2022.03.28 Weekly Note

13 min readMar 28, 2022


Some pressure cooking against Equities…



Ukraine claims Russia wants to end the war by 9 May (livemint) The Kyiv Independent on Friday posted a tweet where they claimed,” According to intelligence from the General Staff of the Armed Forces of Ukraine, Russian troops are being told that the war must end by May 9 — widely celebrated in Russia as the day of victory over the Nazi Germany.”

Russia Refocuses on Ukraine’s East After Month of Heavy Losses (WSJ) When Russia launched its assault on its smaller neighbor, it attacked on several fronts and rushed to take Kyiv with an airborne assault that quickly faltered. A thrust toward Ukraine’s second-largest city, Kharkiv, also stalled. Russia said it was refocusing its mission in Ukraine on the country’s east, a shift from its initial attempt to capture the capital, Kyiv, and swaths of the country after meeting relentless resistance and suffering heavy losses.

Russia’s Shifting War Plan Threatens More Suffering for Eastern Ukraine (WSJ) Ukraine’s military overnight said Russian forces were regrouping in what appeared to be preparations for a renewed offensive in the contested area that stretches from Luhansk along Russia’s southern border with Ukraine to west of the southern port city of Mariupol that has seen street-by-street warfare as Russia troops try to capture the city. The region is viewed as strategically important to the Kremlin. After seizing both Crimea and much of Donbas in 2014, Moscow has been aiming to secure a “land bridge” between western Russia and the Crimean Peninsula, and to expand its control of Donbas. The industrial Donbas region runs across Ukraine’s entire eastern border with Russia. Moscow has long occupied swaths of the region, since fomenting a rebellion there in the spring of 2014. Russian-backed separatists briefly held parts of Mariupol during the early fighting before Ukrainian forces beat them back. Intermittent fighting persisted for eight years and cost more than 14,000 lives before Russia launched its full-scale invasion last month.

Biden blasts Putin in powerful speech; U.S. to provide $100 million in assistance to Ukraine (CNBC) “Ukraine will never be a victory for Russia, for free people refuse to live in a world of hopelessness and darkness; For God’s sake, this man cannot remain in power”. Later Saturday, White House sought to clarify Biden’s remarks, saying that he was not discussing Putin’s power in Russia or a regime change.

U.S., Europe Unity on Ukraine Shows Limits Amid Differences on Russia Sanctions (WSJ) Points of particular contention center on targeting Russian energy exports and whether new sanctions would inflict job losses and other pain on some European countries, whose trade with Russia dwarfs the U.S.’s, and could incite voter anger at a time of high inflation.

Russia Is Talking About Using Bitcoin as Payment for Exports (Barrons) Russia’s energy chief Pavel Zavalny said Thursday that “friendly” countries could potentially use Bitcoin as payment for energy commodities, following on from remarks from President Vladimir Putin that he wanted “unfriendly” countries to pay in rubles.

The U.S. Has Tried to Change Russia’s Behavior Before. This Time, It May Work (Barrons) A total of 46 nations are now cooperating to squeeze Russia’s elite. On March 2, the U.S. established Task Force KleptoCapture to go after “dark money.” Private Russians are estimated to hold as much as $920 billion in offshore wealth. There is unprecedented diplomatic cooperation with leading economies in Europe and Asia. Authorities acted at lightning speed, taking by surprise Putin who thought he had amassed a foreign currency reserve that would insulate him from economic sanctions.


War in Ukraine causes German business morale to collapse (Reuters) German business morale plummeted in March as companies worried about rising energy prices, driver shortages and the stability of supply chainsin the wake of the war in Ukraine,pointing to a possible future recession, a IFO survey showed on Friday.

War to Raise Pressure on Stretched Prices, Bloomberg Trade Tracker, Factory Costs Surge From Russia War (Bloomberg) Factories from Australia to Europe are seeing already surging costs jump further as Russia’s war in Ukraine and the barrage of sanctions rolled out in response roil commodity markets and trade.

