News

01.08.2023 – Interesting times: Despite the interest rate hikes, the gold price is not too far from its all-time high. JP Morgan even sees a new price record for next year. Gold would therefore be an investment for patient investors. Which is also due to the chart technique.

The resistance of gold is indeed amazing, here the monthly chart. Actually, the tightening in the world should affect the precious metal – because gold does not yield any return. Counterparts like government bonds or stocks with dividends, on the other hand, do. And a safe deposit box at the bank for the metal costs a fee on top of that. But the still high inflation speaks for gold. And the danger of recession. So that it goes further upward, the yellow metal must first break the resistance from three summits.

Source: Bernstein Bank GmbH

If the breakout comes, it will be because many investors still see gold as insurance in a recession. Greg Shearer, for example, executive director of global commodity analysis at JPMorgan. He expects gold to reach $2,175 per ounce by the fourth quarter of 2024.

Interest rate cut in case of recession
The expert believes in an end to interest rate hikes by the Federal Reserve after the July meeting just ended and even rate cuts by the middle of next year. According to JPMorgan, there is even more upside potential if the U.S. economy does slip into recession. In that case, the Fed would just have to cut rates again.
In fact, there are some signs that point to an economic crisis. For example, the Index of Leading Economic Indicators has already slid 15 times in a row – the longest stretch since 2007/2008. Now the Fed is pulling the “easy money” out of the economy – but the situation with debt and bad investments is far more dramatic than in the financial crisis of 2008, says Shearer.
The analyst concludes that gold and silver are “late cycle diversifiers and something that will perform as we look to the next sort of 12, 18 months.” In the second half of the year, the gold price will average $2,012 per ounce, he says. The expert believes there will be strong buying by institutional and retail collectors.

Central banks are buying

At the same time, diversification among central banks away from the dollar continued. Central bank reserves, for example, would have increased by 228 tons in the first quarter – 38 percent higher than the previous record for a first quarter set in 2013. The lobby group World Gold Council also believes that just under a quarter of the world’s central banks plan to diversify their reserves toward gold over the next 12 months.
We add: However, there is also the opposite trend. For example, in the weeks leading up to the presidential election in May, the Turkish central bank threw massive amounts of gold onto the market to support the lira, as Handelsblatt has learned from industry circles. Accordingly, Turkey may have dumped more than a hundred tons of precious metal between March and mid-May.
The Bottom Line: Watch the real-time news for signals of recession and hints of new interest rate cuts. If central banks then buy, gold should make a new run to the upside. Bernstein Bank wishes successful trades and investments!

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The content of this publication is for general information purposes only. In this context, it is neither an individual investment recommendation or advice nor an offer to purchase or sell securities or other financial products. The content in question and all the information contained therein do not in any way replace individual investor- or investment-oriented advice. No reliable forecast or indication for the future is possible with respect to any presentation or information on the present or past performance of the relevant underlying assets. All information and data presented in this publication are based on reliable sources. However, Bernstein Bank does not guarantee that the information and data contained in this publication is up-to-date, correct and complete. Securities traded on the financial markets are subject to price fluctuations. A contract for difference (CFD) is also a financial instrument with leverage effect. Against this backdrop, CFD trading involves a high risk up to the point of total loss and may not be suitable for all investors. Therefore, make sure that you have fully understood all the correlating risks. If necessary, ask for independent advice. CFDs are complex instruments and are associated with the high risk of losing money quickly because of the leverage effect. 68% of retail investor accounts lose money trading CFD with this provider. You should consider whether you understand how CFD work and whether you can afford to take the high risk of losing your money.7

28.07.2023 – The Bank of Japan is making things exciting: On the one hand, it is still shying away from an official turnaround in monetary policy. And in doing so, it is disappointing the expectations of many yen bulls. However, the central bank’s first signal confirmed suspicions that the time could soon come.

USDJPY was recently torn back and forth, here the hourly chart. Which is hardly surprising given the contradictory signals.

Source: Bernstein Bank GmbH

Early Friday morning, the Bank of Japan (BOJ) announced its interest rate decision. Some market players had expected an official change in monetary policy by the new governor Kazuo Ueda. That did not come.

