The Morning Hark - 12 Feb 2024
Today’s focus...Quiet Lunar New Year markets. The Week Ahead.
Overnight Highlights
Prices are at 7.00 GMT/2.00 EST, with changes reflecting movement from midnight GMT
Oil - Oil quiet in Asia with Brent and Crude April futures at 81.90 and 76.60 respectively but holding onto their general bid tone. FWIW OPEC release their monthly report tomorrow.
EQ - Asian equity markets mostly closed for the Lunar New Year celebrations. The Nikkei futures however continuing to sit high in the water currently at 37,220.
The US indicies flat in Asia but holding onto their strong close of last week with the S&P futures currently at 5045 and the Nasdaq at 18,025.
ZeroHedge - Retrospective of All Time Highs
Gold - Gold little changed with April futures currently trading flat at 2038.
FI - Global yields backing off a touch in Asia after their strong gains last week. The US2y and US10y yields currently at 4.49% and 4.18% respectively. Remember the 10y 4.20% is big.
European yields also closed last week on a firm footing with the German 10y at 2.39% and the Italian 10y yield at 3.96%.
UK gilt 10y similarly at 4.08%.
FX - FX in Asia had little of note with the USD Index currently at 104.03. The JPY, EUR and GBP little changed at 149.20, 1.0790 and 1.2630 respectively.
Today’s FX option expiries sees in the Eur €3bn at both 1.0725 and €1bn at 1.08.
Others - Bitcoin and Ethereum held onto their gains from last week over the weekend to remain close to their recent highs at 48,110 and 2500 respectively.
Macro Themes At Play
Recap
January Canadian Labour Report warmed the cockles of the BoC’s heart. Decent uptick in Employment Change with a 37.3k increase, its best since September. The Unemployment Rate also ticked down to 5.7% its first decline in 4 months. However most encouragingly was the drop in the Average Hourly Earnings to 5.3% YoY marking a decline from its 3.5y high and hopefully starting a trend back into softer wage growth for the BoC.
The BLS US CPI revisions were of little note. Small downticks but nothing to move the dial substantially in terms of the Fed. Must admit I’ve been in the markets a good while and never known these revisions to garner as much attention as they did.
Central Bank Speakers
Fed’s Logan claimed the Fed was highly focused on the risks to inflation but the US economy is in a good place. Don’t see urgency to adjust rates and we need to build confidence on inflation profile.
Bostic encouraged the Fed to be resolute and stay the course to get to target inflation. Still a ways to go.
ECB’s Villeroy told us nothing new when saying the ECB will probably cut rates this year.
Panetta stated the obvious that the ECB will need to cut rates soon.
The Week Ahead
UK Labour Report. As we have mentioned before this slew of data around the UK labour market is far from reliable but its all we’ve got! The unemployment rate for December is expected to tick up after a run of 4 months of declines. In more encouraging news the average hourly earnings rate (inc bonus) is expected to dip below 6% and print its lowest level since mid 2022.
Swiss Inflation. SNB Chairman Jordan has referred recently to inflation ticking higher, in the coming months, on the back of increases in VAT, rents and electricity prices. However, more importantly, he does not see it getting back above the 2% upper target band and overall the trend in inflation is down. It will be interesting to see the SNB’s reaction if the January print does trouble the upper band. This is a big if though, with expectations for only a small uptick for the January print.
US Inflation. The highlight of the week by far but expectations are for a benign reading in line with recent months. In effect the easy miles are done on the inflation fight and its now the bumpy sticky prints that the Fed hopes will see them eventually get back to target. Expectations for a low print in January rest on lower gasoline and used car prices. On the flip side services inflation remains firm on the back of housing rents and medical supplies. The headline print is forecast to dip onto a 2 handle for the first time in 3 years but for core to remain entrenched higher. This stickiness is the worry for the Fed as food disinflation starts to flatten out they will hope for service inflation to wane too. However if it remains firmer then the lack of food disinflation should keep inflation worryingly underpinned. No doubt there will be plenty of market volatility but as the Fed has been at pains to stress, since the last FOMC, they need more evidence that inflation is coming down “over at least a few months”. No matter how much of a hurry the market is for cuts the Fed, for now, is not.
UK Inflation. If expectations are to be believed the January UK inflation report will not be as rosey as its US counterpart. Both headline and core YoY measures are expected to tick up on base effects and put the market firmly on the back foot in their pursuit of rate cuts. The MoM is expect to show a drop in inflation driven by a welcome drop in wage growth and food inflation. A higher print would put further brakes on any imminent BoE rate cut and we expect them to remain the laggard of the major central banks in terms of the start of the rate cutting cycle.
Japan GDP. A rebound is expected for the q4 print after the last quarter’s horrible prints which had the QoQ showing its first contraction in a year and the annualised measure showing its sharpest fall since q2 2020 at the height of the pandemic. The extent of the rebound remains in question though with industrial production and retail sales for the period all underwhelming.
