The Morning Hark - 16 Jan 2024
Today’s focus...Post holiday rates rally, ECB new “deny, deny, deny” mantra and Trump takes Iowa.
Overnight Highlights
Prices are at 7.00 GMT/2.00 EST, with changes reflecting movement from midnight GMT
Oil - Oil quiet overnight in Asia with Brent and Crude March futures flat at 78.30 and 72.80 respectively. Nothing new in terms of news with Middle East tensions remaining and doubts still clouding the demand side of the equation.
EQ - Asian equity markets a sea of red with the higher yields even turning around the Nikkei for the first time this year. Currently it is off well over one percent at 35,645. The Hang Seng, as you’d expect, suffering more with an over two percent dip to 15,920. Despite even its poor start to the year the index is shaping to have its worst day in three months. The bank sector suffering on the back of the property sector’s funding plans.
The US indices off half of one percent with the S&P currently at 4795 whilst the Nasdaq is at 16,870.
Gold - Gold little changed with Feb futures trading at 2052.
FI - Global yields rallying overnight post holiday with the US2y and US10y currently up well over one percent at 4.21% and 4% respectively.
European yields firmer on the ECB deny ,deny, deny chant with regard to rate cuts with the German 10y at 2.24% and the Italian 10y yield at 3.78%.
UK gilt 10y little changed at 3.80%.
FX - The USD has had a post US holiday rally with a further rally in US yields helping it reach its highest level in a month. The USD Index currently at 102.95. The JPY, EUR and GBP all suffering as a consequence with them currently at 146.20, 1.0915 and 1.2680 respectively. In the usual risk off scenario AUD, NZD, NOK and KRW all suffering the most.
FX option expiries nothing of note.
Others - Bitcoin and Ethereum all a bit dull after the recent fireworks as they stabilise around their post weekend levels at 42,725 and 2530 respectively.
Macro Themes At Play
Recap
The WSJ’s Fed whisperer, Timiraos expressed the view that Fed officials are set to start deliberations on slowing QT, albeit not ending, as soon as their meeting at the end of this month.
The ECB speakers were maybe trying to teach the Fed speakers a thing or two with their deny, deny, deny tactics in terms of rate cuts as opposed to their American counterparts “oversharing” policy.
Trump, not unexpectedly, takes Iowa with ease. Probably the most insightful piece of new information was that Haley has problems with numbers after declaring that “tonight Iowa made this Republican primary a two person race” as she came a distant third. In other news Ramaswamy pulled out after finishing fourth and endorsed Trump. Its gonna be a long 11 months!
Germany’s 2023 GDP Growth was inline with expectations at -0.3%. It seems that the cocktail of high inflation, rising interest rates and weak internal demand as well as abroad was enough to tip the engine room of Europe into recession for the year. Well telegraphed but still not a good look. Last year’s growth was also downgraded a touch to 1.8%.
Eurozone’s Balance of Trade for November had a better than expected trade surplus of €20.3bn easily beating expectations.
Industrial Production for November came in as expected at -0.3% MoM and making it 5 out of the last 6 months of contraction.
Central Bank Speakers
ECB’s Holzmann was punchy with the proclamation that we shouldn’t count on rate cuts at all in 2024. Rate cut expectations remain optimistic and early wage data points to quite high increases.
Nagel as ever felt it was too early to discuss rate cuts. Inflation remains too high and markets are overly optimistic. Decisions will be made on a meeting by meeting basis but perhaps we can wait for the summer break before contemplating rate cuts.
Herodotou was also on the hawk juice as he saw easing talk as premature. Need a lot more data from the first half of the year for future decisions.
The Day Ahead
Just printed the final December German Inflation Report and in line with the preliminary reading with the YoY at 3.7%.
Also the UK Labour Stats with the Unemployment Rate for November printing steady at 4.2%.
The October Employment Change decent upside surprise with a 73k increase beating the 50k estimate.
Ave Earnings incl. Bonus for November cooling to a, BoE welcoming, 6.5% and well below estimates.
Overall something for everyone there!
Later in the morning we have Eurozone Consumer Inflation Expectations followed by the ZEW Surveys for Germany and the wider Eurozone.
The afternoon sees the December Canadian Inflation Report and the US NY Empire State Manufacturing Index for January.
Finally overnight we have the January Japanese Reuters Tankan Index and the Chinese Data Dump.
In addition a sprinkling oil central bank speakers. Whilst just before going to print tomorrow the December UK Inflation Report.
👏 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+5 / CET-1 / JST-9)
The main highlights for the day ahead ahead in terms of data and speakers:
Tuesday
EU Consumer Inflation Expectations Nov consensus % vs previous 4% (9.00 GMT)
Germany ZEW Economic Sentiment Index Jan consensus 12 vs previous 12.8 (10.00 GMT)
EU ZEW Economic Sentiment Index Jan consensus 21.9 vs previous 23 (10.00 GMT)
Canada Inflation Rate MoM Dec consensus -0.3% vs previous 0.1% (13.30 GMT)
Canada Inflation Rate YoY Dec consensus 3.4% vs previous 3.1% (13.30 GMT)
Canada Core Inflation Rate MoM Dec consensus % vs previous 0.1% (13.30 GMT)
Canada Core Inflation Rate YoY Dec consensus % vs previous 2.8% (13.30 GMT)
US NY Empire State Manufacturing Index Jan consensus -5 vs previous -14.5 (13.30 GMT)
Japan Reuters Tankan Index Jan consensus vs previous 12 (23.00 GMT)
Fed Speakers
Waller (16.00 GMT)
ECB Speakers
Villeroy (07.15 GMT)
BoE Speakers
Bailey (15.00 GMT)
Early Wednesday
China GDP Growth Rate QoQ Dec consensus 1% vs previous 1.3% (02.00 GMT)
China GDP Growth Rate YoY Dec consensus 5.3% vs previous 4.9% (02.00 GMT)
China Industrial Production YoY Dec consensus 6.6% vs previous 6.6% (02.00 GMT)
China Retail Sales YoY Dec consensus 8% vs previous 10.1% (02.00 GMT)
China Unemployment Rate Dec consensus % vs previous 5% (02.00 GMT)
China Industrial Capacity Utilisation q4 consensus vs previous 75.6% (02.00 GMT)
UK Inflation Rate MoM Dec consensus 0.2% vs previous -0.2% (07.00 GMT)
UK Inflation Rate YoY Dec consensus 3.8% vs previous 3.9% (07.00 GMT)
UK Core Inflation Rate MoM Dec consensus 0.4% vs previous -0.3% (07.00 GMT)
UK Core Inflation Rate YoY Dec consensus 4.9% vs previous 5.1% (07.00 GMT)
Good luck.
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.