The Morning Hark - 22 Feb 2024
Today’s focus...Nvidia saves the day but even then markets remain pretty dull.
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 83.30 and 78.20 respectively. Yesterday saw a small uptick as API data showed mixed signals but the bid tone is continuing due to the tensions in the Middle East with no sign on the Houthis backing down with their Red Sea attacks.
EQ - Asian equity markets a cheerier place to be today thanks to Nvidia with the Nikkei leading the way and now at an all time high. The futures currently sitting at 39,140. The Hang Seng up over one percent at 16,660.
The US indices joining the party in Asia with the S&P futures up close to one percent at 5040 and the Nasdaq closer to a two percent rise at 17,820.
Gold - Gold unmoved in Asia and still very much rangebound in a 2000/2050 band so little to get excited about. The April futures currently trading flat at 2039.
FI - Global yields backing off a touch in Asia after yesterday’s rally with the US2y and US10y yields currently at 4.65% and 4.31% respectively.
European yields firmer in line with the US with the German 10y at 2.45% and the Italian 10y yield at 3.95%.
UK gilt 10y similarly at 4.11%.
FX - FX in Asia again saw minimal movement with the USD Index little changed at 103.84. The JPY, EUR and GBP smalls firmer across the board with them currently sitting at 150.20, 1.0840 and 1.2650 respectively.
Today’s FX option expiries sees $1bn at 1.35 in USDCAD.
Others - Bitcoin and Ethereum had a bit of a rollercoaster again yesterday but we are right back to where we opened yesterday at 51,780 and 2960 respectively.
Macro Themes At Play
Recap
China put in place a ban on major institutional investors from reducing equity holdings at the open and close of each trading day.
Nvidia Results
Nvidia to the rescue! After a nervous session in the lead up to the release of earnings, it paid to hold your nerve as the results did not disappoint.
EPS was $5.16 vs $4.53 est
Revenue was $22.1bn vs $20.41bn est
The comment from CEO Huang’s press conference that has really caught the imagination is that AI has “hit the tipping point”.
Guidance was eye-watering too with further big upticks in revenues expected.
FOMC Minutes
Nothing majorly of note for the minutes with a general theme that the Fed is more fearful of cutting too soon rather than waiting too long to do so. Hence on the margins a hawkish set of minutes.
They still saw upside risks to inflation with stronger growth and those pesky easing financial conditions being the main contributing factors. Indeed some officials saw risks that the progress made in the inflation fight may stall.
On QT tapering they pointed to a slower pace of runoff helping smooth the transition to normalisation. However the March discussion would be more in-depth and in effect kick things off.
Incoming data was key to assessing if inflation is moving to the 2% target in a sustainable manner.
Policy rate was likely at its peak for this cycle.
All in all higher for longer is looking like making a mantra comeback.
Central Bank Speakers
Fed’s Barkin bigged up the US economy claiming that the big picture on inflation and jobs was “remarkable”. However the recent data on CPI and PPI has been less good and is showing the dependence of disinflation on goods. He felt that January’s data made things harder for the Fed but we should not put too much weight on the month’s data due to seasonal issues.
Interestingly he also stated that the US still has a “ways to go” to get to a soft landing.
We are looking at monthly and 3 monthly inflation not yearly.
Bowman stressed that the housing market was not influencing the Fed rate cut decision.
BoJ’s Ueda was insistent that inflation was accelerating as the tight labour market puts upward pressure on wages. This as a Reuters poll suggested that almost 80% of economists had April in their diaries as the date for the end of negative interest rates.
BoE’s Dhingra release the doves! Monetary policy needs to be forward looking because moderation of the policy stance requires time to implement and to feed through to the real economy. Evidence to err on the side of over tightening is not compelling as it often comes with a hard landing. Outlook for headline inflation is down but bumpy whilst consumption remains below pre-pandemic levels. Price developments strongly signal that inflation is already on a path of sustainably meeting the BoE’s target over the medium term.
Policy will remain restrictive even when rates are cut.
She’s a barrel of laughs!
ECB’s Wunsch pushed back on rate cut expectations saying that it was maybe too early to get hopes up.
The Day Ahead
Overnight we started the Flash PMIs for February with Australia and Japan printing.
Australia supplied an interesting mix with Manufacturing dipping well back into contraction territory at 47.7, having last month got back above the 50 line for the first time in a year. Last month’s print now looks like a blip with the contraction trend resuming. New orders were the main driver for, what was, the sharpest monthly decrease since May 2020.
Services, on the other hand, had a better time of it with a 52.8 print and the first growth month since September.
Japan had a couple of disappointing prints with Manufacturing hitting its lowest level since August 2020 at 47.2 and hitting a 9 month losing run. New orders and foreign sales the main drag.
Meanwhile Services although staying in growth at 52.5 was a dip from last month’s print.
At last some data as we get the Flash PMIs for Germany, Eurozone, UK and US. Elsewhere final EU Inflation Report for January should pass without notice. ECB Minutes will equally not move the dial much.
Canadian Retail Sales for January the other main focus for the afternoon.
Overnight we have q4 NZ Retail Sales and tomorrow opens up on a depressing note with the final German q4 GDP print.
Whole heap of central bankers telling us how patient they are throughout the day.👏 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.
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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:
Thursday
Germany HCOB Manufacturing PMI Flash Feb consensus 46.1 vs previous 45.5 (08.30 GMT)
Germany HCOB Services PMI Flash Feb consensus 48 vs previous 47.7 (08.30 GMT)
EU HCOB Manufacturing PMI Flash Feb consensus 47 vs previous 46.6 (09.00 GMT)
EU HCOB Services PMI Flash Feb consensus 48.8 vs previous 48.4 (09.00 GMT)
UK S&P Global Manufacturing PMI Flash Feb consensus 47.5 vs previous 47 (09.30 GMT)
UK S&P Global Services PMI Flash Feb consensus 54.1 vs previous 54.3 (09.30 GMT)
EU Inflation Rate MoM Final Jan consensus -0.4% vs previous 0.2% (10.00 GMT)
EU Inflation Rate YoY Final Jan consensus 2.8% vs previous 2.9% (10.00 GMT)
EU Core Inflation Rate Final YoY Jan consensus 3.3% vs previous 3.4% (10.00 GMT)
ECB Monetary Policy Meeting Accounts (12.30 GMT)
Canada Retail Sales MoM Jan consensus 0.8% vs previous -0.2% (13.30 GMT)
Canada Retail Sales YoY Jan consensus % vs previous 1.8% (13.30 GMT)
US S&P Global Manufacturing PMI Flash Feb consensus 50.5 vs previous 50.7 (14.45 GMT)
US S&P Global Services PMI Flash Feb consensus 52 vs previous 52.5 (14.45 GMT)
US Existing Home Sales Jan consensus 3.97m vs previous 3.78m (15.00 GMT)
NZ Retail Sales QoQ q4 consensus % vs previous 0% (21.45 GMT)
NZ Retail Sales YoY q4 consensus % vs previous -3.4% (21.45 GMT)
Fed Speakers
Jefferson (15.00 GMT)
Harker (18.15 GMT)
Cook (22.00 GMT)
Kashkari (22.00 GMT)
ECB Speakers
Fernandez-Bollo (07.30 GMT)
BoE Speakers
Greene (06.30 GMT)
Early Friday
Germany GDP Growth Rate QoQ Final q4 consensus -0.3% vs previous 0% (07.00 GMT)
Germany GDP Growth Rate YoY Final q4 consensus -0.2% vs previous -0.3% (07.00 GMT)
Good luck.
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