• Stéphan

Electricity is now a luxury! / SPX levs / CS, GOOG, AMZN, SHOP, MSFT, MCD / IMF cuts / FOMC next

  • FOMC day – 75bps baked in >>> we could get some BIG moves tonight/next few days….CTA’s covered a lot of shorts lately, and many remain invested on a FED pivot on inflation, this IS very unlikely for reasons we’ve mentioned this week, namely that ‘sentiment’ are very low, but employment data and real hard data remains ok/softer but nothing dramatic, so FED should not blink, inflation is 9%.... the massive problem, as we see in recent earnings reports, is that inflation is eating your real wages, personal savings and profits margins of all companies that can’t pass their expensive to the consumer… (only very few companies can and will be able to)…seems many hanging in there hoping FED pivots to friendly (for the record we may still see further short covering, but a lot has been done already..we are unlikely to sustain much higher levels of SPX say 4000/4100+

  • German consumer confidence fell to its lowest level ever on NatGas worries. RU is likely to keep vital gas flows to Europe at minimal levels as long as the standoff over UKR continues, people familiar with the leadership’s thinking said. EU ministers reached a deal to cut gas use by 15% through next winter as the prospect of a full cut-off grows increasingly likely, though it won't apply to all member states equally. European energy prices soared to a record as uncertainty over supplies continued

  • Credit Suisse – another change….Ulrich Koerner Succeeds Thomas Gottstein

  • SPX/QQQ – may the short covering is mostly done already (see GS & JPM comments, very much been the chatter for the short covering rally lately…with the trigger being ‘FED to pivot’ at this meeting ..Wage growth tracker by industry, with trade and transportation growth picking up to 6% (chart below) – it is really hard to see why the FED should not continue! >>> -7% or so is as ‘easy policy’ as it gets

  • China Targeted Fed to Build Informant Network, Access Data, a Probe Says. The investigation by Senate Republicans found that the decadelong effort included detaining a Fed economist in China

  • McDonald’s says U.S Labor inflation is about 10% and U.S food and paper costs up 12-14% in 2022, UK : McDonalds: "From today, we’ll be increasing the price of our cheeseburger for the first time in over 14 years, taking it from 99p to £1.19", Deutsche Bank showing reasonable earnings/higher than expected, Danone selling a lot of yogurts, Coinbase chopped again on SEC move, Microsoft misses estimate but guidance higher, Google misses on earnings shares up though overnight, Shopify shares plunged on layoffs news )interesting, usually it used to push shares higher, probably a sign that business conditions are worse than many previously thought). Amazon will raise fees for its delivery and streaming service Prime in Europe by up to 43% a year

  • IMF cut global growth again from 3.6% to 3.2% - Weakening Growth Outlook: The IMF cut its world GDP forecast, again, for this year and next, warning the economy may be on the cusp of a downturn. 2022 expansion will likely slow to 3.2% from a prior 3.6% forecast, while rate hikes to address price increases will lead to 2023 growth of 2.9%. "The outlook has darkened significantly since April. The world may soon be teetering on the edge of a global recession, only two years after the last one," Pierre-Olivier Gourinchas, the IMF's chief economist, said.

  • AUD inflation on 21y highs, CPI 6.1% yoy, core inflation record 4.9%, markets seem to think 50bps next week (rather than 75bps)

Markets :
  • Rates overall, the market ‘pricing’ cuts for 2023 seems wrong imho, rates will be higher than many think for a little longer than many think – see big wager put on in market yesterday (below text)

  • SPX reversed on the huge 4k resistance and is back to the 50 day moving average. Our general take remains intact. This market lacks new direction and there is no new trend. Resistance around the 4k level. Big support down at 3750. Trade the range until we break out, either way... (chart)

  • USD got firmer again last 48hours ahead of FOMC, CHF though got even stronger with EURCHF making some sort of all time lows (Italy, EU problems with NatGAs etc)

  • Crude, commods, metals all been suffering on higher USD and the ‘R’ talks prices are skyrocketing around the world - more than tripling in many markets.

(Bloomberg) -- A huge hawkish wager on expectations for the Federal Reserve’s rate path turned heads in the US short-term interest-rate market Tuesday. In futures referencing the Secured Overnight Financing Rate-- a Libor successor -- 67,000 contracts traded via block at 9:45am New York time. December 2022 contracts were bought and December 2023 contracts were sold in a bet that the gap between the two will widen as the swaps market prices in fewer Fed ratecuts.

The value of the position stands to rise or fall by around $1.7 million per basis-point move in the spread. The trade is among the biggest seen in SOFR futures, which debuted in 2018.

It was put on with the inverted spread between the two contracts at 63 basis points, pricing in at least two 25-basis- points rate cuts in 2023. Should the Fed continue raising ratesnext year, the spread should widen and profit in the trade will

accumulate.The swaps market is currently priced for the Fed policy rate to drop from 3.37% in December to 2.75% by December 2023,reflecting expectations for an economic hard landing.Fed policy makers are set to announce their latest policy

decision Wednesday, with markets broadly pricing in a 75-basis- point rate increase. Microsoft misses estimates but stock up 5% on rosy guidance Alphabet reported weaker-than-expected earnings and revenue for the second quarter. The stock rose more than 4% in extended trading.

The EU agreed to curb natural gas demand by 15%. Member states, barring Hungary, voted to reduce natural gas usage, with some exemptions, in anticipation of further Russian cuts. The Council also extended sanctions against Russia to 2023. >>> never going to work nicely.. China Targeted Fed to Build Informant Network, Access Data, a Probe Says

The investigation by Senate Republicans found that the decadelong effort included detaining a Fed economist in China

EU will not be divided by gas cuts, German foreign minister says

We will see about this then… How Himars could force Russia into an embarrassing collapse in UKR

Global economy hurtling toward historic slowdown, IMF warns

Ulrich Koerner Succeeds Thomas Gottstein

SPX/QQQ – may the short covering is mostly done already, the jury is till out tough..all about FOMC!

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