U-turn light
The central bank left the upper limit for ten-year government bonds at 0.5 percent after all. In addition, short-term interest rates remain at minus 0.1 percent. However, the BoJ surprised the financial markets by announcing an easing of its control mechanism for Japanese government bonds. Thus, the BoJ did keep its target for ten-year yields at zero percent. But then came the first crack in its previous monetary policy: the central bank said that from now on the 0.5 percent ceiling would only be a reference point and no longer a hard limit, as it wanted to make its easing program more flexible.

Nikkei largely confirmed
The BoJ had thus largely confirmed a report by the Nikkei news group, according to which the BoJ was discussing the yield control curve and a higher yield limit. Say: must allow rising interest rates. Nikkei is considered the mouthpiece of the central bank. What is not, can therefore still become. That means: possible rising real interest rates because of inflation – which makes the yen more attractive.
End of US Tightening in Sight
Meanwhile, there doesn’t seem to be much room left for the dollar in terms of interest rate hikes. As expected, the Fed has raised interest rates once again. The Federal Open Market Committee voted unanimously to raise the fed funds rate by 25 basis points to between 5.25 and 5.50 percent. However, the market assumes that this will soon be the end of the tightening in the USA.
The conclusion from all this: Traders and investors should pay attention to the yen whether the monetary policy turnaround is actually initiated. Apparently, some investors assume very well. The Wall Street Journal recently reported the end of large yen shorts: “Hedge funds have unwound their bets against the currency. We are curious to see what happens next and will keep you up to date!

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The content of this publication is for general information purposes only. In this context, it is neither an individual investment recommendation or advice nor an offer to purchase or sell securities or other financial products. The content in question and all the information contained therein do not in any way replace individual investor- or investment-oriented advice. No reliable forecast or indication for the future is possible with respect to any presentation or information on the present or past performance of the relevant underlying assets. All information and data presented in this publication are based on reliable sources. However, Bernstein Bank does not guarantee that the information and data contained in this publication is up-to-date, correct and complete. Securities traded on the financial markets are subject to price fluctuations. A contract for difference (CFD) is also a financial instrument with leverage effect. Against this backdrop, CFD trading involves a high risk up to the point of total loss and may not be suitable for all investors. Therefore, make sure that you have fully understood all the correlating risks. If necessary, ask for independent advice. CFDs are complex instruments and are associated with the high risk of losing money quickly because of the leverage effect. 68% of retail investor accounts lose money trading CFD with this provider. You should consider whether you understand how CFD work and whether you can afford to take the high risk of losing your money.7

25.07.2023 – Tomorrow, Wednesday, the Federal Reserve will again have its say. Apparently, the U.S. central bank has succeeded in containing inflation without choking off the economy. At any rate, optimism is growing about a “soft landing.” And about the fact that the cycle of interest rate hikes is coming to an end.

The stock market has already celebrated moderately: the Dow Jones – shown here in a daily chart – has just closed higher than it has in around fifteen months.

Source: Bernstein Bank GmbH

Currently, the federal funds rate is between 5.00 to 5.25 percent. Currently, according to the CME Fedwatch Tool, 98.9 percent of the market believes rates will rise to the 5.25 to 5.50 percent range tomorrow. You can imagine the swings if the Fed fails to meet this solidified expectation. A new rate move would be the 11th since March 2022 – and the highest interest rate in 22 years.
Economists surveyed by “Bankrate.com” see a peak in the key interest rate of 5.5 to 5.75 percent. Accordingly, 37 percent of the experts believe in another interest rate step and 33 percent even in two further rate hikes. The always well-informed “Wall Street Journal” also wrote in this direction: The Fed is not yet ready to declare victory over inflation

Growing optimism
Meanwhile, economists at Goldman Sachs have lowered the possibility of a U.S. recession from 35 to 20 percent. Even the rather pessimistic Deutsche Bank has meanwhile repositioned itself: “We have greater resiliency within the economy than I would have anticipated at this point in time, given the extent of rate increases we’ve gotten,” judged Matthew Luzzetti Chief Economist in the USA. Consumer spending remains high, he said, and many people still have reserves from the government stimulus from the Corona era and are now catching up on things they missed, such as travel, restaurants and entertainment.

