Thread by @mosesharding

FED policy week turned out disastrous despite delivering to expectation of 75 bps hike with guidance of another 100-150 points lift before end of 2022!

Then, why post-policy risk-off? Shift to rate cut cycle not an option in 2023-2024 (Fund rate >4%) to fight recession?…1/N

Equities of developed & emerging markets collapsed! S&P500 down at target at 3650 (low 3647) from mid-August high 4325 for >15% collapse at set focus zone 3650-4350!

US1-2Y yield curve at 4-4.25% and 10Y yield spike at 3.65-3.85% is tell-tale of medium term rate outlook…2/N

Taking signs of extreme recession in 2023, #Brent Crude got pushed down to lower end of $85-100 and so is #Gold into extended weakness below $1685 with pull bias into $1565-1635!

What to expect when dynamics into extended phase of high interest rates & negative growth?…3/N

EUR/USD collapsed to target 0.9650 (low 0.9668) while USD/JPY held at set top-heavy zone 145-150 by BOJ intervention to retain play within 140-145.

#WhatNext in Q4/2022 could get worse given the lack of visibility on end of rate hike cycle - December 2022 or beyond?…4/N

S&P500 QoQ 2022 declining trend (on closing basis) set to continue at 4530/3785/????

Can Q3 close stay above 3393-3636 (pre-covid high & 2022 low) when sell-on-recovery sentiment would resist move towards 3925-4000?

US 1-2Y yield supported at 4.10-4.25% & 10Y at 3.75-3.85%…5/N

While FED policy week turned bloody, what about RBI policy week ending Q3/2022 & H1/FY23?

While weakness across India equities & rate markets got extreme this week giving away all of gains of first half of September, end is not at sight when RBI rate action is ahead….6/N

Market will position for 35 bps rate hike (post pre-policy 25 bps lift of effective rate from SDF to Repo) and 50-60 bps hike will be taken as unpleasant surprise.

Repo rate through Q4/2022 is set at 5.75-5.90/6.0% (35/50/60 bps hike in 1 or 2 steps).

What’s outlook?…7/N

#Nifty turnaround from 18000-18150/18350 (high 18096) was the script (unwinding 2-step intra-2022 re-rating from 15150-17150) for consolidation at 16650-17350 (low 17291). Undertone for rest of 2022 remains weak while below 17700-17850.

Lucky if YoY2022 (17350) is positive…8/N

#banknifty did better to punch new ATH going beyond 40160-41829 (high 41831) but followed by collapse from 41650-41850 to below 39650-40000 (low 39412).

#WhatNext sentiment is weak for shift of play at consolidation zone 37000-40000 awaiting stability in rate markets…9/N

When India equities into orderly value normalization mode #nifty at 16850-18350 (keeping 15150-15500 out of focus), FED impact is huge on rate markets - INR got pushed down deep into target 80.65-81.15 and 10Y bond down from 7.05-7.10% into 7.35-7.50%!

#WhatNext is mystery…10/N

Can @RBI establish USD/INR consolidation at 80-81.50 being ok with lift from 78.50/79.15-80?

Will 12M FX premium at 2.50-2.75% turn serious headwind for INR allowing 12M $ push above 83.50 and worse if FPIs turn turtle on India?

Solace from #Brent Crude at $65-100…11/N

When most were building 10Y yield consolidation at 7-7.25%, FED policy stance pushed focus into 7.25-7.50% & pulling 7.65% into striking distance in @RBI policy week!

While US 10Y at 3.60-3.85%, India 10Y is good at 7.35-7.65% with yield spread at 3.65-3.80%…12/N

@RBI balancing act now gets complex, pushed to manage conflicting things at the same time despite having better comfort on growth-inflation and twin-deficits dynamics, but can’t be complacent when the West into extended phase of recession!

What’s up on 30th September?…13/N

What’s important for @RBI is to establish post-policy stability (unlike the FED) by avoiding unpleasant surprises!

35 bps hike with out lifting CPI estimate from current 6.7% will set up risk-neutral sentiment while combination of 50 bps & 7% will turn heavy!

🤞 …14/14