market conditions

BTC/USD BTC/USD has been trading upside as I expected and I found the breakout of the well defined sideways range, which is good sign for the higher prices.   Due to the breakout of the well defined range and the upside trend on the mid and long term cycles, I see potetnial for the higher process after the downside correction.   Upside objectives are set at the price of $29.145 and $29.870 Stochastic oscillator is showing oversold condition and fresh bull cross, which is another sign for the upside movement.   Key support cluster is set at the price of $25.900    

Trend analysis. The market may move upward from the level of 1.0724 (closing of Friday's daily candle) with the target of 1.0758, the 14.6% pullback level (red dotted line). When testing this level, the price may move downward with the target of 1.0737, the 61.8% pullback level (yellow dotted line).       Comprehensive analysis: Indicator analysis - up; Fibonacci levels - up; Volumes - up; Candlestick analysis - up; Trend analysis - down; Bollinger bands - down; Weekly chart - up.     Today, the price may move upward from the level of 1.0724 (closing of Friday's daily candle) with the target of 1.0758, the 14.6% pullback level (red dotted line). When testing this level, the price may move downward with the target of 1.0737, the 61.8% pullback level (yellow dotted line). Alternatively, the price may move upward from the level of 1.0724 (closing of Friday's daily candle) with the target of 1.0758, the 14.6% pullback level (red dotted line). When testing this level, the price may continue to move upwards with the target of 1.0794, the 23.6% pullback level (red dotted line).  

USD/CAD has been trading downside and I found the breakout of the support cluster at the price of 1.3590, which is good sign for the further downside movement.   Due to the breakout of the support cluster and the increasing in the downside movement, I see potential for the further lower prices towards downside references.   Downside objectives are set at 1.3540 and 1.3490 MACD is showing increasing of the downside momentum, which is good sign for the further lower prices.... Key resistance is set at the price of 1.3650  

GBP/USD may start moving upward this week, starting from the level of 1.2344 (closing of the last weekly candle) to 1.2499, which is a historical resistance level (blue dashed line). Upon reaching this price, the pair will climb further to 1.2678, which is an upper fractal (red dashed line).   Comprehensive analysis: Indicator analysis - upward Fibonacci levels - upward Volumes - upward Candlestick analysis - upward Trend analysis - downward Bollinger bands - upward Monthly chart - upward       All these point to an upward movement in GBP/USD. Conclusion: Most likely, the pair will have a bullish trend, with no first lower shadow on the weekly white candle (Monday - upward) and a second upper shadow (Friday - downward).   So during the week, pound will rise from 1.2344 (closing of the last weekly candle) to the historical resistance level at 1.2499 (blue dashed line), and then head to the upper fractal at 1.2678 (red dashed line).   Alternatively, the quote could go up from 1.2344 (closing of last week's candle) to the historical resistance level at 1.2499 (blue dashed line), and then turn around and fall down to the 38.2% retracement level at 1.2342 (red dashed line).  

Forex Analysis & Reviews: Technical Analysis of Daily Price Movement of S&P 500 Index, Monday May 29, 2023   With the price movement in the channel that dips upwards and the two Moving Averages which are still in Golden Cross condition on the daily chart, we can see that Buyers are still dominating the S&P 500 index so that in the next few days #SPX has the potential to appreciate an upward rally up to penetrate above the level of 4216.17 and if this level is successfully broken above then the SPX still has the potential to go to the upper line of the bullish channel and/or the level of 4324.96 but please also pay attention if there is a downward correction which is indicated by the appearance of deviations between price movements and the MACD indicator because if a correction occurs If it breaks below the level of 4070.35 then all scenarios of a rally up above that have been described previously will become invalid.        

GBP/USD Yesterday, the British pound grew (by 0.47% compared to a 0.20% decline in the dollar index) and its upper shadow managed to reach the target level of 1.2443. As the signal line of the Marlin oscillator has already approached the boundary of the growth area, it may start to reverse downwards in the direction of the main trend.   If the reversal occurs and the price establishes itself below the MACD line (1.2400), the first target will be 1.2273 (the April 3 low and the high of February 14). If the price stays above 1.2443, it can rise towards 1.2583. However, the pound may not reach this level, and a reversal could occur from any intermediate resistance.       On the 4-hour chart, the price has settled above the balance and MACD indicator lines, and the Marlin oscillator has shown slight growth in the growth area but is now showing initial signs of a downward reversal.   Since the MACD line is located below the 1.2400 level, overcoming the support level (1.2365) will serve as the final condition for the price to reverse into a medium-term decline.  

The recent range is a tough ceiling to break for euro rates Even if ECB hawks continue to talk up the odds of July and September hikes, with the former still flagged as a more than even probability even by centrist members, it will take a pick-up in activity data for markets to price a terminal rate above 4%, as they did before the Silicon Valley Bank failure in March.   We’re not expecting a huge change in communication in short, and markets will focus on changes in economic data instead to infer how many more hikes the ECB has under its belt. In that context, we think longer-dated rates struggle to break above the top of their recent range, which roughly sits at 2.54% for 10Y Bund and 3.16% for 10Y swaps against 6m Euribor.   In light of the current lack of direction in financial markets, these levels may seem difficult to achieve, but the pre-ECB and Federal Reserve meeting lull is proving a fruitful time for primary market activity. On the sovereign side, Spain and France announced deals yesterday which we think will add to other deals in pushing yields up today.   Taking a step back, May has seen issuance volumes above historical averages every single week as opportunistic borrowers used this window of calm to push deals. We don't think this week will be any different. This shouldn’t be mistaken for a conviction macro trade, but we think the benign market conditions should continue to result in higher bond yields and weaker safe havens as investors feel more comfortable with owning riskier alternatives.       Big debate on direction from the US. We look for upward pressure on yields for now In the US, there is a stark juxtaposition between strong ongoing payroll growth versus PMIs and ISMs entering recessionary territory (low 40s for some components of the manufacturing PMI). On the inflation front, there is evidence of more subdued pipeline pressure while core inflation remains elevated (in the area of 5%).   Our model for US "rates" pitches fair value at 6% when we take everything into account. That has drifted up from 5.75% in the past week or so. Relative to this, the funds rate (ceilling at 5.25%) is not too deviant from that. But longer tenor rates are quite low relative to the big figure of 6%, reflecting ongoing deep inversion of the curve.   While there are some good reasons to expect market rates to fall (weak PMIs for example), our preferred expectation from here is to see some further upward pressure on market rates first. The 4% area for the 10yr Treasury yield for example remains a generic target that could well be hit in the coming month or so.     Today's events and market view Today’s session should be relatively light on economic releases with only US trade standing out. Instead, we expect the focus to be on the Bank of Canada’s meeting in the afternoon. Consensus is for no change in policy rates but the surprise Reserve Bank of Australia hike yesterday, as well as a greater skew towards a hike in the most recent contributions to the Bloomberg survey, means markets are on high alert. Bond supply will be concentrated in the 3Y sector with sales from the UK and Germany (a green bond in the latter’s case). Spain and France mandated banks for the sale of 10Y and 15Y linker bonds via syndication. ECB speakers on the last day before the pre-meeting quiet period will be VP Luis de Guindos, Klass Knot, Fabio Panetta, and Boris Vujcic.

The European Central Bank (ECB) has recently made a surprising shift in its approach towards financial stability, signaling a departure from its historically dovish stance. This decision, prompted by the challenges posed by inflation, has significant implications for both the performance of individual economies and the overall prosperity of the European Union.   In this article, we had the opportunity to discuss the ECB's decision with Petr Ševčík, an analyst from BITMarkets, who shared valuable insights into the repercussions of this move. BITMarkets, a platform that has been closely monitoring the rise of cryptocurrency trading in Europe, has observed increased trading activity in this sector since the beginning of the year. Cryptocurrencies, known for their volatility, have gained attention as a potential refuge in times of economic uncertainty and hardship. As inflationary pressures continue to burden traditional industries such as housing and banking, some investors are turning to alternative assets like cryptocurrencies.   The impact of the ECB's decision is already being felt across various sectors, with construction and materials stocks experiencing a 0.8% drop and bank stocks dwindling by 0.7%. These developments are a natural consequence of higher borrowing costs, leading to a slowdown in loan growth. However, amidst these challenges, there are signs of resilience in certain areas. Media stocks, for instance, enjoyed a 0.7% upside following the news, indicating that the markets may begin to respond more favorably to individual performance rather than being solely influenced by widespread conditions.    FXMAG.COM: Could you please comment on the ECB decision?   It's crystal clear that the reluctant ECB is that of the past. Historically known for adopting a very dovish approach towards financial stability of the bloc by avoiding sharp interest hikes, its decision to bump rates again highlights the struggles caused by inflation which are burdening the performance of individual economies and corporations and the livelihood of individuals; on a macro scale, this has been hindering the prosperity of the European Union for a daunting lengthy period. BITmarkets has witnessed the rise of crypto trading since the start of the year, and a notable portion of increased trading activity has stemmed from Europe. Cryptocurrency assets are volatile and always have been, but they have been regarded as refuge by some in times of economic uncertainty and hardship. What's apparent is that the housing industry and the banking sector are among the industries which are being damaged the most, with construction and materials stocks dropping 0.8% and bank stocks dwindling 0.7% following the news. From a wider perspective, this is only natural as borrowing costs increased which attributes the slowdown of growth in loans.  While the news was not taken very lightly as the continent's most popular indices shed their prices, I don't project much more dismay for Europe with regards to economic stability. Media stocks enjoyed a 0.7% upside and that speaks a thousand words. Inflation is cooling down and markets may begin to behave based on performance rather than being continuously-succumbed to widespread conditions. The European financial market has been a victim of calamitous market conditions for years, but the latest ECB move is one that can ultimately bring the EU out of its shell.