Sanctions on Russia, War in Ukraine and Covid in China Are Transforming Global Supply Chains (WSJ) Modern supply chains were designed to be cost-effective, but not necessarily resilient. It has long been standard practice to have more than one supplier for goods and parts in a supply chain, but beginning with the most recent trade wars, more companies, even small and medium-size ones, have been forced to do the hard work of setting up more factories and synchronizing the quality of goods across them, he adds.
[WSJ Documentary “Why Global Supply Chains May Never Be the Same” follows the monthslong, 14,000-mile journey of a typical consumer good from factory to front door to reveal the vulnerabilities of the global supply chain]

HSBC steps up scrutiny of Russian clients worldwide as sanctions ratchet up (Reuters) HSBC is shunning prospective Russian clients and declining credit to some existing ones, two sources with knowledge of the matter told Reuters, as the bank seeks to shield itself from Western sanctions against Moscow.


China’s Sinopec pauses Russia projects, Beijing wary of sanctions (Reuters) Beijing has repeatedly voiced opposition to the sanctions, insisting it will maintain normal economic and trade exchanges with Russia. But behind the scenes, the government is wary of Chinese companies running afoul of sanctions — it is pressing companies to tread carefully with investments in Russia.

China Economy Faces Worst Slowdown Since Pandemic (Bloomberg) Nomura: China’s economy faces its worst downward pressure since the spring of 2020 when it was hit by the first wave of Covid-19, slowdown in China’s growth worsened in the first quarter and markets should be concerned about a further slide in the second.

China Looks to Salvage Relationship With Europe (WSJ) With U.S.-China relations on shaky ground, Beijing’s alignment with Russia could harm its ties with EU. When China and the EU meet for a virtual summit April 1, European Commission President Ursula von der Leyen and Charles Michel, president of the European Council, plan to stand with the Biden administration in warning that China’s relations with the bloc would suffer if it provides substantive assistance to Russia in its military assault in Ukraine, according to foreign-policy analysts in Europe. To keep the relationship with Europe from falling off a cliff, Mr. Xi is expected to highlight the scope for cooperation between China and Europe during the summit, say foreign-policy experts close to the Chinese government. Much as he did with President Biden last week, Mr. Xi is also likely to seek to present China as neutral in the Ukraine conflict, the experts say, even as China sticks to its partnership with Russia to counter the U.S.-led West.

Chinese, U.S. regulators are working hard on solution to audit dispute (Reuters) affecting U.S.-listed Chinese firms and want to achieve effective and sustainable cooperation as soon as possible, a state-run newspaper reported on Sunday.

China Bond Market Exodus Shows Signs of Gathering Pace in March (Bloomberg) The biggest exchange-traded fund tracking yuan bonds recorded a whopping $460.4 million of outflows so far this month, adding to recent signs of an exodus from Chinese assets.


High-Velocity Market Swings Have Roots in Economic Boom Thesis (Bloomberg) At times in the last few weeks, trying to glean a coherent message from disparate swings across asset classes has been an exercise in futility. Where once surging bond yields and commodity prices spelled big trouble for equities, now stocks are surging alongside them. Stiffening hawkishness at the Federal Reserve started out as a reason to panic in risk markets. Now, even the threat of supersized interest-rate hikes isn’t enough to ruffle Wall Street bulls.

The Stock Market Got a Big Boost From the Bond Selloff. The Fed Could Change That (Barrons) Don’t go looking for the “good news” that was responsible for the week’s gains — there wasn’t any, at least not of the traditional kind. Russia’s invasion of Ukraine shows few signs of ending. Fed have been talking up the possibility of half-point rate increases at upcoming meetings. And bonds continued to get crushed, with the 10-year yield closing the week at 2.491%, its highest since May 2019.

