The Morning Hark - 24 June 2024
Today’s focus...The week the market meets politics.
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Overnight Highlights
Prices are at 6.40 BST/1.40 EST, with changes reflecting movement from midnight GMT
Oil - Oil unchanged in Asia with Brent and Crude August futures currently at 84.40 and 80.70.
EQ - Asian equity markets mixed overnight with the Hang Seng off over one percent to 17,745. Meanwhile Nikkei futures currently up close to one percent at 38,850.
The US indicies unchanged with the S&P and Nasdaq futures now at 5530 and 19,985 respectively. The main highlight Friday was Nvidia suffering its first down week in two months!
Gold - Gold up smalls in Asia with the August futures trading currently at 2338.
FI - US yields unchanged in Asia with the US2y futures trading at 4.74% whilst the US10y futures yield at 4.26%.
European yields closed the week little changed with the German 10y closing at 2.41% and the Italian 10y yield at 3.95%.
UK gilt 10y at 4.09%.
FX - The USD flat in Asia with the USD Index currently at 105.80. The majors now trading at; JPY, EUR and GBP 159.80, 1.07 and 1.2650 respectively. USDJPY once again stretching the authorities’ patience.
Today’s major FX option expiries we have in the EURUSD; $€1.5bn at 1.0700/10.
Others - Bitcoin and Ethereum not a great weekend for crypto as the weakness in the sector continues. The pair currently at 62,420 and 3360 respectively.
Macro Themes At Play
Recap
UK Retail Sales for May had a sharp rebound and more than compensating for April’s soggy disappointment. Clothing and furniture retailers the big winners as the MoM number scaled the giddy heights of 2.9% and taking the YoY figure back into positive territory to 1.3%.
Germany Manufacturing Flash PMI for June starts the day off on a poor note with manufacturing plummeting lower to 43.4 well below consensus and last month’s print. Services faired a touch better with a 53.5 print but again below expectations and previous.
June’s EU Manufacturing PMI Flash followed in a similar vein. Manufacturing big miss on both and indeed the lowest print of the year. Services not quite as bad but still missing on previous and expectations at 52.6.
UK Manufacturing PMI Flash for June was a mixture with a small beat on manufacturing to 51.4 but rather worryingly services dipped to their lowest point in seven months to 51.2.
April’s Canada Retail Sales came in line at 0.7% MoM for April the largest increase in the series in a year.
US Flash PMIs for June faired a lot better than the European data with beats for both manufacturing to 51.7 and services to 55.1. Services printing its highest level since April 2022.
May’s US Existing Home Sales close to expectations at 4.11m.
The Week Ahead
Canada Inflation Report. Slowly moderating is the theme with consensus looking for a cooling headline MoM to 0.3% with core remaining at 0.2%. On the YoY measures headline is expected to dip to 2.6% which would be the lowest print since March 2021. On the BoC’s more favoured measures median is expected to remain at 2.6% and continue a trend that has not seen an uptick since August whilst trimmed-mean is expected to continue its adventures below 3%. There is one other CPI report before the July BoC so no decision will be made on the back of this print. However with the BoC’s dovish tilt last month, there is a 65% chance of a further July rate cut, there will be a lot of noise around the print. Couple of other things to note; Macklem speaks on Monday and GDP for April is out on Friday and is expected to show a decent 0.3% growth on the back of strong manufacturing, mining and oil and gas extraction data.
Riksbank Interest Rate Decision. After the May rate cut guidance pointed to two more rate cuts in the second half of the year if the inflation outlook materialised in the manner the Bank expects. However Governor Theeden, in recent communications, has been strong in his belief that June will not be live in terms of rate cuts. The meeting will have significance though for the updated forecasts and forward guidance.
Australia Inflation Data. Further upside seen here with a higher 3.8% print expected which would be a third month of upward ticks. The RBA is the most hawkish of the major central banks and with this backdrop it is no surprise. In their words inflation is above target, and whilst the persistent element is easing, it is slower than had been previously expected. This week’s print will not help to ease fears about that diagnosis.
US Presidential Debate. The first Biden/Trump debate will catch the spotlight on Thursday. The polls seem to be closing a touch with a Fox poll showing Biden ahead for the first time since October. Although an Ipsos one gives Trump the advantage in the 7 key swing states. The all important betting sites still have Trump as the winner. Overall Trump is seen as inflationary with his penchant for tariffs, devaluing the USD, curbing immigration and meddling with the Fed.
Japan Data Dump. Industrial production is expected to get a boost from the normalisation of the automobile sector after the earlier problems seen in the sector at the start of year. This should also have a positive knock on effect for the employment numbers. Retail sales are expected to also get a boost from tourism to round off a rather rosey dump of data for Japan. Most important will of course be the Tokyo CPI print, always the canary in the coal mine for the wider national number, and it is expected to continue its upward trend albeit slow with Core seen regaining the 2% handle.
US PCE Report. So with a soft CPI and PPI this month the treble is on and expectations are for a soft 0.1% MoM headline print which could potentially see the YoY dip to 2.6%. Similar pattern is expected for core although base effects may be a headwind. Remember all the recent Fed communication has been about “several” months of data so if it is as expected it is merely a notch on the bed post.
French Elections. The week will be consumed with the runup to the French legislative elections on Sunday with the possibility that Macron will slip to third and not even make the runoff vote a week later. Whilst not in 2012 territory, the European government bond markets are nervous to say the least with the French/German spread widening out to over 80bps, from a sub 50 level prior to Macron’s gamble.
