The Morning Hark - 29 Feb 2024
Today’s focus...Asia session going through the motions again prior to inflation data. Central bankers same old as is the Bitcoin rally. SBF puts in a hopeful low bid!
Overnight Highlights
Prices are at 7.00 GMT/2.00 EST, with changes reflecting movement from midnight GMT
Oil - Oil quiet in Asia with Brent and Crude April futures trading at 83.20 and 78.50 respectively.
RBC back on the tapes again re OPEC+. Saudi Arabia rethinking policy on holding spare capacity. OPEC considering rolling over output curbs to June.
EQ - Asian equity markets seeing nothing of note overnight with the Nikkei and Hang Seng futures up smalls at 39,240 and 16,590 respectively.
The US indices little changed with the S&P and Nasdaq futures currently at 5080 and 17,910 respectively.
Gold - Gold still very much rangebound in its 2000/2050 band. The April futures currently trading at 2045.
FI - Global yields unchanged in Asia with the US2y and US10y yields currently at 4.66% and 4.28% respectively.
European yields little changed yesterday with the German 10y at 2.46% and the Italian 10y yield at 3.89% but still very much rangebound.
UK gilt 10y similarly so at 4.12%.
FX - FX in Asia same old with the USD little changed USD Index currently at 103.88. The JPY, EUR and GBP currently sitting at 149.80, 1.0830 and 1.2660 respectively. The JPY a touch firmer on the back of BoJ’s Takata comments.
Today’s FX option expiries sees €1.5bn at 1.0860 and 1.09 in the EUR with an additional €1bn at 1.0855. One we do not talk about much but in USDBRL there is $1.5bn at 5.00.
Others - Bitcoin and Ethereum holding up well overnight again especially after yesterday’s blip. The all time high around 69k seems to be the obvious target. The pair currently at 63,000 and 3480 respectively. Again a strong day of flows yesterday into the ETFs with over $0.5bn being added. Yesterday was Blackrock’s 32nd straight day of inflows.
Fun and games in Bitcoin yesterday as it went from close to $64k to $59k in less than 15 minutes as stories emerged about issues at Coinbase whereby clients were showing $0 balances on their accounts. To be honest, given the exorbitant fees on Coinbase, I’m surprised more people don’t have $0 balances on their accounts!
SBF starting to re-emerge as his sentencing hearing comes into view next month. He is arguing for 5/7 years for his conviction. From memory 100 years was being talked about as a recommendation by the judge. Seems to be as wide a spread as some of the ones he used to make people trade on on his FTX exchange!
Macro Themes At Play
Recap
The second estimate for US GDP q4 had a small downward revision to 3.2% due to a dip in private inventories. Of more concern for the Fed were the price measures which all showed an uptick on the previous estimates.
Central Bank Speakers
Pretty much the same old for the central bankers. Fed still see work to do and are keen to be patient before push the button, BoJ edging slowly towards an exit to negative rates but March is probably too soon. ECB a little more split than of late with some pointing to June but others at least wanting the discussion started for cuts in March.
All in all as we’ve been saying without data falling off a cliff its hard to see any movement from them. Maybe today and tomorrows’s inflation data will spur some panic?
Fed’s Logan said that slowing the balance sheet run off means controlling the pace, not stopping. He was keen for us to disconnect the idea of slower runoff pace and ending QT.
Williams still sees a ways to go to achieve 2% target. Although three rate cuts this year is reasonable for the Fed to debate.
Bostic similarly saw work to do on inflation and he is comfortable being patient. It won’t be a fast match to 2% and expects volatility.
Collins wanted the Fed to not overreact to single bumpy data. She also wants to see inflation cool across more categories before supporting rate cuts. Again she called for patience and called cutting rates in May premature.
BoJ’s Takata covered a lot of ground as he emphasised the importance of a simple exit strategy. He also sees the need to retain some easing measures. Various options remain when we dismantle yield curve controls. Wants to confirm the pace of investments and wages. There is no plan to increase interest rates sequentially. An atmosphere of wage driven virtuous cycle is emerging compared to last year or even six months ago. Wage increases are expanding more broadly than last year. He is undecided on monetary policy decision for ending negative rates in March or April however he called for a shift in policy and not to go backwards.
