So as to demonstrate the ECB’s determination to achieve price stabilityMembers widely expressed concern over high inflation numbersMany of the upside risks to inflation outlook that was discussed last summer had materialisedMembers pointed out it was hard to imagine sustained higher inflation without increase in wage pressuresThe notion of „some time“ should not prevent timely rate rise if conditions so warrantedFull accountI think it is clear enough that the ECB is arguably unanimous in proceeding with a July rate hike. That said, it was expressed that „even relatively small steps might be sufficient to turn the current accommodative monetary policy stance into a restrictive stance“. That’s something to consider when it comes to viewing how aggressive the central bank is going to be in the months ahead.I mean, when you consider stagflation risks and a looming recession, the point being made about reaching the neutral level „only at a very late stage of the normalisation process“ may not necessarily mean the ECB could afford to hike continuously without interruptions this year.All this are but some food for thought for the coming months, in any case.

Their previous call for 4,900 was set back in 10 January, so it comes before all the shenanigans involving the Russia-Ukraine conflict and China lockdowns. No doubt that the inflation outlook and squeeze on businesses (in turn earnings) and consumers are part and parcel of the picture now.In case you missed it, Deutsche had earlier today called for the S&P 500 to fall to 3,650 before recovering to around 4,700 to 4,800 by year-end here.

This is exactly why we have been aggressively warning people to hedge and protect their investment portfolios. All year. This is not a short-term aberration that people can walk away from and just assume the market will magically rise back up. The hard truth is that global stock markets are only in the very early stages of pricing in a global economic slow-down that is already in full swing. There is in fact significant risk of a Triple Recession across the northern hemisphere of the world’s three largest economies, Europe, USA and China. China will be the first out of this difficult period, but even there too, subdued growth long term is the new reset normal.  Europe will continue to be impacted by war, sanctions and energy concerns. USA will have an inappropriately blindly aggressive central bank focussed only on inflation. Which is bizarre to say the least given it’s previous best efforts to completely ignore rising inflation for the past year. Everywhere, yes, the entire globe will continue to experience both extreme inflation and actual food or energy scarcity over the next 12 months. This, as we have been saying all year, even before the tragedy of Ukraine, is not an environment in which to be buying stocks.  This is a long term correction. Not a short term aberration. As such we cannot know if this will be a 6-18 month corrective phase or is in fact something far more significant akin to a 3-6 year decline in asset prices generally. When hedging investment portfolios is so easy these days, why take that degree of risk. I continue to suggest playing defence in the current global economic and financial market environment. Markets which are likely to remain strong, regardless of gains already seen and recent volatility, are the US dollar, Gold and Oil. The world is full of opportunity as long as investors play good defence now. So as to be in a position of relative power when markets eventually begin a new grand bull cycle. At the moment we are only in the early stages of ending the last grand super cycle 2009 to 2021. Clifford Bennett ACY Securities Chief Economist. The view expressed within this document are solely that of Clifford Bennett’s and do not represent the views of ACY Securities.All commentary is on the record and may be quoted without further permission required from ACY Securities or Clifford Bennett. This content may have been written by a third party. ACY makes no representation or warranty and assumes no liability as to the accuracy or completeness of the information provided, nor any loss arising from any investment based on a recommendation, forecast or other information supplied by any third-party. This content is information only, and does not constitute financial, investment or other advice on which you can rely.

Headlines:Dollar checks back its early week lossesUK April CPI +9.0% vs +9.1% y/y expectedECB’s Rehn: It is necessary for rates to move relatively quickly out of negative territoryECB’s de Cos: Bond buying should end in early Q3, first rate hike to follow shortly afterUS MBA mortgage applications w.e. 13 May -11.0% vs +2.0% priorEurozone April final CPI +7.4% vs +7.5% y/y prelimJapan to hold auction to sell 4.7 mil bpd of oil from its national reserve on 10 JuneMarkets:JPY leads, GBP lags on the dayEuropean equities lower; S&P 500 futures down 0.8%US 10-year yields up 2.1 bps to 2.991%Gold down 0.1% to $1,812.23WTI crude up 1.7% to $114.30Bitcoin down 1.0% to $29,727It was mostly a quiet session in terms of key headlines, though we did see UK inflation surge to 9% – its highest in some 40 years.That will keep the pressure on the BOE to act more aggressively but also squeeze the purse strings of UK consumers, with the cost-of-living crisis set to worsen in the months ahead.Risk tones were more cautious and that saw a return to old habits in markets with the dollar and yen gaining, while equities slumped.European indices were little changed early on but are posting slight losses now with US futures marked lower after a more sluggish start to the session earlier. Elsewhere, bonds are also offered with 10-year Treasury yields moving up to close in on the 3% mark again.In FX, EUR/USD is marked down by 0.3% to test 1.0500 while GBP/USD retreated from 1.2500 at the start of the day to hit a low of 1.2370 before keeping near 1.2400 currently.AUD/USD is also dragged lower by 0.3% to test the 0.7000 handle on the session while USD/CAD is up 0.2% to around 1.2830-40 levels.As much as there was some scope for optimism early this week, the subtle moves today are but a reminder that the storm clouds are still hanging over markets for the time being.

