The Morning Hark - 21 Feb 2024
The Morning Hark - 21 Feb 2024
Today’s focus...Nvidia to spice up the markets whilst Boris prices himself out of his.
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 82.50 and 77.20 respectively. Yesterday saw a small sell off with global demand worries weighing more on the market than the Middle East tensions. The rather damp squib reaction to the China rate cut seems to have raised concerns over oil demand out of China over the coming year.
EQ - Asian equity markets mixed again with the Hang Seng up over two percent at 16,600 whilst the Nikkei flat at 38,300. China took a step forward as yesterday’s rate cut was followed up with measures by the Chinese housing authority to inject liquidity into the property sector.
The US indices flat in Asia with the S&P futures currently at 4985 and the Nasdaq at 17,560 after yesterday’s sell off. The sell off was led by Nvidia, which had its biggest daily fall in 4 months potentially some profit taking ahead of today’s earnings.
Oh and in case you hadn’t heard Nvidia earnings up after the bell today. The implied move is a cool +/-11%.
Nvidia stat for the day and we all have a favourite; 2y ago the S&P energy sector was 5x Nvidia. On the eve of earnings Nvidia is bigger than the combined value of all the energy stocks in the S&P. Ever get the impression somethings not right?
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 2040.
FI - Global yields steady in Asia with the US2y and US10y yields currently at 4.59% and 4.28% respectively.
European yields mildly softer in line with the US with the German 10y at 2.38% and the Italian 10y yield at 3.86%.
UK gilt 10y similarly at 4.04%.
FX - FX in Asia again saw minimal movement with the USD Index little changed at 104 after yesterday’s sell off on the back of lower yields. The JPY, EUR and GBP as you’d expect a touch firmer across the board with them currently sitting at 150, 1.0810 and 1.2630 respectively.
Today’s FX option expiries sees $1.3bn at 150.50 in USDJPY. Whilst in the EUR we see €2.5bn at 1.0778/80.
Others - Bitcoin and Ethereum rollercoaster yesterday with a 51/53k range but we are right back in the middle again at 51,720 and 2960 respectively. Ethereum outperformed taking 3000 out again before backing off.
Whether true or not its a good story. Our erstwhile former PM Boris J was recently approached to do an interview with Tucker Carlson to discuss Ukraine and Russia. Boris’s people came back with a request for $1m to be paid not in the King’s pound but rather USDs, gold or bitcoin! Seems that Boris mirrors Nvidia at being a tad overvalued!
Macro Themes At Play
Recap
Riksbank’s Floden first up felt that the risks for sustained inflation has decreased and is in line with our November forecast. Not necessary to wait for ECB to cut.
Riksbank Breman similar line with her seeing the risk that inflation becomes entrenched at too high a level has declined in recent months. She also alluded to interest rate cuts this year.
Canada Inflation Report softer than anticipated with headline YoY dipping back below 3% to 2.9% for the first time since June whilst the core YoY came in at 2.4% the lowest since April 2021. Main drivers were airfares, clothing and food prices. Overall a softer reading than had been expected, especially given the recent US CPI high print. However overall the BoC’s dial doesn’t move materially and they will still push back on any near term change in policy although at some point that wears a touch thin..
Walmart jumped close to 6% on the open after their better than expected earnings. Highest jump since 2022. Guidance however was soft with warnings about “choiceful” consumers spending less.
Less rosey round at Home Depot though where sales dropped for the fifth quarter in a row on the back of higher mortgage costs. However they did beat estimates but the underlying theme was negative with comparable sales falling and guidance pointing to a decline in revenues again this year.
In case you missed yesterday……..
Central Bank Speakers
Overall the BoE speakers as expected with the general patience theme and pushing back on market expectations. There was also a common theme that wages would be coming down over the coming months. Bailey interestingly was happy to down play the UK in recession whilst of course Dhingra was telling us to beware the shadows!
BoE’s Bailey happy to sty in the herd as he claimed no central bank is saying when rate cuts will happen. He repeated that he does not endorse the market’s pricing of rate cuts. However we do not need inflation to be back at target to start cutting rates. We are seeing some signs that pay growth is adjusting down in line with lower headline inflation.
Broadbent pointed to the gradual easing in the tightness in the labour market as one indicator that monetary policy is restrictive. Timing of any adjustment can only depend on actual economic data. Evidence does not support rate cuts as service inflation and wage growth are twice the rate consistent with sustainable inflation. However he did see wage growth falling in the coming months.
Dhingra beat the dovish drum as ever claiming that there are significant downside risks to the economy and these are exacerbated by tight monetary policy. UK consumption is still very weak.
Greene pointed to wages as still being an upside risk to inflation. There is a risk of cutting too quickly then reversing hence needs more evidence for a cut.
The Day Ahead
Overnight we got the Japanese Reuters Tankan Survey for February and it wasn’t great with the headline dropping to -1, its first negative print since April. Domestic consumption weakening adding to last weeks gloomy GDP print.
On the positive side of things their Trade Balance in January narrowed helped by rising exports which hit a 14 month high.
Continuing the theme of the week, the rest of the day has not an awful lot to enthuse us. Central banker speak and the FOMC Minutes is all she wrote.
Overnight we start to get the Flash PMIs for February with Australia and Japan up first.
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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:
Wednesday
BoC Gravelle speaks (13.30 GMT)
FOMC Minutes rates held steady at 5.25% (19.00 GMT)
Australia Judo Bank Manufacturing PMI Flash Feb consensus vs previous 50.1 (22.00 GMT)
Australia Judo Bank Services PMI Flash Feb consensus vs previous 49.1 (22.00 GMT)
Fed Speakers
Bostic (13.00 GMT)
Bowman (18.00 GMT)
ECB Speakers
Nagel (10.00 GMT)
Fernandez-Bollo (10.25 GMT)
Tuominen (15.10 GMT)
BoE Speakers
Dhingra (14.00 GMT)
Early Thursday
Japan Jibun Bank Manufacturing PMI Flash Feb consensus 48.2 vs previous 48 (00.30 GMT)
Japan Jibun Bank Services PMI Flash Feb consensus vs previous 53.1 (00.30 GMT)
Good luck.
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