The Morning Hark - 13 Feb 2024
Today’s focus...Thin and quiet Lunar New Year markets. US inflation report top of the prints and Bitcoin hits the bullseye.
Overnight Highlights
Prices are at 6.45 GMT/1.45 EST, with changes reflecting movement from midnight GMT
Oil - Oil quiet in Asia with Brent and Crude April futures at 82.30 and 77 respectively holding onto their Middle East risk premium bid. Look out today for the OPEC monthly report.
EQ - Asian equity markets mostly closed again for the Lunar New Year celebrations. The Nikkei futures however continuing to sit high in the water up a further three percent on the back of a soft JPY currently at 38,240.
The US indicies flat in Asia after a rollercoaster day yesterday with the S&P futures currently at 5037 and the Nasdaq at 17.950. Yesterday initially the algos decided to “bully” the market higher pushing the S&P to new all time highs however momentum waned and we hit a couple of downside vacuums which eventually took the indicies to smalls down on the day. Thin markets never much fun to trade!
Gold - Gold little changed with April futures currently trading flat at 2037.
FI - Global yields flat in Asia with the US2y and US10y yields currently at 4.47% and 4.18% respectively.
European yields off a touch with the ECB softer comments yesterday with the German 10y at 2.37% and the Italian 10y yield at 3.92%.
UK gilt 10y similarly at 4.06%.
FX - FX in Asia had little of note again with the USD Index currently at 104.19 and well within its recent ranges. The JPY, EUR and GBP little changed at 149.50, 1.0770 and 1.2620 respectively.
Today’s FX option expiries sees in the Eur €1.5bn at both 1.07 and €1bn at 1.08. In USDJPY we see ¢1.5bn at 150.
Others - Bitcoin and Ethereum both up decent amounts overnight with the pair sitting pretty at 50,020 and 2650 respectively. The recent run up continues as the daily flows into Bitcoin ETFs build on a consistent basis. The outflows from the Grayscale GBTC, that we saw after the initial ETF launch, have started to dry up leaving the market in more of a one way play. The bids, on the exchanges, have also started to build up always a sign of some further strength.
Macro Themes At Play
US Inflation Report
Expectations are for a rather benign reading on the MoM measures matching last month’s prints for headline and core at 0.2% and 0.3% respectively. That would cool the YoY measures back down to 2.9% and 3.7% which would take both measures to a near 3 year low.
Expectations for a low print rest on lower gasoline and used car prices whilst on the flip side services inflation remains firm on the back of housing rents and medical supplies.
If in line, it will be a welcome boost for the Fed but the stickiness in the core measure will concern them. They have recently flagged food disinflation as starting to flatten out, and as this plays out, they will hope for service inflation to wane too. However if this 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 recently been at pains to stress 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.
Central Bank Speakers
Usual rhetoric from the Fed speakers all warning that inflation is not beaten yet, maybe a lean into today’s number?
The ECB interestingly saw a small change in tack from their speakers with a more balanced view of the rate profile than we’ve seen from them over the last few weeks.
The RBA meanwhile hawkishly cautious in their outlook.
Fed’s Bowman was confident that the present Fed policy rate was in the right place. However many risks remain in the fight against inflation and, as ever, its too soon to project when the Fed will cut rates and she doesn’t see them in the immediate future.
Barkin saw the Fed closing in on the inflation target but we’re not there yet and he warned that there is a risk that businesses may be slow to give up their practise of significant price hikes.
ECB’s de Cos suggested that new forecasts for inflation and growth, due out in March, will be key for the timing of ECB rate cuts.
Cipollone broke from script a touch when he said that there was no need for monetary policy to generate further clack to keep inflation in check with weak demand and inflation expectations anchored.
Wunsch felt that risks are not big either way whether we wait for more data or not.
Buch a tad apocalyptically warned that EU banks were unprepared for some of the new economic and political risk they face.
BoE’s Bailey emphasised that any UK recession will be shallow.
RBA Kohler saw signs of easing wage pressures in some sectors however most labour market indicators still look tight to historical norms. Inflation is coming down but is still too high and it will take some time to get back to target band; 2025 to enter the range and 2026 to be at the midpoint. As for growth it is expected to remain subdued.
The Day Ahead
The week starts to get going today with the UK Labour Report for December just about to hit the tapes.
Next up Swiss Inflation Report for January then the ZEW Surveys. The afternoon is taken up with the highlight of the week; January’s US Inflation Report.
Some ECB Speakers and Riksbank’s Jansson throughout the day and as we go to print tomorrow we have the q4 Norwegian GDP and the UK Inflation Report for January.
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Main Highlights Ahead
All times in GMT (EST+5 / CET-1 / JST-9)
The main highlights for the day ahead ahead in terms of data and speakers:
Tuesday
UK Employment Change Dec consensus 73k 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 5.6% vs previous 6.5% (07.00 GMT)
Swiss Inflation Rate MoM Jan consensus 0.6% vs previous 0% (07.30 GMT)
Swiss Inflation Rate YoY Jan consensus 1.7% 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 20.1 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 2.9% 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 3.7% vs previous 3.9% (13.30 GMT)
ECB Speakers
Buch (09.55 GMT)
Tuominen (10.40 GMT)
Early 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 0.8% vs previous 0.6% (07.00 GMT)
UK Core Inflation Rate YoY Jan consensus 5.2% vs previous 5.1% (07.00 GMT)
Good luck.
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