Morning Brew August 16 2023

Good Morning,

After the higher than expected retail sales, US equities traded lower and the three Indexes each lost app 1%. Banks were the biggest losers. This was also fueled by a report that rating agency Fitch was considering downgrading US Banks. JP Morgan fell 2.5%, Bank of America 3.2% and Wells Fargo 2.3%.

US 500 fell to close below the 50 Day moving average for the first time since March. and has reached the inital target our strats put out. The key now is if we see a further decline or a reversal. 

There has not been any change in the near term fed outlook, there is a 90% chance, the fed will pause at the September meeting and the Minutes from the last Fed Meeting may give more insight on their thought process at 20:00 tonight. As of right now, the first real rate change is expected in May 2024.

The 10 year yields popped to near 4.3% after the Retail Sales release but retreated to below 4.2%.

The USD Index is trading at 103.13, EURUSD 1.0915 and GBPUSD 1.2705 and USDJPY is in intervention territory while technically the break above the July highs gives room to the upside.

Gold continues to trade on support and above the June lows and on the 200 day moving average. Silver is at 22.60

Our Strats team sees no imminent decline in the USD: Stagflation could bring a short-term uptrend in the US Dollar and the implications of a staglation:

• Lower equity returns during stagflation – This equity article from our Heady of Equity Strategy, Peter Garnry, discusses defensive positioning.
• Stagflation: the revival of Treasury Inflation-Protected Securities (TIPS) – This article on bonds positioning from our Senior Fixed Income Strategist Althea Spinozzi discusses how Treasury Inflation-Protected Securities (TIPS) could provide a hedge against stagflation.
• Navigating End-of-Cycle Dynamics: Protecting and Enhancing Portfolio Returns – This video takes you through the risks ahead for the US economy and how you could use diversification, defensive positioning and option strategies in this environment.
• Investing with Options: Hedging your Portfolio – Our Options Strategist, Koen Hoorelbeke, discusses options strategies to hedge portfolios.

A good summary on current key technicals is available here:

https://www.home.saxo/content/articles/technical-analysis/cramers-corner-daily-technical-update-15082023

Althea wrote on the BoE , Chances for a Bank of England 50bps rate hike in September are high with the conclusion “not only does the BOE not have inflation under control, but the economy is quickly deteriorating!”

UK CPI and PPI will be released at 8:00 this morning giving more clarity on either the rock or the hard place the BOE is stuck between.

China's new home prices fell for the first time this year in July albeit at the slowest possible pace at -0.1%. This confirms China needs to act to support the economy if it wants to keep the economic targets in place. Acc to Reuters the only viable path seems to be increasing household spending. In Japan, the Tankan survey rose but companies see slow demand in China.

Wednesday August 16

Data: AU Rate decision, UK CPI, EU GDP, US Industrial Production, Fed Minutes

Earnings: Tencent Holdings, Cisco, JD.com, Synopsys Inc

Thursday August 17

Data: JP Trade, Initial Jobless claims

Earnings: Target Corp, CNOOC,, Adyen, Walmart Inc, Applied Materials Inc,

Friday August 18

Data: UK Retail sales, HICP

Earnings: Palo Alto Networks, Deere, Estee Lauder