Recession versus inflation

Indeed, the labor market also remains robust enough for further interest rate hikes: 209,000 new jobs were created in June, and the unemployment rate fell to 3.6 percent – nearly the lowest level in half a century. Meanwhile, inflation has slipped: from 9.1 percent in June 2022 to 3 percent most recently. The Fed’s target of 2 percent seems close to being reached.
Our conclusion: pay attention to the Fed’s expectations management. Important will again be the choice of words in the press release and in Jerome Powell’s press conference. Presumably, there will be no euphoric undertone – that would whip prices upward. But even the slightest hint that mission tightening is almost accomplished will please the bulls. Conversely, the bears will be served if the Fed is overly cautious about the economy and inflation and hints at an even stronger than expected need for action on interest rates.

It remains to be added that the current reporting season with more than 500 corporations this week also gives a hint about the current economic situation and the scope for interest rates. In this sense: Bernstein Bank wishes successful trades and investments!

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The content of this publication is for general information purposes only. In this context, it is neither an individual investment recommendation or advice nor an offer to purchase or sell securities or other financial products. The content in question and all the information contained therein do not in any way replace individual investor- or investment-oriented advice. No reliable forecast or indication for the future is possible with respect to any presentation or information on the present or past performance of the relevant underlying assets. All information and data presented in this publication are based on reliable sources. However, Bernstein Bank does not guarantee that the information and data contained in this publication is up-to-date, correct and complete. Securities traded on the financial markets are subject to price fluctuations. A contract for difference (CFD) is also a financial instrument with leverage effect. Against this backdrop, CFD trading involves a high risk up to the point of total loss and may not be suitable for all investors. Therefore, make sure that you have fully understood all the correlating risks. If necessary, ask for independent advice. CFDs are complex instruments and are associated with the high risk of losing money quickly because of the leverage effect. 68% of retail investor accounts lose money trading CFD with this provider. You should consider whether you understand how CFD work and whether you can afford to take the high risk of losing your money.7

20.07.2023 – Is this it for the sugar rally? Or will the price make another run for an upward breakout? We look at the bullish and bearish arguments.

In April, the sugar price reached its highest level since 2012. In recent weeks, however, the price set back again, which was mainly due to Brazil, see below. Can the price still rise above the interim record of April? Presumably, a global shock would be needed for that to happen, like the 1973 oil crisis: in November 1974, sugar marked an all-time high of 65.20 cents per pound. A possible effect of this magnitude would be persistent weather capriciousness.

Source: Bernstein Bank GmbH

But first, a look at current developments. We see a tug of war in the market between bulls and bears.

Bullish: Real, Ethanol, Thailand and India
“Barchart.com” initially cited the strength in the Brazilian real against the dollar as reasons for the recent price increase. This dampens exports from Brazil. In addition, the rise in oil prices has created more demand in sugar mills – in such periods, the detour of sugar to ethanol production increases.

In addition, the ongoing drought in Thailand is reducing supply, and the country is the world’s third-largest sugar producer. This year, he said, Thailand’s rainfall is about 28 percent below last year’s volume. Wholesaler Czarnikow had warned that Thai production this year could fall below the level of the 2009/10 season – and that was the second-lowest level ever.
Further, he said, the El Nino weather phenomenon could exacerbate the situation. This usually brings heavy rains to Brazil as well as drought to India and surrounding areas. India and Brazil are the world’s two largest sugar producers. Prices also rose sharply during the last major drought in Asia in 2015 and 2016. “Tradingeconomics.com” pointed out that India had cut volumes for export because of the drought.

Bearish: Brazil and sweetener substitutes

However, it had been rather dry in Brazil recently – and this has accelerated the harvest, according to Barchart.com. Furthermore, the probability of frost has decreased. For example, Unica, which is Brazil’s sugarcane industry association, recently reported that output in the south and center of the country – which is Brazil’s most important growing region – was up 7.6 percent year over year in the second half of June. He said production so far in the 2023/2024 season has climbed as much as nearly 26 percent year over year. Czarnikow raised his forecast for the Center-South region’s crop this year by 500,000 tons to 38.2 million tons.
Plus, sugar is replaceable these days. The Wall Street Journal speculated back in April that beverage companies could increasingly switch to fructose syrup, which is derived from grains.
The conclusion to be drawn from all this is that the crucial question will be the harvest prospects among the top 3. So keep an eye on the real-time news. Whether long or short – Bernstein Bank wishes successful trades and investments!

