STATE OF THE MARKETS

Investors cautious amid inflation data. Global markets took a cautious stance on Tuesday as investors await US inflation numbers on Thursday. The China inflation released Wednesday pointed to a sudden 9% jump in cost of raw materials, sending major Asian bourse lower. Nikkei (-0.35%) closed lower while FTSE (-0.56%) is down as of this writing. S&P (0.00%) and Dow (-0.09%) gapped lower in pre-market Wednesday as the US10Y benchmark fell to 1.50% in the European session.

Crude futures continued its upward trajectory, breaking $70.50/bl, in anticipation of a 2 million barrel reduction in US crude inventory. Gold was on firm bid as yields fell, though remains capped below the $1,900/oz mark.

The fall in US bond yields, sent King Dollar (DXY) in limbo around the 90 handle, while short term traders lifted Swiss to the forefront of demand. Risk off seems to be the order of the day as the commodity currencies were on offers, while safe havens on bids. Euro and Sterling remain in a tug of war as markets await the ECB decision this Thursday, while Loonie is on edge as BoC is expected to keep its forward guidance on rates.

OUR PICK – No New Pick For Equities

Wait and see for now. At this juncture in the equities market, where capital outflows were the order of the week for the past 9 weeks; we rather stay put for now as the market is trying to break from its range. Though breadth is mostly bullish, showing that investors are accumulating selective stocks, inflation and yields concerns might derail that momentum and give a better level to participate later in our view. Let’s stay on the sideline for now.

Trades updates:  We are out of PFE for now, we look to close MO around $48.50, we remain bullish AUY and will re-entry if stopped, AUD/USD and EUR/USD remain active, we remain bullish T and bearish AUD/NZD.

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