Stocks still look expensive and valuations look high – Morgan Stanley

 Will the fourth quarter bring an end to the bear market? Morgan Stanley’s Global Investment Committee believes this bear market is far from over and recommends investors consider three key dynamics to inform their equity investments going forward.

Stock investors should demand a greater premium for taking on risk

“The paths for interest rates, inflation and corporate profitability all remain uncertain. That’s why stock investors should be demanding a greater premium for taking on risk. In other words, stocks still look expensive, and valuations look high, especially given that inflation-adjusted yields have moved up.”

“Investors could be in for more surprises as they continue to overlook the impact of tightening financial conditions. They should be cautious about investing in long-duration or growth-oriented equities, which currently may not offer fair compensation for the risks of rising rates, weakening operating leverage and the strong US dollar.” 

“Any bear-market rally that may occur in the seasonally strong fourth quarter should be used for rebalancing portfolios and tax-loss harvesting.”

📕 Comment on Gold on April 22, 2022:

 📕 Comment on Gold on April 22, 2022:

 - After falling to 1935 in yesterday's session, precious metal Gold rebounded and closed the day's trading session with a bearish candle around the 1950 price. This is the 3rd day in a row that World Gold closes.  around this price.  In my personal opinion, the possibility that Gold in the beginning of today's trading session will still be supported around the 1940-1945 price zone.

 - On the H4 chart, we can clearly see the precious metal's withdrawal signal around the upper price range so we can consider buying with a safe target around 1960 in today's session.

Gold Price Forecast: XAUUSD to see a fresh bull trend only above the $2,070/75 highs – Credit Suisse

 

Gold maintains a slight upward bias in its broader sideways range. A break past the $2,070/75 highs would resolve the range higher for a fresh bull trend, strategists at Credit Suisse report.

Break below $1,877 to reassert the broad sideways range

“Gold above $1,877 can maintain an immediate upward bias in the broader sideways range.”

“Only above the $2,070/75 highs though would be seen to resolve the range higher for a fresh bull trend, with resistance then seen at $2,280/2,300.”

“A break below $1,877 can further reassert the broad sideways range with support then seen next at $1,845/31.”

USD/CAD holds comfortably above 1.2600 mark amid broad-based USD strength

• USD/CAD gained some positive traction on Monday, though lacked follow-through buying.
• Retreating crude oil prices undermined the loonie and extended support amid a stronger USD.
• The Fed’s hawkish outlook, elevated US bond yields, the risk-off mood all benefitted the buck.

The USD/CAD pair maintained its bid tone heading into the North American session and was last seen trading just a few pips below the daily high, around the 1.2630-1.2625 region.

A combination of factors assisted the USD/CAD pair to build on last week's goodish rebound from the 1.2520 area and gain traction for the third successive day on Monday. A modest pullback in crude oil prices weighed on the commodity-linked loonie and extended support to spot prices amid sustained US dollar buying interest.

Crude oil pulled back from the three-week high after data out of China pointed to economic weakness and fueled worries over slowing demand amid COVID-19 curbs. That said, concerns over tight global supply and a potential European Union (EU) embargo on Russian gas, helped limit the downside for the black liquid, at least for now.

On the other hand, the USD stood tall near the two-year high and continued drawing support from expectations for a more aggressive policy tightening by the Fed. Investors seem convinced that the Fed would hike rates at a faster pace to curb soaring inflation. This, along with elevated US Treasury bond yields, underpinned the buck.

Against the backdrop of the Fed's hawkish outlook, concerns that the worsening Ukraine crisis would put upward pressure on already high inflation pushed the US bond yields to a fresh multi-year peak. Apart from this, the risk-off mood - as depicted by a weaker tone around the equity markets - further benefitted the safe-haven greenback.

That said, relatively thin liquidity conditions on the back of a holiday in Europe held back bulls from placing aggressive bets. The USD/CAD pair, so far, has been struggling to find acceptance above the very important 200-day SMA, which, in turn, warrants some caution before positioning for any further near-term appreciating move.

There isn't any major market-moving economic data due for release on Monday, either from the US or Canada. Hence, the US bond yields, along with the broader market risk sentiment, will play a key role in influencing the USD demand. Traders will further take cues from oil price dynamics to grab some short-term opportunities.

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EUR/USD Price Analysis: Extra pullbacks seen below 1.0800

 

• EUR/USD fades the initial move north of 1.0900.
• Recent lows around 1.0800 emerge as the next contention area.

EUR/USD fades the pre-ECB uptick to the 1.0920 zone on Thursday.

In light of the ongoing price action, extra losses in the pair remain in the pipeline in the short-term horizon. Against that, a break below the so far monthly low at 1.0808 (April 14 should pave the way for a quick visit to the 2022 low at 1.0805 (March 7) before the May 2020 low at 1.0766 (May 7).

While below the 200-day SMA, today at 1.1440, the outlook for the pair is expected to remain negative

 Dollar Edges Lower Ahead of Fed Minutes; Aussie Dollar Soars

The U.S. dollar traded in a tight range Tuesday, while the euro edged lower on talk of additional sanctions on Russia and the Australian dollar received a boost from a hawkish central bank.

At 3:00 AM ET (0700 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, traded marginally lower at 98.955, just below the one-week high of 99.083 reached overnight. 

The dollar has been drifting this week so far as investors await the arrival of the minutes from last month’s Federal Reserve policy meeting, due on Wednesday. 

Expectations are building that the central bank will move more aggressively at its meeting in May, especially after a jobs report that showed nonfarm payrolls increasing by 431,000 jobs last month while the unemployment rate fell to a new two-year low of 3.6%.

Ahead of the Fed minutes, Tuesday sees the release of ISM’s non-manufacturing PMI data for March, at 10:00 AM EST (1400 GMT), which is expected to show increased momentum in March, while speeches from Fed policymakers Neel Kashkari, Lael Brainard and John Williams will also be closely studied.

Elsewhere, AUD/USD rose 0.9% to 0.7607, jumping to a nine-month high, after the Reserve Bank of Australia left its benchmark interest rate unchanged at 0.1% at its latest policy setting meeting, but indicated that rate hikes were coming.

Australia’s central bank dropped its pledge to be "patient" on tightening policy in its statement following the decision, a phrase that has featured in every post-meeting release since November 2021, suggesting that it is going to hike sometime soon.

EUR/USD was largely unchanged at 1.0972, hovering above a one-week low, on talk of fresh sanctions on Moscow following alleged atrocities on civilians by Russian forces in the Ukrainian town of Bucha.

German Chancellor Olaf Scholz said that Putin and his supporters would "feel the consequences" of events in Bucha, while Biden's national security advisor, Jake Sullivan, stated that new U.S. sanctions against Moscow would be announced this week.

“It still seems that the EU is some way from weaning itself off Russian oil,” said analysts at ING, in a note. “Presumably, any moves from the EU toward a Russian oil embargo would see crude prices spike higher again and the euro come under pressure.”

USD/JPY fell 0.2% to 122.58, dropping back further from the multi-year high of 125.10 reached in late March after Bank of Japan Governor Haruhiko Kuroda stated that the recent pace of appreciation was "somewhat rapid," and policymakers are watching moves "carefully."

GBP/USD rose 0.1% to 1.3133, USD/CNY was flat at 6.3638, while USD/TRY rose 0.1% to 14.7092 the day after Turkey’s inflation jumped to a fresh 20-year high in March, with consumer prices rising an annual 61.1% through last month.

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