The Morning Hark - 30 Apr 2024
Today’s focus...Unsurprisingly.... "intervention don’t work, it'll just make you worse". Elsewhere markets quiet ahead of the heavy data points.
Overnight Highlights
Prices are at 6.40 BST/1.40 EST, with changes reflecting movement from midnight GMT
Oil - Oil trading off a touch overnight with Brent and Crude June futures currently at 87 and 82.40. Oil’s softness continuing with the ongoing Israel/Hamas peace talks offering hope of a peaceful resolution to the conflict. However the sector remains very jumpy.
EQ - Asian equity markets quiet overnight with the Hang Seng and Nikkei futures steady at 17,665 and 38,230 respectively.
The US indicies similarly in Asia, with the S&P and Nasdaq futures flat at 5140 and 17,900 respectively.
Gold - Gold off one percent in Asia with the June futures trading currently at 2333. Gold lower on the general higher for longer sentiment on US rates and a general leaking of safe haven status with ceasefire talks continuing in the Middle East.
FI - US yields flat overnight with currently the US2y futures trading at 4.97% whilst the US10y futures yield at 4.61%.
European yields opening the week a touch lower with the German 10y closing at 2.53% and the Italian 10y yield at 3.82%.
UK gilt 10y closed similarly at 4.30%.
FX - The USD up smalls overnight with the USD Index currently at 105.85. The majors now trading at; JPY, EUR and GBP 156.75, 1.07 and 1.2540 respectively. Today’s FX option expiries sees in the EUR; €1bn at 1.0750.
Others - Bitcoin and Ethereum found some support yesterday around the 62,000 level with the pair now trading at 63,300 and 3165 respectively.
Macro Themes At Play
Recap
Swedish GDP for q1 confirmed a fourth quarter of contraction for the Swedish economy and taking the annualised rate to -1.1% YoY.
Preliminary April German Inflation Report came in softer than anticipated at 0.5% MoM taking the YoY down to 2.2% an almost 3 year low.
JPY Intervention
So look at the Japanese all grown up and using a Japanese holiday to intervene in USDJPY. The actions probably throw up more questions than answers to be honest though.
Was Ueda’s relaxed press conference on Friday a precursor to a “premeditated” move today? Or was 160 the trigger to “release the hounds”? Does anyone actually care?
What is for sure is that golden 2024 paradigm of the BoJ hiking as the Fed start cutting seems a long distant memory for the favourite trades of 2024.
We now find ourselves with a tentatively cautious BoJ, witnessing a fading inflation profile whilst over in the US, a rebounding inflation backdrop has caused the Fed to backdown on rate cuts and blown off the dust on the “higher for longer” mantra. The fundamentals do not support intervening to strengthen the JPY.
The best options from the Japanese would be for them to surprise the market with a “meaningful hike” in rates and maybe do it inter-meeting to really put some two sidedness back into the market. Alternatively start to reduce QE. Both have negative implications obviously but if they want to stem the weakening JPY tide then these seem the most plausible.
Central Bank Speakers
ECB’s Wunsch felt that a second rate cut in July would lead to a repricing that might go too far.
de Guindos usual stuff; come a long way on inflation but still a long way to go. Services inflation has stalled. He again stressed that he is not committing to a future rate path. Once more inflation will fluctuate around its current levels for the next few months.
The Day Ahead
Overnight we had the Japanese Data Dump for March with the Unemployment Rate coming in steady at 2.6%
Retail Sales a lot softer than expected with a -1.2% MoM print returning the YoY measure back to its lowest level in 2 years at 1.2%.
Whilst the preliminary Industrial Production saw a decent uptick in the MoM of 3.8% which, as expected, was largely down to the automobile sector.
Elsewhere Australia’s Retail Sales preliminary reading for March disappointed with a drop of 0.4% MoM and also saw a downward revision to the February number in a broad based pullback.
China PMIs for April saw a mixed bag with both manufacturing measures showing gains in the previous month and indeed on expectations. NBS and Caixin hit 50.4 and 51.4 respectively. However the NBS non-manufacturing measure dipped from last month to 51.2 on the back of softer new orders.
As we go to print we get the German Retail Sales data for March and, later in the morning, we get the country’s Labour Report for March and q1 GDP.
Next moving to the EU where we get their March Inflation Report as well as their q1 GDP.
The afternoon kicks off with Canada’s Monthly GDP data as well as the US’s ECI. Finally we get the Chicago PMI.
Overnight all about NZ with the RBNZ’s Financial Stability Report as well as their q1 Labour Report. In addition the final Japan and Australian Manufacturing PMI prints for April.
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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:
Tuesday
Germany Retail Sales MoM Mar consensus 1.3% vs previous -1.9% (07.00 BST)
Germany Retail Sales YoY Mar consensus % vs previous -2.7% (07.00 BST)
Germany Unemployment Rate Apr consensus 5.9% vs previous 5.9% (08.55 BST)
Germany Employment Change Apr consensus 7k vs previous 4k (08.55 BST)
Germany GDP Growth Rate QoQ Flash q1 consensus 0.1% vs previous -0.3% (09.00 BST)
Germany GDP Growth Rate YoY Flash q1 consensus -0.2% vs previous -0.2% (09.00 BST)
EU GDP Growth Rate QoQ Flash q1 consensus 0.1% vs previous 0% (10.00 BST)
EU GDP Growth Rate YoY Flash q1 consensus 0.2% vs previous 0.1% (10.00 BST)
EU Inflation Rate MoM Flash Apr consensus % vs previous 0.8% (10.00 BST)
EU Inflation Rate YoY Flash Apr consensus 2.4% vs previous 2.4% (10.00 BST)
EU Core Inflation Rate YoY Flash Apr consensus 2.6% vs previous 2.9% (10.00 BST)
Canada GDP MoM Feb consensus 0.3% vs previous 0.6% (13.30 BST)
Canada GDP MoM Prel Mar consensus % vs previous 0.4% (13.30 BST)
US Employment Cost Index q1 consensus 1% vs previous 0.9% (13.30 BST)
US Chicago PMI Apr consensus 44.9 vs previous 41.4 (14.45 BST)
RBNZ Financial Stability Report (22.00 BST)
NZ Unemployment Rate q1 consensus 4.3% vs previous 4% (23.45 BST)
NZ Employment Change q1 consensus 0.3% vs previous 0.4% (23.45 BST)
NZ Labour Costs Index QoQ q1 consensus 0.8% vs previous 1% (23.45 BST)
NZ Labour Costs Index YoY q1 consensus % vs previous 3.9% (23.45 BST)
ECB Speakers
Buch (11.00 BST)
Early Wednesday
Australia Judo Bank Manufacturing PMI Final Apr consensus 49.9 vs previous 47.3 (00.00 BST)
Japan Jibun Bank Manufacturing PMI Final Apr consensus 49.9 vs previous 48.2 (01.30 BST)
Good luck.
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