US Session (11/23/2021)
The technology sector continued losses as rising government yields dampened the outlook for growth equities, while US shares rallied on the back of advances in cyclicals.
After bouncing between gains and losses in the last hour of trading, the S&P 500 finished the day higher. The rise was led by energy and financial stocks. The tech-heavy Nasdaq 100 fell, adding to Monday's late-night selloff. The treasury yield curve steepened, with the 10-year yield approaching a one-month high. Turkey's currency crisis worsened, with the lira falling below 13 per US dollar. Zoom fell as growth appeared to be halting.
Traders reduced their bets on the Federal Reserve remaining dovish for a longer period of time after Jerome Powell was selected to a second term. In his policy approach, the chair aimed to strike a compromise, stating that the central bank will utilize all measures at its disposal to help the economy while also preventing inflation from becoming entrenched.
Despite recent dips, US stocks have been trading at all-time highs, raising concerns about valuations as investors weigh growth prospects in the face of rising inflation and a lingering pandemic.
Since September 2020, the dollar has traded at its greatest level. For the first time since 2017, the Japanese yen surpassed 115 per dollar.
Fed's Bostic on Monday that the US central bank may need to accelerate the elimination of monetary stimulus and allow for an earlier-than-planned increase in interest rates.
Turkey's lira fell the most in the world, reaching a new low after President Erdogan defended his pursuit of lower interest rates to support economic growth and job creation. His unconventional stance that rising interest rates feed inflation has caused the currency to fall for nine years in a row, resulting in a 43% drop in 2021 alone.
Zoom video fell as analysts, notably Citigroup Inc., expressed concern about sluggish incremental growth and the lowest new-customer additions in three years. The stock of Urban Outfitters is down 9.4% as a result of supply-chain problems and cost pressures in the third quarter.
Oil rose after an unprecedented plan by consumption countries to use their strategic oil reserves proved less severe than investors had anticipated. While the headline magnitude of the US release is considerable, a major portion of the crude will be borrowed and returned later, leaving traders expecting tighter balances in the future. In collaboration with China, Japan, India, South Korea, and the United Kingdom, the United States will release 50 million barrels of crude from its strategic reserves.
Asia Session (11/23/2021)
Most Asian stocks dipped on Wednesday, and bond yields fell, as traders considered the economic implications of tighter monetary policy while waiting for vital US data and the latest Federal Reserve minutes.
For the third day in a row, MSCI Asia-pacific .'s share gauge fell. Energy and financials helped the S&P 500 eke out a gain, while the NASDAQ 100 continued its decline. Later in the day, a spate of reports on US economic activity and the cost of living is due.
Treasuries rose, reversing some of their overnight declines. Bond market inflation forecasts have been moderated by the potential of the Fed removing stimulus more swiftly to combat price pressures, albeit they remain historically elevated.
The New Zealand dollar fell after the country boosted interest rates to 0.75% to combat pricing pressures, a smaller move than some had anticipated. By the end of 2022, the central bank expects benchmark borrowing costs to be 2%.
Analysts believe China's PPI may have peaked due to a decline in coal prices - CSJ.
Europe Session (11/23/2021)
Treasury rates surged and US index futures pointed to a further selloff in technology stocks, as traders trimmed expectations on a more dovish Federal Reserve after Jerome Powell's re-nomination.
After a late-day selloff in technology companies on Monday, futures on the Nasdaq 100 index sank 0.3%. On Tuesday, the sector was Europe's weakest performance, dropping the region's benchmark to a three-week low. Turkey's currency crisis worsened, with the lira falling below 12 per dollar. Oil prices dropped as countries from the United States to India sought to tap their strategic supplies.
Following Powell's confirmation for a second term, investors are lowering their expectations for the Fed to take a more dovish posture. The chair himself attempted to find a compromise in his policy stance, stating that the central bank will utilize all of its capabilities to help the economy while also preventing inflation from becoming entrenched.
White House: Biden will make available up to 50 million BBL's of oil from the US strategic petroleum reserve.
BoE's Haskel: Before interest rates are raised, we need to see clear evidence of both an increase in the size of the economy and an increase in the strength of the labor market.
ECB's Knot: After 2022, ECB rates will likely have a lift-off.
Money Markets: Fully anticipating a 10 BPS ECB rate hike in December 2022 IRPR, as opposed to the roughly 50% chance forecast from Monday.
ECB's Schnabel: It's possible that inflation may fall below 2% in the medium term.
ECB's Schnabel: Inflation risks are skewed to the upside.
Wednesday FX Option Expiries
EUR/USD: 1.1500 (EU4.2B), 1.1400 (EU1.84B), 1.1625 (EU1.04B)
USD/CAD: 1.2340 ($917M), 1.2480 ($875M), 1.2580 ($546M)
USD/JPY: 115.50 ($1.24B), 113.50 ($1.04B), 115.00 ($946M)
AUD/USD: 0.7275 (AUD544.3M), 0.7270 (AUD375.5M), 0.7200 (AUD356.6M)
USD/CNY: 6.3900 ($350M), 6.3700 ($300M)
USD/BRL: 5.6830 ($750M), 5.3350 ($320M), 5.4000 ($300M)
GBP/USD: 1.3440 (GBP303.6M)
EUR/GBP: 0.8550 (EU303.5M)
USD/KRW: 1250.00 ($494M)
USD/MXN: 20.85 ($380M)