The Day Ahead
The BoJ Summary of Opinions was all a bit outdated especially given USDJPY is knocking on 160 again.
The rest of the day sees German Ifo survey and thats it. Indeed the slate is fairly sparse the whole week until PCE on Friday.
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Main Highlights Ahead
All times in BST (EST+5 / CET-1 / JST-9)
The main highlights for the week ahead ahead in terms of data and speakers:
Monday
Germany Ifo Expectations June consensus 91 vs previous 90.4 (09.00 BST)
Germany Ifo Business Climate June consensus 89.7 vs previous 89.3 (09.00 BST)
Germany Ifo Current Conditions June consensus 88.4 vs previous 88.3 (09.00 BST)
BoC’s Macklem Speaks (18.30 BST)
Fed Speakers
Waller (08.00 BST)
Daly (19.00 BST)
ECB Speakers
Nagel (11.10 BST)
Villeroy (13.30 BST)
Schnabel (16.30 BST)
Tuesday
Canada Inflation Rate MoM May consensus 0.3% vs previous 0.5% (13.30 BST)
Canada Inflation Rate YoY May consensus 2.6% vs previous 2.7% (13.30 BST)
Canada Core Inflation Rate MoM May consensus 0.2% vs previous 0.2% (13.30 BST)
Canada Core Inflation Rate YoY May consensus % vs previous 1.6% (13.30 BST)
Canada CPI Median YoY May consensus 2.6% vs previous 2.6% (13.30 BST)
Canada CPI Trimmed-Mean YoY May consensus 2.8% vs previous 2.9% (13.30 BST)
Fed Speakers
Bowman (12.00 BST)
Cook (17.00 BST)
Bowman (19.15 BST)
ECB Speakers
Stournaras (10.00 BST)
Wednesday
Australia Monthly CPI Indicator May consensus 3.8% vs previous 3.6% (02.30 BST)
US New Home Sales May consensus 0.65m vs previous 0.634m (15.00 BST)
ECB Speakers
Rehn (10.30 BST)
Panetta (11.00 BST)
Lane (13.40 BST)
Thursday
Riksbank Interest Rate Decision rates to remain on hold at 3.75% (08.30 BST)
Riksbank Monetary Policy Report (08.30 BST)
US Durable Goods Orders MoM May consensus 0.3% vs previous 0.7% (13.30 BST)
US GDP Growth Rate QoQ Final q1 consensus 1.3% vs previous 3.4% (13.30 BST)
US GDP Price Index QoQ Final q1 consensus 3.1% vs previous 1.7% (13.30 BST)
US GDP PCE Prices QoQ Final q1 consensus 3.3% vs previous 1.8% (13.30 BST)
US GDP Core PCE Prices QoQ Final q1 consensus 3.6% vs previous 2% (13.30 BST)
ECB Speakers
Kazimir (09.00 BST)
Friday
Japan Tokyo CPI YoY June consensus % vs previous 2.2% (00.30 BST)
Japan Tokyo Core CPI YoY June consensus 2% vs previous 1.9% (00.30 BST)
Japan Unemployment Rate May consensus 2.6% vs previous 2.6% (00.30 BST)
Japan Retail Sales MoM May consensus % vs previous 1.2% (00.50 BST)
Japan Retail Sales YoY May consensus % vs previous 2.4% (00.50 BST)
Japan Industrial Production MoM Prel May consensus 2% vs previous -0.1% (00.50 BST)
Japan Industrial Production YoY Prel May consensus % vs previous -1.8% (00.50 BST)
UK GDP Growth Rate QoQ Final q1 consensus 0.6% vs previous -0.3% (07.00 BST)
UK GDP Growth Rate YoY Final q1 consensus 0.2% vs previous -0.2% (07.00 BST)
Germany Unemployment Rate June consensus 5.9% vs previous 5.9% (08.55 BST)
Germany Unemployment Change June consensus 15k vs previous 25k (08.55 BST)
Canada GDP MoM April consensus 0.3% vs previous 0% (13.30 BST)
Canada GDP MoM Prel May consensus % vs previous % (13.30 BST)
US PCE Price Index MoM May consensus 0% vs previous 0.3% (13.30 BST)
US PCE Price Index YoY May consensus 2.6% vs previous 2.7% (13.30 BST)
US Core PCE Price Index MoM May consensus 0.1% vs previous 0.2% (13.30 BST)
US Core PCE Price Index YoY May consensus 2.6% vs previous 2.8% (13.30 BST)
US Personal Income MoM May consensus 0.4% vs previous 0.3% (13.30 BST)
US Personal Spending MoM May consensus 0.3% vs previous 0.2% (13.30 BST)
US Chicago PMI June consensus 40 vs previous 35.4 (14.45 BST)
US Michigan Consumer Sentiment Final June consensus 65.9 vs previous 69.1 (15.00 BST)
US Michigan 1y Inflation Expectations Final June consensus 3.3% vs previous 3.3% (15.00 BST)
US Michigan 5y Inflation Expectations Final June consensus 3.1% vs previous 3% (15.00 BST)
Fed Speakers
Barkin (11.40 BST)
Bowman (17.00 BST)
ECB Speakers
Villeroy (11.00 BST)
Good luck.
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