Research

Menu

Back

Choose Language

September 19, 2022

News

Monday Briefing – 19th September 2022

  • The optimism that was baked into equity markets evaporated on Tuesday last week with the peak inflation narrative being repriced violently towards a tightening cycle that potentially lasts longer and ends higher.
  • The repricing of monetary policy in the US was substantial with the Fed’s terminal rate now at 4.5% vs. 4.0% before last week’s CPI. Some market participants feared the possibility that the Fed will go into 80’s mode and hike rates by a full 1%, while observing poor trading liquidity in government bond markets.
  • The year-ago rate of US inflation moderated from 8.5% to 8.3% but was still higher than the 8.1% expected. More concerning, core inflation beat strongly on the upside in areas like new cars, apparel, rent and owners’ equivalent rent. The Atlanta Fed’s so-called sticky CPI (weighted basket of items that change price relatively slowly) rose 6.1% from a year ago, the biggest gain in 40 years.
  • As higher uncertainty on how quickly inflation will cool means higher volatility in financial markets, the synchronised sell-off for both bonds and equities highlighted again the fact that there is currently nowhere to hide, and that the only thing efficient in a bear market is risk management.
  • The dollar was supported by 2-year Treasury yields trading around 3.90%, the highest level in nearly 15 years, while the yen received little support after Japan’s Finance Minister Suzuki offered a strong declaration to combat the currency fall. If history is still a guide, investors will now have to test the BOJ’s resolve. The People’s Bank of China continued its currency defense after the yuan weakened past the key level of 7 per US dollar, by fixing its reference rate for the yuan with the strongest bias on record.
  • In the US, a railroad strike was averted with a tentative agreement going back to unions for a vote. Such an agreement is a positive news in front of what could have been considered a major issue in terms of the supply chain whack-a-mole game at play.
  • On Friday, shipping giant FedEx Corp., a company at the very pulse of the global economy, withdrew its revenue and profit forecast with the CEO saying that the weakness was due to rapidly softening global demand (not increasing prices or supply chain issues). The guidance cut for FedEx caused the stock to suffer its biggest one-day drop (-21%) in its history, dating back to its IPO in 1978. As a member of the Dow Jones Transportation index, FDX’s huge drop on Friday caused the index to break to new bear market lows. Not a good development for Dow theorists and their barometer of the economy’s health. Obviously, FedEx’s warning signals the post-pandemic unwind.
  • Markets will be squarely focused on central banks this week, with the Fed's decision on Wednesday being the key macro event. The BoE, SNB and BoJ decisions will also keep investors busy on Thursday.