Treasury Selloff Sends Yields Racing Past Limits of Bullish Era (Bloomberg) 10-year yield breaches decades-long downward trend line, Bond rout deepens as market gears up for aggressive Fed hikes. MUFG George Goncalves: “There is a scenario that the trend breaks for good, the real risk at the moment is that the market gaps out to 2.60%, and perhaps even 2.8%, because there is so much uncertainty about inflation and the Fed’s reaction function. This does seem like a time to take the opposing view and buy Treasuries, but investors have low conviction after many months of losses. Until inflation turns and the Fed is less hawkish, yields can stay elevated and suggest a reversal of the long-term trend remains in place.”

Stocks Defying Bond-Market Danger Put Wall Street On Notice (Bloomberg) Risk assets rally even as Treasuries signal bad economic news,
Plenty of pain thresholds seen as the discount rate rises anew. The steepest bond selloff in history, Europe’s first land war between two sovereign states since 1945, a Federal Reserve tightening into a possible growth slowdown. Oh, and U.S. inflation still near a four-decade high. “Judging from the performance of risk assets, markets seems to believe such levels will not trigger a recession and hurt risk assets. We think the 2.75% rate will be highly restrictive for the U.S. and equally importantly for the global economy. Slowly but surely, risk premia will rise and earnings expectations should moderate.”

The World Could See A Record-Breaking Oil Supply Shock (OilPrice) IEA: market could lose around 3 million bpd of supply from Russia starting in April. Sanctions come at a time that OECD crude inventories were already well below their 5-year average. OPEC producers have not been willing to fill the supply gap. U.S. shale not expected to bring immediate relief to oil markets.

Companies Are Starting to Worry About the Stronger Dollar. It Matters for Stocks (Barrons) Not only is a stronger dollar consistent with slower economic growth, but it immediately lowers corporate profits. When companies that do business globally translate their overseas earnings back into dollars, they receive fewer greenbacks, stronger dollar usually accompanies poor stock-market returns. Economically weaker countries, and less stable companies, would suffer. That adds to the case for holding greenbacks, or U.S. Treasury debt, which is denominated in dollars.

Yen Unraveling Risks Collapse to 1990 Level as Fed, Oil Weigh (Bloomberg) “The yen has further to decline with a June 2015 low of 125 levels in sight in the near-term,” JP Morgan Chase Sasaki said. “Over the longer run, it could extend its drop depending on how high commodities and energy prices climb.”

Why the Postwar 1940s May Tell Us More About Our Inflation Than the ’70s (Barrons) As inflation stirs, economists have fixated on the 1970s. That’s a mistake, says Guggenheim’s chief investment officer, Scott Minerd, who believes the causes of the Great Inflation of the ’70s — funding the Vietnam War and Great Society, delinking the dollar from gold, energy crises — don’t relate to 2022. A more appropriate era, he says, is after World War II, when manufacturing disruptions, rising demand, savings and money growth drove prices.


Newsflow continues to highlight challenges of full reopening while Governments constantly tinker their “living-with-covid” policy measures. While cases do appear to be moderating from prior weeks surge, parts of Europe and Asia are still reporting high case numbers implying supply chain tightness and costs pressures will persist.

Living with Covid does not mean pretending it no longer exists (FT)
If we want lasting freedom from the virus, we must accept the need to continue mitigating its risks

People With Covid-19 and Flu at Greater Risk of Severe Illness and Death (Bloomberg) Scientists found that patients who had both SARS-CoV-2, which causes Covid-19, and influenza viruses were more than four times more likely to require ventilation support and 2.4 times more likely to die than if they just had Covid-19.


Surprisingly risk-on given the lack of positive news last week and bond yields surging higher — Equities coming off the back of strong momentum extended gains, Commodities broadly higher, Bond’s sold off to new lows, high beta Currencies mostly traded through prior week highs.


Mixed performances across global equities, China/HK impacted by the sell-off in Chinese tech stocks, negative covid and slowing growth news, and European equities weighed down by the ongoing Ukraine-Russia conflict.

MSCI World ACWI saw continuation from prior week’s bullish engulfing print while MSCI Emerging markets EEM was held by the 200wma with a bearish harami print.

