Morning Brew July 27 2021

Good Morning

It is really not easy to make sense of markets and to find the right thing to focus on:

Looking from trading levels, US Yields rose to 4.84 and weighed on equities a little. The Dow, S&P and Nasdaq fell all less than 0.5% The USD Index fell despite rising yields and precious metals rose. The USD Index is testing the 106 level at the moment and Gold is approaching the 1940 level while Silver has broken above the 23 level again to trade at 23.10.

Blackout Period starting end of the Week so from next week, there will be no fed speakers.

Rate hikes are basically off the table for the current cycle for the Fed, the ECB the Bank of Japan, the Bank of England, Bank of Canada, the Australians as well as the New Zealands, the probability of a hike is less than 20% priced in. only the Swedes, the Indonesian, as well as the Turks are seen to hike at the next meeting.

Rate hikes are basically off the table for the current cycle for the Fed, the ECB the Bank of Japan, the Bank of England, Bank of Canada, the Australians as well as the New Zealands, the probability of a hike is less than 20% priced in. only the Swedes, the Indonesian, as well as the Turks are seen to hike at the next meeting.

Althea wrote on overall Rates: Geopolitical tensions fail to stall the rise in long-term rates

Koen wrote on how one could play bonds via options using the TLT ETF: As the allure of bonds re-emerges, the spotlight also shines on sophisticated investment methods like options on bond ETFs, especially TLT. Current yields have reshaped bonds into a promising investment medium, bestowing them with merits such as comparatively lower risk than stocks, bolstered diversification, and a dependable income flow resilient to economic fluctuations.

Please find the overview page for options here: Options Trading - Stock Market Analysis & News | Saxo Group (home.saxo) this contains very basic education and advanced ideas.

• In Gaza a hospital was hit with rockets, Israel states it looks like Hamas launched them.
• Joe Biden is in Israel today
• The US decision to ban exports of chips to China that had been designed specifically for that market weighed on Nvidia – stocks fell over 4%,
• China's economy grew at a faster-than-expected clip in the third quarter, while consumption and industrial activity in September also surprised on the upside
• China's economy grew at a faster-than-expected clip in the third quarter, while consumption and industrial activity in September also surprised on the upside
• Republican Jim Jordan ailed in his first attempt to become speaker.
• Goldman Sachs as well as Bank of America beat expectations but this failed to boost shares out of the bearish trend – possibly driven by worries on the substantial unrealized losses in the Hold to Maturity Bonds.
• The big question at the moment is of course how o trade4 the current market. There is a huge event risk in most asset classes and markets making risk management the key point and I would approach my positions from “What happens if I am wrong” rather than from “What happens if I am right”

There is ample opportunity but also lots of downside in possibly great spikes of volatility. For speculative positions, bought options are very appealing at the moment because they allow to take a position without necessarily setting a stop. ( the premium is at risk but that is usually much smaller than the nominal involved)

Please get in touch if you have any questions.

Upcoming events:

Wednesday
- Data China Retail Sales & GDP, UK CPI, EU HICP, US Housing Starts
- Earnings ASML, P&G, Morgan Stanley, US Bancorp, NASDAQ, Tesla, Alcoa,

Thursday
- Data: AU Unemployment, US Initial Jobless Claims,
- Earnings AT&T American Airlines, TSMC, Nokia,

Friday
- Data Japan CPI, China Rates, UK Retail Sales, .
- Earnings Amex,