Mar 22, 2017 - Market Update

Short recap

Europe opening lower

Asia down as markets doubt about the Trump’s ability to bring real pro-growth policies in life. In other words the after Trump victory reflation trade is loosing momentum. Nikkei testing the important psychological level 19 000.

The US markets suffered heavy selloff that was also accelerated by negative comments from US administration about the ban of nuclear weapons.

Abe supported open markets policy in Brussels yesterday

EU-JP working hard on a trade pact

US regulators pushing for a risk reduction via making the securities settlement time shorter (2 instead of 3 days)

Trump putting pressure on lawmakers to vote for Obamacare repeal bill as it is a first major hurdle to implementing his agenda. Bear in mind that there is Senate and two Houses of Congress to get it through.

Brexit – 27 remaining members to meet on Apr 29 (note Art 50 to be triggered on Mar 29)

London based banks not to face lengthy set up process while moving to EZ

Goldman Sachs to start moving staff to EZ soon

UK banks to face investigation in relation to Russia money laundering activities

US banks hardly hit during US session (down 3%) as markets losing faith in Trump pro-growth policies, thus reflation trade

We may get ready for a 5-10% correction

S&P 500 below 2350 support

After closing the investigation of Opel (GM) in emission scandal yesterday, the French authorities continue with Fiat-Chrysler

Apple is out with newer version of iPad, priced at USD 329 (lowest in Apple world)

New opportunities for global investment banks open in Canada as the appetite for M&A from Canadian companies and pension funds is rising

Oil still feeling the oversupply

Russia open to support the OPEC/Non-OPEC deal

Gold – finding ideal support from risk off (lower stocks, USD, yields and mounting political risks in US)

EURUSD – important 1.0800/50 if broken we aim for 1.1000 and higher

But if the rally in EURUSD is based on political risk off how sustainable is it?

At the moment the Le Pen defeat is not a done deal yet, just recall the Hillary Clinton winning the debates but the winner was…

USD – suffering against EUR, JPY and GBP, while stronger against EM currencies (reflation trade fading away)

USDJPY – 111.60 important, driven by yields

10-yr Trys yield at 2.43% (mid band of 2.30%-2.60% range)

10-yr Bunds yield at 0.43% (flat)

ECB is “testing” the market reaction to possible taper announcement at Dec 2017 meeting with a 10 bps rate hike

EURCZK – at the beginning of this week we saw a significant increase in activity on the bid side across all forward maturities. At the same time the flow was also much higher than usual, what may continue as a part of risk off, reflation and EM flows, not to mention, of course, the likelihood of CNB to remove the EURCZK 27.000 floor this year.

Data

US: Existing Home Sales – expecting a small decline

Villeroy (ECB) to speak (0830 GMT)

Lautenschlager (ECB) to speak (1130 GMT)

Thursday: US House voting on Obamacare repeal

Super important event in terms of whether Trump can/is able to deliver

Should you have any questions feel free to contact me anytime.

Good luck Champs!

Mr Hawk

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