Australian Labour Report. Key component for the RBA who recently retained their hawkish bias despite the December labour report making for grim reading. The headline came in at -65k which was made all the worse by the underlying full time job number dropping by over 100k. Is this a blip or a new trend? The series is volatile although the underlying trend has been a softening of an extremely hot labour market so one would expect some sort of rebound in January. The unemployment rate could tick up as more return to the labour force after the holiday period.
UK GDP. The red tops are readying themselves for a big recession splash as the UK looks set to dip into contraction for the second quarter in a row albeit in a very small manner. The recent PMI strength, especially in services, would be one optimistic note for holding out for a positive print. However December’s shocker of a retail sales print would flip the argument back into negative territory. Either way its not going to move the dial materially for the BoE either way.
US Retail Sales. Looks like being a payback month for the US after we saw the very strong retail sales figures in the last quarter of 2023 which had the Fed scratching their heads. We have already had the auto sales data for January which disappointed and the bad weather, seen across the country, in January is also expected to have weighed on sales.
UK Retail Sales. If the British Retail Consortium are to be believed then the January retail sales print should show a further slowing due to the cost of living crisis. Although their survey showed an increase, it was much lower than had been anticipated and also below trend growth. Lets see what the real figures bring!
The Day Ahead
Sparse best describes it with a plethora of central bank speakers but that’s your lot.
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Main Highlights Ahead
All times in GMT (EST+5 / CET-1 / JST-9)
The main highlights for the week ahead ahead in terms of data and speakers:
Monday
RBA Kohler speaks (21.55 GMT)
Fed Speakers
Bowman (14.20 GMT)
Barkin (17.00 GMT)
Kashkari (18.00 GMT)
ECB Speakers
de Cos (09.45 GMT)
Lane (09.45 GMT)
Lane (13.15 GMT)
Cipollone (15.50 GMT)
Buch (16.00 GMT)
BoE Speakers
Bailey (18.00 GMT)
Tuesday
UK Employment Change Dec consensus 75k vs previous 108k (07.00 GMT)
UK Unemployment Rate Dec consensus 4% vs previous 3.9% (07.00 GMT)
UK Average Earnings incl Bonus (3m/Yr) Dec consensus 5.7% vs previous 6.5% (07.00 GMT)
Swiss Inflation Rate MoM Jan consensus % vs previous 0% (07.30 GMT)
Swiss Inflation Rate YoY Jan consensus 1.6% vs previous 1.7% (07.30 GMT)
Riksbank Jansson speaks (08.10 GMT)
Germany ZEW Economic Sentiment Index Feb consensus 17.5 vs previous 15.2 (10.00 GMT)
EU ZEW Economic Sentiment Index Feb consensus vs previous 22.7 (10.00 GMT)
US Inflation Rate MoM Jan consensus 0.2% vs previous 0.2% (13.30 GMT)
US Inflation Rate YoY Jan consensus 3% vs previous 3.4% (13.30 GMT)
US Core Inflation Rate MoM Jan consensus 0.3% vs previous 0.3% (13.30 GMT)
US Core Inflation Rate YoY Jan consensus 3.8% vs previous 3.9% (13.30 GMT)
ECB Speakers
Buch (09.55 GMT)
Tuominen (10.40 GMT)
Wednesday
Norway GDP Growth Rate QoQ q4 consensus % vs previous -0.5% (07.00 GMT)
Norway GDP Growth Rate YoY q4 consensus % vs previous -1.9% (07.00 GMT)
UK Inflation Rate MoM Jan consensus -0.3% vs previous 0.4% (07.00 GMT)
UK Inflation Rate YoY Jan consensus 4.2% vs previous 4% (07.00 GMT)
UK Core Inflation Rate MoM Jan consensus % vs previous 0.6% (07.00 GMT)
UK Core Inflation Rate YoY Jan consensus 5.2% vs previous 5.1% (07.00 GMT)
EU Employment Change QoQ prel q4 consensus 0.2% vs previous 0.2% (10.00 GMT)
EU Employment Change YoY prel q4 consensus % vs previous 1.3% (10.00 GMT)
EU GDP Growth Rate QoQ q4 2nd est consensus 0% vs previous -0.1% (10.00 GMT)
