
Weeks Review into W/C 26nd September 2022-Post FOMC 75bp, BOE

Last Weeks Summary
Weeks Summary
US equity markets fell this week, with the Dow briefly entering bear market territory and closing at a new 2022 low as concerns about recession risks grew following the Federal Reserve’s 75-basis-point (bps) hike in interest rates to combat inflation. The Dow fell 4% last week, the S&P 500 fell 4.7%, and the Nasdaq fell 5%. Treasury yields reached their highest level in more than a decade. The yield curve inversion deepened as the yield onOvernight Session More the two-year note rose above 4.2%, indicating growing scepticism about the economy’s near-term health. Oil prices fell onOvernight Session More Friday as global recession fears and a stronger dollar—which reached multi-decade highs against the euro and pound—raised concerns about the global economy.
Following the BOJ’s relatively muted monetary policy announcement, the Japanese yen spiked lower, with the benchmark USD/JPY exchange rate probing above the closely watched 145.00 figure. The central bank maintained all of its key stance elements. The target short-term lending rate was kept at -0.1 percent, and the yield onOvernight Session More the 10-year Japanese Government Bond (JGB) was kept at 0%.
Governor Haruhiko Kuroda and company provided no fuel for such speculation with this announcement, instead stating that they are monitoring FX market movements and their impact. This could indicate that, as was the case for much of the time following the 2008 financial crisis, the Bank is more concerned with managing the rate of Yen movements rather than their direction.
BOE hiked as expected but a mini-budget from the incoming finance minister sent GBP and GILTS spiralling lower as participants lose confidence in the government’s economic policy
The price actionPrice action More in UK gilts is deteriorating. For investors in sterling-denominated bonds, a daunting list of challenges has emerged, and the Treasury’s mini-budget has done little to bolster confidence. Widening rate differentials are no consolation for the pound, as foreign exchange remains the primary vehicle for pricing UK country risk.



Events Calendar:
KEY TAKEAWAYS
- Corporate earnings reports are expected from Nike, Micron Technology, CarMax, Carnival Corporation, and Bed Bath & Beyond, among others
- S&P Global will release its Case-Shiller National Home Price Index onOvernight Session More Tuesday, showing the monthly change in housing prices for July
- Updates onOvernight Session More consumer sentiment are expected, with the Conference Board’s Consumer Confidence Index (CCI) and University of Michigan’s Consumer Sentiment Index (MCSI) onOvernight Session More Tuesday and Friday, respectively
- The final reading for second-quarter U.S. GDP growth is expected Thursday, along with growth in corporate profits and consumer spending during the second quarter
- The Personal Consumption Expenditures (PCE) Price Index—the Fed’s preferred measure of inflation—will be updated Friday, tracking price growth in August
- A key inflation update for the eurozone is expected onOvernight Session More Friday
Events Calendar:
Monday, September 26
- Chicago Fed National Activity Index (Aug)
- Dallas Fed Manufacturing Index (Sep)
Tuesday, September 27
- Ferguson PLC (FERG) and BlackBerry Ltd. (BB) report earnings
- Durable Goods Orders (Aug)
- S&P Case-Shiller Home Price Index (Jul)
- Freddie Mac House Price Index (Jul)
- New Home Sales (Aug)
- CB Consumer Confidence Index (Sep)
Wednesday, September 28
- Paychex Inc. (PAYX), Cintas Corp. (CTAS), and Jefferies Financial Group (JEF) report earnings
- Wholesale Inventories (Aug)
- Goods Trade Balance (Aug)
- Pending Home Sales (Aug)
Thursday, September 29
- Nike (NKE), Micron Technology (MU), CarMax (KMX), Carnival Corporation (CCL), Bed Bath & Beyond (BBBY), and Rite Aid Corporation (RAD) report earnings
- U.S. GDP Growth Rate – Final Reading (Q2 2022)
- Corporate Profits (Q2 2022)
- PCE Prices (Q2 2022)
- Real Consumer Spending (Q2 2022)
- Euro Area Economic Sentiment Indicator (Sep)
Friday, September 30
- Personal Income and Spending (Aug)
- PCE Price Index (Aug)
- Chicago PMI (Sep)
- Michigan Consumer Sentiment Index – Final Reading (Sep)
- Euro Area Inflation Rate – Flash Reading (Sep)
- U.K. GDP Growth Rate – Final Reading (Q2 2022)
Weekend Reading:
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By identifying areas of balance/ acceptance in the auction I have a natural edge. I can identify value and the pivots of change. In balance I look to fade the extremes, when activity leaves an area of acceptance, I monitor for strength and conviction of the move. For this, I use volume and value as a guide. As a general rule, if a move is genuine, volume and value will move in away from prior acceptance to a new area.
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UPDATE: