Fed rate decision in focus; Putin steps up his war against UA

Trading activity is subdued as investors await the Federal Reserve's rate hike and further clues on what to expect in the upcoming rate decisions. We see global equities slightly higher after yesterday's sharp losses, even after Russian President Vladimir Putin stepped up his war on Ukraine.

U.S. 10-year Treasury bond yields fell 3-4 basis points to 3.53%. The Fed is widely expected to raise interest rates for the third consecutive time by 75 basis points. A full percentage point (100 basis point) hike is widely ruled out and would send Wall Street plummeting. There could be a slight boost to stocks after the 75 basis point rate hike, as there is also fear of a 100 basis point hike. However, I don't think risk sentiment will improve after the Fed's rate decision and Fed Chair Jerome Powell's reiteration of lowering inflation back towards the Fed's 2% target. 

We also expect another 75 basis point rate hike in November, which means the Fed will maintain the current pace of rate hikes. Interest rates would thus range between 4% and 4.25% by the end of the year – in this range, it would be surprising if Wall Street did not see further downside given the huge mountains of corporate debt, rising debt costs and the depreciation of future earnings.

The USD continued its upward trend and also benefited from weakness in the euro today as investors reacted to Putin's announcement of “partial mobilization” and the imminent annexation of parts of Ukraine.

Oil prices rose in response to further escalation of the Russian war. Recession concerns will keep gains in check, however. Natural gas prices will likely end the day with solid gains. In the medium term, I see oil prices higher. I believe that further rising tensions (especially in Europe) have not yet been priced in, increasing the case for even worse risk sentiment. The USD will continue to be in demand, further weighing on equities and riskier (perceived) assets and currencies (emerging market currencies, GBP, AUD, CAD, etc.). Precious metals are experiencing some (but only temporary) increased demand.


🇺🇸 US Markets ↕️ (possibly first up in reaction to rate decision / US Markets remain bearish)
Cyclical Stocks ↕️
Tech/Growth Stocks ↕️
Financial stocks ↕️/↗️
Energy ↗️

💱 Forex Markets
USD, CHF ↗️ 
JPY ➡️/↗️
CAD ➡️
GBP, AUD ➡️/↘️
EUR ↘️

⚒ Commodity Markets ➡️/↗️
Oil prices ➡️/↗️
Natural Gas prices ↗️
Metal prices ➡️/↘️
Precious Metals ➡️/↗️

⚡️Crypto Market ➡️

(*↗️ bullish, ↘️ bearish, ➡️ sideways / stable, ↕️ mixed / volatile)

Yours, Robert 🇺🇸🏦🔍🇷🇺☠️