5 defence stocks to arm your portfolio

Defence stocks have been in the spotlight for more than a year owing to geopolitical trends predating the Ukraine war and low valuations. Alec Cutler, portfolio manager of the Orbis Global Balanced and Cautious Funds, presents the bullish case.

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European countries untie the energy sector from gas

European markets traded moderately in the red on Wednesday, taking over the bearish baton from the US market, whose capitalization shrank on Tuesday. Investors are actively dumping European assets, as the threat of the gas crisis spreading to the financial sector grows, threatening to launch a wave of bankruptcies. European governments, probably with some delay, are developing mechanisms to isolate the economy from the energy crisis, including: limiting the wholesale prices at which gas is purchased from Russia, taxing excess profits, or capping the prices of energy companies in the green energy sector that are raising prices along with traditional producers, issuing special credit facilities for electricity suppliers, who are facing soaring borrowing costs due to declining margins (due to fixed selling price in contracts), and compensating utility bills to poor households, while promoting energy rationing.The pumping of gas through the Nord Stream pipeline has been completely stopped, given the ultimatum conditions of both parties, it is unlikely to resume in the near future. European countries have achieved some acceptable results in filling gas storages and preparing for winter. Consequently, the demand for European currencies becomes a function of the effectiveness of the actions of European governments in overcoming the existing imbalances in the energy system of the EU and the UK. In other words, investors are asking themselves the question whether European countries will be able to prevent unforeseen bankruptcies that could shake the financial sector. It will take time to answer this question, so the credit risk premium in European assets is set to rise in the short term.European currencies are under serious pressure, the British pound has suffered more than others and collapsed to 1.14. Given that sellers are approaching the level for the second time, and that uncertainty is growing, there is a high probability of a breakdown and a new low this week (1.13-1.1350). The fall of the Euro is constrained by expectations that the ECB will raise rates by 75 basis points on Thursday. Just under half of the economists surveyed by Bloomberg expect this outcome. Most expect the ECB to raise the rate by 50 basis points, but most likely EURUSD will fall to 0.96 on such a decision:The yen is in free fall, USDJPY has crept close to the round mark of 145 yen per dollar. The Bank of Japan has not yet commented on the fall; however, the last few days of parabolic movement increase the chances of foreign exchange intervention, or at least verbal warnings about interventions in the foreign exchange market. In addition, the weekly chart shows that the price is approaching the level of 146 (the peak value of August 1998), which can work as a powerful resistance:

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ECB Preview: 50 or 75?

The Eurozone’s record inflation print of 9.1% has left markets pricing in a 75 basis point hike at next week’s meeting. We suspect that the hawks have been pushing the debate of a 75 basis point hike as a way to force the doves into agreeing to a half point move.

This leaves the risk of disappointment if the ECB doesn’t deliver. This could mean further problems for the EUR and thus additional inflation risks. For the Eurozone though, 100 basis points of tightening over two meetings is a pretty significant step, and one that should go some way toward restoring confidence in the central bank and its commitment to defending price stability.

The ECB kicked off its tightening with a bold 50 basis point move at the last meeting. The doves hoped that the front loading would allow a switch to more conservative quarter point moves at subsequent meetings. Yet, instead of now eyeing a return to more “normal” quarter point steps, it is clear that the hawks are pushing for another half point hike, and would like to debate a 75 basis point move in the light of record high inflation, which reached 9.1% in August.

This week’s council meeting will come with updated staff projections, which are likely to bring considerable upward revisions to the inflation projections, at least near term. ECB’s Schnabel already said during a panel discussion at the Fed’s Jackson Hole Symposium that

“In this environment, central banks need to act forcefully. They need to lean with determination against the risk of people starting to doubt the long-term stability of our fiat currencies”. The Executive Board member also argued that much speaks in favor of the central bank acting determinedly even if that means risking lower growth and higher unemployment because a “robust control” approach reduces the risk of very bad economic outcomes in the future.

So, how aggressive of a policy path is meant by “determinedly” and “forcefully”. 

What is pretty clear is that a recession is looming now, with data signalling broad based contraction already in the Q3. Things could get much worse over the winter if and when energy shortages lead to outages and rationing. Private consumers will have priority over the winter, which in an extreme situation could force outages at major factories that would also hamper the services sector. Russia”s throttling of gas supplies coincides with major outages at French nuclear power plants and weather-related problems for electricity production, and there are few people now who don’t expect Europe to head for recession. The real question is how long and how deep will it be.

