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Monday 21st March 2022
Hi Friend,
TSE Monday Morning Markets ...
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| | The Saturday Economist Monday Morning Markets ...
This is our Monday Morning Markets Update for the 21st of March 2022. The Russian war on Ukraine continues. The humanitarian crisis increases.The Russians have upgraded the levels of civilian attacks
and large scale destruction. It is like watching a 1930's news clip. The
annexation of a sovereign state, millions of refugees fleeing across
Europe, a dictator unchallenged at home. The scenes in Mariupol appalling ...
It was another interesting week for markets. Equities rallied. Oil and gas prices were mixed. Bond yields bounced back. The Dollar gave up some earlier gains. Gold and metal prices moved lower. Bitcoin closed above $41,000 level.
Our "Empires of the Cloud Fund" was up 9%. Our "Dynasties in the cloud Fund" was up 16%. Facebook bounced 15%. Alibaba, Baidu and Weibo were up 25%.
Top line, "Cash is Trash, (Jamie Dimon), Bonds are Garbage ( Bill Gross), Equities Are Overvalued (Everyman), Bitcoin is worthless (Jamie Dimon), Most NFTs are junk (John Hargrave)" ... When it comes to understanding market moves, "Any explanation is better than none" (Nietzsche). Be careful out there ...
"To understand the markets, you have to understand the economics".
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| | Markets up 4.8%. Overvaluation 2.4% ... Our global equity index basket closed up 4.8% this week. In the USA, the Dow, S&P and Nasdaq closed up 7.0%. Nasdaq the biggest gainer up 8%.
In Asia, Shanghai was down 1.8%, Nikkei up 7%, the volatile Hang Seng index up over 4%. China tech stocks rallied as government appeared to ease talk of clampdown.
Europe continued to rally. The CAC and Dax were up almost 6%. The FTSE, was up 3.5%. So what can we make of values? Our overvaluation rating closed at +2.4%. The US returns to expensive territory.
In Asia, the Hang Seng and Shanghai are over sold, so too the markets in France and Germany. Buy when the tanks are rolling into the abyss we said. "The contrarians will pick the opportunities in Central Europe and the East" ... and they did.
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| | Bond Market Sentinel ... US Ten Year Yield 2.15 ...
Big reversal this week, US bond yields jumped 14 points to 2.15. In the U.K. ten year rates closed 2 points higher at 1.50. Euro rates closed 11 points higher.
We said last week, we expect U.S. bond yields to retest the 2.00 level 'ere too long, 2.50 the forecast by end of year. UK rates at 1.50 then 2.00 the call.
Central banks may lose their commitment to the escape from Planet ZIRP. Rate rises may be mitigated in the face of lower growth and rampant inflation. Possibly! This is not our Friday Forward Guidance at present. The bond moves appear to be back on track.
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| | Exchange Rates ... Sterling Up $1.32 ...
Dollar softening was evident in the week. Sterling closed up against the dollar at $1.32 from $1.31, unchanged against the Euro at €1.19. The Euro was up against the Dollar at $1.11 from $1.10.
Sterling trades at $1.3178 against the Dollar this morning. The Euro is steady against the Dollar at $1.1051.
We expect Sterling to average £1.35 through the year. Against the Euro, we model €1.18 with a slight uplift in the Euro Dollar rate to $1.15.
["One of the nice things about being a currency forecaster, is that expectations of you are very low. Moderate success is a great surprise". Professor Avinash Persaud].
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| | Oil Brent Crude lower ... $107.82 ...
Oil
prices Brent Crude closed lower last week at $107.82.Trading at $108.33 this morning, markets are adjusting to a life with restrictions on Russian oil.
The U.S. oil rig count eased to 524 last week. The count could well double, if oil rests at the $100 dollar mark.
The gas rig count was up to 137 from 80 at start of year. Natural gas prices moved higher to $4.86 dollars from 4.50 at start of week.
The US Energy Intelligence Authority is forecasting oil prices, Brent Crude, to average over $100 dollars in the year, easing to $95 dollars in the final quarter.
It is possible oil may average $95 dollars in Q2, then through to the end of the year. The situation in Ukraine could change quickly and hopefully for the better. "Volatility remains in price levels, exacerbated by geopolitical supply side complications." Yep we really did say that!
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| | That's all for this week. This is the last in our "test" series on Monday Morning Markets. The last in the "test" series Friday Forward Guidance was on 18th March 2022.
John
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© 2022 John Ashcroft, Economics, Strategy and Financial Markets, experience worth sharing.
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