Market Update – September 7/2022

Written by Andria Pichidi
  • USDIndex – remains above 110 and the ongoing strength of the dollar, fueled by aggressive Fed hikes and the firm push back against inflation continues to weigh on stock markets, as traders assess recession risks amid Europe the escalating energy crisis in Europe.
  • 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. Rates 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. Of 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.

About the author

Andria Pichidi

Having completed her five-year-long studies in the UK, Andria Pichidi has been awarded a BSc in Mathematics and Physics from the University of Bath and a MSc degree in Mathematics, while she holds a postgraduate diploma (PGdip) in Actuarial Science from the University of Leicester.