The Morning Hark - 3 May 2024
Today’s focus...All eyes on NFP to finish a rather nervy week. USDJPY a break from the norm. Is something a brewing?
Overnight Highlights
Prices are at 6.35 BST/1.35 EST, with changes reflecting movement from midnight GMT
Oil - Oil trading unchanged from our opening levels yesterday with Brent and Crude July futures currently at 84 and 79.
Sources suggested yesterday that OPEC+ could extend their voluntary oil cuts beyond q2 although formal talks are yet to start.
EQ - Asian equity markets backing off a touch overnight with the Hang Seng and Nikkei futures off smalls at 18,400 and 37,820.
The US indicies continuing to firm in Asia, with the S&P and Nasdaq futures now at 5103 and 17,750 respectively. Apple’s earnings beat, post the close, yesterday affording the indicies a nice bounce going into the Asian session.
Gold - Gold continuing to be supported with the June futures trading currently at 2317.
FI - US yields stabilising overnight with currently the US2y futures trading at 4.88% whilst the US10y futures yield at 4.57%.
European yields softening in line with the US yesterday with the German 10y closing at 2.54% and the Italian 10y yield at 3.84%.
UK gilt 10y closed similarly at 4.30%.
FX - The USD flat overnight with the USD Index currently at 105.23 and once again stabilising after its sell off yesterday on lower yields. The majors now trading at; JPY, EUR and GBP 152.90, 1.0735 and 1.2550 respectively. The majority of the USD weakness being played out on the JPY axis. The second bout of intervention certainly seems to have stemmed the tide and the usual reaction post such a move, where the market reverts to trend, seems to be missing this time. Something seems different. Let’s see how today’s numbers play out.
Today’s FX option expiries sees in the EUR; €1bn each at 1.0750 and 1.07 respectively. In the AUD we see AUD1.5bn at both 0.66 and 0.65.
Others - Bitcoin and Ethereum trying hard to stage a recovery after their fall earlier in the week. At best its looking fragile. The pair currently at 59,600 and 3005 respectively.
Macro Themes At Play
Recap
Switzerland Retail Sales for March declined to -0.1% MoM after a couple of months of positive growth and drags the YoY to -0.4%. More importantly Switzerland Inflation Rate for April came in higher than expected at 0.3% MoM taking the YoY to its highest print of the year at 1.4% and well above expectations. Still well within the SNB’s target range but tempers hopes, a touch, for them joining the ECB on the June rate cut train.
Switzerland procure.ch Manufacturing PMI for April hit a 6 month low at 41.4.
April Germany Manufacturing PMI final reading was a small upward revision to 42.5 with the EU equivalent having a similar small upward revision to 45.7.
US Nonfarm Productivity QoQ preliminary reading for q1 disappointed with 0.3% of a gain its weakest in a year and to get the stagflation tongues wagging again Unit Labour Costs for the quester skyrocketed to 4.7% its highest level in a year.
US Factory Orders MoM for March were on the money at 1.6%.
NFP Preview
That time of the month again when the market gets all frothed up over a number. NFP day is once again upon us. Expectations are for a trending 243k print for the headline with a range of 150/280k from the major analysts. For the record q1 has been trending at 276k.
Remember as we always say the analysts have a trend for undercooking their estimates with 23 of the past 27 months seeing headline printing above the market consensus. We are actually on a 5 month winning streak on that one too.
The unemployment rate is expected to remain steady at 3.8%. This measure has been below 4% now for well over 2 years.
Average hourly earnings are expected to remain above 4% YoY with a 0.3% MoM expected.
As always remember the revisions! Plus remember too we have the ISM print later with its prices element which may have more of a bearing on where we end the week in markets.
Central Bank Speakers
BoC Macklem had some comments I omitted from yesterday’s piece but thought they were worth noting. The BoC does not need to do what the Fed do. They are closer to being able to cut rates as the data since January has increased the Bank’s confidence. Expect core inflation to ease gradually but stay close to 2.9% for the next several months. The Bank is looking for GDP to hit 1.5% this year and 2% in the next two years.
ECB’s Lane was adamant that the ECB will continue to follow a data dependent approach. Not pre-committing to a particular rate path. Given the lags in transmission the tightening effects from our last interest rate hikes are still unfolding. Inflation has declined more quickly than expected. Next phase will be more gradual.
Stournaras sees a higher likelihood of three cuts in 2024.
The Day Ahead
Overnight saw the Australian Services PMI final print for April which was revised smalls down from the preliminary at 53.6.
Norges Bank Rate Decision the highlight of the morning then its all about the NFP and just in case that doesn’t shake the markets up enough we have the US ISM Services PMI and underlying measures.
One other point of note over the weekend we have a handful of Fed speakers. May be worth tuning into their thoughts.
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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
Norges Bank Interest Rate Decision rates to remain on hold at 4.5% (09.00 BST)
UK S&P Global Services PMI Final Apr consensus 54.9 vs previous 53.1 (09.30 BST)
EU Unemployment Rate Mar consensus 6.5% vs previous 6.5% (10.00 BST)
US NFP Apr consensus 238k vs previous 303k (13.30 BST)
US Unemployment Rate Apr consensus 3.8% vs previous 3.8% (13.30 BST)
US Average Hourly Earnings MoM Apr consensus 0.3% vs previous 0.3% (13.30 BST)
US Average Hourly Earnings YoY consensus 4% vs previous 4.1% (13.30 BST)
Canada S&P Global Services PMI Apr consensus vs previous 46.4 (14.30 BST)
US S&P Global Services PMI Final Apr consensus 50.9 vs previous 51.7 (14.45 BST)
US ISM Services Apr consensus 52 vs previous 51.4 (15.00 BST)
US ISM Services Employment Apr consensus vs previous 48.5 (15.00 BST)
US ISM Services New Orders Apr consensus vs previous 54.4 (15.00 BST)
US ISM Services Prices Apr consensus vs previous 53.4 (15.00 BST)
Saturday
Fed Speakers
Goolsbee (00.45 BST)
Williams (00.45 BST)
Cook (17.20 BST)
Good luck.
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