MSCI World excluding-US (ACWX) is showing a similar pattern as EEM being held by the 100wma with a bearish harami print, and MSCI Emerging markets excluding-China (EMXC) is looking only just slightly more constructive than the all inclusive index.

Tech’s have led last week’s rally with other sectors catching up later in the week. US sentiment is clearly very strong with most of the sector ETF’s trading through prior week highs while small-caps potentially hinting that economic sentiment may not be as robust as the rest of the market suggests.

NDX and SPX have had a strong continuation from the prior week’s mostly short-squeeze fueled rally which was about double NDX and SPX returns from the mid-March lows.

In addition to the MSCI charts dropping some subtle hints of weakness, technicals looks increasingly challenging for NDX and SPX to extend gains. Meanwhile surging yields and unfolding narratives is pointing to a potentially harder landing from Central bank’s aggressive fight against inflation pressures than the US stock market currently suggests.


US yield curve made a big shift higher since NDX put in lows on Mar-14th (Purple curve). With short/belly yields up +40bp, the steepening at the front of the curve appears to reflect stronger expectations of inflation and, more aggressive hikes which would inevitably increase recession risks, reflected by the 3s/5s/7s vs 10s inversion and flattening of the long-end.

Eurodollar June July contracts lost 17bp and 24bp respectively.

5y forward inflation breakevens also ramped higher which tends to be a good indication of forward growth expectations — Hugo Devere has a deep dive on this above, as well as other interesting takes on recent moves with consideration to the Fed’s reaction function on outlook.

The MOVE index close at 125.27, some 12pts higher than time I posted the above chart. It would seem unlikely the trend in rates would let up just yet which makes it very doubtful Nasdaq can hang onto its gains this week.


Bloomberg commodities index confirmed continuation of previous week’s bar.
Bloomberg Energy and Agricultural indices continue to push highs.

While the bias remains strongly bullish, I would not be surprised to see further consolidation especially if the slowing-growth/stagflation concerns, or the consumer/business confidence data this week sours sentiment and leads to some profit-taking in risk-assets. Conversely, commodity prices going to new highs could very well upset risk sentiment also.

Precious metals should be under some pressure this week with real yields (Purple, inverted) going to new highs while Gold (Orange) has not been fazed by the move in rates so far.


Higher beta EM and Commodity FX were strongest, Asian FX weakest, and USD mildly higher mostly owing to a weaker EUR and even weaker JPY.

USD longs still preferred against the low-yielders, while JPY shorts could continue to pay off given the current path of global yields however should some risk-off set in, it could pay to be tactically long JPY. I continue to maintain a bearish bias on EUR as the Euro-area outlook still looks to be one of the most challenged economies going forward.

I like fading the move in antipodes, particularly AUD vs the CAD. AUD fundamentals appear too laggy to expect continued outperformance while it’s strong links to China should weigh on the AUDCAD cross. On the pro-risk side, I do like long MXN which broke out last week.

NOK continues to benefit from strong Oil prices while SEK suffers from the Ukraine-Russia conflict whose industries are more supply-chain focused. ZAR still looks to benefiting from inflows as being one of the more desirable markets for EM funds.


My core book remains completely unchanged. For the short-term trading book, I’m still holding onto my now protected Oil longs, and have been focused on DAX and NDX and GBPUSD last week with some good results, no success trying to fade AUD however.

This week I will look to trade the following:

  • NDX and Gold short on rallies — I think these could finally crack under the pressure of higher real yields which has yet to have been affected by it.
  • AUD shorts — vs CAD as I continue to like the divergent fundamentals between Australia and Canada along with my short-risk bias, and vs JPY but only if I acquire strong conviction of a turn as there is good potential for a deep correction.
  • MXN longs — which should continue to get support from the technical breakout, an aggressive Banxico, and strong Oil prices.

I’m also taking a bigger interest in stocks and ETF trading and have recently put aside a decent amount of capital to get going. At the outset, I’m interested in a long/short TLT/ACWX and will be researching and planning on constructing my medium to long-term portfolio in my downtime.

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Good luck, and have a great week trading.