ECB’s de Guindos noted that recent inflation outlook has been very positive but rates will be cut when the ECB is sure inflation is headed for 2%. The decision will be dependent on data not dates.
Kazimir pointed to headline disinflation going quicker than expected but core still uncertain. He prefers a June rate cut followed by a “smooth and steady cycle of policy easing”. The ECB should avoid forward guidance on rates in March. The market’s rate cut pricing now more realistic.
Kazaks a little more hard edged with his comments. Haven’t kept current tight policy in place long enough. There have been some inflation surprises recently but lets not get ahead of ourselves. It would be a very bad outcome if we went too early and then had to hike anew. At the moment I don’t see the data telling us to move.
Simkus didn’t see anything wrong with starting to discuss rate cut preconditions in March.
Vasle noted that the ECB are looking at rte cuts if there are no “big surprises”.
The Day Ahead
Overnight Japan Retail Sales and Industrial Production for January printed with Retail Sales showing an inline 2.3% YoY growth with the monthly beating estimates at 0.8%. This is now close to 2 years worth of expansion for the series. Industrial Production however declined by 7.5% MoM, its steepest decline since the pandemic mainly dragged down by motor vehicles.
Australia’s Retail Sales print for January came in a touch lower than expected at 1.1%.
German Retail Sales as we go to press which again disappointed with a 0.4% drop, its 7th negative print in 8 months. It takes the YoY to -1.4%
Busy day ahead with Swiss q4 GDP and German Labour and Inflation Reports for February. Later we get Canada q4 GDP as well as the highlight of US PCE, as well as Personal Income and Personal Spending, for January. Chicago PMI closes the day.
Overnight the final Manufacturing PMIs start to hit the tapes with Australia, Japan and China all up.
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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
Switzerland GDP Growth Rate QoQ q4 consensus 0.1% vs previous 0.3% (08.00 GMT)
Switzerland GDP Growth Rate YoY q4 consensus 0.7% vs previous 0.3% (08.00 GMT)
Germany Unemployment Change Feb consensus 7k vs previous -2k (08.55 GMT)
Germany Unemployment Rate Feb consensus 5.8% vs previous 5.8% (08.55 GMT)
Germany Inflation Rate MoM Prel Feb consensus 0.5% vs previous 0.2% (13.00 GMT)
Germany Inflation Rate YoY Prel Feb consensus 2.6% vs previous 2.9% (13.00 GMT)
Canada GDP Growth Rate QoQ q4 consensus % vs previous -0.3% (13.30 GMT)
Canada GDP Growth Rate Annualised q4 consensus 0.8% vs previous -1.1% (13.30 GMT)
Canada GDP MoM Dec consensus 0.2% vs previous 0.2% (13.30 GMT)
Canada GDP MoM Prel Jan consensus % vs previous 0.3% (13.30 GMT)
US PCE Price Index MoM Jan consensus 0.3% vs previous 0.2% (13.30 GMT)
US PCE Price Index YoY Jan consensus 2.4% vs previous 2.6% (13.30 GMT)
US Core PCE Price Index MoM Jan consensus 0.4% vs previous 0.2% (13.30 GMT)
US Core PCE Price Index YoY Jan consensus 2.8% vs previous 2.9% (13.30 GMT)
US Personal Income MoM Jan consensus 0.4% vs previous 0.3% (13.30 GMT)
US Personal Spending MoM Jan consensus 0.2% vs previous 0.7% (13.30 GMT)
US Chicago PMI Feb consensus 48 vs previous 46 (14.45 GMT)
Australia Judo Bank Manufacturing PMI Final Feb consensus vs previous 50.1 (22.00 GMT)
Japan Unemployment Rate Jan consensus 2.4% vs previous 2.4% (23.30 GMT)
Fed Speakers
Bostic (15.50 GMT)
Goolsbee (16.00 GMT)
Mester (18.15 GMT)
Goolsbee (22.00 GMT)
Early Friday
Japan Jibun Bank Manufacturing PMI Final Feb consensus vs previous 48 (00.30 GMT)
China NBS Manufacturing PMI Feb consensus 49.1 vs previous 49.2 (01.30 GMT)
China NBS Non Manufacturing PMI Feb consensus vs previous 50.7 (01.30 GMT)
China Caixin Manufacturing PMI Feb consensus 50.6 vs previous 50.8 (01.45 GMT)
Good luck.
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