Today’s growth data, presented an upward revision, with Eurozone Q2 GDP revised up to 0.8% q/q from 0.6% q/q reported initially. The unexpected upward revision doesn’t change the increasingly gloomy outlook, but still indicates that the Eurozone headed into the energy crisis with a higher starting base than previously thought. Household consumption bounced 1.3% q/q, government expenditure lifted 0.6% q/q and investment picked up 0.9% q/q. The bounce in investment was counterbalanced by a downward revision to Q1 numbers, which show a contraction of -0.8%. Still, an overall solid report and with employment growth accelerating to 2.7% q/q from 2.4% q/q.

All that will give the hawks something to argue with tomorrow, although the dovish camp has plenty of survey data highlighting downside risks for coming quarters.

The EURUSD holds below parity as investors also concerned that overly aggressive central bank action will add to growth risks, there may be initial pressure on the EUR in the wake of a half point hike, but the single currency may bounce back quickly, depending on Lagarde’s delivery.

Its a close call, but 50 basis point hike is the main scenario, but with a big chance of a 75 basis point hike and an overall hawkish message from the governing council. What is clear is that more tightening is underway. Ultimately the end point for rate hikes will be important for debt financing costs. That end-point though won’t necessarily be impacted by next week’s decision, as the ECB clearly is front loading the steps towards a neutral position on monetary policy. How far it will go from there will depend on many variables, including the future of relations with Russia and the prospect for electricity production over the winter. Data dependency and flexibility will remain a key part of Lagarde’s message.

Click here to access our Economic Calendar

Andria Pichidi

Market Analyst

Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in Leveraged Products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.

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DAX INDEX FUTURES (FDAX1!), H4 Potential For Bearish Drop

Type: Bearish DropKey Levels:Resistance: 12999Pivot: 12809Support: 12415Preferred Case:On the H4, with price moving within a descending channel and below the ichimoku indicator, we have a bearish bias that price will drop from pivot at 12809 where the pullback resistance is to the 1st support at 12415 where the swing low support, 61.8% fibonacci projection and 161.8% fibonacci extension are.Alternative Scenario:Alternatively, price could break pivot structure and rise to 1st resistance at 12999 where the pullback resistance, 61.8% fibonacci projection and 23.6% fibonacci retracement are.Fundamentals:Due to the extended Nord Stream 1 halt, we have a bearish view on the DAX Index .

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Market Spotlight: GBPJPY Longs Moving Nicely

GBPJPY Breaking OutThe recent GBPJPY long idea from the breakout above 163.18 highs is now moving nicely higher and the pair is around mid-way to target at the 168.39 level. The recent surge higher in GBP has benefited the trad nicely with the Pound boosted by confirmation of Liz Truss as the new UK PM. Despite criticism over her proposals, traders at least have welcomed the return of some certainty and clarity with regard to UK politics. Additionally, hawkish BOE expectations are driving GBP higher against JPY here given the stark divergence in monetary policy between the two central banks. Comments today from ex Japanese MoF Watanabe, who said that there is no need to intervene in current JPY moves, have certainly fed into this narrative. Near-term the outlook remains firmly bullish for the pair with the retail market now heavily short.Keep An Eye OnToday’s BOE monetary policy report hearings, where the bank sets out its quarterly forecasts, will be closely watched by traders. In particular, inflation forecasts will be key for GBP. If inflation is forecast to remain higher for longer, this will keep hawkish BOE expectations firmly in place, keeping GBP supported near term.

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Market Spotlight: EURCAD & Today's BOC Meeting

BOC In Focus TodayThe main event focus today will be the Bank of Canada’s September rates meeting. The BOC has been among the more hawkish of the G10 central banks, having been the first to hike rates in the post-pandemic tightening cycle and the first to hike rates by a full 1%. Consequently, the expectation is also that the BOC will be the first to suspend its tightening operations, which brings us to today’s meeting.There has been a lot of speculation about whether the BOC will use today’s meeting to effectively pause its tightening cycle for now. In terms of the hike itself, .5% hike is priced in, while many platers are looking for a larger .75% but none are expecting a follow-up to the 1% hike seen last time around. Even at .5%, that would take Canadian rates up to 3%, the highest in the G10 block.Guidance KeyHowever, the bigger focus at this meeting won’t be on the size of the rate hike but on the guidance given. If the bank confirms it will pause on more tightening for now, or signals a likelihood of doing so before year-end, this is likely to send CAD lower near-term as traders look to other central banks playing catch up to trade a narrowing interest rate differential. On the other hand, if the BOC focuses on still-high inflation and the need to keep going with tightening, this should see CAD supported on the back of the meeting.Where to Trade the BOC Today?EURCADWith hawkish ECB expectations ahead of tomorrow’s meeting, EURCAD is a great choice for a CAD short if we see CAD weaken on today’s meeting. The pair has been trading lower within a broad bullish channel this year. However, recently price action has flattened out a little and we’ve seen strong bullish divergence on momentum studies suggesting the pair might be basing here. Bulls can look to trade a break of the 1.3198 highs, targeting a move through 1.3384 up to 1.3766 longer term.