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The content of this publication is for general information purposes only. In this context, it is neither an individual investment recommendation or advice nor an offer to purchase or sell securities or other financial products. The content in question and all the information contained therein do not in any way replace individual investor- or investment-oriented advice. No reliable forecast or indication for the future is possible with respect to any presentation or information on the present or past performance of the relevant underlying assets. All information and data presented in this publication are based on reliable sources. However, Bernstein Bank does not guarantee that the information and data contained in this publication is up-to-date, correct and complete. Securities traded on the financial markets are subject to price fluctuations. A contract for difference (CFD) is also a financial instrument with leverage effect. Against this backdrop, CFD trading involves a high risk up to the point of total loss and may not be suitable for all investors. Therefore, make sure that you have fully understood all the correlating risks. If necessary, ask for independent advice. CFDs are complex instruments and are associated with the high risk of losing money quickly because of the leverage effect. 68% of retail investor accounts lose money trading CFD with this provider. You should consider whether you understand how CFD work and whether you can afford to take the high risk of losing your money.7

20.07.2023 – The Artificial Intelligence (AI) theme is picking up steam, with both Apple and Microsoft triggering a buying frenzy with their plans. Just as we did with Nvidia, we advise traders and investors to keep an eye on Artificial Intelligence (AI).

Microsoft is currently riding the AI wave, and the stock has just set a new price record. For one, the corporation is investing billions in OpenAI, which is the creator of ChatGPT, the pioneer of intelligent search engines. Microsoft also just shared the price for AI organizer
Microsoft 365 Copilot – $30 per user per month on top of the 365 subscription. The company also announced that the use of its AI-based chatbot Bing for commercial purposes will no longer be free in the future. For businesses, a paid software subscription to Microsoft 365 will be required. The cash register is ringing – investors were enthusiastic. Here in the picture the four-hour chart.

Source: Bernstein Bank GmbH

Apple also saw a strong upward trend: The share gained a market cap of 80 billion dollars within seconds. In the meantime, the group, which had recently cracked the 3 trillion mark, was worth around 3.1 trillion dollars. The trigger was a report by the Bloomberg news agency, according to which Apple is working on a tool that attacks the AI products of the competition, according to insiders. According to the report, the system is known under the internal name “Ajax” or AppleGPT.

Well-tempered language plastic
But beware: The trees are not yet growing into the sky. For example, if you spend a little time with ChatGPT (which stands for Chatbot Generative Pre-trained Transformer), you will quickly notice the pitfalls. The language is still plastic, artificial: a well-tempered monotony of both and. Just don’t give offence, just don’t deviate from the mainstream from which the tool draws. Examples for statements made are often missing. Errors sometimes creep in, especially in the case of multiple inquiries on the same topic. And legal subtleties sometimes escape the machine. Speech software also still has problems “thinking along”. For example, if a German text is to be spoken and an English term appears in it, it will also be spoken in German.

Simulation: Drone eliminates officer
The most spectacular AI failure was the use of artificial intelligence in a US Air Force combat drone: In a simulation, the AI first eliminated its own commanding officer, because there was a risk that he could block the order to kill as many enemies as possible with his veto. When the operator told the drone that it was not okay to eliminate him, the weapon system just eliminated the tower to cut off communication.
The Air Force immediately denied the anecdote, saying that such a simulation never took place. However, it is astonishing that Colonel Tucker Hamilton talked about it at the Future Combat Air and Space Capabilities Summit in London in May, as the “Guardian” reported. Hamilton is, after all, the head of AI testing in the U.S. Air Force. He has since stated that his story was a purely hypothetical scenario. Hmm…
So keep an eye on how the technology develops. If it has too many quirks that can’t be fixed, then the boom will end quickly. And then all the AI champions are suddenly short candidates. We keep an eye on the development for you – Bernstein Bank wishes successful trades and investments!

