Category: Research Report

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Global Market – Looking beyond recession & US Fed

Global market has risen around 7% – 10% from lows made in June 2022, during this there are various factors which have triggered rally in bits and pieces on back of low conviction.  Today we will discuss few points with a view whether market is already looking beyond recent worries.

1) U.S. Gasoline Prices Fall To Two-Month Low With Pump Pain Easing
2) Housing Starts In U.S. Decline To Lowest Level Since September
3) Canada Inflation Quickens To 8.1%, Keeping Up Rate Pressure
4) Chinese Banks Hold Lending Rates As PBOC Remains Cautious
5) China’s Premier Signals Flexibility On Economic Growth Target
6) ECB Rushes To Tighten As Half-Point Hike Matched By Crisis Tool
7) German Economic Activity Unexpectedly Shrinks On Inflation
8) Powell Seen Slowing Fed’s Hikes After 75 Basis Points Next Week

Corporate earnings from Wall Street have been better than market estimate which have triggered risk-on sentiment across the asset class.  China’s supportive policy could help metal prices.  ECB rate hike by 50 bps last week have stopped deprecation of EURO against global currency.

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Global market – Market looking beyond recession & US Fed.pdf
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Global Market – Europe Epicenter of next crisis?

Global Market – Europe – Epicenter of next crisis?

This week, we will discuss Europe and which could become next major reason to worry for smooth economic recovery.  EURO at parity with US Dollar, sharp depreciation of EURO could just be an early sign of big storm coming.

Double Whammy: High inflation & High interest rate

We have discussed “Double Whammy” on our 5-Mar-22 article, after Russia-Ukraine crisis and early days of talk of sanctions on Russia.  It triggered energy prices rise to record high and triggered the inflation problem globally.

Why crisis in Europe is next biggest hurdle for global market?

We believe, problem in Europe is at initial stage and things could get worse before things could settle down.  Why we believe so – let us discuss few points mentioned below.

• Inflation problem in Europe is more adverse compared to US.
• ECB & BOE are much behind the curve – in raising interest rate.
• Political crisis in UK & ITALY – more to come?

In next 3 – 6 months, we expect European crisis & Decoupling to be the next important factor to be discussed and driving the market.

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Global market – Europe – Epicenter of next crisis?.pdf
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Global Market – Food and Energy inflation – worst behind?

We have discussed Food inflation & Energy inflation on 4th June and since then prices have come down and it is one of the major concerns of inflation.

In a testimony to Congress Senate & Banking committee on 23-Jun-22 said: they could not increase supply or bring prices down for Oil & Gas or Food but they will continue to increase interest rate to bring inflation at sustainable level.

Equichain Wealth Advisors: View & Opinion

In last 2 week, cool-off in Crude oil & Gas, Metal & Agriculture commodity, which is major concern of high inflation is down from 10% – 20%.  Market is taking this as early sign of inflation peaking.

By end of July, 2 key events: US FOMC meeting on 27-Jul-22 & US Advance GDP data on 28-Jul-22 will bring much needed clarity in market which could provide confirmation of market may find its bottom in short term.

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Global market – Food and Energy Inflaton – worst behind.pdf
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Global Market – Inflation, Jobs & Corporate earnings

Last week we have highlighted 3 questions and this week we will try to highlight 3 set of data which will help us answer these questions.  We will mention question here and list of economic data from US & Europe which will decide next action of US FED, ECB & BOE.

Before we move forward, let me mention question that we have discussed last week.

1) Does Central banks can control Food inflation & Energy inflation by increasing interest rate?
2) US market (mother market) – is it in bear market?
3) US Fed (most powerful central bank) – pushing world in another crisis only to save it later?


We believe July 2022 to be action packed month and currently we are just trading with 5% of fresh lows and don’t get surprise if fresh lows are tested again, but if any sell-off trigger will come from global market and we will be watching data mention in above table closely.

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Global market – inflation, Jobs data and Corporate earnings .pdf
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Global Market – Questions, question & Questions?

In last 3 weeks we have covered 3 important subjects going into key central banks events and last week analyzing US Fed’s move.  

1) Food inflation & Energy inflation – 4th June 2022
2) Central Banks – Sacrifice growth to control inflation – 11th June 2022
3) US Fed preparing for crash landing – 18th June 2022

This week we will try and analyze whether financial market globally have come to term with the changing dynamics or financial market needs to be prepared for worst outcome?  We would mention here 3 question and share our views on it.

1) Does Central banks can control Food inflation & Energy inflation by increasing interest rate?
2) US market (mother market) – is it in bear market?
3) US Fed (most powerful central bank) – pushing world in another crisis only to save it later?