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Traders Struggling To Price September FOMC

USD Rally Marches OnThe US Dollar rally this week has been a thorn in the side of many USD bears. Following the correction lower in July, the Dollar index has since regained its upside momentum and has broken out to new 2022 highs, taking the index back to prices not seen since early 2002. Along the way, there have been many calls for a deeper correction with bears claiming that the upside rally is overextended and vulnerable to a clear-out. However, the key driver of recent market action is market pricing for the upcoming September FOMC.Traders Split on FedWith the next Fed rate decision fast approaching, traders have really struggled this time around to land on either a smaller .5% hike or a larger .75% hike. Over the first half of July, a softer CPI reading and negative Q2 GDP reading slotted nicely into calls for the Fed to slow down on the pace of tightening in September. However, a firmly hawkish set of July FOMC minutes, and a slew of hawkish Fed commentary since (including Powell’s Jackson Hole speech) has seen bulls regaining confidence. Recent data surprises (NFP beat, ISM manufacturing and services beat) have also helped lift sentiment in USD ahead of the meeting, driving the current rally.Larger Fed Hike Not Yet Priced InLooking at the CME group market pricing for the September meeting, traders are now once again leaning towards a larger .75% hike, priced at 70%. This pricing (which is where it was at the start of last week) had been as low as 55% earlier this week, reflecting the ongoing battle.However, the big takeaway here is that a larger hike is not fully priced in. With that in mind, there is plenty of room for USD to rally further on the back of the September meeting. At the very least, there is room for USD to rally more heading into the meeting if traders start to move towards fully pricing in a larger hike. Today’s Fed commentary will be key to watch. If we hear a solid set of hawkish comments today, that might well seal the deal, driving USD firmly higher into the meeting. At that point, the post-meeting reaction will depend on the outlook and guidance from the Fed.Technical ViewsUSDJPYThis pair has been one of the best vehicles for USD longs this year given the divergence between the Fed and the BOJ. Following the breakout from the bull flag, USDJPY has since broken above the former 2022 highs at 139.56 and is now fast approaching a test of the long term bull channel top and the 146.97 resistance level. While above 139.56, the medium term outlook remains bullish.

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Investment Bank Outlook 07-09-2022

BNY MellonAPAC FX Depreciation Expectations RiseThe latest sentiment data from APAC painted a mixed picture. August manufacturing PMIs for China and South Korea fell into the contraction zone for the second consecutive month, while Taiwan's collapsed to 42.7, the lowest reading since May 2020. At the other end of the spectrum, India and Singapore manufacturing PMIs came in much higher, at 56.2 and 56.0, respectively. Overall, aside from upward trending confidence in Thailand (last at 53.7), the downward trend for the rest of Asia suggests faltering growth momentum. China's non-manufacturing PMI eased to 52.6, but the subcomponents offered little comfort: all but one, the business activities expectation, are in the contraction zone.Renewed COVID-related mobility restrictions across cities in China will undoubtedly weigh further on already-downbeat consumer confidence, as well as on retail and investment activity. It has been reported that more than 70 cities, including Shenzhen and Chengdu, have been put under full or partial lockdowns since late August, impacting more than 300 million people. China's latest (July) consumer confidence hit an historical low of 87.9. Retail sales have been negative since April 2022, with the July reading at -0.2% year-to-date y/y.Stimulus measures, including a series of targeted credit easing, direct pledges, and measures related to housing, e.g., special loans to help finish projects, relaxation of purchase rules, and lower mortgage reference rates (5y Loan Prime Rate reduced 15bp to 4.30%), have had only a limited impact so far. For example, the average of home prices across 70 cities fell again in July (-0.11% m/m), marking the eleventh consecutive monthly decline. The phenomena of too much money and too little demand continues.The latest economic stress point in China is the yuan. CNY has weakened sharply in August, by 2.2%. Excluding the COVID lockdown triggered 4.2% depreciation in April this year, it is the biggest monthly decline since August 2019, when the US Department of the Treasury designated China a currency manipulator.Contributing to the sizeable depreciation of CNY in August were persistent US dollar strength and surprise interest-rate reductions in PBoC open market operations (OMO), as well as on multiple local instruments, such as MLFs and LPRs. The authorities have taken measures to signal unease with the fast-paced depreciation, however. The counter-cyclical factor (CCF), which had been suspended since October 2020, has been redeployed since the end of August. CCF refers to the spread between the daily USDCNY fixings and implied levels. A strong CNY fixing, typically ranging from 100 to 300 pips versus implied levels, may be interpreted as the PBoC signaling intent to slow CNY depreciation. Also this week, the reserve ratio on foreign currency deposits was reduced to 6% from 8%. Despite the PBoC's intent, its signaling is a rather blunt tool to curb CNY depreciation pressure, in our view. Measures that effectively increase funding and trading costs are likely to have greater and more immediate short-term impact. One straightforward way is to tighten onshore and offshore funding costs, though this may create unintended consequences and disrupt normal funding operations in the interbank system. Another is to invoke the reserve ratio on FX forwards trading. The PBoC has twice raised the reserve ratio on FX forwards, from 0% to 20% in September 2015 and in August 2018, to curb depreciation pressure.