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The content of this publication is for general information purposes only. In this context, it is neither an individual investment recommendation or advice nor an offer to purchase or sell securities or other financial products. The content in question and all the information contained therein do not in any way replace individual investor- or investment-oriented advice. No reliable forecast or indication for the future is possible with respect to any presentation or information on the present or past performance of the relevant underlying assets. All information and data presented in this publication are based on reliable sources. However, Bernstein Bank does not guarantee that the information and data contained in this publication is up-to-date, correct and complete. Securities traded on the financial markets are subject to price fluctuations. A contract for difference (CFD) is also a financial instrument with leverage effect. Against this backdrop, CFD trading involves a high risk up to the point of total loss and may not be suitable for all investors. Therefore, make sure that you have fully understood all the correlating risks. If necessary, ask for independent advice. CFDs are complex instruments and are associated with the high risk of losing money quickly because of the leverage effect. 68% of retail investor accounts lose money trading CFD with this provider. You should consider whether you understand how CFD work and whether you can afford to take the high risk of losing your money.7

19.07.2023 – There’s life in the old dog yet: Not so long ago, the European single currency fell below parity with the dollar. That was last fall. And now the euro is enjoying its longest rally in almost two decades. We take a look at the background.

According to the Bloomberg news agency, the euro has just achieved its longest winning streak since 2004. The EURUSD was last as strong as it was in February 2022. Here is the daily chart.

Soruce: Bernstein Bank GmbH

The strength of the euro is actually a dip in the U.S. currency – namely, it has recently lost value against some major currencies.

Yellen talks down inflation

Recently, U.S. Treasury Secretary Janet Yellen created a bearish mood for the dollar. In an interview with Bloomberg TV, she explained that the U.S. is making good progress in reducing inflation. Speaking from the G20 meeting in India, she said, “the most recent inflation data were quite encouraging.” And the U.S. economy will not slip into a recession, she added.
Thus, the main reason for dollar weakness still lies in data from about a week ago. That’s when the U.S. had reported a Consumer Price Index for June that had climbed weaker than expected. Specifically, the CPI rose 0.2 percent month-over-month and 3.0 percent year-over-year. Ergo, hopes rose for an end to the tightening cycle – after all, the Federal Reserve now has fewer arguments to raise interest rates.

Interest rate differential with Euroland

In Europe, on the other hand, the end of interest rate hikes is probably still a long way off. According to Eurostat, the statistics authority, inflation in the euro area fell to 5.5 percent in June 2023, down from 6.1 percent in May. You can see that inflation is still far above that in the United States. In addition, the European Central Bank still has room for improvement in the key interest rate, which stands at 4.0 percent in the euro zone. In the U.S., it is between 5.0 and 5.25 percent.

The development of EURUSD is indeed astonishing, because apart from monetary policy, there are some factors that speak more in favor of an investment in the U.S. than in Europe. As there would be a solid energy policy, where the economy is not threatened with migration. Or the abundant natural resources in the USA, such as oil or natural gas. In addition, the greenback is always in demand as a safe haven when crises rage. Ukraine and Taiwan are just two of them. We keep an eye on the development for you and wish successful trades and investments!

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The content of this publication is for general information purposes only. In this context, it is neither an individual investment recommendation or advice nor an offer to purchase or sell securities or other financial products. The content in question and all the information contained therein do not in any way replace individual investor- or investment-oriented advice. No reliable forecast or indication for the future is possible with respect to any presentation or information on the present or past performance of the relevant underlying assets. All information and data presented in this publication are based on reliable sources. However, Bernstein Bank does not guarantee that the information and data contained in this publication is up-to-date, correct and complete. Securities traded on the financial markets are subject to price fluctuations. A contract for difference (CFD) is also a financial instrument with leverage effect. Against this backdrop, CFD trading involves a high risk up to the point of total loss and may not be suitable for all investors. Therefore, make sure that you have fully understood all the correlating risks. If necessary, ask for independent advice. CFDs are complex instruments and are associated with the high risk of losing money quickly because of the leverage effect. 68% of retail investor accounts lose money trading CFD with this provider. You should consider whether you understand how CFD work and whether you can afford to take the high risk of losing your money.

18.07.2023 – Investing against the tide of the mainstream media: Those who are embraced by them sometimes get into trouble. One example of this kiss of death in the press is Volkswagen. Plus the beer company Anheuser-Busch Inbev – where attentive customers recently discovered a death star for Bud Light.

Let’s look at the USA first. At Anheuser-Busch Inbev, the bottler Ardagh Group has had to close two bottling plants, one in North Carolina and another in Louisiana, because of the collapsing sales of Bud Light. This was because Bud Light, once the leading beer brand, had taken a marketing turn that had been well received in the media: away from babes and barbecue and toward a transvestite as an advertising figure. The result was a boycott by customers. To be sure, Inbev’s stock has recovered recently; here’s the daily chart. That’s because the queer marketing strategy was largely called off and those responsible were fired. But buyers continue to sulk.