Please read this as our disclaimer: we are optimistic on market with long term view and also remain bullish with short term view going into result season.  In medium term, let us say for next 1 – 2 quarter, globally narratives and dynamics are changing very fast.
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Global-Market-Question-question-and-more-questions.pdf
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Global Report – Food Inflation & Energy Inflation

This week we will discuss inflation concern comes mainly from food inflation and another important contributor to inflation is high energy prices (Oil & Gas).   After Russia-Ukraine crisis since 24-Feb-22 and sanctions on Russia by US & other European countries inflation have sky rocketed.

Food inflation

The FAO Food Price Index dropped 0.6% mom to 157.4 in May of 2022, the second month of declines, but still remained close to a record high of 159.7 points hit in March.

Energy inflation – Crude oil & Natural Gas

OPEC+ meeting delivered only a modest increase in output despite speculations of a bigger supply boost. 

The group of major producers decided to increase output by 648,000 barrels per day in July and August instead of the previously agreed 432,000 bpd, in a move that was seen as hardly enough to compensate for lost supply from Russia.

Central banks meeting this month will try to do a balancing act and try to calm the market but Central banks could do very little to solve supply side problem and could end up doing destruction in an attempt to bring inflation down.

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Global Market – Food Inflation & Energy inflation.pdf
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Global Market – Recession fear – Before Central Banks run its full course

Global Market – Recession fear deepens even before Central banks steps run its full course.

Before we share our view on global factors and market reactions which did witness a change in narrative and central banks are now more focus on avoiding recession.  Key objective of central banks is to maintain price stability & robust growth environment.  It always has a balancing act to do to control pendulum moving on either side to extreme.

1) U.K. Slaps 25% Windfall Tax On Profits Of Oil And Gas Firms
2) Xi-Li Discord Paralyzes Officials Responsible For China Economy
3) U.K. Recession Risk Makes BOE Wary Of Acting On Inflation, Pill Says
4) Supply Woes Raise Recession Risk As Fed Rejects Inflation Nuance

If next quarter US GDP data turns negative, then officially it can be termed as recession, but as of now market is expecting rate hike by 50 bps each by US Fed in upcoming June 2022 & July 2022 meeting.  So, the big question how central banks will do balancing act.

We believe, Central banks will move slowly on monitory tightening because it will be tough for them to reverse their policy on interest if the move too fast from here on.  Any sudden reversal on policy front will also hurt their credibility. 

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Global Market – Recession fear deepens even before Central banks steps run its full coursed-recession-fear.pdf
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Global Market – US corporate earnings & China re-opening & Recession fear

US retail sales grew at a solid pace in April, reflecting broad-based gains and suggesting demand for merchandise remains resilient despite rampant inflation.

China’s economy is paying the price for the nation’s Covid Zero policy, with industrial output and consumer spending sliding to the worst levels since the pandemic began and analysts warning of no quick recovery.

Goldman Sachs Senior Chairman Lloyd Blankfein urged companies and consumers to gird for a US recession, saying it’s a “very, very high risk.”  

The ruble surged to the highest level in seven years against the euro as more European companies appeared to be complying with Vladimir Putin’s demand that they switch to paying in Russia’s currency for natural gas.

US Fed has started tightening from March onwards and corporate result are already seeing impact on its margin due to high inflation.  So, the big question based on key points mention in this article is – US heading for recession?  Have global market after current fall have factored in recession prices??

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Global-Market-US-Corporate-earnings-and-Chinas-reopening-and-recession-fear.pdf
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Risk-Off Trade – Equity Currency & Crypto Currency

This week, we will discuss impact of US FOMC policy which is now very clear on its monitory policy.  US Fed have now used all its financial tools and now the focus depends on quantum of rate hike which will be followed by US Fed, ECB, BOE & RBI.  

First let us discus valuation reset and opportunity which comes with a shake off which we have seen this week.

Crypto currency is now a familiar word in financial world.  There are two extreme groups who are believer in crypto currency and on the other side of the camp who are non-believer as it is not regulated by any country and does not have any underlining as assets.

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Global-market-Risk-off-Trade-Equity-Currency-and-Crypto.pdf
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Dollar Index Vs Other currency – Equichain View

INR against 3 major currencies – USD, EUR & GBP from 1-Jan-20 to 9-May-22.
&
USD/INR @ 77.50 – all time low – Key developments

US Dollar being a reserve currency and enjoys the status of safe heaven investment, any risk-off trade will move money towards US treasury and US Dollar.

US Dollar Index basket consists of 6 currencies – EURO, SWISS FRANC, JAPENESE YEN, CANADIAN DOLLAR, BRITISH POUND AND SWEDISH KORNA.

Rubble continues to trade strong compared to other currencies since Russia-Ukraine crisis.  It had a highly volatile move post announcement on sanctions by US & European nations.

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Dollar Index Vs Other Currency – Equichain View.pdf
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