Downward pressure on the economy is increasingWill ensure economic operations in 1H 2022 are within reasonable rangeWill take effective measures to boost confidence of private firmsPretty much the usual talk as China continues to reaffirm support for the economy. I don’t think this is much of a hint of a LPR cut this coming Friday but we’ll see.

It didn’t take long for the breathing room to be suffocated as equities are starting to track lower again. Treasuries are also being offered on the day, so one might point to perhaps a continuation of some develeraging pressure. The dollar is firmer across the board alongside the yen, paring back some of the losses from the start of the week.Nasdaq futures are also seen down 0.9% and Dow futures also down 0.5% currently.

Prior +2.0% Market index 319.4 vs 358.9 prior Purchase index 225.0 vs 255.4 prior Refinancing index 826.9 vs 913.6 prior 30-year mortgage rate 5.49% vs 5.53% prior Mortgage activity in the US continues to take a big hit amid rising rates with the purchase index slumping to its weakest since May 2020 and the refinancing index dragged to its lowest since January 2019. This continues to suggest that there is a toll being exerted on the housing market even if prices are still yet to really cool down significantly. There’s a story to tell from the charts below: US dollar

The firm notes that:“Q1 results were strong, and while guidance was largely maintained, the outlook has become more uncertain. Some of this appears to be already in the price, as the market has moved ahead of earnings and therefore implies lower revisions ahead. But until expectations are reset lower, if recession worries don’t ease, we think that equity upside will be capped, at best, and that investors will continue to sell rallies.“That’s a fair argument considering that inflation and cost pressures are here to stay for longer. Adding to that will be the tightness in consumer spending, not to mention the rougher global growth outlook (recession fears) for the time being.

Headlines:ECB’s Knot: 25 bps rate hike in July is realisticRisk appetite improves further in European morning tradeDollar retreats on risk optimismEurozone Q1 GDP second estimate +0.3% vs +0.2% q/q prelimUK April claimant count change -56.9k vs -42.5k expectedOPEC+ continues to produce well below required level in AprilJapan takes first steps in reopening borders for tourismRussia says talks with Ukraine are not taking place ‚in any form’Markets:GBP leads, JPY lags on the dayEuropean equities higher; S&P 500 futures up 1.7%US 10-year yields up 3.4 bps to 2.913%Gold up 0.3% to $1,829.47WTI crude up 0.7% to $114.99Bitcoin up 1.6% to $30,421The market is embracing a more positive risk mood and that is pretty much setting the tone for trading on the day.Equities are surging higher while bond yields also ticked up, with the dollar seen retreating against its peers. The moves are pretty decent with the likes of the euro, aussie and kiwi gaining nearly 1% against the greenback. Meanwhile, the pound is indeed up over 1% against the dollar as cable comes up for some air.EUR/USD moved up from 1.0420 to 1.0480 before catching an added bid following ECB policymaker Knot’s remarks on a potential 50 bps rate hike in July. That sees the pair now near 1% gains at around 1.0530.GBP/USD pushed higher from 1.2380 to 1.2490 and is holding up 1.3% on the day around 1.2475 now ahead of some resistance around 1.2500. The pound is also helped by more solid UK labour market data earlier as well.Meanwhile, the aussie and kiwi are benefiting from the more optimistic risk mood with US futures extending gains during the session. S&P 500 futures were initially up around 0.3% before rising up to gain by 1.7% now.AUD/USD pulled up from 0.6990 to 0.7040 as buyers look to try and test a hold above 0.7000 for now.US retail sales data and Fed chair Powell’s speech on inflation will be the next two key risk events coming up later.

From a technical perspective, the pair is also seeing a modest bounce off support around 1.0400 if you go by the weekly chart. With broader risk sentiment also faring better today, the dollar is seeing a bit of a pullback against other major currencies.But EUR/USD did get a jolt from 1.0480 to 1.0520 on the back of Knot’s remarks here. At this stage, a July rate hike is all but a given but he floated the idea of a potential 50 bps rate hike and that is getting markets a tad bit excited.The ECB does have its fair share of courting the dramatic but one must take into account that Knot is one of the more hawkish members and for a central bank that hasn’t hiked rates in over a decade, it is tough to buy into a sudden major shift in mentality from a majority dove to an uber hawkish one.Nonetheless, money markets are now pricing in roughly 105 bps worth of rate hikes before year-end by the ECB. That compares with the roughly 95 bps as of yesterday.EUR/USD has now cleared its 200-hour moving average @ 1.0494 and a hold above 1.0500 does allow for buyers to establish some breathing room after an unrelenting push lower since the start of the year. The region around 1.0580-00 will offer some minor resistance next before we start to really come up with potential Fib levels to be tested.