The Morning Hark - 29 May 2024
Today’s focus...The slow start to the week leaks further.
Overnight Highlights
Prices are at 6.20 BST/1.20 EST, with changes reflecting movement from midnight GMT
Oil - Oil continuing to trade firmly in Asia with Brent and Crude July futures currently at 84.20 and 80.10. Oil rose on continuing hopes that OPEC+ will maintain output cuts when they meet this weekend. In addition Monday was the traditional start to the “driving season” in the US a further spur for fuel consumption.
EQ - Asian equity markets lower overnight with the Hang Seng and Nikkei futures trading close to one percent lower at 18,480 and 38,675 respectively as they followed the US sell off.
The US indicies equally softer with the S&P and Nasdaq futures now at 5310 and 18,900 respectively. If it wasn’t for Nvidia, which again rallied strongly, the sell off would have been a lot more pronounced.
Gold - Gold unchanged in Asia with the June futures trading currently at 2359 and holding in well despite the higher USD..
FI - US yields had a good day yesterday with the curve steepening. Currently the US2y futures trading at 4.98% whilst the US10y futures yield at 4.56%.
European yields closed higher following the US move with the German 10y closing at 2.60% and the Italian 10y yield at 3.90%.
UK gilt 10y at 4.28%.
FX - The USD holding onto yesterday’s gains on the back of higher US yields with the USD Index currently at 104.70. The majors now trading at; JPY, EUR and GBP 157.25, 1.0850 and 1.2750 respectively.
Today’s major FX option expiries sees; in the EUR sees €2.7bn between 1.0875 and 1.0890.
Others - Bitcoin and Ethereum steadied the ship yesterday and traded off its recent lows taking it back into the middle of its recent range. Currently the pair at 68,580 and 3860 respectively.
Macro Themes At Play
Central Bank Speakers
Fed’s Kashkari didn’t see any need to hurry to cut rates but claimed that the Fed should not rule out anything out on the policy path. He also felt that the Fed needed to see many more months of positive inflation data to give confidence that it is appropriate to cut rates.
ECB’s Holzmann sees two rate cuts this year, with a maximum of three. He will not automatically support moves after June.
Centeno claimed that inflation is under control and interest rate reduction process is about to start.
Knot felt that the policy rate will slowly but gradually move to less restrictive levels. Based on March projections, the optimal policy would have been broadly in line 3/4 cuts this year. He pointed to the projection round meetings being key for interest rate decisions. However the precise path depends on data and projections.
BoJ’s Adachi expected inflation to increase gradually however we are not yet at the stage where we are convinced that there is a sustained achievement of the price target hence we must maintain accommodative conditions.
If the JPY falls excessively and in a prolonged manner which would affect our price target achievement then responding with monetary policy may be appropriate.
Other Points of Interest
The Day Ahead
Overnight we got the April Australia Monthly CPI Indicator came in a lot hotter than expected at 3.6% putting the RBA back in play for one of those rate hikes they’ve been threatening of late. The print was the highest since November and is being blamed on a sharp rise in food and especially fruit and vegetables whose prices rose the most in a year.
The rest of the day is down to the German Inflation Report for May and a Fed speaker.
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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:
Wednesday
Germany Inflation Rate MoM Prel May consensus 0.2% vs previous 0.5% (13.00 BST)
Germany Inflation Rate YoY Prel May consensus 2.4% vs previous 2.2% (13.00 BST)
Fed Speakers
Williams (18.45 BST)
Good luck.
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