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Risk appetite positive despite rising yields

Fawad Razaqzada Fawad Razaqzada 22/03/2022
Risk appetite positive despite rising yields Risk appetite positive despite rising yields
Risk appetite positive despite rising yields Fawad Razaqzada
  • US markets shrug off rising yields
  • Ukraine ceasefire optimism
  • Disparity in FX
 
US markets shrug off rising yields

US stocks extended their gains on Tuesday, following a positive session in Europe. Optimism over a ceasefire in Ukraine continues to outweigh concerns over rising bond yields. The US 10-year yield has closed in on 2.4%, after its latest gains. But crucially, the yield curve has flattened with the rise in shorter-dated maturing bond yields rising faster than those at the longer end. This suggests that investors are expecting rate hikes to be front-loaded, which will probably cause a slowdown in economic activity, which, in turn, will call for looser monetary policy in the longer-term outlook. This explains why US stocks, especially the tech sector, has been able to rise so sharply off late.

yields spreadSource: ThinkMarkets and TradingView.com
 
Ukraine ceasefire optimism

The drop in oil and gold prices and gains for European stocks all point to optimism about a potential ceasefire and hopefully end of the conflict in Ukraine. It looks like the markets have responded to the latest comments from Zelensky, suggesting Ukraine is ready to discuss commitment not to join NATO and that it is ready to discuss the status of Crimea and Donbass after the ceasefire. However, he also indicated that the nation would hold a referendum on the terms of any potential peace agreement. So, it may be too soon to be very optimistic about the end of the war in Ukraine.
 
Disparity in FX

The growing disparity between monetary policies of the Federal Reserve and Bank of Japan is plain to see and explains why we have seen the USD/JPY skyrocket past 120.00 in recent days. BoJ Governor Kuroda again reiterated that it is too early to talk about the BoJ ending its easing, including ETF purchases. This contrasts sharply to the Fed, with Powell raising the prospects of 50 bp hikes at one or more upcoming FOMC meetings, as well as the prospect that QT could start as early as in May.

Meanwhile, the Bank of England was a little less hawkish as had been expected, but the GBP/USD has today surged past 1.3200 anyway. The pound, Aussie and other commodity dollars have been in fine form of late, owing to the positive risk sentiment emitting from the stock markets. Pound traders will face a busy week, with the release of UK CPI due out Wednesday morning and the Annual Budget due for later in the day. UK PMIs will be released on Thursday, followed on Frida by the release of UK retail sales. For a full preview of the week, click HERE.

For our latest views on gold and other markets, please watch the recording of our webinar from earlier in the day:

 
Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice. ThinkMarkets will not accept liability for any loss or damage including, without limitation, to any loss of profit which may arise directly or indirectly from use of or reliance on such information.

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Meet our contributors
Carl Capolingua
×
Carl Capolingua
Market Analyst, Melbourne

Carl has over 20 years' experience in financial markets and has held senior analyst roles at a number of financial institutions. Specialising in Australian and US stock markets in particular, Carl uses a top-down approach to assess the global macro picture before using both technical and fundamental techniques to select stocks. He regularly appears as an expert commentator on a number of media outlets throughout the Asia-Pacific region.
 
 
 

Lesego
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Lesego Mthombothi
Market Research Analyst, South Africa

Lesego Mthombothi is an experienced market research analyst and investment professional who proudly holds an honours degree in investment management and completed her CFA level 1.
 
 
 

Mahmoud Alkudsi
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Mahmoud Alkudsi
Chief Markets Analyst, MENA

Mahmoud is a market analyst, with over a decade of experience in financial markets. He follows main market movers and tracks their effect on the price chart. Mahmoud mixes technical and fundamental tools with a deeper focus on the technical side, and with his wide experience in providing educational and guidance materials to all levels of traders, he helps them in making informed trading decisions. Before joining ThinkMarkets, Mahmoud was head of market research departments in different reputed financial companies, where he provided market analysis for a variety of asset classes, including FX, equities, indices, and commodity futures. As an experienced market commentator, he was hosted by too many print and broadcast media, including not limited to Sky News Arabia, France 24, Alarabyia, Alsharq-Bloomberg, and CNBC Alarabyia to discuss key risk events their clear impact on the price action. Mahmoud holds a Master of Business Administration (MBA) from Cardiff Metropolitan University of Wales, UK, and speaks Arabic, English, and Spanish.

Carl Capolingua
Carl Capolingua
Carl has over 20 years' experience in financial markets and has held senior analyst roles at a number of financial institutions.
Lesego
Lesego Mthombothi
Lesego Mthombothi is an experienced market research analyst and investment professional who proudly holds an honours degree in investment management and completed her CFA level 1.
Mahmoud Alkudsi
Mahmoud Alkudsi
Mahmoud is a market analyst with over a decade of experience in financial markets. Mahmoud mixes technical and fundamental tools with a deeper focus on the technical side, and has experience in providing guidance to all levels of traders.
Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice. ThinkMarkets will not accept liability for any loss or damage including, without limitation, to any loss of profit which may arise directly or indirectly from use of or reliance on such information.
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