In the wake of 10 consecutive interest rate hikes, it is high time for the markets to embrace a more positive outlook. The Powell-led committee's aggressive pursuit of raising benchmark rates, although necessary, has cast a shadow of pessimism over financial markets, potentially overshadowing the remarkable achievements of industry pioneers. Throughout history, monetary policy has proven to be a valuable tool for achieving financial stabilization in economies. The United States has faced its fair share of hardships in recent times, including a prevailing sense of distrust toward local banks and the adverse ripple effects of the debt ceiling conundrum. These challenges have been further exacerbated by soaring nationwide inflation, which has also left its mark on the cryptocurrency market.   It has been 15 months since the Federal Reserve decided to pause the rate hikes, indicating a momentary respite for the nation's monetary defenses. During this time, cryptocurrencies have displayed a bullish trend when examined from a long-term perspective. While current market conditions may appear to be in the red, they could potentially serve as necessary corrections following the rapid price surges witnessed in the crypto asset space. The Federal Reserve's monetary policy is operating as intended, with continuous and comprehensive assessments of economic conditions. Crucially, these assessments should consider the implications not only for industry leaders but also for everyday households. Adopting a bottom-up approach may yield insightful findings regarding the broader impact of monetary policy decisions.   FXMAG.COM: Could you please comment on the FOMC decision? It’s about time for markets to see the brighter side of day after 10 straight interest rate hikes. The Powell-led committee has been on a frenzy of aggressive benchmark rate increases – while necessary – has infected financial markets with pessimism, and that can overshadow the successes and feats of industry pioneers. Monetary policy has historically served as a very useful tool for achieving economy financial stabilization, and the United States economy has been susceptible to quite the hardship in recent times. The distrustful sentiment towards local banks and the adverse ripple effect of the debt ceiling conundrum had been exacerbated with scorching nation-wide inflation. That has also had its impact on the crypto market. It has been 15 months since the Fed decided to pause the rate hikes, which perhaps is an indication that the nation’s monetary defenses are taking a breather. Since the start of the year, cryptocurrencies have been very bullish when putting on the long-term lenses. While contemporary market conditions are more in the red, they potentially serve as corrections to the recent sharp price bumps in crypto assets. The Federal Reserve’s monetary policy is doing as it should, given continuous extensive assessment of economic conditions. What’s pivotal here is the conditions to be assessed, which in my perspective should take into consideration the implications on industry leaders but also those on everyday households; a bottom-up approach may present quite the insightful findings.  

Bank of Japan keeps policy settings unchanged – for now The BoJ has unanimously decided to maintain its ultra-easing monetary policy as it is still looking for clearer signs of sustainable inflation growth. We believe higher-than-expected inflation, a continued solid economic recovery, and growing pressures from the weaker yen will eventually convince the bank to revise its YCC policy in July.   The Bank of Japan's no change decision was very much in line with market expectations The Bank of Japan's (BoJ’s) monetary policy statement hasn’t changed much at all on its view on the growth and inflation outlook and hasn’t given a hint of any exit plans. The BoJ kept its dovish stance by repeating that “the bank will not hesitate to take additional easing measures if necessary”. What is more worth noting, however, is that the BoJ pointed out that wage gains are expected, accompanied by changes in firms’ price and wage-setting behaviour. We believe that this is the change of structural and behavioural disinflation factor that the BoJ has been looking for.   To be precise, the latest labour cash earnings data were disappointing despite the surprisingly solid Shunto (Spring wage negotiations) results. Thus, an improvement in earnings is another factor to watch to gauge the BoJ’s policy action and we will also see how earnings data unfold in the coming months. We believe that rising asset prices are another important factor in sustainable inflation. With recent rallies in Japanese equity markets and the gradual rise in housing prices, the positive wealth effect is likely to keep inflation above the BoJ’s target, in our view.   Dovish comments from Governor Ueda Governor Kazuo Ueda’s comments at the press conference were no different from what the statement suggested. Ueda is concerned that the outlook for wage growth is highly uncertain and wants to see clearer signs of sustainable inflation. There were no hints about future policy adjustments in his comments.   However, we still think that the BoJ can change its YCC policy in July for the following reasons: First, the BoJ is likely to upgrade its inflation forecast in the quarterly outlook report in July. That could more easily justify the BoJ’s policy action. As mentioned previously, we expect inflation to remain higher for longer than expected.   Second, the overall bond market functions have improved, although there have been some fluctuations since December’s YCC band widening, and the market is not testing BoJ’s YCC upper limit of 10Y JGB. Thus, we believe that the market stress has been reduced, and it is a good time for the BoJ to revisit its YCC policy to reflect changes in market conditions.   Third, a weaker yen will likely add more inflationary pressures. If the BoJ continues to maintain its current policy setting, it would risk leaving the BoJ “behind the curve”. We believe that Japan’s economy is recovering solidly compared to other major economies and will continue to outperform in the future. But, if monetary policy fails to reflect this shift of economic fundamentals and the BoJ keeps its dovish policy, then the yen should depreciate even more.Lastly, by the time of the July meeting, the US Federal Reserve will have already decided on monetary policy, and where the UST will be is another factor the BoJ should consider.   From now on, we will be closely watching upcoming data releases such as June Tokyo CPI, labour cash earnings, and the movement in JPY, to see if these give a clearer signal of sustainable inflation.

Despite the fact that the European Central Bank has much more reasons to consider lowering interest rates compared to the Federal Reserve, the ECB not only raised the refinancing rate but Lagarde practically stated that there would be another rate hike in July. This decision not only contradicts expectations but also goes against common sense to some extent. Of course, this resulted in the dollar's decline, thereby reducing the pressure caused by its apparent overbought condition. However, the European economy is facing serious difficulties associated with the increased cost of energy resources.   The European industry suffers the most. Many, including in the West, are already openly calling what is happening the deindustrialization of Europe. And a strong dollar may somewhat alleviate this negative trend. So, the decisions and intentions of the ECB are more harmful than beneficial to the European economy. Especially considering that inflation in the euro area is slowing down as fast as in the United States. Today's inflation report should confirm the fact of its slowdown from 7.0% to 6.1%. And don't think that the ECB was unaware of this yesterday because we are talking about final data.   The preliminary assessment was already available two weeks ago. In such a situation, the most reasonable approach would have been not to touch interest rates and observe the developments for at least two or three months.   Frankly speaking, the ECB's actions are raising more and more questions. And this naturally leads to an increase in concerns, which are usually referred to as uncertainty risks. Investors typically try to stay away from such risks. Therefore, the euro's substantial growth, which pulled the pound along, is likely to be unsustainable and probably won't last long. The GBP/USD pair has surged in value by nearly 300 pips since the beginning of the trading week.     This movement has resulted in the extension of the medium-term uptrend. Take note that such an intense price change has triggered a technical signal of the pound's overbought conditions. On the four-hour chart, the RSI is at its highest level since autumn 2022, indicating a technical signal of overbought conditions.   On the same timeframe the Alligator's MAs are headed upwards, which points to an upward cycle. Outlook In this case, speculators are disregarding the overbought status, as evidenced by the sustained momentum and the absence of a proper correction. However, this process cannot persist indefinitely, and sooner or later, there will be a liquidation of long positions, leading to a pullback. Until then, traders will consider the psychological level of 1.3000 as the main resistance level.  

Unibail’s new hybrid and debt swap illustrates the large extension risk Real estate firm Unibail has decided to take an uncommon approach by offering hybrid bondholders a debt swap. We see this as somewhat positive for hybrid markets and shows issuers' willingness to adapt to market conditions and please investors, but it also illustrates the large extension risk for some issuers, particularly in distressed sectors.   The hybrid market has been under some pressure in recent months with much higher interest rates causing a large amount of uncertainty around extension risk for hybrids. But we see significant value in hybrids, namely from frequent (non-real estate) issuers. There is decent tightening potential in hybrids when compared to BB spreads and equity. The news yesterday from Unibail-Rodamco-Westfield, the commercial real estate firm that operates the Westfield brand, that it is offering its hybrid bondholders a debt swap, is somewhat positive for the hybrid space, in our opinion.   It is of course not as positive as an outright call and does illustrate the large extension risk for some issuers, particularly in distressed sectors, but it does compensate more than not calling. We initially saw three options for Unibail with the upcoming call on its hybrid bond (ULFP2.125 PERP); call the bond, not call the bond, and call and tender the rest of the curve and remove itself from the hybrid market. The company instead decided to take an uncommon approach of offering hybrid bondholders a debt swap, exchanging the current bond paying a coupon of 2.125% with a new standard structure corporate hybrid bond (Deeply Subordinated Perpetual Fixed Rate Resettable Perp-NC 5.25) with a coupon of 7.25%. There is also a small tender of the rest of the bond that is not getting exchanged, totalling no more than €200m. The firm will exchange 84% (€1.05bn) of the original size and tender up to 16% (max €200m).   We think this is somewhat positive for the hybrid market as it shows issuers' willingness to adapt to market conditions and please investors, instead of resorting to simply not calling the bond. This could be another option for a very selective hybrid refinancing. There was a similar exchange seen by Banco Comercial Portuguese back in November, which decided to not call a T2 bond but exchange fully instead. The market reaction has been positive for the Unibail curve, but the corporate hybrid index did widen by 4bp while the senior index remained unchanged yesterday. However, hybrids still sit 3bp tighter on the week. The other outstanding hybrid on the Unibail curve (ULFP2.875 PERP) tightened by 182bp yesterday.  