Source: Bernstein Bank GmbH

Now new trouble is looming: Photos of a “Death Star” at Costco are circulating on social media. This is an asterisk on the price tags of Bud Light, which, according to insiders, signals that the brand will no longer be listed, i.e. removed from the shelves. That would be a major blow because Costco, the wholesaler, operates more than 800 stores in the United States.

Get woke, go broke
And with that, we look domestically. Volkswagen is one of the icons of German industry. But with its pivot to electric cars, the company has taken a dangerous turn. Management has always been celebrated in the green-left media for its ecologically correct course. After all, VW wants to phase out internal combustion cars by 2033, also at the request of politicians, of course.
But now VW’s existence seems to be in danger: Volkswagen is “under enormous pressure from internal and external factors,” Thomas Schäfer, group board member for the core VW brand, recently warned some 2,200 executives. As reported by Der Spiegel, he even reportedly said, “The future of the VW brand is at stake.” The reasons: First, too rigid internal processes and too high costs.

Market versus political media guidelines
But above all, the crisis in e-cars – people are hardly buying. Topics that are rarely covered critically in the mainstream media are the problems with batteries, which are extremely difficult to extinguish in fires and can destroy the entire car. In addition, charging stations are too rare, the range is too short and charging takes too long. Furthermore, e-cars are simply too expensive for many people. Tesla or the Chinese company BYD can produce them much more cheaply. Many also wonder where the energy will come from when the German nuclear power plants are shut down – if France ever needs all of its own electricity, it will no longer be able to export energy to Germany.
The workforce will have to pay the price for this woke decision: VW recently cut production at its e-car plant in Emden, extended the plant vacations by a week and laid off hundreds of temporary workers.

The conclusion to be drawn from all this: remain critical of the zeitgeist, inform yourself outside the mainstream media. And observe whether a group learns from its mistakes – then the share offers recovery potential. Bernstein Bank wishes successful trades and investments!

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The content of this publication is for general information purposes only. In this context, it is neither an individual investment recommendation or advice nor an offer to purchase or sell securities or other financial products. The content in question and all the information contained therein do not in any way replace individual investor- or investment-oriented advice. No reliable forecast or indication for the future is possible with respect to any presentation or information on the present or past performance of the relevant underlying assets. All information and data presented in this publication are based on reliable sources. However, Bernstein Bank does not guarantee that the information and data contained in this publication is up-to-date, correct and complete. Securities traded on the financial markets are subject to price fluctuations. A contract for difference (CFD) is also a financial instrument with leverage effect. Against this backdrop, CFD trading involves a high risk up to the point of total loss and may not be suitable for all investors. Therefore, make sure that you have fully understood all the correlating risks. If necessary, ask for independent advice. CFDs are complex instruments and are associated with the high risk of losing money quickly because of the leverage effect. 68% of retail investor accounts lose money trading CFD with this provider. You should consider whether you understand how CFD work and whether you can afford to take the high risk of losing your money.7

17.07.2023 – Once again we have to deal with the wheat crisis. Because today the export agreement between Ukraine and Russia expires. Whether there will be an extension this time is open, because Moscow is blocking. And then there is the latest report of the US Department of Agriculture on the world market.

Lively ups and downs in wheat: first the United States Department of Agriculture sank the price last Wednesday. Here is the four-hour chart of the September contract in cents per bushel. And then it went north because Russia’s President Vladimir Putin blocked. There had been such threats time and again. But how will it end this time?

Source: Bernstein Bank GmbH

Wheat for the world
The “Frankfurter Allgemeine Zeitung”, however, judged that the whole world would be affected if the agreement were to be terminated. That’s because, according to UN data, some 32.9 million tons of grain had been exported since the agreement was concluded last July, 725,000 tons of it by the World Food Program (WFP) for underdeveloped countries such as Ethiopia, Somalia or Yemen. That was more than half of the grain shipped by WFP in 2022, he said – making the importance of the corridor abruptly clear. We are curious to see how the political tug-of-war will develop. What is already clear is that many fields near the front lines in Ukraine will not be harvested, and that this will reduce the harvest.

