The Morning Hark - 15 Mar 2024

Today’s focus...Risk off. Bitcoin clubbed. Japanese wage data incoming.....5% being touted.

Overnight Highlights

Prices are at 6.50 GMT/2.50 EST, with changes reflecting movement from midnight GMT

Oil - Oil flat in Asia with Brent and Crude May futures trading at 85.30 and 80.60 respectively. Yesterday saw a decent rally for oil after the IEA hiked its demand outlook for the the year whilst also pointing to tighter supplies due to the continuing tensions in the Middle East. Brent has also taken out a topside technical level and if it can hold above 85 we should see further upside.

EQ - Asian equity markets a sea of red with the Hang Seng trading off two percent at 16,670 following the US dip yesterday. The move is lead by heavy losses in the tech sector as expectations start to grow that the Fed will be cutting less and later. The Nikkei the outlier helped by the stronger dollar and is currently trading smalls up at 38,430.

The US indices flatlining in Asia with the S&P and Nasdaq futures currently at 5210 and 18,215 respectively.

Gold - Gold up smalls in Asia with April futures currently trading at 2172, pretty much where we opened yesterday

FI - Global yields softened a touch in Asia after yesterday’s gains with the US2y and US10y futures yields currently at 4.68% and 4.28% respectively.

European yields followed the US lead and ended yesterday firmer with the German 10y at 2.43% and the Italian 10y yield at 3.68%. The spread tightening into its narrowest in 2 years.

UK gilt 10y similarly at 4.19%.

FX - FX in Asia doing little. The risk proxy currencies are all about 50bps lower but the overall USD and majors flatlining. The USD Index currently at 103.42 and holding onto its gains from yesterday which saw the USD have its best day in a month. The majors; JPY, EUR and GBP currently at 148.30, 1.0880 and 1.2740 respectively.

Today’s FX option expiries today in the JPY $1.2bn at 149. In the EUR we have €1.3bn at 1.0940 and €1bn at 1.09.

Others - Bitcoin and Ethereum clubbed! Risk off environment, profit taking and back through the previous all time high saw the pair drop over six percent. The pair currently at 68,400 and 3740 respectively.

The judge in the Craig Wright case somewhat unsurprisingly laid down the verdict that indeed he was not Satoshi.

Wired - Craig Wright is not Satoshi

Macro Themes At Play

Recap

Sweden Inflation Report for February was overall a touch softer than expected with the MoMs for headline and core both coming in at 0.2%. That takes the YoY measures to 4.5% and 2.5% respectively.

Services inflation a touch higher than forecast which will make the Riksbank cautious however overall the inflation data is lower than the Bank’s forecast.

US PPI Report for February showed another hot set of data with the headline MoM coming in at double expectations at 0.6%. Core MoM also a touch higher than expected at 0.3%. YoY headline now at its highest since last September at 1.6%. Whilst core YoY remains steady at 2%.

The upticks largely down to the energy component.

US Retail Sales for February showed a big miss overall with a disappointing 0.6% MoM print lower than expectations and made worse by a big downward revision to the previous month at -1.1%. The mighty US consumer stumbling?

JiJi reports that the BoJ is preparing to end negative interest rate policy at the March meeting.

Kyodo just reporting that the Japanese unions have won an over 5% wage hike.

Central Bank Speakers

All of yesterday’s ECB speakers seemed intent on June being the month of choice for the first rate cut, no matter what the Fed does.

ECB’s Stournaras insisted that the ECB must cut rates twice before the summer break and 4 in total for this year seems reasonable. Monetary policy must not become too restrictive.

Muller was less of an enthusiast though insisting that more information was needed and that would come over the next few months.

Lane was looking for a bit more data to gain more confidence and will learn a lot more by June. However the ECB should go from meeting to meeting and give no calendar guidance. The ECB is watching services inflation.

Knot interestingly suggested that the “interim” meetings would also be available for rate cuts if incoming data tells us we should do more. He expects the first cut in June with further cuts expected in September and December which will be helped by new projections and data.

de Guinods again pointed to June, as when the ECB will have sufficient information to make a decision on monetary policy. Inflation is heading to target but wages are still a risk.

Rehn felt that the inflation profile would enable an ECB easing near the summer.

The Day Ahead

All US facing data today and all fairly second division with the NY Empire State, Industrial and Manufacturing Production and Michigan Survey with the inflation expectations.

Japanese Wage Round results are expected at 16.15 Tokyo time.

The PBoC 1y MLF the other point of note.

I promise next week will get better! Lot of central bank rate decisions, inflation reports and flash PMIs. All the fun of the fair!

👏 If you found this briefing helpful, please show the desk some appreciation by giving it a ‘Like’ or a ‘Comment’ at the bottom of the page.

Stay on top of the latest market narratives throughout the day using our curated research & commentary channels on Harkster.com

Main Highlights Ahead

All times in GMT (EST+4 / CET-1 / JST-9)

The main highlights for the day ahead ahead in terms of data and speakers:

US NY Empire State Manufacturing Index Mar consensus -7 vs previous -2.4 (12.30 GMT)

US Industrial Production MoM Feb consensus 0% vs previous -0.1% (13.15 GMT)

US Industrial Production YoY Feb consensus % vs previous 0% (13.15 GMT)

US Manufacturing Production MoM Feb consensus 0.3% vs previous -0.5% (13.15 GMT)

US Manufacturing Production YoY Feb consensus % vs previous -0.9% (13.15 GMT)

US Michigan Consumer Sentiment Prel Mar consensus 76.9 vs previous 76.9 (14.00 GMT)

US Michigan Inflation Expectations Prel Mar consensus % vs previous 3% (14.00 GMT)

US Michigan 5y Inflation Expectations Prel Mar consensus % vs previous 2.9% (14.00 GMT)

China PBoC 1y MLF Rate Announcement consensus for rates to remain on hold at 2.5%

Japan Rengo First Tally all important wage negotiation results

ECB Speakers

Vujcic (09.35 GMT)

Lane (14.30 GMT)

Good luck and a good weekend to one and all.

---

The information provided in this post is for general information purposes only. No information, materials, services, and other content provided in this post constitute solicitation, recommendation, endorsement or any financial, investment, or other advice. Seek independent professional consultation in the form of legal, financial, and fiscal advice before making any investment decision.