Markets hope for Q1/22 boost; downward pressure remains

📰 US equity markets opened positive in pre-market trading today as investors sought to put geopolitical risks, inflationary pressures and tighter monetary conditions behind them. Investor sentiment improved with an eye toward the unofficial start of first-quarter earnings season, which could restore some positive momentum to recently battered equity markets.

Results got off to a mixed start, with JPM reporting a wider-than-expected loss as business volumes slowed and trading revenue declined. JPMorgan was also hit by its exit from the Russian market. I expect profits at other US banks to be hit even harder by sanctions against Russia. Delta Airlines, on the other hand, reported a smaller-than-expected loss and said March revenue was above pre-pandemic levels for the first time. Home goods retailer Bed Bath & Beyond disappointed, saying it was hit hard by supply chain disruptions and an increase in logistics costs.

I'm not as optimistic on US corporate performance during the first quarter as most analysts and investment banks, and also expect CEOs/CFOs to be cautious given the impact of higher commodity costs, the fallout from the ongoing war in Ukraine, and supply chain disruptions that don't appear to have improved – and may even worsen as China likely struggles with COVID-19 cases in the coming months, warn.

I expect increasing pressure on the financial and retail sectors – especially after JPM and BBBY earnings reports. The energy sector is benefiting from higher prices and China's slightly loosened lockdown measures.

New data from Harris Poll shows that about 84% of Americans plan to cut spending due to higher prices. The biggest cuts are to eating out and impulse purchases, as well as driving and experiences like concerts and sports. With inflation at 8.5%, the highest level since 1981, consumers are having to make tough choices even as the job market remains solid. While wages are rising, they cannot keep up with inflation for everyday items. In addition, consumers, especially those with low to moderate incomes, are being hit hard by the Federal Reserve's first interest rate hikes. 

The focus will also be on the ECB, which meets tomorrow for its interest rate decision and will likely provide a preview of its upcoming monetary policy. I expect both the ECB and the Bank of England to be more cautious than the Fed, which could disappoint investors and put further pressure on European currencies. The yen fell to a 20-year low as the growing gap between rising U.S. bond yields and persistently low yields in Japan continues to weigh on the JPY. I don't think this trend will end for now. New Zealand's central bank made its biggest rate hike in 22 years (by 50 basis points), but said it would bring forward upcoming rate hikes, which weighed on the NZD (and also the AUD). 

Risk sentiment and demand for safe assets (such as precious metals) remain high.


🇺🇸 US Markets ↕️/↘️
Cyclical Stocks ↕️/↘️
Financial Stocks ↘️
Energy Stocks ↗️
Tech/Growth Stocks ➡️/↘️

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

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

⚡️Crypto Market ➡️/↘️

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

Yours, Robert 🏢🏭🏦📚🔍