The EUR/USD pair has been seen moving higher on the daily time frame as there is still a room on the RSI indicator before it hits the extremely overbought market conditions. The next target for bulls is seen at the level of 1.1054 - 1.1097, which creates a supply zone for bears. The intraday technical support is located at 1.0971 and 1.0873. The bulls are clearly in control of the market and there is no indication of a up trend termination or reversal.      

Rates Spark: Different causes, same effect The US and European economic trajectories are diverging. Yields have followed, albeit more modestly. In both cases the result is ever flatter curves, helped by seasonal factors.   Yield differentials widen, but all curves flatten It is hard to completely dismiss technical factors when finding an explanation for the continued flattening of yield curves heading into the summer market lull. Expectations of calmer market conditions in the summer don’t always come true but worse liquidity make investors wary of keeping positions that carry negatively, for fear of being unable to exit them should markets move against them. We think this is an important factor adding a tailwind to the curve flattening. We think steepeners have been a popular trade in recent months as investors foresee the end of central banks’ hiking cycles. The problem is, these are costly to hold. For instance, a euro swap 2s10s steepener costs over 6bp per quarter in carry. Its US dollar equivalent cost over 17bp.   Of course, it helps that curve flattening is the rational reaction to a world where the economic outlook is worsening, look for instance at Europe or at the disappointing recovery in China. Add to that central banks adding another layer of hawkish paint at the European Central Bank‘s (ECB) Sintra conference which continues today, and you have the perfect recipe for a flatter curve. This thesis get an important reality check over the coming days in the eurozone, in the form of the June inflation data. Italy is the only country to publish its own today, but markets may well be tempted to extrapolate its finding to other countries until they publish their own.   One country that seems impervious to the overall gloom is the US. Perhaps due to its lower reliance on global demand for growth, or perhaps due to the resilience of its domestic job market. The result is the same. Markets increasingly believe the Fed will hike at least once more in this cycle. If US curve developments are highly correlated to its foreign peers, albeit for slightly more upbeat reasons, its curve has shifted upwards relative to its European peers. Despite arguably encouraging progress relative to Europe on the inflation front, euro-dollar yield differentials have widened. This yield divergence coincides with the divergence in economic surprise indices, albeit to a less spectacular extent.   EU gloom and US glee both result in flatter curves, helped by carry   Today's events and market view Italy is the first Eurozone member state to release its June inflation today. It will be followed by Germany and Spain tomorrow, and France and the eurozone on Friday. ECB monthly monetary aggregate data, including M3 growth, and Italian industrial production complete the list. US data is relatively thin today, with only mortgage applications and inventories to look out for. This will leave plenty of time for investors to scrutinise central banker comments with an all-star line-up comprising Fed, ECB, Bank of Japan and Bank of England governors. TLTRO and eurozone financial system nerds will also look at the 3m LTRO allotment which settles tomorrow, a day after today's June TLTRO repayments. Yesterday, settling with the repayments, the central bank allotted €18bn at the weekly main refinancing operations facility, the most since 2017. Presumably, some lenders find its 4% interest rate the most attractive option, or maybe the only available, to finance the repayment of TLTRO funds. Italy accounts for today’s euro sovereign bond supply with 2Y debt, followed in the afternoon by the US Treasury selling 2Y FRN and 7Y T-notes.

EUR: Not worth chasing it higher for now EUR/USD was meant to be primarily a dollar story in the latter part of this week and the pair is finding some support due to the soft-ish USD momentum, despite strong US data. As highlighted above, we see a dollar comeback as likely, so we would be reluctant to chase a EUR/USD much beyond 1.0900. The current set of market conditions would suggest 1.0750/1.0800 to be a more appropriate trading range. The eurozone calendar remains uninspiring from a data standpoint but there are some ECB speakers to monitor today. President Christine Lagarde will participate in a panel although it is unclear whether she will discuss monetary policy, and we’ll also hear from Guindos, Stournaras and Nagel. In the UK, the Bank of England published a survey of corporate pricing plans yesterday, which included some encouraging news for lower inflation. Our UK economist discusses in this article how Bank of England members  – and markets – are losing confidence in these forward-looking indicators and at least two more 25bp hikes are on the cards. Still, the inflation picture should improve later this year, which means some pricing out of BoE rate expectations can come hitting the pound down the road. For now, it remains hard to see a sustained GBP downtrend.

CEE: Recovery despite global story This week, the calendar is light again in the region and the focus will be on the global central bank story. But before that, today we will see consumer confidence in the Czech Republic. Tomorrow, the Hungarian National Bank will meet and we expect the cutting cycle to remain unchanged, i.e., 100bps in the effective rate to 15%. Tomorrow we will also see labour market data in Poland and Hungary. In the Czech Republic, we can expect a few Czech National Bank (CNB) speakers ahead of Thursday's blackout period. Otherwise, market attention will be driven by the global story.  In the FX market, we saw the region's rally stall last week, with the Hungarian forint and Czech koruna in particular weakening once again. The National Bank of Hungary meeting should be the main driver for the forint this week and we expect a hawkish tone versus market expectations to be positive for FX. The forint remains our favourite currency in the region due to by far the highest carry and attractive current levels. Moreover, we see the forint lagging behind Friday's renewed improvement in market conditions. Thus, in the short term, we expect a pullback back to 370 EUR/HUF. A stronger US dollar as a result of central banks in the second half of the week may be a problem and might also be an obstacle for the Czech koruna. However, it could be supported by the hawkish remarks of the CNB board members, so we expect a recovery from the weakest levels since March this year to 23.90 EUR/CZK

Powell signals Fed to tread carefully, but that rates will stay high Chair Powell acknowledges that monetary policy is “restrictive” and that policymakers will “proceed carefully” in determining whether to hike rates further. September is set for a pause, but robust growth means the door remains ajar for a further potential hike. Markets see a 50-50 chance of a final hike while we think rates have most probably peaked. 2% remains the target with the Fed prepared to hike further In his Jackson Hole address, Federal Reserve Chair Jerome Powell reaffirmed that the Fed remains focused on hitting the 2% inflation target and keeping it there. He spends a considerable amount of time breaking down inflation into different components and explaining the drivers, but as is usually the case, emphasises the non-energy, non-housing services. This remains the stickiest portion given relatively high labour input costs in a tight jobs market environment. Here, “some further progress… will be essential to restoring price stability”, but the expectation is that “restrictive monetary policy” will bring supply and demand into better balance and it will come down. In fact, the description “restrictive” with regards to monetary policy is used on seven occasions in his speech with higher borrowing costs and tighter lending conditions acknowledged as factors that will act as a brake on the economy and slow inflation to 2% over time. But Powell is wary the recent strength in activity data mean that the “economy may not be cooling as expected”. In turn, this “could put further progress on inflation at risk and could warrant further tightening of monetary policy.” As a result, the Fed "are prepared to raise rates further if appropriate, and intend to hold policy at a restrictive level until we are confident that inflation is moving sustainably down toward our objective". Monetary policy signalled to stay tight Nonetheless, he acknowledges that monetary policy assessment is “complicated by uncertainty about the duration of the lags” between implementation and the real world impact. With real interest rates “well above mainstream estimates for the neutral policy rate” there is clearly a concern that the Fed don’t want to tighten too much. This view point was echoed in the minutes to the July FOMC meeting that said  “a number of participants judged that… it was important that the Committee's decisions balance the risk of an inadvertent overtightening of policy against the cost of an insufficient tightening”. With Chair Powell concluding that “we will proceed carefully as we decide whether to tighten further or, instead, to hold the policy rate constant and await further data” we expect the Fed to leave the Fed funds target range unchanged at 5.25-5.5% at the September meeting. However, given the tight jobs market and strong third quarter activity the Fed will continue to signal the potential for one further rate rise before year-end in their forecast update, and will likely scale back the median forecast for 100bp of rate cuts in 2024 that it published in June.   We think rates have peaked and cuts will come in 2024 We don't think it will carry through with that final forecast hike though. The combination of higher borrowing costs, which is resulting in mortgage rates, credit card, auto loan and personal loan borrowing costs hitting two-decade plus highs, together with less credit availability, pandemic-era savings being run down and student loan repayments restarting should intensify the financial squeeze in the fourth quarter and beyond. So while the US economy may well expand at more than a 3% annualised rate in the current quarter, we expect to see a weaker performance in the fourth quarter together with further significant progress on inflation returning towards target. Our base case continues to be interest rate cuts through 2024 as monetary policy is relaxed to a more neutral footing.