Disclaimer

All financial data and/or economic information released by this Publication (the “Publication”); (the “Data” or the “Financial data and/or economic information”), are provided for information purposes only, without warranty of any kind, including without limitation the warranties of merchantability, fitness for a particular purpose or warranties and non-infringement of any patent, intellectual property or proprietary rights of any party, and are not intended for trading purposes. Banque Internationale à Luxembourg SA (the “Bank”) does not guarantee expressly or impliedly, the sequence, accuracy, adequacy, legality, completeness, reliability, usefulness or timeless of any Data. All Financial data and/or economic information provided may be delayed or may contain errors or be incomplete. This disclaimer applies to both isolated and aggregate uses of the Data. All Data is provided on an “as is” basis. None of the Financial data and/or economic information contained on this Publication constitutes a solicitation, offer, opinion, or recommendation, a guarantee of results, nor a solicitation by the Bank of an offer to buy or sell any security, products and services mentioned into it or to make investments. Moreover, none of the Financial data and/or economic information contained on this Publication provides legal, tax accounting, financial or investment advice or services regarding the profitability or suitability of any security or investment. This Publication has not been prepared with the aim to take an investor’s particular investment objectives, financial position or needs into account. It is up to the investor himself to consider whether the Data contained herein this Publication is appropriate to his needs, financial position and objectives or to seek professional independent advice before making an investment decision based upon the Data. No investment decision whatsoever may result from solely reading this document. In order to read and understand the Financial data and/or economic information included in this document, you will need to have knowledge and experience of financial markets. If this is not the case, please contact your relationship manager. This Publication is prepared by the Bank and is based on data available to the public and upon information from sources believed to be reliable and accurate, taken from stock exchanges and third parties. The Bank, including its parent,- subsidiary or affiliate entities, agents, directors, officers, employees, representatives or suppliers, shall not, directly or indirectly, be liable, in any way, for any: inaccuracies or errors in or omissions from the Financial data and/or economic information, including but not limited to financial data regardless of the cause of such or for any investment decision made, action taken, or action not taken of whatever nature in reliance upon any Data provided herein, nor for any loss or damage, direct or indirect, special or consequential, arising from any use of this Publication or of its content. This Publication is only valid at the moment of its editing, unless otherwise specified. All Financial data and/or economic information contained herein can also quickly become out-of- date. All Data is subject to change without notice and may not be incorporated in any new version of this Publication. The Bank has no obligation to update this Publication upon the availability of new data, the occurrence of new events and/or other evolutions. Before making an investment decision, the investor must read carefully the terms and conditions of the documentation relating to the specific products or services. Past performance is no guarantee of future performance. Products or services described in this Publication may not be available in all countries and may be subject to restrictions in some persons or in some countries. No part of this Publication may be reproduced, distributed, modified, linked to or used for any public or commercial purpose without the prior written consent of the Bank. In any case, all Financial data and/or economic information provided on this Publication are not intended for use by, or distribution to, any person or entity in any jurisdiction or country where such use or distribution would be contrary to law and/or regulation. If you have obtained this Publication from a source other than the Bank website, be aware that electronic documentation can be altered subsequent to original distribution.

As economic conditions are subject to change, the information and opinions presented in this outlook are current only as of the date indicated in the matrix or the publication date. This publication is based on data available to the public and upon information that is considered as reliable. Even if particular attention has been paid to its content, no guarantee, warranty or representation is given to the accuracy or completeness thereof. Banque Internationale à Luxembourg cannot be held liable or responsible with respect to the information expressed herein. This document has been prepared only for information purposes and does not constitute an offer or invitation to make investments. It is up to investors themselves to consider whether the information contained herein is appropriate to their needs and objectives or to seek advice before making an investment decision based upon this information. Banque Internationale à Luxembourg accepts no liability whatsoever for any investment decisions of whatever nature by the user of this publication, which are in any way based on this publication, nor for any loss or damage arising from any use of this publication or its content. This publication, prepared by Banque Internationale à Luxembourg (BIL), may not be copied or duplicated in any form whatsoever or redistributed without the prior written consent of BIL 69, route d’Esch ı L-2953 Luxembourg ı RCS Luxembourg B-6307 ı Tel. +352 4590 6699 ı www.bil.com.

Read more


More

January 10, 2025

News

Video summary of our Outlook 2025

2024 - The US economy exhibited impressive strength powered by consumption, while Europe struggled with weak demand and a protracted manufacturing downturn 2025 - The...

December 27, 2024

News

BIL Investment Outlook 2025 – T...

  Introduction from our Group Chief Investment Officer, Lionel De Broux       As the oldest private bank in Luxembourg, we’ve been managing clients’...

December 20, 2024

Weekly Insights

Weekly Investment Insights

  Having spent ten straight days decked out in red, the Dow Jones Industrial Average index recorded is longest losing streak since 1974. Other global...

December 13, 2024

Weekly Insights

Weekly Investment Insights

  It has been a big week for France, with Notre Dame finally reopening after five years of reconstruction, and Francois Bayrou being named France’s...

December 9, 2024

Weekly Insights

Weekly Investment Insights

  December is here, and while the cold, dark days may not be everyone's cup of cocoa, the festive spirit is starting to set in....

All articles