Week to Mar 4th

Ukraine war causes DAX and EUR collapse. Oil at record highs.

MY CALL THIS WEEK : BUY EURNZD

LAST WEEK

Whereas US markets only slipped slightly in an inside week, mostly on the Ukraine nuclear power plant attack, DAX had its worst week since the pandemic crash in Mar 2020, and FTSE fared little better, with its Russian components falling more than its oil components rose. Markets more or less ignored the otherwise important NFP beat, which gives the Fed little room to delay their tightening.

Oil hit 116.52, its highest price ever except for the summer of 2008, and easily its highest price ever expressed in GBP or EUR. The Brent/WTI spread varied by 10c in the week, the widest since the negative WTI crisis during COVID. 10-year yields dropped sharply, back to October 2021 levels, and EUR had its worst week since the start of the COVID crisis, propelling DXY up to levels not seen since 2020. Notably Asian currencies were not affected, JPY retraced last weeks' gains in an inside week, and AUD and NZD outperformed the dollar, the former on rate hike hints. An actual rate hike in Canada was already priced and the currency hardly moved.

WEEKLY PRICE MOVEMENT

The biggest index mover was Ukraine-sensitive DAX, down 10.11%. The top forex mover was EURAUD down 5.11%. Bitcoin and Ethereum were fairly flat. Some of the FANGs performed a lot worse than NDX, although in general tech underperformed.

Last week's EURNZD short position made 4.68%, which means I am ahead 7.59% this year, with 5/8 (62.5%) wins. I will now reverse that position and buy EURNZD, as the rate hike hint may drive AUD up more.

Note we use Google Finance data for daily movements, listing UUP as a proxy for DXY. All references to ‘the dollar’ are based on DXY. The equity and index prices are now based on the cash close each day.

NEXT WEEK

Although Ukraine is likely to dominate markets, the key day for schedule news is Thursday with the ECB simultaneous with US core inflation (ie without Ukraine factor-oil) which is estimated to make a new high. We also have inflation from Germany and China, US, Canada, China trade figures and GDP from Eurozone, UK and Japan.

CALENDAR  (all times are GMT, volatile items in bold)

Monday March 7
02:00 China Imports/Exports/TB
07:00 Germany Factory Orders
09:00 Germany Retail Sales (time approx.) (e9.5% p0%)
23:50 Japan Current Account

Tuesday March 8
10:00 Eurozone GDP (QoQ e0.3% p0.3%)
13:30 US Trade Balance
13:30 Canada Trade Balance
22:15 RBA Governor Lowe speech
23:30 Aus Westpac Consumer Confidence
23:50 Japan GDP (e1.4% p1.3%)

Wednesday March 9
01:30 China CPI/PPI
08:00 RBA Debelle speech

Thursday March 10
00:00 Aus Consumer Inflation Expectations
12:45 ECB Rate Decision/Statement (e0% hold)
13:30 ECB Press Conference
13:30 US CPI (Core e6.4% p6.0%)
13:30 US Jobless Claims
19:00 US Monthly Budget Statement
22:15 RBA Governor Lowe speech
23:30 Japan Overall Household Spending

Friday March 11
07:00 UK GDP
07:00 UK Ind/Mfr Production
07:00 Germany CPI (e5.5% p5.5%)
13:30 Canada NFP/AHE/UnEmp (UE e6.2% p6.5%)
15:00 Michigan CSI (e61.3 p62.8)