In the past few months, the company has consistently exceeded our expectations regarding the monetization of 'Unsolved.' Apart from the impressive revenue growth, the most surprising factor for us has been the shift in the trajectory of marketing expenditures. Through further improvement in KPIs of this application, despite seasonally unfavorable market conditions (high CPI), the company continues to increase user acquisition investments simultaneously maintaining consistent expected returns.       Keeping the above in mind, we anticipate that when user acquisition costs begin to decline (likely around end of the 3rd or beginning of the 4th quarter), the potential of the implemented changes in the application should be further unlocked, resulting in its continued dynamic progression of results. Additionally, we would like to point out that the most significant changes regarding 'Unsolved' are still ahead of us. As we indicated in our previous recommendation, the new metagra should prove to be the element that will contribute the most to the improvement of the application's KPIs. We expect to see the initial effects of these changes around 2H'24. The production of the studio's second most important project (a new RPG game) is proceeding according to schedule.   A technical soft launch of the game was conducted during 2Q'23, which received positive reviews from testers. We anticipate that this project will make its market debut in 2024. Despite the recent dynamic increase in the stock price, our estimated results for the 2023-24 period imply an attractive multiple valuation for the company (adjusted P/E at the level of 8-10x). Furthermore, the decrease in the risk-free rate also has a positive impact on the valuation. With this in mind, we maintain our BUY recommendation for Artifex Mundi, while simultaneously raising the target price to 22,8 PLN per share, which is 30% above the current market price.

High 2024 borrowing needs in Poland no longer fundable locally Poland’s government unveiled the 2024 draft budget bill with a cash-basis deficit of PLN164.8bn and record-high net borrowing needs. Next year’s deficit is boosted by a strong rise in spending, while revenues should grow slower due to disinflation. Given the high borrowing needs the Polish budget should become more reliant on foreign financing in 2024.   The budget draft The 2024 draft budget bill approved by the government envisages the central deficit (cash-basis) at PLN164.8bn (vs. PLN92bn targeted this year). The reasons behind the strong rise in the deficit are spending, which grew by 22.5% year-on-year, while total revenues are projected to rise by 10.5% YoY amid further disinflation. What is even more striking is a strong increase in borrowing needs. Net borrowing needs for 2024 are projected at PLN225.4bn (c.6% of GDP). This is up by 55% vs. an already high PLN143bn planned for this year and close to zero in 2020-21. Combined with maturing debt it means that gross borrowing needs are expected to exceed PLN400bn next year.     In 2023 net savings in banking sector covers substantial part of borrowing needs In 2023 the financing of (central budget) borrowing needs is based mainly on local sources, ie, the net savings in the banking sector. It grew fast as high interest rates trimmed demand for new loans, while deposits continued expanding. As a result, the net savings in the domestic banks are expected to cover around two-thirds of the state budget net borrowing needs this year, which are estimated at PLN143bn. Also, the government turned more open to external financing and tapped the Eurobonds markets more eagerly than in the previous year, so overall funding of the budget is very safe.   A strong rise of net borrowing needs requires more external funding on hard currency bonds and POLGBs Net borrowing needs and its financing in 2023 and 2024 (PLNbn)   In 2024 net savings of local banks to grow much slower, while borrowing needs rise and budget requires more external funding than in past years We estimate that in 2024 the net savings in local banking sector may reach an equivalent of about 30% of total borrowing needs, estimated at PLN225.4bn. That is why the Ministry of Finance changed the funding plan, which requires much more external savings. In 2024 the authorities plan to expand Eurobonds issuance by nearly PLN37.8bn vs. PLN13.3bn in 2023 (net). Also, foreign investors’ engagement in Polish government bonds (issued domestically in PLN) may also need to increase as the domestic banking sector may not have sufficient capacity to absorb supply of PLN160.7bn in new PLN-denominated government securities (compared with some PLN62.9bn this year). In detail, the net supply of PLN-denominated government securities is the following: (1) the government intends to sell over PLN54.5bn T-bills in 2024; they will be issued for the first time in a long time (are usually purchased by domestic banks), (2) the supply of POLGBs should reach PLN99.2bn vs. PLN48.2bn in 2023, and (3) the supply of retail bonds is expected at PLN7bn vs. PLN14.9bn in 2023. On the top of that the borrowing needs assumes raising PLN28.6bn from the EU Recovery and Resilience Facility. This source of funds is currently locked due to Warsaw’s conflict with Brussels over the rule of law in Poland.   Summary We expect the Ministry of Finance to keep sizable offers of POLGBs in the second half of the year to take advantage of favourable market conditions. Also, the high cash buffer of MinFin (over PLN130bn at the end of July) will be held and used as a safety buffer to prevent problems with funding. Yet, given that net savings in domestic banks may prove insufficient to cover high government funding in 2024, MinFin is likely to rely on foreign investors, who refrained from increasing holdings of POLGBs in past years.

The current international debate on whether or not Germany is once again the 'Sick man of Europe' could finally bring about the long-awaited sense of urgency for a new reform programme by the government. It has been the big summer theme in Europe: weak growth, worsening sentiment and pessimistic forecasts have brought back headlines and public discussion about whether Germany is once again the ‘Sick man of Europe’. The Economist reintroduced the debate this summer more than two decades after its groundbreaking front page. The infamous headline seems currently justified when looking at the state of the German economy. The 'Sick man of Europe' debate The optimism at the start of the year seems to have given way to more of a sense of reality. In fact, the last few weeks have seen an increasingly heated debate about Germany’s structural weaknesses under the placative label “sick man of Europe”. Disappointing industrial data, ongoing problems in the energy-intensive industry and a long list of structural problems have fuelled the current debate. And indeed, no other eurozone economy is currently facing such a high number of challenges as the German economy. Cyclical headwinds like the still-unfolding impact of the European Central Bank’s monetary policy tightening, high inflation, plus the stuttering Chinese economy, are being met by structural challenges like the energy transition and shifts in the global economy, alongside a lack of investment in digitalisation, infrastructure and education. To be clear, Germany’s international competitiveness had already deteriorated before the Covid-19 pandemic and the war in Ukraine. To a large extent, Germany's issues are homemade. Supply chain frictions in the wake of the pandemic, the war in Ukraine and the energy crisis have only exposed these structural weaknesses. These deficiencies are the flipside of fiscal austerity and wrong policy preferences over the last decade. Fiscal stimulus during the pandemic years and last year to tackle the energy crisis have prevented the German economy from falling deeper into recession. However, with our current forecast of a contraction of the entire economy by roughly 0.5% over the entire year and yet another contraction next year, the economy would basically be back to its 2019 level in late 2024. There are many varieties of illness and the German economy has clearly caught a few bugs due to its own lifestyle choices.    

Oil prices have strengthened over the summer as fundamentals tighten, whilst natural gas prices have been volatile, with potential strike action in Australia leading to LNG supply uncertainty. Chinese concerns are weighing on metals, but grain markets appear more relaxed despite the collapse of the Black Sea deal.   Oil market tightness to persist Oil prices have strengthened over the summer, with ICE Brent convincingly breaking above US$80/bbl. The strength in the flat price has coincided with strength in time spreads, reflecting a tightening in the physical oil market. OPEC+ cuts, and in particular additional voluntary cuts from Saudi Arabia, mean that the market is drawing down inventories. We expect this trend will continue until the end of the year, which suggests that oil prices still have room to move higher from current levels. While the fundamentals are constructive, there are clear headwinds for the oil market. Firstly, it is becoming more apparent that the Fed will likely keep interest rates higher for longer and that, along with renewed USD strength, is a concern for markets. Secondly, Chinese macro data continues to disappoint, raising concerns over the outlook for the Chinese economy and what this ultimately means for oil demand. That said, up to now, Chinese demand indicators remain pretty strong. We expect the tight oil environment to persist through much of 2024 with limited non-OPEC supply growth, continued OPEC+ cuts and demand growth all ensuring that global inventories will decline. However, we could see some price weakness in early 2024, with the market forecast to be in a small surplus in the first quarter of next year before moving back into deficit for the remainder of 2024, which should keep prices well supported. The risks to our constructive view on the market (other than China demand concerns) include further growth in Iranian supply despite ongoing US sanctions and a possible easing in US sanctions against Venezuela, which could lead to some marginal increases in oil supply.  

Supply risks plague the natural gas market The European natural gas market has behaved in a volatile manner over the summer. This was sparked by prolonged maintenance in Norway, significantly reducing gas flows into Europe. In fact, further maintenance in Norway again saw gas flows declining more recently. There's also been concern over Australian LNG supplies, with workers threatening to go on strike. Potential strike action would have put supply at three facilities at risk, which make up around 10% of global LNG supply. These LNG supply risks have eased somewhat with unions and the Woodside company coming to an agreement for workers at the North West Shelf facility. However, negotiations are still ongoing at two other facilities operated by Chevron. These have a combined capacity of 24.5mtpa, around 6% of global supply. This is clearly still a risk to the market, particularly if we see a prolonged strike that would affect all of this capacity and if it runs deep into the Northern Hemisphere winter. Australia is not typically a supplier of LNG to Europe. However, reduced LNG supply would mean that Asian buyers would look elsewhere for alternative supply, increasing competition with European buyers. This is an upside risk to European gas prices, particularly if it were to occur over the heating season. European gas inventories naturally decline over the winter, with demand basically doubling over these months. If the LNG supply, which Europe is more reliant on now, is also reduced, inventories would fall quicker through winter. That said, Europe is in a comfortable situation in the near term. Despite Norwegian disruptions, storage has filled up at a good pace and is, in fact, 92% full already. This is above the 79% seen at the same stage last year. It also means that the EU has hit the Commission’s target of having 90% storage by 1 November, more than two months before the target date. We believe that Europe will go into the 2023/24 winter with storage basically at 100%. This suggests that in the short term, we will need to see European gas prices weaken and trade at a discount to Asian LNG. This is to ensure that LNG flows are diverted from Europe. Only when Europe starts drawing down storage during the heating season will we see further upside for prices.  

