The Morning Hark - 21 June 2024
Today’s focus...Ugly US data does little to derail equities. Flash PMIs the order of the day to close off the week.
Overnight Highlights
Prices are at 6.35 BST/1.35 EST, with changes reflecting movement from midnight GMT
Oil - Oil unchanged in Asia with Brent and Crude August futures currently at 85.70 and 81.30.
EQ - Asian equity markets mixed overnight with the Hang Seng off over one percent to 18,030. Meanwhile Nikkei futures currently unmoved at 38,590.
The US indicies unchanged with the S&P and Nasdaq futures now at 5550 and 20,070 respectively.
Gold - Gold up smalls in Asia with the August futures trading currently at 2377.
FI - US yields a touch firmer in Asia with the US2y futures trading at 4.74% whilst the US10y futures yield at 4.26%.
European yields little changed yesterday with the German 10y closing at 2.43% and the Italian 10y yield at 3.94%.
UK gilt 10y at 4.06%.
FX - The USD flat in Asia with the USD Index currently at 105.55. The majors now trading at; JPY, EUR and GBP 158.90, 1.0720 and 1.2665 respectively. USDJPY once again stretching the authorities patience.
Today’s major FX option expiries we have in the EURUSD; $€1.3bn and €2bn at 1.0650/60. In USDJPY we see $1.5bn at 159.
Others - Bitcoin and Ethereum slipped a touch with the pair currently at 64,580 and 3510 respectively.
Macro Themes At Play
Recap
US Building Permits preliminary estimate for May had a big downside miss to 1.386m, the lowest in almost 4 years. Housing Starts faired little better to 1.27m and again close to a four year low.
Philadelphia Fed Manufacturing Index for June also disappointed printing a five month low at 1.3 and well below estimates. The underlying measures were mixed with some improvement, although still in negative territory, for both Employment and New Orders to -2.5 and -2.2 respectively. Meanwhile Prices Paid climbed to 22.5.
SNB Review
Overall on the dovish side.
Further 25bp cut from the SNB as they continue to try to front run the ECB. Rates now stand at 1.25%.
Statement highlights
Swiss growth is likely to remain moderate in the coming months.
Willing to be active in the FX markets if necessary.
Inflation being driven by higher prices for domestic services.
Will adjust monetary policy to ensure inflation remains within the range consistent with price stability over the medium term.
Significant uncertainty remains
Forecasts
GDP
2024 at 1% (previously 1%)
Inflation
2024 at 1.3% (previously 1.4%), 2025 1.1% (1.2%) and 2026 1% (1.1%)
Jordan’s presser
CHF has significantly increased in the past few weeks.
Inflation pressures have decreased
We will continue to monitor inflation developments closely and adjust policy accordingly.
Norges Review
Overall mildly hawkish.
Unchanged as very much expected. Rates remain at 4.5% and the Bank sees them remaining there for some time ahead with tight policy remains for “somewhat longer”.
Policy to remain at 4.5% to end of year from their rate path.
3 cuts are seen for 2025.
BoE Review
Overall a touch on the dovish side.
Unchanged as very much expected. Rates remain at 5.25% with a 7/2 hold/cut vote.
Labour market loosening but still tight.
Some played down the threat from services inflation and minimum wage hike.
For some MPC members the decision was finely balanced as higher than expected services inflation reflected factors that would not push up medium term inflation.
There is a range of views on the extent of evidence needed to cut rates.
Central Bank Speakers
Fed’s Kashkari felt it would take a year or two to get back to 2% inflation. The interest rate outlook depends on the path of the economy.
Barkin wanted clearer signals on inflation before rate cuts.
Bullard said that the pace of rate cuts will be slow.
ECB’s Knot optimal policy rate path sees just under 3 cuts this year. Recent upticks remind us that disinflation is bumpy. Strong case for using the projection meetings to re-calibrate the policy stance.
Centeno was keen to leave all options open for July.
The Day Ahead
The June Flash PMIs started hitting the tapes overnight with Australia hopefully not leading the way as it dropped to 47.5 after nearly touching the 50 level last month. This is the second worst reading for the series since the pandemic. Equally services pulled back to 50.6, its worst print in 5 months.
Japan didn’t do that much better. Manufacturing dropped back on last month and expectations to 50.1 whilst services had a much sharper decline and back into contractionary territory to 49.8. Thats the first venture into contraction since August 2022.
Japan’s Inflation Report for May showed a headline print at 2.8% matching the year’s high with higher electricity prices, which swung back after 15 months of declines, the main factor. Core meanwhile rose on last month to 2.5% but just came up shy of matching expectations.
Flash PMIs from the major economies hit the tapes throughout the day. UK Retail Sales for May the morning highlight with the Canadian version, for April, in the afternoon.
👏 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 BST (EST+5 / CET-1 / JST-9)
The main highlights for the day ahead ahead in terms of data and speakers:
Friday
UK Retail Sales MoM May consensus 1.5% vs previous -2.3% (07.00 BST)
UK Retail Sales YoY May consensus -0.9% vs previous -2.7% (07.00 BST)
Germany HCOB Manufacturing PMI Flash June consensus 46.4 vs previous 45.4 (08.30 BST)
Germany HCOB Services PMI Flash June consensus 54.4 vs previous 54.2 (08.30 BST)
EU HCOB Manufacturing PMI Flash June consensus 47.9 vs previous 47.3 (09.00 BST)
EU HCOB Services PMI Flash June consensus 53 vs previous 52.9 (09.00 BST)
UK S&P Global Manufacturing PMI Flash June consensus 51.3 vs previous 51.2 (08.30 BST)
UK S&P Global Services PMI Flash June consensus 53 vs previous 52.9 (08.30 BST)
Canada Retail Sales MoM April consensus 0.7% vs previous -0.2% (13.30 BST)
Canada Retail Sales YoY April consensus % vs previous 1.9% (13.30 BST)
US S&P Global Manufacturing PMI Flash June consensus 51 vs previous 51.3 (14.45 BST)
US S&P Global Services PMI Flash June consensus 53.7 vs previous 54.8 (14.45 BST)
US Existing Home Sales May consensus 4.1m vs previous 4.14m (15.00 BST)
ECB Speakers
Nagel (08.00 BST)
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.