Morning Brew February 14 2024

Good Morning

The higher than expected achieved two major things, causes a selloff of risk across the board on the one hand, it also adjusted the traders expectation close to the Feds projection of the rate path.

The Fed was expecting to cut 3 times this year while the traders had seen 6 cuts in the beginning of the year and are now at 3.5 ( a cut is 25 basis points)

10 Year Yields rose to 4.33 and the USD Index rose to 104.70, EURUSD 1.0720, GBPUSD 1.2565 after the CPI came lower than expected - USDJPY 150.50 and Gold and Silver 1991 and 22.00.

The US 500 lost the 5k and fell to 4957, yesterdays close was 1.4% lower for the S&P and the Dow, the Nasdaq  lost 1.8%, the Russel 2000 lost 4.3% in the largest drop since June 22 and the Vix rose a full point. Koen comments: “Yesterday's CPI data release, coming in above expectations, significantly jolted the markets, propelling the VIX to an intraday peak of $17.94 before settling at $15.85 (+1.92 | +13.78%). This marked the highest VIX level since the onset of the last rally in early November. Accompanying this surge, the VVIX and SKEW indices also experienced substantial increases, up 10.11% and 11.60%, showing that nervousness is far from gone. “

Peter Garny had pointed our yesterday that the valuation of Arm was exaggerated, yesterday the stock declined by 19%.

Key articles:

Technical Update - ASML top and reversal pattern, indicators suggesting larger correction

 What is driving cocoa's sweet price?

Sticky US inflation could make dollar strength more durable

Episode 7 of 'Saxo Options Talk': the strategy of put spreads

From here, todays agenda is fairly thin after the UK Inflation came a little lower than expected. and we can expect seesawing to adjust to the new rate expectations. One of the drivers behind the high CPI print in the US was shelter which is less represented in the PCE number – that realization could spark hopes for a lower PCE print at the next read on the 29^th but that is uncertain.

Trade very carefully!!

Wednesday
- Data UK CPI, EU GDP,
- Earnings: Sony, Heineken, CME, Cisco, Occidental Petroleum,

Thursday
- Data JP GDP, UK GDP US Retail Sales, Initial Jobless Claims, Bostic speaks,
- Earnings: Schneider, Stellantis, Applied Materials, Airbus, Deere, Safran,

Friday
- Data US PPI

- Earnings: Eni