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Research Report

Global Market – It’s “PAUSE” or “Indicative PIVOT”

Global Market – It’s a “Pause” or “Indicative Pivot”

This week we will discuss all three central bank’s meeting outcome and its impact on global sentiment and interest rate policy.  Our focus will be that whether it will be “Pause” or “Indicative pivot”.  US Fed & ECB meeting outcome was in-line with estimate and BOJ outlook and guidance was positive as they maintain JGB yield curve at -0.50% to 0.50%.

US Fed meeting outcome on 14-Jun-23

• US Fed kept interest rate unchanged after 15-months of rate-hike cycle.
• Current interest in US at 5.25% is same rate as seen in 2007, back in 2006 – 07 – interest rate remains at 5.25% for 14 months before interest rate heads downward.

U.S. Fed chair Jerome Powell had signaled that they would prefer to skip rate hike at June meeting, while still leaving room for a hike in coming months, if needed. 

ECB meeting outcome on 15-Jun-23

• ECB hikes rate by 25-bps to 4.00%.  Deposit rate now stands at 3.50%, highest level in more than 2-decades.
• ECB guides for continuation of rate hike to bring long term inflation at 2% and to keep interest rate higher as long as necessary.

BOJ meeting outcome on 16-Jun-23

• BOJ kept interest rate by -0.10%, maintain interest rate at ultra-low level.
• BOJ signaled JGB yield curve between -0.50% to 0.50%.
• BOJ maintain its current pace of quantitative easing, and said that it will continue to purchase exchange-traded funds and Japanese real estate investment trust.

The BOJ’s move on Friday comes largely in line with market expectations, as analysts saw little scope for immediate change in the bank’s dovish stance under new Governor Kazuo Ueda.

Equichain Wealth Advisors: Market View & Opinion

While BOJ maintains its ultra-low interest rate and QE policy.  If we compare all these policies, we see significant contradiction as all these central banks are key liquidity provide for global financial market.

Our base case assumption does suggest that – we could consider this as early sign of “PIVOT” as higher interest rate will show its impact sooner rather than later.

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Weekly Reports

17-Jun-23 Technical & Fundamental Insight

Last week – review

We went into trade in this week expecting momentum build-up as there was US Fed, ECB & BOJ central bank’s meeting.  After RBI’s meeting last week, indices failed to gained momentum as supply seen from higher level.  Mid-cap & Small-cap continues its upward momentum as defense stocks rallies. 

Technical Insight

• Nifty RSI @ 67.18 & RSI average @ 64.90.  Nifty after consolidation this week continues its upward momentum with highest closing at 18826.
• Banknifty RSI @ 53.53 & RSI average @ 54.94.  Banknifty is currently underperforming Nifty.  Last week RBI meeting & this week, US Fed, ECB & BOJ continues to weight on Banknifty.

Going into trade this week, Nifty support level @ 18503 & Banknifty support level at 43552 will re critical.  Indices continue to indicate mix view with upside target on Nifty @ 18965 & Banknifty @ 44959.  As we have seen in last 2 weeks, indices remain in narrow range, we could again see this week indices trade in narrow range, we would be watching VIX closely for any change in view on increase in volatility.


Fundamental Insight

1) India’s Trade Deficit Widens To $22.1 Billion In May
2) Government Lines Up Two Tranches Of Sovereign Gold Bonds In First Half Of FY24
3) Housing Prices Rise in Top Indian Cities, Delhi Sees Highest Spike

Equichain Wealth: Market View & Strategy

Major events such as RBI MPC meeting in previous week, US Fed, ECB & BOJ meeting outcome concluded in week just concluded, outcome was mostly in-line with market expectation.  Globally market is trading near their respective high, marking 2023 with positive return after flat or negative 2022.  

Our strategy this week to remain invested around 80% – 85% and any rally to be used to reduce exposure and fresh deployment of fund to be done on major correction.  Meanwhile if market continue to trade in range, stock rotation with limit of 85% could be preferred.

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Daily Reports

Daily Report 16-Jun-23

Wall Street rallied over 1% on all major indices as market bets that interest rate in U.S. interest rate is near its peak, S&P500 & NASDAQ closed at 14-months high.

ECB raises rates by 25-bps to 4.00%, highest interest rate in 22 years and signal more hike to come, ECB maintain long term inflation target at 2%, which is currently far away from 6.1% latest inflation figures.

Bank of Japan kept rate unchanged at -0.10%, maintain yield for JGB at -0.50% to 0.50%.

VIX @ 11.08: continues to trade near lower end of the range.

Approach on indices: Indices likely to bounce after correction / profit booking seen post US Fed meeting outcome.  Indices do indicate sharp probability of bounce back.  Nifty continue to trade above important support level where as Banknifty underperform and closed below 43552.