Bearish WASDE report
And with that, we look at global supply. Last Wednesday, USDA had its say with the World Agricultural Supply and Demand Estimates (WASDE). The agency raised its estimate for global wheat production volume for the 2022/23 season to 790.20 million tons. The volume in the 2021/23 season had been 781.05 million tons. It also said exports would increase from 202.85 million tons to 217.17 million tons. It added: “The projected season-average farm price is forecast at $7.50 per bushel, down $0.20 from last month.”

Barchart.com commented: “The July WASDE report hit the agricultural sector like a ton of bricks.” But the website still remained bullish: “The kneejerk selling in the soybean, corn, and wheat futures market turned out to be a mistake, and the bearish tone of the July WASDE report provided market participants that bought the dip with a gift.” The arguments: Drought in the Northern Hemisphere; rising production costs added to the product; and just the war in Ukraine. In addition, USDA tends to traditionally give a best-case scenario. At least with regard to the influencing factor of the Ukraine war, Barchart has been proven right for the time being. We are curious to see how the matter develops – we will keep you up to date!

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The content of this publication is for general information purposes only. In this context, it is neither an individual investment recommendation or advice nor an offer to purchase or sell securities or other financial products. The content in question and all the information contained therein do not in any way replace individual investor- or investment-oriented advice. No reliable forecast or indication for the future is possible with respect to any presentation or information on the present or past performance of the relevant underlying assets. All information and data presented in this publication are based on reliable sources. However, Bernstein Bank does not guarantee that the information and data contained in this publication is up-to-date, correct and complete. Securities traded on the financial markets are subject to price fluctuations. A contract for difference (CFD) is also a financial instrument with leverage effect. Against this backdrop, CFD trading involves a high risk up to the point of total loss and may not be suitable for all investors. Therefore, make sure that you have fully understood all the correlating risks. If necessary, ask for independent advice. CFDs are complex instruments and are associated with the high risk of losing money quickly because of the leverage effect. 68% of retail investor accounts lose money trading CFD with this provider. You should consider whether you understand how CFD work and whether you can afford to take the high risk of losing your money.7

12.07.2023 – The market firmly believes that inflation in the USA will fall. This would give the Federal Reserve fewer arguments to raise interest rates. The dollar falls, equities rise, the yield on US government bonds falls. And above all, sterling is gaining against the greenback.

By this Wednesday afternoon, we’re all smarter: the majority of analysts expect annual core Consumer Price Index in the U.S. to slip from 5.3 to 4.9 percent – will be the third consecutive decline. On a month-on-month basis, the consensus stands at plus 0.2 percent.

Declining inflation?
If the numbers come in like that, or even weaker, it would give the Fed less of a case for another rate hike. The stock market would celebrate disinflation. But if inflation turns out higher, there could be a damper on the rate front for now. “Our economist expects a consensus 0.3% month-on-month core read, which should keep providing encouraging news on the disinflationary story – but should still fall short of tweaking the Fed narrative or convincing markets to price out a July hike,” ING analysts judged.

Source: Bernstein Bank GmbH

The trade on inflation expectations in the GBPUSD currency pair will be particularly interesting. Sterling just climbed to a new 15-month high – the picture above shows the daily chart. On the island here, investors expect further interest rate hikes. That’s because inflation in the U.K. is at 8.7 percent – the highest inflation in Western industrialized countries. Wages on the island are rising rapidly.

At the same time, the Bank of England’s Financial Stability Report stated that financial institutions in the UK are “strong enough” to deal with the risk of rising mortgage rates. Ergo, banks can probably absorb bad loans well. This doesn’t look like the central bank cares about homebuilders.

Expensive mortgages

We had already talked about this topic: In the U.K., most mortgage loans are floating rate or, at best, short-term. When the prime rate rises, it gets expensive for households. Which can lead to a recession, because consumers drastically cut back on consumption. The experts at Moneyfacts found out exactly how expensive it will be: according to them, the average two-year fixed interest rate costs 6.66 percent. That is the highest level in 15 years.

The conclusion from all this: GBPUSD is currently an interesting currency pair in terms of monetary policy. Whether long or short – we wish you successful trades and investments!

