The Morning Hark - 20 Feb 2024
Today’s focus...Its eerily quiet out there.…
Overnight Highlights
Prices are at 7.00 GMT/2.00 EST, with changes reflecting movement from midnight GMT
Oil - Oil steady in Asia again with Brent and Crude April futures trading at 83.40 and 78.30 respectively. Again nothing new to report in the sector with the tensions in the Middle East continuing to give oil an underlying bid tone.
EQ - Asian equity markets little changed despite the hullabaloo over the China rate cut. The Hang Seng up smalls at 16,220 whilst the Nikkei off a touch at 38,480 but nothing of note.
The US indices flat in Asia with the S&P futures currently at 5010 and the Nasdaq at 17,710.
Gold - Gold unmoved in Asia but still rangebound in a 2000/2050 range so little to get excited about. The April futures currently trading flat at 2031.
FI - Global yields steady in Asia with the US2y and US10y yields currently at 4.64% and 4.31% respectively.
European yields started the week a touch firmer with the German 10y at 2.41% and the Italian 10y yield at 3.90%.
UK gilt 10y unchanged at 4.11%.
FX - FX in Asia again saw minimal movement with the USD Index little changed at 104.35. The JPY, EUR and GBP similar as they currently sit at 150.35, 1.0775 and 1.2590 respectively.
Today’s FX option expiries sees $1.6bn at 150.50 in USDJPY.
Others - Bitcoin and Ethereum quiet session but still hanging in near their recent highs at 52,000 and 2930 respectively.
Macro Themes At Play
Recap
That was one of the quietest days I can ever remember in the markets yesterday……
To cheer everyone up and just in time for Easter……..
Central Bank Speakers
Japan MoF official Mimura suggested that they are always communicating and coordinating with other nations in case for currency intervention. Good luck with that!
The Day Ahead
The RBA Minutes showed that they still have a hawkish tilt and indeed considered a rate increase at the recent meeting. They continue to not rule out further rate increases as, although inflation has moderated, it is still too high. There was much uncertainty in the economy and the cost of not achieving low inflation was very high. They felt that labour growth was strong but wage growth was slowing. Goods inflation is lower but services is still too high.
The focus is now on the incoming data which, hopefully, will give the Board greater confidence that it has done enough to subdue inflation. Overall the market took the rate hike chatter as “bluster” to temper rate cut expectations. Nevertheless rate cut timing was nibbled away at again with the AUD unchanged.
China’s Loan Prime Rates, as I said yesterday what do I know, were lowered. In a surprise move the PBoC held the 1y steady at 3.45% but slashed the 5y rate by 25bps to 3.95%. This is the 5y’s first cut since May and its biggest cut on record.
This is an unusual move from the PBoC, in that when they have done one sided moves, in the past, it tends to be the 1y that changes. It would appear the move is focused on the ailing property market as the 5y is used as a reference rate for mortgages. Unfortunately this will only assist new loans as existing loans will only be rebased early next year so the benefits may be limited.
Main highlight for the rest of the day is the Canadian Inflation Report for January.
We have three Riksbank Speakers throughout the day as well as a clutch of BoE Speakers appearing in front of the Treasury Select Hearing on the latest MPC which in an otherwise dull day may garner some attention.
We also have Home Depot and Walmart earnings today which are always a good gauge of the real economy in the US.
Overnight we get the Japanese Reuters Tankan Survey for February.
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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
Riksbank Floden speaks (08.45 GMT)
Riksbank Breman speaks (11.00 GMT)
Canada Inflation Rate MoM Jan consensus 0.4% vs previous -0.3% (13.30 GMT)
Canada Inflation Rate YoY Jan consensus 3.3% vs previous 3.4% (13.30 GMT)
Canada Core Inflation Rate MoM Jan consensus % vs previous -0.5% (13.30 GMT)
Canada Core Inflation Rate YoY Jan consensus % vs previous 2.6% (13.30 GMT)
Riksbank Thedeen speaks (16.55 GMT)
Japan Reuters Tankan Index Feb consensus vs previous 6 (23.00 GMT)
BoE Speakers
Bailey (10.15 GMT)
Broadbent (10.15 GMT)
Dhingra (10.15 GMT)
Greene (10.15 GMT)
Good luck.
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Spring is round the corner?!?!!?
the winter doldrums?