Agriculture – Supply concerns from Africa push cocoa higher Cocoa prices made strong gains during August as supply concerns from West Africa continued to keep the market tight. London cocoa front-month contract settled at a fresh five-year high of GBP2,944/t yesterday. The weather has improved in recent weeks in West Africa including Nigeria, Ghana and Ivory Coast; however, crop development remains poor due to multiple factors including swollen-shoot disease and a supply shortage of fertilisers. Meanwhile, cocoa demand has been increasing in the US and Europe ahead of the winter and Christmas holidays.

Mexican peso corrects: Don't panic! USD/MXN has spiked higher on news that Banxico wants to start unwinding its short dollar position acquired through FX intervention. While the market may be correct in thinking that Banxico does not want the peso to be a lot stronger, we think that after some temporary weakness in September, the peso will still outperform its steep forward curve. Unwinding the intervention Late yesterday, Mexico’s central bank, Banxico, announced its plans to unwind the outstanding balances of its FX hedging programme, a programme launched in February 2017 to support the beleaguered peso. During two intervention episodes - February 2017 and March 2020 - Banxico effectively acquired short USD/MXN positions in the FX forwards market when spot was trading over 20 and 24, respectively. In its press release, Banxico clarified that $5.5bn of its forward position was built during 2017 and another near $2bn during the March 2020 episode to leave the current outstanding balance near $7.5bn. Banxico has said that it will let these short USD/MXN positions in the forward market (held in the one to twelve-month tenors) roll off gradually. In practice, this means rolling only 50%, not 100%, of the shorter-dated positions and allowing the longer nine and twelve-month positions to mature on schedule.   There are probably three reasons why USD/MXN spiked so sharply on the news. The first is that the Mexican peso has been investors' EM darling this year and that long MXN positions are crowded. The second is that Banxico’s decision to unwind this hedge programme could mean Banxico’s tolerance of peso strength has reached some kind of limit. The third is the technical aspect that the biggest impact on the FX market could come this month. If, as Banxico says, only 50% of this month’s reported $4.8bn in maturing forwards is rolled, that means the FX market has to absorb the sizeable impact of a $2.4bn Banxico dollar offer disappearing. While all of the above concerns have merit, we are less concerned than some and take Banxico’s press release at face value. In it, Banxico said it was now unwinding these positions because market conditions are now orderly and liquidity conditions are good (they weren’t when the intervention took place). And that, by unwinding these positions now, Banxico allows banks on the other side of these trades to do so in an orderly manner.

Peso positives remain in place Physically it looks like the majority of this hedge unwind will hit the USD/MXN market in September. However, the hedge unwind does nothing to reduce one of the key driving factors of peso strength this year – which is the risk-adjusted carry. Even Banxico in its meeting minutes highlights how the risk-adjusted yield is the dominant force in driving the peso. As we highlight below, the peso offers the higher carry-to-risk ratio in the EM space. This is the nominal implied yield available through the deliverable/non-deliverable FX forward market, adjusted by implied volatility from the FX options market. Unless Banxico plans to slash nominal rates or engineer some local factor that would command significantly higher implied volatility for USD/MXN, then this carry-to-risk ratio will remain a major boon to the peso.   EM currencies 'carry-to-risk' ratio and YTD performance versus USD   On the subject of potential rate cuts, it was noticeable that the Mexican TIIE swap curve barely budged on this announcement. If the FX market thinks Banxico may potentially even want to cut rates to put a floor under USD/MXN, the rates market is not buying the story. And Banxico this week has, in fact, said it will not be rushed into early rate cuts. Recall that Banxico had kept policy rates 600bp+ over the Fed to keep USD/MXN stable. We would be more worried for the peso if Banxico did threaten large, early rate cuts. New FX policies from central banks?     We tend to view this as more a commercial and financial stability-led decision from Banxico rather than a formal red flag to further peso strength. As an aside, Brazil’s central bank – the BCB – has a $100bn short USD/BRL position through the FX forwards following intervention and probably would not go near unwinding it for fear of crashing the Brazilian real. Chile’s central bank happens to be buying FX at the moment – but that looks a function of financial stability as it tries to rebuild FX reserves after losing half of them last year. In short, we do not think Banxico’s move is part of an effort to cap the strength in Latin currencies. Instead, we think Mexico’s high carry, decent growth, strong sovereign position and positioning for geo-political nearshoring should mean strong demand for the peso on any weakness this month. Additionally, foreign positioning in Mexcio’s local currency MBONO bond market is not particularly extreme; Mexico should be well positioned to receive funds when bond markets eventually come back into favour given its large 10% weight in the JPM GBI-EM local currency bond index. We currently forecast USD/MXN trading down through 16.50 next year when the broad dollar turns lower on a larger-than-expected Fed easing cycle. We do not think this Banxico announcement necessitates a forecast change, and the peso will comfortably outperform its steep forward curve.          Non-resident holdings of Mexican government securities  

Logistics market ​According to JLL 1Q23 data, total net demand for logistics space decreased in 1Q23 by 35% y/y to 1.0m sqm, concurrently with an increase of lettable area of 21% y/y to 30.5m sqm (we note that the developers delivered 1.5m sqm in 1Q23). The most active group of tenants were industrial and e-commerce companies. The vacancy rate amounted to 6.3% (+1.2pp. q/q; ca. 1.9m sqm).      As major risk factors we point to: • Risk related to the demand for dwellings. The company’s results are dependent on pre-sales, which took place in previous quarters. Thus, in most cases a drop in demand will negatively affect the financial data and profitability. We note that in 2021- 22, Marvipol Development pre-sold 376 and 207 apartments, respectively, due to a limited offer and the above-mentioned deterioration in demand. Hence, we predict that the developer will deliver 442 flats in 2023E, in comparison with 910 units in 2022.     • Risk related to interest rate volatility. In 2022, demand surged, which was driven mainly by interest rate hikes implemented by the MPC. The clients lost their creditability, which decreased by 60-70% (according to market data). Moreover, the share of credit-buyers fell from 70-80% to ca. 20% as of end-2022. Nevertheless, starting from 1Q23, creditworthiness started to slowly recover, which has underpinned pre-sale volumes. Given recent BIK data, the number of granted mortgages in June present an increase in y/y terms for the first time since Dec21.     • Risk related to the mortgage bank’s policy. The demand change may also be affected by the bank’s attitude to mortgage policy. According to the latest NBP survey, the majority of sector representatives are planning to tighten credit policy in coming months, despite an improving market environment.     • Risk related to costs. The profitability of residential projects depends on two key factors on the cost side: 1) material prices, and 2) landplot prices.   We observed increased volatility of core material prices in 2022, due to the negative impact of the war in Ukraine, which could leave a footprint on future projects. Nevertheless, the developers decided to increase selling prices and we suppose that the companies will be able to mitigate the above-mentioned factor. Furthermore, the developers reported that in 2023E the key material prices, have at least stabilized, which sounds quite supportive to us. Regarding landbanks, prices continue their long-term trend of hikes and the share of the landbank in the selling price grew from 20% to 22-24% as of now. In our model, we assume that gross profitability will gradually fall to nearly 23% (vs. a long-term average of 23.7%).   • Risks related to the logistics market. The logistics division is a supplementary activity within the company’s business model. As of end-2Q23, the group has invested > PLN 200m in logistics projects and will regain this, if the projects are sold. As of now, we observe a slowdown in the investment market, which is caused by a deterioration in the macro environment and increase in exit yields, which has left a footprint on valuations.

The global financial markets have witnessed significant turbulence in recent times, with a confluence of factors contributing to this uncertainty. As we delve into the intricate web of market dynamics, we'll explore the implications of events such as Lego's surprising decision to abandon oil-free bricks, China's gold buying spree affecting bullion pricing, and Morgan Stanley's prediction that the Federal Reserve has paused its interest rate hikes. These developments, among others, have sent shockwaves through various sectors, leaving investors and analysts grappling with what lies ahead.   A Rollercoaster Week for US Stocks The past week saw US stocks experiencing their most challenging period since March, triggered by the Federal Reserve's update. Both the S&P and Nasdaq indexes retreated by 2.9% and 3.6%, respectively. This downturn in the market was mirrored globally, with the MSCI World Index recording a 2.67% slide, its sharpest decline since March. The MSCI Asia ex-Japan Index also suffered a substantial setback, losing 2.3%, positioning it for a 3% loss in the third quarter. These declines have sent shockwaves through the investment world, raising concerns about the overall health of the global economy.   Bond Yields and the Fed's Stance One of the key indicators of this market turbulence is the surge in 10-year US yields, marking their most substantial weekly rise since July. Over the last ten weeks, yields have risen in eight, and 10-year real yields have surpassed 2%. Morgan Stanley's Ellen Zenter has stated that the Federal Reserve is likely done with its rate hikes for the time being. These developments have left investors wondering about the impact on various asset classes and the broader economic landscape.   Earnings Reports to Watch As we navigate these turbulent financial waters, several earnings reports are on the horizon. Companies such as Costco, Cintas, Micron Technology, Jefferies, Nike, Accenture, BlackBerry, and Carnival Corporation are set to release their financial results. These reports will shed light on the performance and outlook of various sectors, providing critical insights into market trends.   Paradigm Shift in Bullion The bullion market is experiencing a paradigm shift driven by Chinese gold buying. This shift is having a profound impact on the pricing and demand for gold. Understanding this shift is crucial for investors and central banks alike, as gold has historically been a safe-haven asset during times of economic uncertainty.   Thailand's Tech Investment Expectations Thailand is gearing up for substantial investments from tech giants like Tesla, Google, and Microsoft, with expectations totaling $5 billion, according to the Prime Minister. This influx of tech investment could transform the country's tech landscape and create opportunities for growth in the Southeast Asian region.   Lego's Surprising Decision In a surprising turn of events, Lego has decided to abandon its efforts to produce oil-free bricks. This move has garnered attention due to the increasing focus on sustainability and environmental responsibility in the corporate world. The implications of this decision go beyond just the toy industry, as it reflects broader concerns about the use of fossil fuels.   The recent market turbulence, influenced by various global factors, highlights the interconnectedness of the financial landscape. As we navigate these uncertain waters, staying informed about developments such as central bank policies, corporate decisions, and geopolitical events becomes increasingly critical. Investors and financial analysts must remain vigilant and adapt to changing market conditions to make informed decisions in these challenging times.

