-low interest rates and left its yield control policy unchanged at the January meeting. Governor Haruhiko Kuroda reiterated the 2% inflation target must be achieved in a sustainable fashion, accompanied by a healthy rise in wages.

10-Year Government Bond Yields
US 10-Year Treasury Yield Approaches 3.8%
UK Bond Yields Ease after Fresh Inflation Data
French 10-Year Bond Yield Climbs to 6-Week High

US 10-Year Treasury Yield Approaches 3.8%
The yield on the US 10-year Treasury note, seen as a proxy for global borrowing costs, approached 3.8%, a level not seen in more than a month, as investors adjust their portfolios for a higher terminal rate. The closely watched US CPI reading for January landed at 6.4%, the lowest since October 2021, still above economists’ forecast of 6.2%, opening the door to further rate hikes by the Federal Reserve. At the same time, Dallas Fed President Lorie Logan was the last official to warn that borrowing costs may need to go higher than expected. Money markets have now priced at least two more 25 basis point rate hikes this year and see interest rates peaking at 5.2% by July. Looking ahead, Wall Street and the Fed are again in a standoff on the future path of interest rates, with the former betting on a rate cut later this year while the latter reaffirmed its view that interest rates will stay higher for longer.

UK Bond Yields Ease after Fresh Inflation Data
The yield on the UK’s 10-year Gilt fell to 3.43% from a near one-month high of 3.52% on February 14th, after lower-than-expected inflation figures for the UK offered some relief about the need of a more aggressive monetary policy stance from the central bank. Annual inflation rate eased for the third straight month to 10.1% in January and core inflation was the lowest in seven months, both below market expectations. The new figures are not expected to change the need of further interest rate increases, because inflation is still high, the labour market remains tight and the economy had performed better than initially expected, but the peak interest rate is now seen lower at 4.55% compared to 4.69% prior to the release. The Bank of England has raised interest rates by 50bps at the beginning of the month but dropped its pledge to keep increasing them “forcefully” if needed and said inflation had probably peaked, while projecting a much shallower contraction than previously estimated

French 10-Year Bond Yield Climbs to 6-Week High
France’s 10-year government bond yield rose back to above 2.8%, the highest since January 3rd, as investors bet on prolonged monetary tightening cycles in Europe and the US. The ECB raised interest rates by 50bps at its February meeting, pushing borrowing costs to the highest level since late 2008. The central bank signaled a similar move in March, and markets projected the deposit rate to rise above 3.5% by August 2023. Elsewhere, the US inflation rate slowed at a softer-than-anticipated pace, strengthening expectations for further hike rates from the Fed. Domestically, preliminary estimates showed France’s annual inflation rate edged up to 6% in January from 5.9% in December, compared to market forecasts of 6.1%. Meanwhile, the unemployment rate fell unexpectedly to 7.2% in Q4.

Stock Markets
Turkish Stocks Gain 10% after Reopening
European Stocks Rise on Wednesday
Wall Street Ends in The Green

Turkish Stocks Gain 10% after Reopening
BIST 100 index jumped nearly 10% to around 4,940 on Wednesday, the first trading session after a 5-day suspension after a major earthquake that hit the country last week sent markets into turmoil. Billions of Turkish liras have been injected into the market, and government measures have been taken to support stocks, including a cut in the withholding tax on share buyback programs to zero from 15% and an increase in the required shares in the government pension scheme to 30% from 10%. Still, the surge is likely to be temporary as political and economic uncertainty remain. The presidential and parliamentary elections scheduled for May may be delayed because of logistical difficulties and the declaration of a 3-month state of emergency in the 10 affected provinces.

European Stocks Rise on Wednesday
European equity markets rose on Wednesday, with the benchmark Stoxx 600 up 0.5% led by construction and industrial stocks. In corporate headlines, Europe’s largest food retailer Carrefour advanced 8% after it announced an 800 million euro share buyback and increased dividends by 8% to 0.56 euros per share. On the other hand, mining stocks fell and banks were also pressured after Barclays (-8%) reported a 19% decline in annual net profits. Elsewhere, Glencore declared a $7.1 billion payout to shareholders after a record trading profit, Kering sales fell 7% following a slump at its Gucci brand and Heineken recorded better than expected profit on a rebound in Asia. On the data front, investors welcomed strong retail sales data out of the US and a faster-than-expected slowdown in the UK inflation rate.

Wall Street Ends in The Green
The Dow Jones finished roughly 40 points higher on Wednesday, while the S&P 500 and the Nasdaq added 0.2% and 0.9%, respectively, as investors weighed January retail sales and inflation data while remained cautious about prolonged rate hikes. The Commerce Department report showed retail sales rebounded 3% in January, the sharpest one-month increase since March 2021, in the latest sign of consumer resilience and complicating the Federal Reserve’s task to cool the economy. Meanwhile, the NAHB/Wells Fargo Housing Market Index increased for a 2nd month to the highest since September and beating market forecasts of 37 as easing mortgage rates over the past several months have boosted the housing market. On the corporate side, Airbnb surged 13.3% after the home-sharing company posted an upbeat revenue outlook. Tesla gained almost 2.4% after Elon Musk said he intends to appoint a new CEO to Twitter.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, we closed oir long 4XSetUps in the DOW Future also. Now, we`re long in the EURUSD pair, in the DAX Future, and/or long in the ADIDAS share & BITCOIN (since monday, this week). Even if I`m not a friend of cryptos – quite the opposite! But I don’t write my DEVISE 2 DAY Affiliate Financial Market Online Newspaper 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 action today was negativ once again. Brent crude futures fell more than 1% to around $84 per barrel on Wednesday, extending losses for a second session amid lingering concerns about weak demand. The latest EIA report showed that US crude inventories jumped by 16.283 million barrels to 842.973 million last week, the highest level since early October. Oil prices were already under pressure after the US government announced plans to release 26 million barrels of oil from strategic reserves. Supply worries also eased after the EIA said it expected record March production from the seven largest US shale basins. Keeping a floor under prices, the IEA raised its forecast for 2023 oil demand growth and said that restrained OPEC+ output could bring a supply deficit in the second half. OPEC has also revised its 2023 oil demand forecast by 100,000 barrels per day, citing higher demand from China. On top of that, the cartel said it plans to stick with production quotas fixed late last year for the rest of 2023.