STATE OF THE MARKETS

Stocks surged amid a gloomy economy. US stocks surged on Thursday despite reports of contracting GDP (-1.4%) for the last quarter. Strong earnings from Meta (FB) and Qualcomm (QCOM) helped boost the major index with Dow (+1.85%), S&P (+2.47%) and Nasdaq (+3.06%), including Russell (+1.87%) closed in the green.

Bonds lost bids, sending yields higher, with the 10Y settled at 2.83% as inversion with the 5Y (2.85%) and 7Y (2.87%) remains. Month end profit taking put the Dollar under pressure, with the index settled around 103.65 and stalled around the 103 handle at writing.

In the commodities market, news of European ban on Russian oil sent the black gold higher to close at $104.25/bl and currently piercing $105.50/bl in early Friday trading. Gold rebounded on strong bids and closed above $1,894.50/oz while continuing to surge higher as Dollar was sold. Elsewhere, iron ore continues to drag lower as investors’ worries on China demand continue. The commodity around $151.20/tn as New York closed.

In the FX space, short term traders were quick to take profits in Dollar and demand more Loonie, Aussie and Swiss while sending Sterling to offers. Sentiments in the medium and long term accounts were little changed.

On Friday, markets await new European sanction on Russia while looking forward to seeing earning reports from Bristol-Myers Squibb (BMY), Weyerhaeuser (WY), Honeywell (HON), Newell (NWL), Phillips 66 (PSX) and Abbvie (ABBV) as well as the latest PMI composite figures.

OUR PICK – No New Pick

No new pick going into the weekend. This week saw a huge inflow to the short term money market (close to $40b) while equities ($3b) continue to bleed. Month end rebalancing will bring the Dollar on a pullback while waiting to confirm the 50bps rate hike next week. If no positive surprise from the Feds, we expect to see further Dollar pullback with rebound in equities, commodities and higher beta currencies.

Trades updates: 

Equities: AUY (19% undervalued, 2.15% yields) is on wave 4 pullback and we expect to meet the final target in the coming weeks. We remain bullish CTRA (COG) (20% undervalued, 2.06% yields) and revised target to $35.30, we believe T (23% undervalued, 5.72% yields) has found a bottom and looking to close the gap, MO (22% undervalued, 6.52% yields) was stopped out, VIPS (35% undervalued with 4.78 z-score) remained well bid after UBS maintain neutral rating but reduced target by 10 cents, CRON (21% undervalued with 27.69 z-score), WBA (28% undervalued, 4.29% yields) had pulled back further to $44 and we remained bullish, and M (44% undervalued, 2.45% yields).

FX & Commodities: Silver may have found a bottom, AUD/CAD had reached all targets, AUD/USD was stopped out, CAD/CHF reached short term TP1 and was stopped out, Crude has reached short term TP1 and we expect a pullback.

Risk Disclaimer:

This article is for general information purpose only. It is not an investment advice or a solicitation to buy or sell any securities/oz. Opinions expressed are of the authors and not necessarily of MFM Securities Limited or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.