EU GDP Growth Rate YoY q4 2nd est consensus 0.1% vs previous 0% (10.00 GMT)
EU Industrial Production MoM Dec consensus -0.3% vs previous -0.3% (10.00 GMT)
EU Industrial Production YoY Dec consensus -4.1% vs previous -6.8% (10.00 GMT)
BoC Mendes Speaks (19.30 GMT)
Japan GDP Growth Rate QoQ prel q4 consensus 0.3% vs previous -0.7% (23.50 GMT)
Japan GDP Growth Annualised prel q4 consensus 1.4% vs previous -2.1% (23.50 GMT)
Fed Speakers
Goolsbee (14.30 GMT)
Barr (21.00 GMT)
ECB Speakers
Vujcic (08.00 GMT)
Guindos (08.30 GMT)
Cipollone (14.00 GMT)
Nagel (17.00 GMT)
BoE Speakers
Bailey (15.00 GMT)
Thursday
Australia Employment Change Jan consensus 30k vs previous -65.1k (00.30 GMT)
Australia Unemployment Rate Jan consensus 4% vs previous 3.9% (00.30 GMT)
Japan Capacity Utilisation MoM Dec consensus % vs previous 0.3% (04.30 GMT)
Japan Industrial Production MoM Final Dec consensus 1.8% vs previous -0.9% (04.30 GMT)
Japan Industrial Production YoY Final Dec consensus % vs previous -1.4% (04.30 GMT)
UK GDP Growth Rate QoQ prel q4 consensus -0.1% vs previous -0.1% (07.00 GMT)
UK GDP Growth Rate YoY prel q4 consensus % vs previous 0.3% (07.00 GMT)
UK GDP MoM Dec consensus -0.1% vs previous 0.3% (07.00 GMT)
UK GDP 3m Avg Dec consensus -0.1% vs previous -0.2% (07.00 GMT)
UK Industrial Production MoM Dec consensus -0.1% vs previous 0.3% (07.00 GMT)
UK Industrial Production YoY Dec consensus % vs previous -0.1% (07.00 GMT)
UK Manufacturing Production MoM Dec consensus 0% vs previous 0.4% (07.00 GMT)
UK Manufacturing Production YoY Dec consensus % vs previous 1.3% (07.00 GMT)
Riksbank Thedeen speaks (08.00 GMT)
US Retail Sales MoM Jan consensus -0.1% vs previous 0.6% (13.30 GMT)
US Retail Sales YoY Jan consensus % vs previous 5.6% (13.30 GMT)
US NY Empire State Manufacturing Index Feb consensus -15 vs previous -43.7 (13.30 GMT)
US Philadelphia Fed Manufacturing Index Feb consensus -8 vs previous -10.6 (13.30 GMT)
US Philadelphia Fed Employment Feb consensus vs previous -1.8 (13.30 GMT)
US Philadelphia Fed New Orders Feb consensus vs previous -17.9 (13.30 GMT)
US Philadelphia Fed Prices Paid Feb consensus vs previous 11.3 (13.30 GMT)
US Industrial Production MoM Jan consensus 0.3% vs previous 0.1% (14.15 GMT)
US Industrial Production YoY Jan consensus % vs previous 1% (14.15 GMT)
US Manufacturing Production MoM Jan consensus 0% vs previous 0.1% (14.15 GMT)
US Manufacturing Production YoY Jan consensus % vs previous 1.2% (14.15 GMT)
Riksbank Breman speaks (15.20 GMT)
Norges Bank Governor Annual Address (17.00 GMT)
RBNZ Governor Orr Speaks (18.40 GMT)
China PBoC 1y MLF Announcement rates to remain on hold at 2.5%
Fed Speakers
Bostic (00.00 GMT)
Waller (18.15 GMT)
ECB Speakers
Lagarde (08.00 GMT)
Lane (12.00 GMT)
Nagel (18.00 GMT)
BoE Speakers
Greene (13.00 GMT)
Mann (13.50 GMT)
Friday
UK Retail Sales MoM Jan consensus 1.5% vs previous -3.2% (07.00 GMT)
UK Retail Sales YoY Jan consensus % vs previous -2.4% (07.00 GMT)
US Building Permits prel Jan consensus 1.515m vs previous 1.493m (13.30 GMT)
US Housing Starts Jan consensus 1.47m vs previous 1.46m (13.30 GMT)
US PPI MoM Jan consensus 0.1% vs previous -0.1% (13.30 GMT)
US PPI YoY Jan consensus 0.7% vs previous 1% (13.30 GMT)
US Core PPI MoM Jan consensus 0.1% vs previous 0% (13.30 GMT)
US Core PPI YoY Jan consensus 1.6% vs previous 1.8% (13.30 GMT)
US Michigan Consumer Sentiment Prel Feb consensus 80 vs previous 79 (15.00 GMT)
US Michigan 1y Inflation Expectations Prel Feb consensus vs previous 2.9% (15.00 GMT)
US Michigan 5y Inflation Expectations Prel Feb consensus vs previous 2.9% (15.00 GMT)
Fed Speakers
Barr (14.10 GMT)
Daly (17.10 GMT)
ECB Speakers
Schnabel (08.45 GMT)
BoE Speakers
Pill (19.40 GMT)
Good luck.
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