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One year later: how is Afghanistan is faring under Taliban rule?

It’s been a year since the Taliban took back control in the country following the withdrawal of US troops. The outlook remains grim. Simon Wilson reports

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Market Update – September 7 – King Dollar; Yen crushed

• USDIndex – extends rally to 110.68, as bonds sold off hard with yields surging double digits and Wall Street stumbled amid renewed concerns over inflation, the FOMC’s hawkish response, and the concomitant threat to growth – amid a deluge of corporate debt offerings and as ISM services index increase to 56.9 further presser yields higher.
• 20 companies slated bond offerings totaling an estimated $30 billion to $40 billion.
• EUR – break 0.9900 area than expected German orders numbers at the start of the session, only added to signs that Europe is heading for a recession but EUR trades at 0.9957 now. –  German industrial production contracted – less than feared and at the same time the June number was revised up.
• JPY crushed! USDJPY at 144.35.
• GBP – 1.1490. Eyes to parliamentary testimony from the Bank of England governor.
• Stocks – Asian stocks fell to 2-year low on the back of disappointing Chinese trade number (China’s exports slowed in August). US100 fell -0.74% and the US30 and US500 slid -0.55% and -0.41%, respectively.
• Oil at $85.60
• Gold – extends for a 2nd day below $1700

Corporate bond update: there has been a flood of issuance to kick off September. It looks like corporations are jumping in while the going still looks relatively good and before rates go up further. Nestle plans a hefty 5-part sale with 3-, 5-, 7-, 10-, and 30-year coupons. Walmart announced a $5 bln 4-part deal to include a $1.75 bln 3-year, a $1 bln 5-year, a $1.25 bln 10-year and a $1 bln 30-year. Lowe’s plans a $4.75 bln 4-tranche deal with 3-, 10-, 30-, and 40-year tranches. MUFG has a $4.4 bln 4-parter including 3NC2 fixed and FRN, a 6NC5, and an 11NC10. John Deere Capital is selling $2.25 bln in 3-, 5-, and 10-year notes. There is a $2.3 bln 4-parter from Dollar General with 2-, 4-, 10-, and 30-year tranches. McDonald’s announced a $1.5 bln 10- and 30-year. Target has a $1 bln 10-year. Orix has a $1 bln 2-oarter. And this is not even the full list. The explosion of offerings has added to the selling pressures on Treasuries. Rate are up double digits with the 10-year 15 bps cheaper at 3.34%.

Today – Attention will be on the BoC’s rate decision and BOE Monetary Policy Report Hearings along with BOE Governor Bailey testimony. Importance will be remarks from VC Brainard, Michael Barr who will discuss financial systems. Barkin and Mester speak at an MIT event and the US trade deficit will also be important for what it says about global activity.

Biggest FX Mover @ (06:30 GMT) CHFJPY(+0.97%) at record highs, 146.48. MAs aligning higher, MACD histogram positive & signal line rising, RSI 83, H1 ATR 0.284, Daily ATR 1.116.

