The Morning Hark - 11 Jan 2024
Today’s focus...The SEC finally approve via a 404. Ethereum “me next”! CPI Day but don’t get too excited!
Overnight Highlights
Prices are at 7.05 GMT/2.05 EST, with changes reflecting movement from midnight GMT
Oil - Oil once again finding a semblance of stability in Asia with Brent and Crude March futures up a touch at 77.40 and 72 respectively. Ultimately the sector has drifted pretty much in a $5 range since the tail end of last year stuck between the two main themes of Middle East tensions and weak global demand. The EIA data showed an unexpected build for crude but a decline in Cushing for the first time in 3 months.
EQ - Asian equity markets a sea of green for the first time in a while with the Nikkei continuing its good start to the year and up a further one percent at 35,315 buoyed by the weakness in the JPY and what is looking more and more like a good dollop of FOMO. The Hang Seng arresting its recent downward trend with a decent percent plus gain to 16,385.
The US indices up smalls overnight consolidating near their recent highs with the S&P currently at 4830 whilst the Nasdaq is at 17,010.
Gold - And repeat gold is back to its nailed to the wall mode with Feb futures trading at 2038.
FI - Global yields little changed with the US2y and US10y currently at 4.35% and 4.00% respectively.
European yields again firmed a touch with the pushback on rate cuts ECB chatter with the German 10y at 2.21% and the Italian 10y yield at 3.85%.
UK gilt 10y following at 3.83%.
FX - The USD little changed overnight after its sell off yesterday with the USD Index currently at 102.20. The JPY, EUR and GBP currently sitting at 145.50, 1.0985 and 1.2770 respectively. As has been the pattern of late, the JPY continuing to weaken with the recent USD weakness being expressed more through the EUR and GBP.
FX option expiries today sees €1.5bn at 1.1050 in the EUR.
Others - Bitcoin quiet after the storm currently at 46,000. However Ethereum has catch up fever, “me next!!”, as it soars over eight percent to 2580.
At last we get approval as 11 filings have been approved by a rather grudging Gensler and his SEC cronies. His accompanying teenage sulky statement was rather ungracious! It was all not without drama, especially after the previous day’s “hack”, as the statement page on the SEC website appeared intermittently and often accompanied by a 404 error page!
Its done now so let’s see what day one brings. Depending on who you read between $5-100bn are the estimated flows into the sector through the ETFs for the first year. I post a couple of articles with more details of what to expect below.
My own view, fwiw, is that Bitcoin will remain bid throughout this year albeit with supply and demand shocks which will produce pockets of volatility. Generally, however for this move, the easy miles are done. Ethereum, on the other hand, should continue to outperform on the anticipation of its own ETF but again there may be pockets of downside volatility. Buy on dips please?
CoinDesk - What to expect on Day One
Macro Themes At Play
Central Bank Speakers
Fed’s Williams spoke on both key topics of interest. Monetary policy he felt was restrictive enough to guide inflation back to target 2% but will need to stay high for some time to ensure inflation is tamed. The work is not yet done. However he stops short of using the “c” word with regard to the timing for a change in policy and ties the chances of a “c” to how the economy performs. He did note that one of the Fed’s previously flagged inflation measures, “core services ex-housing” inflation, had slowed considerably.
On QT he agreed that the Fed needs to plan for the eventual slow asset runoff this year. However this slowing and eventual end of the runoff will happen when reserves are “somewhat above” the level consistent with ample reserves and we “don’t seem to be close to that point”. So somewhat of a backstep to Logan’s previous nod to the falling Reserve Repo.
So a slightly more hawkish tone from Williams on both topics de jour.
ECB’s de Guindos disinflation that we saw in 2023 will slow this year and indeed pause at the beginning of the year. Rather more gloomily he maintained that economic prospects are tilted to the downside. The usual ECB rate path is data dependent was rolled out too.
Schnabel confirmed that the 2% target is best suited to maintain price stability. There is evidence that sentiment indicators are bottoming out but near term economic outlook remains weak in line with our projections. Financial conditions have loosened more than projected. It is too early to discuss rate cuts.
de Cos stressed that the ECB must avoid insufficient and excessive tightening. Risks to the economy remain on the downside and inflation’s decline will be slower in 2024 than previously. Rate cuts depend on data and uncertainty remains high.
BoE’s Bailey was banging on about targets too expressing that it was important for the UK to return inflation to target. Very bullish on UK households claiming that they are no where near as stressed as at the time of the GFC.
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Main Highlights Ahead
All times in GMT (EST+5 / CET-1 / JST-9)
Thursday
US Inflation Rate MoM Dec consensus 0.2% vs previous 0.1% (13.30 GMT)
US Inflation Rate YoY Dec consensus 3.2% vs previous 3.1% (13.30 GMT)
US Core Inflation Rate MoM Dec consensus 0.3% vs previous 0.3% (13.30 GMT)
US Core Inflation Rate YoY Dec consensus 3.8% vs previous 4% (13.30 GMT)
Fed Speakers
Barkin (17.40 GMT)
ECB Speakers
Vujcic (15.30 GMT)
Early Friday
China Inflation Rate MoM Dec consensus 0.2% vs previous -0.5% (01.30 GMT)
China Inflation Rate YoY Dec consensus -0.4% vs previous -0.5% (01.30 GMT)
China Balance of Trade Dec consensus $74.75bn vs previous $68.39bn (03.00 GMT)
China Exports YoY Dec consensus 1.7% vs previous 0.5% (03.00 GMT)
China Imports YoY Dec consensus 0.3% vs previous -0.6% (03.00 GMT)
UK GDP MoM Nov consensus 0.2% vs previous -0.3% (07.00 GMT)
UK GDP 3m Avg Nov consensus -0.1% vs previous 0% (07.00 GMT)
UK GDP YoY Nov consensus 0.2% vs previous 0.3% (07.00 GMT)
UK Industrial Production MoM Nov consensus 0.3% vs previous -0.8% (07.00 GMT)
UK Industrial Production YoY Nov consensus 0.7% vs previous 0.4% (07.00 GMT)
UK Manufacturing Production MoM Nov consensus 0.3% vs previous -1.1% (07.00 GMT)
UK Manufacturing Production YoY Nov consensus 1.7% vs previous 0.8% (07.00 GMT)
Good luck.
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