The Morning Hark - 10 Apr 2024
Today’s focus... A lot of nervy nothing about nothing. RBNZ nothing new. US CPI the game changer?
Overnight Highlights
Prices are at 6.35 BST/1.35 EST, with changes reflecting movement from midnight GMT
Oil - Oil flat overnight with Brent and Crude June futures trading at 89.60 and 84.60. The ceasefire optimism was back yesterday as well as a healthy bought of profit taking as oil dipped off its recent highs. The EIA revised up its forecasts for both production, to a record high, and demand for next year. The sell off was helped by the API data showing that crude stocks had grown last week higher than expected.
EQ - Asian equity markets mixed overnight with the Hang Seng up well over one percent, despite the Fitch downgrade of China, lead by the tech sector. It currently stands at 17,220 however the Nikkei futures off smalls at 39,640.
The US indices quiet with the S&P and Nasdaq futures currently at 5265 and 18,380 respectively.
Stocks hit a sudden downward vacuum on no news, lead by the Magnificent 7 which seems to have been a positional move based on short term options players buying downside from the open putting pressure on the indices. However the algos seemed to like Bostic’s comments, not sure why, and helped stocks bounce. To be honest, a whole lot of nervy nothing about nothing ahead of CPI today.
Gold - Gold continues to remain bid with the June futures currently trading at 2378. Yawn…..safe haven, China interest, eclipse, imminent financial crisis, Taylor Swift, CPI, you name it any excuse to buy.
FI - US yields continuing to back off with the US2y futures trading at 4.74% whilst the US10y futures yield at 4.36%.
European yields followed US move lower with the German 10y closing at 2.37% and the Italian 10y yield at 3.72%.
UK gilt 10y similarly at 4.03%.
FX - FX in Asia saw the USD flatline again with the USD Index currently at 104.12 and not far off where we were yesterday morning. The majors equally mundane; JPY, EUR and GBP currently at 151.80, 1.0855 and 1.2680 respectively.
Today’s FX option expiries sees quite a bit of action. In USDJPY $1.2bn at 151.50. EUR wise we see €2.3bn at 1.09, €1.5bn at 1.0950 and €1bn at 1.0875. GBP sees £1pm at 1.2675. Whilst in the AUD we see Aud2bn between 0.6645/55.
Others - Bitcoin and Ethereum as is its want got a clubbing and retreated back below 70k. The pair have stabilised, for now, at 69,385 and 3540 respectively.
Macro Themes At Play
Central Bank Speakers
Fed’s Bostic reiterated his expectations for just one rate cut this year, likely q4, but is keeping his options open. He also stated that rate cuts could get pushed even further out in the calendar year. However if job data signals pain to come he’d be open to earlier cuts.
BoJ’s Ueda back at it, saying a lot but saying nothing.
Need to maintain accommodative monetary conditions to support the economy’s momentum towards reaching a 2% target inflation.
Waiting to exit negative rate regime until trend inflation reached 2% target would have heightened risk of inflation overshoot.
BoJ may have to change monetary policy if FX moves risk pushing up trend inflation more than expected.
However they wont use rates to respond to FX moves.
CPI Preview
Both headline and core MoM readings expected to remain firm at 0.3% and remaining above levels the Fed would want. The YoYs are expected to show an uptick for the headline print to 3.4% on the back of base effects but the core is expected to cool a tick to 3.7% and continue the slow and gradual decline we have seen from this series. Given the attention it has been getting of late watch for the housing measures. Also remember the regional surveys have all been indicating inflationary pressures returning although the ISMs have had contrasting fortunes on that front. Finally we have had three months of upside surprises on expectations anyone for a fourth?
So is it a new trend following January and February’s hotter than expected prints or will we see more like the prints that we saw of a cooling picture at the tail end of last year? Wall Street is expecting the return to a more benign picture but the recent Fed chatter and the fact that the relaxed nature of those comments, with regard to early year inflation prints, have started to get walked back suggests the potential for something more sinister is out there.
The Day Ahead
RBNZ Interest Rate Decision was as expected on hold. The statement retained its restrictive stance with the key quote “confident that maintaining the OCR at a restrictive level for a sustained period will return CPI to within the 1-3% target range this calendar year”.
The economist continues to evolve as anticipated.
Maintains restrictive stance to reduce inflation and capacity pressures.
Growth remains weak. Services inflation persistence poses a risk whilst goods price inflation remains high.
Market reaction was muted at best.
All about inflation today with Norway’s March report out as we print and then the main highlight of the week the US CPI Report for March.
Central bank wise we have the BoC Interest Rate Decision as well as the FOMC Minutes of the March meeting as well as a couple of Fed Speakers.
Finally overnight its back on the inflation train with China rolling out their March report.
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Main Highlights Ahead
All times in BST (EST+5 / CET-1 / JST-9)
The main highlights for the day ahead ahead in terms of data and speakers:
Wednesday
Norway Inflation Rate MoM Mar consensus 0.5% vs previous 0.2% (07.00 BST)
Norway Inflation Rate YoY Mar consensus 4.2% vs previous 4.5% (07.00 BST)
Norway Core Inflation Rate MoM Mar consensus 0.4% vs previous 0.4% (07.00 BST)
Norway Core Inflation Rate YoY Mar consensus 4.7% vs previous 4.9% (07.00 BST)
US Inflation Rate MoM Mar consensus 0.3% vs previous 0.4% (13.30 BST)
US Inflation Rate YoY Mar consensus 3.4% vs previous 3.2% (13.30 BST)
US Core Inflation Rate MoM Mar consensus 0.3% vs previous 0.4% (13.30 BST)
US Core Inflation Rate YoY Mar consensus 3.7% vs previous 3.8% (13.30 BST)
BoC Interest Rate Decision expectations for rates to remain on hold at 5% (14.45 BST)
BoC Monetary Policy Report (14.45 BST)
BoC Press Conference (15.00 BST)
FOMC Minutes (19.00 BST)
Fed Speakers
Bowman (13.45 BST)
Goolsbee (17.45 BST)
Early Thursday
China Inflation Rate MoM Mar consensus -0.5% vs previous 1% (02.30 BST)
China Inflation Rate YoY Mar consensus 0.4% vs previous 0.7% (02.30 BST)
Good luck.
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