SGX Nifty @ 18802.50 up 42.50 points at 8:55 AM

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Daily Reports

Daily Report 14-Jun-23

Wall Street had another positive session after CPI came @ 4.0% Vs estimate of 4.1%.  U.S. Core CPI rises to 5.3% in May lowest since November 2021.

US Fed meeting tonight is now factoring in 95% probability of pause after CPI & Core CPI data came in-line with estimate.  US Fed chair Jerome Powell post policy press conference will be key event.

FMCG & defensives stocks continue to lead the Indices higher as Banks & IT stocks see some profit booking.  Mid-cap & Small-cap stocks continue to outperform.

VIX @ 11.11: surprisingly low, any increase in VIX needs to watch-out.

Approach on Indices: With Nifty is less than 170 points away from lifetime high at 18887, expected to test.  Banknifty likely to test 44965 as Banknifty likely to react to US Fed news.  Indices remain in uptrend till Nifty is above 18458 & Banknifty above 43552.  

Market View: We are going into event with indices near all time high, even if indices move higher, we would continue to reduce exposure on higher level.  In near term – even if US Fed decision comes favourable in-line with market expectation – we expect profit booking.

SGX Nifty @ 18830.50 up 45.50 points at 8:35 AM

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Research Report

Global Market – Focus shift to central banks – US Fed, ECB & BOJ

Global Market – Focus shift to Central banks – US Fed, ECB & BOJ

This week, we will discuss how the focus will shift back to central banks as 3 central banks are schedule to meet this week and take decision on interest rate.  Inflation still remains major concern of all these central banks as they continue to focus on their long-term target on inflation at 2%.  We will discuss what market expectation is from this central bank outcome.

US Fed meeting on 14-Jun-23

• US Fed expected to pause on 14-Jun-23, to take breather after more than a year.
• US Fed chair Jerome Powell signaled after May 2023 US Fed meeting.
• Recent hike in interest rate cycle is the most aggressive rate hike, U.S. Fed has hike rates in every meeting since March 2022.

US fed chair Jerome Powell commentary after meeting outcome will be key event market will be watching out for.  Any comment which will mean that further rate hike could be expected after a pause would be negative.

Bank of Japan meeting on 16-Jun-23

• Bank of Japan may keep interest rate at -0.10%, maintain interest rate at ultra-low rate.
• BOJ to make no tweaks to yield control policy
• Board to maintain forecast of moderate economic recovery
• BOJ may lay groundwork for July upgrade in price forecasts
• Gov Ueda to hold briefing after policy meeting

BOJ may signal robust recovery as robust corporate and house hold spending cushion the blow from slowing oversea demand.  BOJ may also signal that inflation is overshooting its forecast.

Equichain Wealth Advisors: Market View & Opinion

This week focus will shift back to central banks, and market would focus on commentary from US Fed and BOJ.  There is major surprise expectation from ECB as market expectation another hike & temporary pause.

US Fed chair Jerome Powell post meeting press conference will be important as market as already factored in pause from U.S. Fed.  U.S. CPI & Core CPI inflation data are due on 13-Jun-23 and U.S. fed policy outcome on 14-Jun-23.  Comment from BOJ will also be important if there is any change in JGB yield curve or any change in policy would be negative.

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Research Report

Global Market – U.S. debt deal & suspends debt ceiling till 1-Jan-25

Global Market – U.S. debt deal – suspends debt ceiling till 1-Jan-25

This week we will discuss the U.S. debt deal details as it suspends debt ceiling limit till next U.S. presidential election, but it comes with certain curbs on spending and restriction.  Prime facie deal looks well balance – we do believe it another round of monitory expansion.

U.S. debt deal details

• Deal would suspend the $31.4 trillion debt ceiling until Jan. 1, 2025, allowing the U.S. government to pay its bills.
• Non-defense discretionary spending would be “roughly flat” at current year levels in 2024, “when factoring in agreed upon appropriations adjustments,” according to White House officials.

Relief for U.S. Presidential election 2024

• The debt limit extension lasts past 2024, meaning Congress would not need to address the deeply polarizing issue again until after the November 2024 presidential election.
• Still, tough conversations about how to allocate money under the new spending caps will need to take place in Congress this year.

Biden and McCarthy agreed to claw back much of the unused COVID relief funds as part of the budget deal. The estimated amount of unused funds is between $50 billion and $70 billion.

Equichain Wealth Advisors: Market View & Opinion

We expect current U.S. deal could have very limited impact in near term, we see this as yet another round of monitory expansion in a gradual manner.  Incoming U.S. economic data would be very important in near term ahead of US Fed meeting on 14-Jun-23.

We see current U.S. debt deal & likely pause by US Fed on 14-Jun-23 would have huge positive impact of risk-on sentiment and big rally is not ruled out.  Another hike of 25-bps by US Fed could change the matrix and probability of rally or change in risk-on sentiment.  So now US Fed meeting on 14-Jun-23 becomes a very important event for global market.