Comment of the Day
Video commentary for November 30th 2022
A link to today's video commentary is posted in the Subscriber's Area.
Some of the topics discussed include: Powell pleases markets, Wall Street rebounds led by Nasdaq, dollar weak, gold firm, emerging markets and Europe rebound, bonds yields contract. yield curve still inverted and deeply so. Recession is still likely in 2023.
Email of the day on the big turn:
Since returning from the Chart seminar in London I have spoken to several people who work in the Israeli high-tech industry, They all tell me that about 10% of their colleagues have lost their jobs recently. Today you referred to your MIIN index. How can we invest in these countries?
Eoin Treacy's view - Thank you for this additional insight. The market for big ideas ballooned with the delivery of free money. Suddenly, no idea was too grand, or time to delivery/commercialization too long. That trend was looking tired in 2019, as the Federal Reserve’s quantitative tightening was siphoning liquidity from the global economy.
EU Is Hooked on Russia LNG and Paying Billions to Keep It Coming
This article from Bloomberg may be of interest to subscribers. Here is a section:
“Russian LNG has to continue to flow,” said Anne-Sophie Corbeau, a researcher at Columbia University’s Center on Global Energy Policy. “We need that on the global LNG balance: it is already tight enough as it is. I think most European countries are indeed happy to turn a blind eye on this.”
Among European nations, only the UK and Baltic states have stopped buying Russian LNG. By contrast, Russian oil has been widely shunned by buyers across the region, and an EU ban is set to come into force on Dec. 5.
A complete embargo on Russian gas has never been seriously considered, given the scarcity of global supply and the potential for an even tighter market next year. Yet the EU has made efforts to find alternative supplies. In March, the bloc pledged to replace almost two-thirds of its gas imports from Russia this year, with most of the new volumes coming in the form of global LNG.
Russian gas now makes up less than 10% of the region’s supply of the fuel, down from more than a third last year, but the share of LNG in Russia’s deliveries is close to half.
Eoin Treacy's view - There is a great deal of discussion about the prospect of a price cap on Russian oil and gas exports. This is the alternative to a full embargo on Russia imports which are slated to go into effect next week. Since Europe still relies on Russia for 10% of its gas, the “price cap” is a virtual necessity to keep economic activity moving even if it is impossible to enforce effectively. That suggests a deal will be reached in coming days.
Powell Signals Downshift Likely Next Month, More Hikes to Come
This article from Bloomberg may be of interest to subscribers. Here is a section:
“The time for moderating the pace of rate increases may come as soon as the December meeting,” Powell said in the text of his speech. “Given our progress in tightening policy, the timing of that moderation is far less significant than the questions of how much further we will need to raise rates to control inflation, and the length of time it will be necessary to hold policy at a restrictive level.”
Policy-sensitive 2-year Treasury yields fell on Powell’s remarks, erasing increases on the day, and the S&P 500 index reversed losses to trade higher. The dollar slipped in value against major rivals on foreign-exchange markets.
The Fed’s actions -- the most aggressive since the 1980s -- have lifted the target range of their benchmark rate to 3.75% to 4% from nearly zero in March. Powell said rates are likely to reach a “somewhat higher” level than officials estimated in September, when the median projection was for 4.6% next year. Those projections will be updated at the December meeting.
Eoin Treacy's view - Jerome Powell confirmed today that the pace of Fed hikes will moderate; not reverse or pause. Nevertheless, cashed-up traders are more than willing to take anything less than outright hawkishness as good news.
Eoin's personal portfolio: stock market long initiated November 30th
One of the questions subscribers ask most often is how to find details of my open trades. To make it easier I will simply repost the latest summary daily until there is a change.