Click here to access our Economic Calendar

Andria Pichidi

Market Analyst

Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in Leveraged Products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.

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Daily Market Outlook, September 7, 2022

Daily Market Outlook, September 7, 2022 Overnight Headlines Dollar Hits Fresh Peak Against Yen On Bets For Aggressive Fed Yen’s Rapid Decline Triggers Strongest Government Warnings Yet Fed’s Barkin: Has A ‘Bias Towards Moving More Quickly’ To Tighten Policy New UK PM Truss Pledges Action On UK’s Soaring Energy Bills This Week UK’s Liz Truss To Step Back From Early Confrontation With Brussels Chengdu Lockdown Likely To Be Extended As Covid Cases Jump Ex-BoJ Policymaker: BoJ To Keep Low Rates Even As Inflation Seen Hitting 3% Japan To Expand Fuel And Ammo Storage On Islands Near Taiwan Australia Economy Buoyed By Consumer Spending, Exports In Q2 China Sets Yuan Fix At Strongest Bias On Record As Losses Mount Yen Set For Worst Year On Record As Traders Eye Intervention BoJ Boosts Bond Buying As Yields Advance Toward Policy Limit Oil Falls On Renewed Demand Concerns, Rate Hike Expectations Google Announces October 6th Event To Launch The Pixel Watch And Pixel 7 AIG Unit Corebridge Targets Up To $15.5 Billion Valuation In US IPO Asian Stocks, Currencies Fall As Strong Data Fans Hawkish Fed Bets Bank of Canada Set To Lift Rates Into Restrictive TerritoryThe Day Ahead Asian equity markets are trading mostly lower as prospects of further global monetary policy tightening weigh on investor risk sentiment. Also adding to the uncertainty are Covid lockdowns in China and the ongoing energy crisis in Europe. Chinese data overnight revealed softer-than-expected trade reflecting weakening global and domestic demand. Meanwhile, yesterday’s US ISM report signalled a robust pace of expansion in services activity, resulting in further rises in Treasury yields and the US dollar. UK markets will likely remain most alert to the economic policies of the new government as well as the appearance of Bank of England Governor Andrew Bailey and other MPC members in Parliament today. New PM Truss will hold her first Cabinet meeting this morning and face PMQs later today. Her stated priorities include tax cuts to boost economic growth and the provision of a major support package for households and businesses in the face of soaring energy prices. The support measures are expected to be announced tomorrow and, according to media reports, could cost as much as £200bn. As noted above, BoE Governor Andrew Bailey will appear before the Treasury Committee along with Huw Pill (Chief Economist) and external MPC members Silvana Tenreyro and Catherine Mann. The latter two are, respectively, considered to be the most dovish and hawkish rate-setters on the Committee. Mann made hawkish comments earlier this week, favouring ‘acting more forcefully’ on interest rates.The MPC members will be questioned on the decision in August to raise interest rates by 50bp to 1.75% and on the outlook for rates and the economy including inflation. The new government’s action on energy prices, if confirmed, may lower the expected peak in inflation but could also increase demand in the economy. The independence of the BoE may also be discussed. Financial markets are partly priced for a 75bp rate rise at their policy update next week. The Bank of Canada is expected to raise interest rates today by another 75bp to 3.25% following its outsized 100bp increased at the last meeting. Fed speakers today include Cleveland Fed President Mester and Vice Chair Brainard who will discuss the economic outlook.FX Options Expiring 10am New York Cut EUR/USD: 0.9875 (649M), 0.9900 (813M), 0.9950 (896M), 0.9975 (605M) EUR/USD: 1.0000 (691M). USD/JPY: 141.00 (1.39B) EUR/GBP: 0.8575 (1.21B) EUR/SEK: 10.6200 (652M). EUR/NOK: 9.8500 (628M)Technical & Trade ViewsEURUSD Bias: Bearish below 1.0250 Asia was risk-off with E-Minis easing 0.6% while AXJ index fell 1.5% USD was bid from the start and made solid gains across the board The EUR/USD eased to 0.9878 and is at the session low into the afternoon Support yesterday's 0.9864 low & there isn't a lot of support below there Market not too concerned about prospect of 75 BP hike by ECB Only a move above 0.9961 puts the trend in doubt Sustained 0.9900 break would target 0.9608 base in September 2002 20 Day VWAP bearish, 5 Day bearishGBPUSD Bias: Bearish below 1.2050 New PM fails to lift negative sterling sentiment Trades down 0.3% with EUR/GBP up 0.15%, as risk currencies sold in Asia Sustained sharp rise in UST yields on Tuesday weighed on sentiment in Asia Latest poll suggests sterling will remain under pressure Bearish trending setup targets a test of the 1.1413 March 2020 base Close above 1.1612 10 day moving average needed to undermine downside bias 20 Day VWAP is bearish, 5 Day bearishUSDJPY Bias: Bullish above 133.40 Japan FX jaw – boning again fall on deaf ears as USDJPY trade above 144 Yield on US Treasury 2s as high as 3.515% overnight, Tsy 10s to 3.355% US yields near trend highs on expectations of aggressive Fed Large 141.00 $1.4 bln option expiries today but well below current spot Meteoric USD/JPY rise should see even more heated jaw-boning today Japanese exporters also likely busy today into Tokyo fix Hawkish Fed, higher US yields, importer demand to keep USD bid on dips 20 Day VWAP is bullish, 5 Day bullishAUDUSD Bias: Bearish below .71 Aus Q2 GDP comes in close to expectations and there is a muted reaction AUD/USD has been under pressure all morning and remains so Risk off mood in Asian with E-minis -0.55% and Nikkei -1.29% AUD/USD at session low below 0.6710 and nearing 2022 low at 0.6682 Weak global growth outlook weighing on AUD/USD sentiment AUD/USD trending lower and break below 0.6680 could see trend accelerate 20 Day VWAP is bearish, 5 Day bearishBTCUSD Bias: Bearish below 25.3K BTC trades sub 19k again Crypto market sinks below $1Trillion as BTC trades to test 2022 lows KMPG report suggests Crypto investment to remain depressed remainder of 2022 Russia exploring stablecoin settlements with friendly nations according to Coindesk Macro econ uncertainty continues to weigh on BTC as USD prints 20yr highs BTC supported by Jul 13 low 18.9k Aug 28's 22.2k may pull BTC higher 20 Day VWAP is bearish, 5 Day bullish

