The Morning Hark - 24 May 2024
Today’s focus... Stronger US PMIs spook the markets. SEC approve Eth. Long weekend looms.
Overnight Highlights
Prices are at 6.20 BST/1.20 EST, with changes reflecting movement from midnight GMT
Memorial Day Weekend in the US and also a Bank Holiday in UK so no TMH on Monday. Enjoy the weekend!
Oil - Oil trading unchanged in Asia with Brent and Crude July futures currently at 81.40 and 76.80. News that CIA director Burns will travel to Europe in the next few days for a meeting with Mossad director David Barnea to try and revive Gaza hostage talks gave a softer tone to the sector.
EQ - Asian equity markets quiet overnight with the Hang Seng and Nikkei futures trading at 18,610 and 38,715 respectively.
The US indicies equally quiet with the S&P and Nasdaq futures now at 5295 and 18,715 respectively. The sell off yesterday post PMIs fuelled by rate cut expectations getting trimmed even further. Luckily Nvidia helped overall or else the damage could have been a lot uglier.
Gold - Gold unchanged in Asia with the June futures trading currently at 2335. The goldbugs continuing to not enjoy the firmer USD tone.
FI - US yields off smalls overnight with currently the US2y futures trading at 4.93% whilst the US10y futures yield at 4.47%. Both went bid post US PMIs.
European yields closed a touch firmer on the back of the US move with the German 10y closing at 2.60% and the Italian 10y yield at 3.90%.
UK gilt 10y at 4.26%.
FX - The USD flat overnight but holding onto its post PMI gains, with the USD Index currently at 105.10. The majors now trading at; JPY, EUR and GBP 157.10, 1.0810 and 1.2690 respectively.
Today’s major FX option expiries sees; in USDJPY $3.5bn at 157 and in the EUR we have €2bn at 1.0875.
Others - Bitcoin and Ethereum mixed fates with Bitcoin struggling with the higher rate expectations and currently at 67,555. However Ethereum holding up well after the and the SEC approved its ETF as expected. Currently sitting at 3800.
Macro Themes At Play
Recap
The Flash May PMIs were the main prints today.
Germany Manufacturing PMI saw a decent upside surprise to 45.4, its highest level since the start of the year. New orders, although remaining in contraction, the decline was the weakest in 2 years. Services meanwhile also saw upside to 53.9 its beat print in a year.
EU Manufacturing PMI had a similar theme as it saw a rise to 47.4, its highest in 15 months. Equally Services remained in growth zone at 53.3, its fourth consecutive month in growth territory.
UK Manufacturing PMI soared into growth territory with a 51.3 easily beating expectations. It was the best print in almost two years. Services however declined but remained on the growth side of the line at 52.9 much lower than expectations.
US Manufacturing PMI better than expected at 50.9. Services however was a big upside surprise at 54.8, the highest print in a year and reversing a four month slowdown.
US New Home Sales for April declined MoM hitting 634k, missing expectations as higher mortgage costs weighed on sales.
Central Bank Speakers
Fed’s Bostic felt thee last couple of inflation numbers suggest its going back to target but slowly and we need to be patient. We are not past the worry point as there are still considerable upward pressure on prices. On rates its important to move in one direction only.
ECB’s de Guindos suggested a prudent approach would be a 25bp cut but that there is no decision on the size or number of cuts. Bizarrely he suggested that a rate rise in the coming months was not the base case scenario!
Villeroy was firm in stating that it was very probable that rates are cut in June. We are going to bring back inflation toward 2% by next year at the latest.
The Day Ahead
Overnight we had the Japan’s Inflation Report for April was as predicted softer than the previous month. Headline YoY now at 2.5% and the core equivalent now at 2.2%. .
As we go to print the UK’s soggy April Retail Sales print and we have the Canadian equivalent later in the day. The US sees Durables and the Michigan Survey.
A heap of ECB speakers throughout the day.
And of course the run up to the Memorial Day long weekend.
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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 Apr consensus -0.4% vs previous 0% (07.00 BST)
UK Retail Sales YoY Apr consensus -0.2% vs previous 0.8% (07.00 BST)
Canada Retail Sales MoM Mar consensus 0% vs previous -0.1% (13.30 BST)
Canada Retail Sales YoY Mar consensus % vs previous 1.2% (13.30 BST)
US Durable Goods Orders MoM Apr consensus -0.8% vs previous 2.6% (13.30 BST)
US Michigan Consumer Sentiment Final May consensus 67.5 vs previous 77.2 (15.00 BST)
US Michigan Inflation Expectations Final May consensus 3.5% vs previous 3.2% (15.00 BST)
US Michigan 5y Inflation Expectations Final May consensus 3.1% vs previous 3% (15.00 BST)
Fed Speakers
Waller (14.35 BST)
ECB Speakers
Schnabel (08.00 BST)
Vasle (10.15 BST)
Muller (10.15 BST)
Nagel (10.15 BST)
Centeno (16.25 BST)
Good luck and a good long weekend to one and all.
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