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The content of this publication is for general information purposes only. In this context, it is neither an individual investment recommendation or advice nor an offer to purchase or sell securities or other financial products. The content in question and all the information contained therein do not in any way replace individual investor- or investment-oriented advice. No reliable forecast or indication for the future is possible with respect to any presentation or information on the present or past performance of the relevant underlying assets. All information and data presented in this publication are based on reliable sources. However, Bernstein Bank does not guarantee that the information and data contained in this publication is up-to-date, correct and complete. Securities traded on the financial markets are subject to price fluctuations. A contract for difference (CFD) is also a financial instrument with leverage effect. Against this backdrop, CFD trading involves a high risk up to the point of total loss and may not be suitable for all investors. Therefore, make sure that you have fully understood all the correlating risks. If necessary, ask for independent advice. CFDs are complex instruments and are associated with the high risk of losing money quickly because of the leverage effect. 68% of retail investor accounts lose money trading CFD with this provider. You should consider whether you understand how CFD work and whether you can afford to take the high risk of losing your money.7

10.07.2023 – Everyone knows the villain “Goldfinger”, not only 007 fans, but “Chocfinger” is probably rather unknown to most: It is an investor who had tried to corn the cocoa market in 2010. In other words, he bought up all the goods available in Europe in order to drive up the price. This only succeeded in the short term. Last week, many felt as if “Chocfinger” had reappeared.

We get to deal with cocoa again: The price has been running – with completely natural setbacks – up like clockwork for almost a year. You can see the weekly chart of the US market in dollars per ton. Perhaps events in Europe will push the price even further north.

Namely, in London, cocoa futures jumped quite a bit last week. The news agency Bloomberg just reported breathlessly: “The biggest cocoa trade in more than a decade is rattling the London exchange.” According to the report, downright panic buying by chocolate manufacturers was underway because stocks were falling. This had led to a massive squeeze and the July cocoa contract was trading at a premium of 240 pounds per ton over the following contract.

Just like Armajaro in 2010.
The last time such a phenomenon occurred was in 2010, according to Bloomberg, when a fund called CC+ struck: according to Wikipedia and Medium.com, the hedge fund, part of the investment firm Armajaro, secured about 240,000 metric tons of cocoa on July 17, 2010. Which drove the price to its highest level since 1977. The deal was worth 658 million British pounds and accounted for about 7 percent of annual cocoa production. That was the entire European supply at the time.
Behind it was trader Anthony Ward, co-founder of Armajaro. As luck would have it, he had previously been head of the European Cocoa Association. So he obviously had inside knowledge of the demand for chocolate. Not really fair, all that. Ergo, Ward acquired the nickname “Chocfinger.” Incidentally, according to the Wall Street Journal, the deal didn’t work out at the time – a worldwide oversupply in the following months caused prices to fall.

The buying panic continues
Will history repeat itself now? Already about three weeks ago, analyst Sergey Chetvertakov of S&P Global Commodity Insights had stated at the request of the television station CNBC: “The cocoa market has experienced a remarkable surge in prices (…) This season marks the second consecutive deficit, with cocoa ending stocks expected to dwindle to unusually low levels.” He said the El Nino weather phenomenon could exacerbate the trend because little rain is expected for West Africa – Ivory Coast and Ghana account for about 60 percent of production. The price could climb to $3,600 over the course of the year, Chetvertakov further warned. So as you can see, amazing things are happening in cocoa. We are keeping an eye on the market for you!

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The content of this publication is for general information purposes only. In this context, it is neither an individual investment recommendation or advice nor an offer to purchase or sell securities or other financial products. The content in question and all the information contained therein do not in any way replace individual investor- or investment-oriented advice. No reliable forecast or indication for the future is possible with respect to any presentation or information on the present or past performance of the relevant underlying assets. All information and data presented in this publication are based on reliable sources. However, Bernstein Bank does not guarantee that the information and data contained in this publication is up-to-date, correct and complete. Securities traded on the financial markets are subject to price fluctuations. A contract for difference (CFD) is also a financial instrument with leverage effect. Against this backdrop, CFD trading involves a high risk up to the point of total loss and may not be suitable for all investors. Therefore, make sure that you have fully understood all the correlating risks. If necessary, ask for independent advice. CFDs are complex instruments and are associated with the high risk of losing money quickly because of the leverage effect. 68% of retail investor accounts lose money trading CFD with this provider. You should consider whether you understand how CFD work and whether you can afford to take the high risk of losing your money.7