The Yen's Tide Lifts Some Boats | Morning Express | 12/20/2022
Posted: Dec. 20, 2022, 8:43 a.m.
E-mini S&P (March) / NQ (March)
S&P, yesterday’s close: Settled at 3845.50, down 33.50
NQ, yesterday’s close: Settled at 11,193.25, down 151.50
Fundamentals: U.S. equity benchmarks continued their steep fall early last night after the Bank of Japan widened its target for 10-year JGBs to as high as +0.50% from +0.25%. The move certainly surprised markets, and although it was not a rate hike, it embodies everything a rate hike could bring, roaring strength in the Yen, sharply higher rates, and a bludgeoning to the Nikkei. The Nikkei has been tagged by 2.5% today, but prior to this, it was only down 5% on the year, anchored by the BoJ’s ultra-loose monetary policy and the Japanese Yen at 32-year lows. With many focusing on the carry trade unwind, and rightfully so, we cannot ignore the steepening yield curve and a weakening U.S. Dollar. U.S. equities have looked bleak in recent days, leaving many wondering if Santa will still show up, but as the S&P closes in on the November 9th gap, both the yield curve and U.S. Dollar could quickly become the much-needed catalyst underpinning a rebound into yearend.
Do not miss our daily Midday Market Minute, from yesterday.
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NQ (March)
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Crude Oil (February)
Yesterday’s close: Settled at 75.38, up 0.92
Fundamentals: Crude Oil has grinded higher with commodity markets broadly finding support from the surging Japanese Yen. Although crosswinds are developing with mounting virus cases in Beijing, since loosening controls, Barclays said it expects a full reopening to increase Oil demand by up to 2 mbpd. Early estimates for tomorrow’s EIA report signal a small drop of -0.167 mb in Crude, +1.917 mb Gasoline, and +0.672 mb Distillates. The wild card remains the SPR release, but also Refinery Utilization, specifically at yearend.
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Gold (February) / Silver (March)
Gold, yesterday’s close: Settled at 1797.7, down 2.5
Silver, yesterday’s close: Settled at 23.199, down 0.129
Fundamentals: Gold and Silver are surging on the heels of the Bank of Japan maneuver, highlighted in the S&P/NQ section. Although the U.S. Dollar Index is down due to the Yen, the Dollar is more or less muted against all other major currencies. Additionally, both the U.S. 10-and 30-year yield are higher by 10bps for the second day in a row. Although rising yields are seen as a headwind, the yield curve is steepening, and days that it has in the second half of the year have been supportive of the precious metals complex.
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Silver (March)
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