Saudi's commitment is not written into a law By Ipek Ozkardeskaya, Senior Analyst | Swissquote Bank   Markets are on an emotional rollercoaster ride this week. The slightest data is capable of moving oceans. Yesterday, the significantly softer-than-expected ADP report, and the announcement that 75'000 healthcare workers at Kaiser went on strike sparked a positive reaction from the market in a typical 'bad news is good news' day. The US economy added only 89K new private jobs in September, much less than 153K penciled in by analysts. It was also the slowest job additions since January 2021. The rest of the data was mixed. US factory orders were better than expected in August, but the services PMI came close to slipping into the contraction zone, and the ISM's non-manufacturing component also hinted at slowing activity. Mortgage activity in the US fell to the lowest levels since 1995, as the 30-year mortgage rates spiked higher toward 8%. Housing and services are among the biggest contributors to high inflation besides energy prices, therefore, seeing these sectors cool down has a meaningful impact on inflation expectations, hence on Federal Reserve (Fed) expectations. As such, yesterday's soft-looking data tempered the Fed hawks, after the stronger-than-expected JOLTs data triggered panic the day before. The US 2-year yield took a dive toward the 5% mark, the 10-year yield bounced lower after flirting with the 4.90% level, while the 30-year hit 5% for the very first time since 2007 before bouncing lower on relieving news of soft job additions. Hallelujah.  The US dollar index retreated across the board, and equities rebounded. The S&P500 jumped from the lowest levels since the beginning of June. The score is now one to one. One good news for the US jobs market, and one bad news. Everyone is now holding his or her breath into Friday's jobs data, which will determine whether we will end this week with a sweet or a sour taste in our mouth. Sweet would be loosening jobs data, sour would be a still-strong jobs data which would fuel the hawkish Fed expectations and further boost US yields while the US yields are at a critical moment.   For the first time since 2002, the US 10-year yield comes at a spitting distance from the S&P500 earnings. The index is just about 60 points above its critical 200-DMA. Looking at the seasonality chart, the S&P500 could dip at about now. In this context, there is a chance that soft jobs data from the US marks a dip in the S&P500 selloff. But one thing is sure: the yields and the US dollar must come down to keep the S&P500 on a rising path. Profits at the S&P500 companies are inversely correlated with the US dollar as their international profits account for about a third of the total. If the yields and the US dollar continue to rise, the S&P500 will face severe headwinds into the year end.    Oil fell nearly 6%!  Rising suspicions that the global economy is headed straight into a wall didn't spare oil bulls yesterday. The barrel of American crude dived almost 6%, slipped below the 50-DMA ($85pb), and below the positive trend base building since the end of June. The 6.5-mio-barrel build in gasoline stockpiles last week helped bring the bears back to the market even though the data also showed a more than 2-mio-barrel draw in crude inventories over the same week.   Yesterday's move shows that what matters the most for intraday moves is the rhetoric. This summer, the market focus was on the tightening global oil supply and how the US will 'soft land' despite the aggressive Fed tightening. Now we start talking about slowing economies and recession worries.   OPEC decided to maintain its oil production strategy unchanged at yesterday's decision. Saudi and Russia repeated that they will keep their production restricted to maintain the positive pressure on oil. But if global demand cools down and volumes fall, both Saudi and Russia will be tempted to increase profits by selling more oil at a cheaper price. Saudi Arabia shouldering all the production cuts for OPEC is not written into a law, it could become uncertain if market conditions turn sour.

End of Europe’s exemption for ship alliances adds to tough market conditions Europe's planned termination of the so-called 'block exemption rule' that enables container liners to closely cooperate within alliances will limit room to manoeuvre. This particularly applies to the container liners outside of the largest players, and adds to already challenging market conditions.   Europe plans to end the anti-trust exemption for container alliances The European Commission has announced it will not extend the block exemption for container liners which expires 25 April 2024. This exemption enabled container shipping companies with a combined market share of up to 30% to provide joint services to clients, and resulted in the formation of three large alliances, 2M (Maersk, MSC), The Alliance (Hapag-Lloyd, HMM, Ocean Network Express and Yang Ming) and The Ocean Alliance (CMA CGM, Cosco, OOCL, Evergreen), as companies sought to manage capacity and share their networks. The exemption in the cyclical container liner market was first introduced during the global financial crisis in 2009 and extended in 2014 and again in 2022. In the early stage of the pandemic - when container liners suffered unprecedented uncertainty - the regulation was again extended. But with consumers stuck at home shifting their spending to goods, and ports and supply chains across the world congested due to closures and events such as the blockage of the Suez Canal, freight rates skyrocketed, and profits reached record highs in 2021 and 2022. This sparked criticism around the rationale for the exemption among shippers and policymakers.   The golden age in container shipping has ended - but the market structure has also changed Container rates have collapsed since early 2022 and spot rates on Asia to Europe trade have dropped below pre-pandemic levels. The sector has also faced a combination of faltering demand and a flood of newly ordered vessel capacity coming online. However, the European Commission has acted in light of what it sees as structural market changes. There has been consolidation. And on top of this, several liner companies including Maersk, CMA CGM and MSC have actively taken stakes in port terminals, logistics services providers and even air freight services over the past two years. With this ‘integration,’ these companies have developed a presence across supply chains and an ability to offer end-to-end logistics solutions.    End of the exemption makes offering joint services and capacity management more difficult The expiry of the block exemption means that cooperation in terms of joint services will be restricted and managing capacity (by for instance taking out (‘blanking’) sailings) will be more difficult. For some container liners, it will also be more difficult to offer specific port calls to clients. Profits in container shipping have been on a downward track from elevated levels since the second quarter of 2022. Global container volumes have been falling this year and are expected to grow only slightly this year amid global headwinds for trade. At the same time, the market is set to be flooded by a wave of new vessels coming online (TEU-capacity will be expanded by some 27% in 2023-2025) making the conditions in container shipping more challenging.   Alliances won't (necessarily) cease to exist, but room to manoeuvre will be more limited The EU and US have followed the same approach regarding the exemption, with the ruling also under review in the US. Either way, the EU is already part of large trade routes and the lifting of the exemption will limit the room to cooperate and weigh on market conditions, especially for pure container liners. MSC and Maersk decided earlier to dismantle their cooperation, possibly because market leader MSC has become big enough by itself. The other two alliances won’t necessarily cease to exist, but there will probably be a higher regulatory burden for joint operations under general competition rules.  

FX Daily: Fed pause renews interest in the carry trade Even though it was a hawkish hold, the Fed's decision to leave rates unchanged for a second meeting in a row has seen interest rate volatility drop and high-yielding currencies start to perform well again. This may be an emerging trend, especially if tomorrow's jobs data isn't too hot. The focus today is on rate meetings in the UK, Norway and the Czech Republic.   USD: Investors look set to explore the Fed pause The dollar has been a little weaker over the last 24 hours. Helping the move has likely been the rally in the US bond market, supported by a lower-than-expected quarterly refunding announcement, the soft manufacturing ISM and then the FOMC meeting. Despite the Fed retaining a tightening bias, it seems investors are more interested in reading and trading a Federal Reserve pause. This has seen interest rate volatility drop and triggered renewed demand for high-yielding FX through the carry trade. Calmer market conditions have gone hand in hand with the re-pricing of the medium-term Fed cycle. Recall that last month, the story was very much 'higher for longer' and rather incredibly, the low point for the Fed cycle over the coming years was priced at just 4.50%. That pricing has now adjusted 60bp lower over the last few weeks and has even seen yields at the short end of the US Treasury curve start to move lower, e.g., sub 5% again. It may be too early to expect these short-end rates to go a lot lower just yet, but it does seem as though investors are a little more open to the prospect of weaker data knocking the dollar off its perch. Without that confidence that US growth will decelerate this quarter, the Fed's pause can, however, see further demand for carry. In the EM space, it has been a good week for currencies in Chile, South Africa and Mexico, while in the G10 space, the under-valued Australian dollar is doing well. We continue to see upside potential for AUD/CNH. This would normally be a weak environment for the yen as well, meaning that we cannot rule out USD/JPY retesting 152. US data will determine whether the dollar can generally hold steady in this carry trade environment or whether weaker US data finally triggers a more meaningful and broad-based dollar correction. For today, the focus will be on the weekly jobless claims data – where any decent jump higher can knock the dollar – and the volatile Durable Goods Orders series. Do not expect big moves before tomorrow's US jobs report, but we would say the dollar's downside is vulnerable today. DXY to drift towards 106.00.

