The Morning Hark - 26 June 2024
Today’s focus...Dull, dull, dull continues although Aussie and Canadian inflation tries to spice things up.
Dear Harkster Subscriber
As you will have seen, through some of our recent publications, we are building out our new product, HarksterAI. We believe that this is an exciting new chapter for the Harkster and we will be sharing more details with you in the coming months.
On that basis, we wish to announce that, as of 30 June, the Harkster Newsletter publications; TMH, Morning Call Script, Read on the Trading Floor and Saturday Hark Back, will cease to be published. The time spent writing and researching for the newsletters will be redirected towards building out and supporting HarksterAI.
Where relevant, refunds will be issued for any subscriber payments made for the period after 30 June. In addition, as of that date, the Harkster Research Inbox website will be decommissioned.
The first iteration of the HarksterAI offering is scheduled for late July. If anyone would like to hear more about this offering, and join the early adopter program, please email Hello@Harkster.com.
At this time we, at the Harkster, would like to thank you all for your support over the last few months and years. We hope that you have found the newsletters to be entertaining and a useful tool in your daily market’s routine. We’d finally like to wish you, the Harkster Subsrcibers, all the best for the future.
Overnight Highlights
Prices are at 6.25 BST/1.25 EST, with changes reflecting movement from midnight GMT
Oil - Oil up smalls in Asia with Brent and Crude August futures currently at 85.40 and 81.30 after yesterday’s weakness on the back of the stronger USD and the API data showing crude inventories rose.
EQ - Asian equity markets saw a bid tone overnight with the Hang Seng and Nikkei futures up at 17,980 and 39,690 respectively. The Nikkei additionally helped by the weakening JPY.
The US indicies unchanged with the S&P and Nasdaq futures now at 5540 and 20,000 respectively.
Gold - Gold off smalls in Asia with the August futures trading currently at 2330.
FI - US yields a touch firmer in Asia with the US2y futures trading at 4.72% whilst the US10y futures yield at 4.27%.
European yields remain little changed with the German 10y closing at 2.41% and the Italian 10y yield at 3.93%.
UK gilt 10y at 4.08%.
FX - The USD flat in Asia with the USD Index currently at 105.67 after yesterday’s reversal rally..turnaround Tuesday strikes again. The majors now trading at; JPY, EUR and GBP 159.80, 1.0710 and 1.2685 respectively.
Today’s major FX option expiries we have in the EURUSD; $€2bn at 1.0700 and 1.0750.
Others - Bitcoin and Ethereum stabilising after all the Mt. Gox fear with the pair currently at 61,650 and 3385 respectively.
Macro Themes At Play
Recap
Hmmm that “pre-emptive” BoC rate cut looking a tad premature after May’s Canada Inflation Report. All upside misses with both MoM coming in much higher than expected and the previous month’s prints at 0.6%. Indeed core hasn’t printed so high on a MoM basis since March 2023. The YoY measures now stand at 2.9% and 1.8% for headline and core respectively. The BoC’s favoured measures did little better with the Median YoY coming in at 2.8% and the Trimmed-Mean at 2.9%. Lot of food for thought for Macklem and co.
Central Bank Speakers
Fed’s Bowman claimed the Fed is willing to raise rates if inflation progress stalls. However we are not yet at the point where a rate cut is appropriate. She expects to see inflation elevated for some time and there are upside risks. We shall remain cautious but need a steady policy rate “for some time” to beat inflation.
She is beginning to shift her view on policy and become more scenario based. She does not see any rate cuts for 2024, all shifted to 2025.
Cook continued the hawkish theme. Progress on inflation has slowed but she expects the disinflation trend to continue. A rise in inflation expectations would imply keeping policy restrictive for longer. Path to 2% target will be bumpy and uneven.
She is watching the labour market. She sees monthly gains to keep unemployment rate steady now at 200k. Policy would have to respond sharper than expected if job market weakens.
ECB’s Rehn sees two further cuts in 2024 as reasonable. Market view of terminal at 2.25/2.5% is fair.
The Day Ahead
Australia Inflation Report for May printed overnight and followed the Canadian model with a big upside miss on expected and previous at 4%. The highest print since November.
Nothing of note for the rest of 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.
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:
Wednesday
US New Home Sales May consensus 0.64m vs previous 0.634m (15.00 BST)
ECB Speakers
Rehn (10.30 BST)
Panetta (11.00 BST)
Lane (13.40 BST)
Good luck.
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.