MBCC Trading Highlights 31st October'22 - What is the terminal rate, that remains to be seen as we head into the Fed FOMC this week...

The key catalyst in the market right now is the Fed FOMC meeting this Wednesday. Market has already priced in for 75 bps rate rise, but it is the forward outlook and guidance that will be watched and listened to. As we said, the Fed is on data dependant mode, they really do not know, and will keep raising until inflation comes down to their 2% target. Now as we expect the top line inflation to ease, perhaps their rate of change going forward will be less, but they are still in a tightening mode! This is important as the market keeps trying to rally as they expect a lower terminal rate, and/or a Fed pivot sooner than later. It is this terminal rate that will determine the value of all Equities and whether or not the markets have reached a bottom.

What is the real terminal rate of the market? What does the Fed see and what will they do? All this and more discussed in today’s note as it is ALL ONE BIG MACRO TRADE.

We also look at US and EU refining margins and what the implications are for US Oil stocks post their q3 eps earnings. Where do they go from here? Are BP 0.00%↑ and XOM 0.00%↑ really cheap here?

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