Analysis of transactions and tips for trading EUR/USD Further decline became limited because the test of 1.0681 coincided with the sharp downward move of the MACD line from zero. This happened even though several Fed representatives hinted at the possible continuation of the rate hike cycle and the lesser chance of a reduction in borrowing costs. Today, CPI data for Germany and retail sales report for the eurozone will come out, but it will not have much impact on the market. Instead, the speech of ECB Executive Board member Philip Lane will generate interest, as well as the speech of Fed Chairman Jerome Powell.     For long positions: Buy when euro hits 1.0700 (green line on the chart) and take profit at the price of 1.0730. Growth will occur after protecting the support at 1.0680. However, when buying, make sure that the MACD line lies above zero or rises from it. Euro can also be bought after two consecutive price tests of 1.0681, but the MACD line should be in the oversold area as only by that will the market reverse to 1.0700 and 1.0730. For short positions: Sell when euro reaches 1.0681 (red line on the chart) and take profit at the price of 1.0656. Pressure will increase after an unsuccessful attempt to hit the daily high, as well as weak data from the eurozone. However, when selling, make sure that the MACD line lies under zero or drops down from it. Euro can also be sold after two consecutive price tests of 1.0700, but the MACD line should be in the overbought area as only by that will the market reverse to 1.0681 and 1.0656.     What's on the chart: Thin green line - entry price at which you can buy EUR/USD Thick green line - estimated price where you can set Take-Profit (TP) or manually fix profits, as further growth above this level is unlikely. Thin red line - entry price at which you can sell EUR/USD Thick red line - estimated price where you can set Take-Profit (TP) or manually fix profits, as further decline below this level is unlikely. MACD line- it is important to be guided by overbought and oversold areas when entering the market   Important: Novice traders need to be very careful when making decisions about entering the market. Before the release of important reports, it is best to stay out of the market to avoid being caught in sharp fluctuations in the rate. If you decide to trade during the release of news, then always place stop orders to minimize losses. Without placing stop orders, you can very quickly lose your entire deposit, especially if you do not use money management and trade large volumes.

Birkenstock Q3 23 – 29/11 – as IPOs go Birkenstock hasn't had a great time of it, trading consistently below its $46 listing price, the shares fell 12% on the opening day, trading down to $36 although we have since rebounded from those lows. They say timing is everything when it comes to IPO's and we can safely say Birkenstocks timing was off, given the sharp sell-off in October. One thing in its favour is that the business is profitable, with the business seeing total revenue in 2022 of $1.35bn, with net income of $202.8m. When the accounts were released prior to the IPO the revenues for the 9-months to June were estimated to be $1.2bn, and on course to beat last year's total revenue number. Themoney raised by the IPO as allowed the company to repay $550m in loans, reducing its total debt to €1.31bn. Will this week's Q3 numbers give the stock a decent leg up?a

CEE: NBP to confirm hawkish turn This morning, the monthly data set was released in the region. We had retail sales data in Romania and retail sales and industrial production in Hungary, all for October. Here we highlight the industrial sector, which fell by 2.8% YoY, below market expectations. Later this morning, we'll see retail sales in the Czech Republic, which should confirm a weak economy in the fourth quarter as well. Later today, we will see a decision from the National Bank of Poland (NBP). We expect rates to remain unchanged, as in November. So, the main event here will be the governor's press conference tomorrow. But today, we'll still see a statement that should confirm the central bank's hawkish turn last month. The Polish zloty is slowly but steadily moving towards stronger levels, and we think that the current market conditions justify the level of 4.320 EUR/PLN. However, PLN rates have followed the fall in core rates, which in our view gives more opportunity for rates to react to the hawkish tone of the central bank – and we should see some upward repricing over the next two days especially at the short end of the IRS curve. This should support PLN and we should see more gains and move towards 4.300 EUR/PLN by the end of the week.

COT reports on the British pound show that the sentiment of commercial traders has been changing quite frequently in recent months. The red and green lines, representing the net positions of commercial and non-commercial traders, often intersect and, in most cases, are not far from the zero mark. According to the latest report on the British pound, the non-commercial group closed 10,000 buy contracts and 4,200 short ones. As a result, the net position of non-commercial traders decreased by 5,800 contracts in a week. Since bulls currently don't have the advantage, we believe that the pound will not be able to sustain the upward movement for long . The fundamental backdrop still does not provide a basis for long-term purchases on the pound.   The non-commercial group currently has a total of 58,800 buy contracts and 44,700 sell contracts. Since the COT reports cannot make an accurate forecast of the market's behavior right now, and the fundamentals are practically the same for both currencies, we can only assess the technical picture and economic reports. The technical analysis suggests that we can expect a strong decline, and the economic reports have also been significantly stronger in the United States for quite some time now.   On the 1H chart, GBP/USD is making every effort to correct lower, but the uptrend remains intact. We believe that the British pound doesn't have any good reason to strengthen in the long-term. Therefore, at the very least, we expect the pair to return to the level of 1.2513. However, there are currently no sell signals, so the uptrend is still intact. On Tuesday, there are few reasons for the pair to show volatile movements. We may see a flat phase, a downtrend, or an uptrend (intraday), so we need to purely rely on technical analysis. We expect the pound to consolidate below the trendline, and in that case, we can consider selling while aiming for the Senkou Span B line. A n upward movement is theoretically possible today, but we see no reason for it, so you shouldn't consider buying at the moment. As of January 2, we highlight the following important levels: 1.2215, 1.2269, 1.2349, 1.2429-1.2445, 1.2513, 1.2605-1.2620, 1.2726, 1.2786, 1.2863, 1.2981-1.2987. The Senkou Span B line (1.2646) and the Kijun-sen (1.2753) lines can also be sources of signals. Don't forget to set a breakeven Stop Loss to breakeven if the price has moved in the intended direction by 20 pips. The Ichimoku indicator lines may move during the day, so this should be taken into account when determining trading signals. Today, the UK and the US will release their second estimates of business activity indices in the manufacturing sector for December. These are not significant reports so it is unlikely for traders to react to them. Description of the chart: Support and resistance levels are thick red lines near which the trend may end. They do not provide trading signals; The Kijun-sen and Senkou Span B lines are the lines of the Ichimoku indicator, plotted to the 1H timeframe from the 4H one. They provide trading signals; Extreme levels are thin red lines from which the price bounced earlier. They provide trading signals; Yellow lines are trend lines, trend channels, and any other technical patterns; Indicator 1 on the COT charts is the net position size for each category of traders; Indicator 2 on the COT charts is the net position size for the Non-commercial group.  

The bearish trend, a significant aspect of Forex trading, plays a crucial role in shaping investment decisions. This article aims to elucidate the characteristics of the bear market and its implications for traders. Understanding the Downtrend As discussed in our previous articles, a trend represents the direction in which the price of a currency pair is moving. A fundamental trading principle is to align investments with the trend rather than against it. Therefore, comprehending the downtrend is essential. The identification of a downtrend can be facilitated by analyzing charts that reflect past price values. Analyzing the Downtrend In the chart, the descending peaks and troughs, marked in red, signify a downtrend. Connecting the peaks forms a clear trend line. The strength of the trend is proportional to the distance between the peaks, with a larger gap indicating a more robust trend. While charts may not always vividly display trend lines, recognizing a general downward price trend can serve as a signal to temporarily exit the market. Bear Market Dynamics A bear market, synonymous with a downtrend, occurs when prices consistently decline. In the long term, it signifies a bearish market. Adhering to the popular adage "the trend is your friend," in such scenarios, traders usually contemplate selling. Bear markets often exhibit greater volatility compared to bullish trends, attributed to the accompanying unease amid declining prices. Support and Resistance Lines Support and resistance lines denote potential reversal points in the price movement of a currency pair. In a downtrend, support comprises the successive troughs, each lower than the previous one. These levels represent the depths of prior downward movements, acting as points where the price resisted further decline. Conversely, resistance surfaces when there is a visible level at which the price resisted further upward movement. Referring to the "change of poles" principle, if a resistance level is breached, it transforms into a support level. This pivotal moment often prompts seasoned traders to enter the market. Understanding the dynamics of a bear market is crucial for Forex traders. By recognizing the signs of a downtrend, interpreting charts, and comprehending the roles of support and resistance lines, traders can navigate the complexities of bearish markets more adeptly.