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Why this biotech company has years of growth ahead

Zimmer Biomet, a leaer in the worldwide market for hip and knee joints enjoys a competitive advantage. Dr Mike Tubbs explains what that is why the company likely has years of growth ahead.

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What Liz Truss could mean for your money: the good, the bad and the ugly

Liz Truss, the new prime minister, has promised deal with the country’s growing list of problems. She's got her work cut out, says Rupert Hargreaves. Here, he looks at some of her proposed changes.

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European indices are capitalizing on the closing dynamics of the US market

European stock indexes capitalized on the US market close by recovering from last week’s losses, the Euro fell to 0.9877 for the first time in 20 years against the US Dollar before closing up +0.08% on Monday. European gas prices remained high, after Russia said its main gas supply pipeline to Europe would remain closed and did not provide a new timeframe for reopening. The news sparked fears of a recession in Europe, with businesses and households hurt the most by high energy prices.

European natural gas futures jumped 15% to above €245 per megawatt hour on Monday, after hitting a three-week low of €203 on Friday. The Nord Stream pipeline was already running at just 20% capacity before the flow was stopped last week for a 3-day maintenance period. Gazprom’s decision will deepen Europe’s ongoing energy crisis, with countries seeking alternatives to Russian gas supplies, including liquefied natural gas from the US. EU ministers will hold an emergency meeting this week to discuss the energy crisis and determine specific measures to combat rising costs, which could include capping gas prices.

https://www.msci.com/our-solutions/indexes/developed-markets

Meanwhile, the MSCI world equity index, which tracks shares in 47 countries, was down more than 0.4% at Friday’s close, last week. In Monday’s trading, the EU50 attempted to bounce back by collecting modest gains of 0.5% while the UK100 was ahead, gaining 1% and GER40 recovering more than 1%.

EU50,F-Daily

EU50,F remains under pressure with price moves below the 26-week and 52-week moving averages, while on the daily period the 200-day EMA is clearly the main barrier. Range-bound trading has been in effect for the past 27 weeks with key support seen at 3341.92 just above the 50.0%FR level of the March 2020 draw low and November 2021 peak. On the upside, the resistance stands at 3819.92. A move below the 3341.92 support, the index could move to the 61.8%FR level around 3066.00 or further to the 2885.00 support. Meanwhile, the index looks difficult to move higher with the conditions that Europe is currently facing.

Click here to access our Economic Calendar

Ady Phangestu

Market Analyst – HF Educational Office – Indonesia

Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in Leveraged Products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.

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