FX Daily: Not too hot to handle Rate expectations were not moved by slightly hotter-than-expected US CPI, and support for the dollar has mostly come through the risk-sentiment channel. Range-bound trading may persist despite conditions for a stronger dollar. Inflation in the CEE region is falling; the NBR leaves rates unchanged.   USD: Markets still attached to March cut US CPI data came in a bit hotter than expected yesterday, with the core rate rising 0.3% MoM and slowing to 3.9% YoY versus 3.8% consensus. The upside surprise in headline inflation was bigger: an acceleration from 3.1% to 3.4% YoY versus the 3.2% consensus. The dollar jumped after the release, also thanks to weekly jobless claims printing lower than expected. Somewhat surprisingly, the US yield curve did not react by scaling back rate cut expectations, as a knee-jerk selloff in 2-year Treasuries was fully unwound within an hour of the CPI release. We've already discussed how we did not expect this inflation read to leave a long-lasting impact on markets, and it definitely appears that most of the fixed-income investor community is almost overlooking the release. The support to the dollar appears mostly tied to the negative response in equities, given the neutral impact on short-dated US yields. A March rate cut is still over 60% priced in, and we still see short-term vulnerability for risk assets from a hawkish repricing. The conditions for a higher dollar this month are surely there, but we have observed numerous indications that markets remain reluctant to make short-term USD bullish positions coexist with the longer-lasting view that US rates will take the dollar structurally lower by year-end. The chances of rangebound trading until we receive clearer messages by activity data and the Fed are high. Today, PPI figures for December will be released, adding information about lingering price pressures and potentially steering the market a bit more. On the Fed front, we’ll hear from hawk Neel Kashakari.

The pivotal question we aim to answer is who should consider such instruments and who might be better off exploring alternatives. Given the diverse array of tools available for exposure to stock indices, it's worth exploring various options. Let's begin by addressing what a stock index truly is. An index, in itself, isn't a financial instrument, security, or derivative. It's essentially synthetic information about the market or specific segments and slices within it. In simpler terms, a stock index is a collection of components (in our case, listed companies) used to calculate its value. Each index has its portfolio, where each company is responsible for a specific percentage weight. Most indices use weights based on market capitalization – the higher the market value of a component, the greater its percentage value in the index portfolio. Additionally, the liquidity of a given company over a specific period (usually 6 months to a year) is often considered when determining portfolio weights. In essence, an index is like a portfolio comprised of a specific number of listed companies (in our case, not limited to just companies) in specific percentage proportions. Its value and price movements depend on the behavior of the components it holds. Explore more: Mastering Requoting in CFD Trading: Navigating Uncommon Market Scenarios In this segment, we'll focus on prominent stock indices from major exchanges. In the USA, the three key indices are the S&P500, Nasdaq-100, and Dow Jones Industrial Average (US30). In Germany, we have the DAX (DE30), once a favorite among traders; in the UK, it's the FTSE-100; in Japan, the Nikkei-225; and in Poland, the WIG20. Of course, this is just a small glimpse of the market, as each stock exchange has dozens, if not hundreds, of sector-specific, thematic, and smaller company-focused indices. However, leading indices are considered benchmarks for the mood and condition of a given exchange, although not always accurately. Investing in Stock Indices: How to Do It? Since a stock index isn't a financial instrument on its own, is it possible to "buy" it? There are numerous ways to gain exposure to index price movements, with the most popular being the purchase of an Exchange-Traded Fund (ETF) replicating a specific stock index. These ETFs construct their portfolios based on the composition of the underlying index, essentially buying shares of selected companies in the appropriate proportions. By investing in such a fund, we gain exposure to the stocks within the index using a single instrument. ETFs boast several advantages, including relatively low management costs, simplicity, convenience, and often high liquidity. However, standard ETFs are typically medium-term instruments, less suitable for speculation due to the lack of leverage and the ability to only take long positions. Of course, there are also synthetic ETFs in the market with double or even triple leverage, and some with inverse positions (short). On the XTB xStation platform, you'll find ETFs on all major stock indices, including their synthetic, leveraged, and inverse versions. Importantly, these can be purchased without any commission, and if you have a currency account, you won't incur any fees for currency conversion – the only cost is the annual management fee charged by the fund provider. If you prefer not to invest in an entire index through an ETF, you can independently create a portfolio of specific companies in predetermined proportions. On the xStation platform, you won't incur any commission fees for such transactions (up to a monthly turnover of 100,000 EUR). However, this approach is more time-consuming, although it exempts you from management costs charged by ETF providers. For more advanced investors, derivative instruments are available, including futures contracts, structured certificates on the Warsaw Stock Exchange, and, of course, Contracts for Difference (CFD), where stock indices serve as the underlying asset. Derivatives offer financial leverage and the ability to take both long and short positions, but they come with higher risk. CFD Market on Indices: Specification and Trading Conditions CFD contracts on stock indices are now offered by almost every broker, covering primarily popular American indices and leading indices from major global stock exchanges. According to the regulations of the European Securities and Markets Authority (ESMA), CFD contracts on indices provide a maximum leverage of 20:1, meaning a 5% margin requirement. Given the volatility of indices themselves, this is sufficient leverage even for intraday speculation. Depending on the broker, CFDs on some indices may have lower leverage – for instance, with XTB, this is the case for the Italian FTSE ITA40 and Reuters Russia 50 (RUS50), where the leverage is 10:1. Read more: Mastering Forex Markets. A Comprehensive Guide to Navigating Sideways Trends and Consolidation Patterns When holding positions overnight, be prepared for negative swap points, although XTB exempts CFDs on indices (excluding cash versions) from swaps, eliminating additional costs for maintaining positions over time. As for the lot value for CFD contracts on indices, it should ideally be equivalent to the multiplier for futures contracts (which are the underlying instruments for CFDs). However, some brokers may apply a multiple of the multiplier. For the most popular CFD indices, the lot values are: S&P500: multiplier 50 (e-mini) Nasdaq-100: multiplier 20 (e-mini) DAX: multiplier 25 (Mini-DAX) WIG20: multiplier 20 (similar to FW20) In the case of CFDs, you can open a position with a minimal volume of 1 micro lot (1/100 of a lot), allowing you to engage with the market without committing significant capital. Who Should Consider CFD Contracts on Indices? When it comes to CFD contracts on indices, as mentioned earlier, they are certainly not suitable for everyone. Leading stock indices themselves exhibit considerable volatility, and with CFDs, this volatility is further amplified by a maximum leverage of twenty times, introducing significantly higher risk. Therefore, these instruments primarily serve a speculative purpose, typically in the short term. Nevertheless, for those comfortable with the risk and desiring to capitalize on prevailing trends, CFD contracts can serve as a more accessible and considerably lower-capital alternative to index futures. It's crucial, however, to employ risk management measures, such as trailing stop-loss orders, especially given the inherent risks associated with these instruments. CFDs can also present a more accessible and significantly lower-capital alternative to index futures.

Borrowing needs will fall this year, meaning a lower supply of LCY bonds, but there is still a long way to go given the slow fiscal consolidation. Central and Eastern Europe should remain more active in the FX market than pre-Covid, while a busy January and the broadening of funding sources offer flexibility for the rest of the year Borrowing needs this year will be down on last year in the whole CEE region, with the exception of Poland. The decline is due to both lower budget deficits and redemptions. In contrast, in Poland, both have increased year-on-year. Overall, the supply of local currency bonds should fall but remain well above pre-Covid levels. Given lower yields, this supply may prove more difficult to place in the market compared to last year, which saw strong market demand despite record supply. This time is different, and we expect financial markets to be tougher and punish more budget overruns and additional issuance. Local currency issuance: Improvement but still a long way to go From a positioning perspective, we find the Romanian government bond (ROMGBs) market to be overcrowded after the significant inflows last year. On the other hand, the significantly underweight Polish government bond (POLGBs) market should help cover the historically record borrowing needs. Czech government bonds (CZGBs) and Hungarian government bonds (HGBs) remain somewhere in between with steady foreign inflows into the market. On the sovereign ratings side, all the obvious changes happened last year and should stabilise this year with only some adjustments in outlooks in the pipeline, unless a more significant shock arrives. On the local currency supply side, we see a clear improvement from last year in the Czech Republic, as it was a bright spot in the CEE region with credible public finance consolidation. In addition, we see it as the only country in the region with positive risks of a lower supply of CZGBs than the Ministry of Finance indicates. Hungary has also made great progress here, of course, with the traditional broad diversification of funding sources that should keep the pressure off the HGB market in the event of an overshoot of the projected deficit. In contrast, we see only a relatively small improvement in Romania, where the supply of ROMGBs will fall only a little. The supply of Polish government bonds, meanwhile, was already at a record-high last year and is set to rise a little more this year. In addition, the use of additional sources to avoid flooding the local currency bond market will increase significantly, which we believe represents the biggest challenge for the bond market in the CEE region this year.   FX issuance: Fast start and diverse funding sources offer flexibility On the FX side, CEE sovereigns are set to remain active in the Eurobond primary market in 2024 and beyond, with the overall trend driven by recent external shocks from Covid and surging energy prices, along with structural factors such as the energy transition in Europe. A key theme that unites regular issuers Romania, Poland, and Hungary is the diversification of funding sources, with more consistent interest in the US dollar, as well as alternative currencies such as the Japanese yen and Chinese yuan, alongside the more traditional euro for the region. The growing green bond market is also an area of focus, with Hungary leading the way, and Romania set to follow this year. At the same time, 2024 should see some divergence, with Poland taking the lead in the region for Eurobond issuance and set to be one of the largest EM sovereign issuers globally this year. Hungary should see a slight reduction in Eurobond supply compared to recent years, with its strategy of diversifying funding sources and front-loading supply providing plenty of flexibility for the rest of the year. Romania should retain its position as a regular issuer, although net supply will be lower this year, while catching up with Poland and Hungary in terms of diverse funding sources via green issuance and alternative currencies. A strong start to the year, with almost $15bn in issuance for CEE in January so far, should mean less pressure on the region to issue later in the year if market conditions turn.