The Morning Hark - 5 Mar 2024
Today’s focus...Two Sessions, despite its name, fails to excite! Bitcoin ATH in sight. FX in Asia what’s the point?….discuss.
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 May futures trading down a touch at 82.40 and 77.80 respectively. Oil took a backward step with disappointment at the lack of any new and concrete initiatives, to spur the China growth story, from the Two Sessions Meeting.
EQ - Asian equity markets were dominated by China with the Hang Seng futures off well over two percent at 16,160 on disappointment with the lack of new initiatives from the Chinese authorities to support the economy. Not sure what they were expecting to be honest. The Nikkei let the day pass it by as it trades flat at 40,080.
The US indices little changed with the S&P and Nasdaq futures currently off smalls at 5125 and 18,180 respectively.
Gold - Gold, after its breakout on Friday, continued to rally yesterday on what seems some overly optimistic hopes for earlier rate cuts. Anyway who am I to question the gold bugs with the April futures currently trading steady at 2125.
FI - Global yields flat in Asia with the US2y and US10y futures yields currently at 4.60% and 4.21% respectively.
European yields ended the day little changed with the German 10y at 2.40% and the Italian 10y yield at 3.83%.
UK gilt 10y similarly at 4.22%.
FX - FX in Asia hmmmm. The USD little changed overnight as the USD Index holds steady at 103.94. The JPY, EUR and GBP currently sitting at 150.50, 1.0850 and 1.2680 respectively.
Risk off has sent the proxy currencies a touch lower with AUD and NZD off at 0.6480 and 0.6080 respectively.
Today’s FX option expiries sees in the EUR; €1.7bn at 1.0845 and €1.2bn at 1.0895. USDJPY has $1bn at 150.20, AUD sees Aud2.2bn around 0.6485/95 and in USDCAD we see $1bn at 1.3550.
Others - Bitcoin and Ethereum's ride continues and new highs are presumably on the agenda for this week. Once captured the price action will be interesting to monitor. Will there be some consolidation and pullback or will a clear break take us to the “moon”. Lot of chatter of 100k being the obvious next target but that seems literally a stretch. However there was a close to seven percent rally in Asia for the pair with them trading at 67,300 and 3710 respectively.
Macro Themes At Play
Recap
Switzerland Inflation Report for February came in hotter on the MoM at 0.6% due to housing rentals and air transport. The YoY measure, although softer than last month, came in slightly higher than expectations at 1.2% with lower food prices contributing the most to the fall from previous. This was the lowest print since October 2021 and keeps a SNB rate cut very much in play for later in the month.
China Two Sessions Meeting
If nothing else the “get together” has a great name, probably more appropriate for a long weekend university bender but nevertheless. Anyway Premier Li, China’s No.2 statesman, pretty much delivered what was expected and as we thought it has underwhelmed.
Growth is expected to be around 5% for the year with a budget deficit set to be 3% of GDP.
There were promises of targeted measures to help the property sector and in particular help finance “justified” projects. Overall it seems a continuation of the drip feed approach of support and reform for the sector which has struggled since 2021 when stricter regulatory controls were put in place to crackdown on highly leveraged projects.
Again no specific measures were detailed and once again this is far from the silver bullet which the market has been looking for.
The Day Ahead
The final February Services PMI prints from Australia, Japan and China started to drop overnight. Australia confirmed their decent bounce for services with a slight upward revision to 53.1. The print was a return to growth and its highest since April spurred on by a rise in new orders.
Japan had a small upward revision to 52.9, although a small tick down from the previous month. This was the 18th month of growth for the service sector in Japan.
China Caixin services cooled to 52.5, its second consecutive cooling although the series has remained in growth now for 14 straight months.
Japan Tokyo Core CPI YoY for February came in as expected at 2.5% confirming the rebound from the surprisingly soft print in January. The headline number mirrored the bounce to print 2.6% YoY. Enough to get the juices going for March? We still think that’s too early and April is more likely after they have all the q1 wage negotiation stats. But it is the BoJ!
All the other major economies see their final February Services PMIs plus the US ISM Services for February as well as January’s Factory Orders.
Overnight Australia q4 GDP prints.
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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:
Tuesday
Germany HCOB Services PMI Final Feb consensus 48.2 vs previous 47.7 (08.30 GMT)
EU HCOB Services PMI Final Feb consensus 50 vs previous 48.4 (09.00 GMT)
UK S&P Global Services PMI Final Feb consensus 54.3 vs previous 54.3 (09.30 GMT)
Canada S&P Global Services PMI Feb consensus vs previous 45.8 (14.30 GMT)
US S&P Global Services PMI Final Feb consensus vs previous 52.5 (14.45 GMT)
US ISM Services PMI Feb consensus 53 vs previous 53.4 (15.00 GMT)
US ISM Services Employment Feb consensus vs previous 50.5 (15.00 GMT)
US ISM Services New Orders Feb consensus vs previous 55 (15.00 GMT)
US ISM Services Prices Feb consensus vs previous 64 (15.00 GMT)
US Factory Orders MoM Jan consensus -2.8% vs previous 0.2% (15.00 GMT)
Fed Speakers
Barr (17.00 GMT)
Barr (20.30 GMT)
Early Wednesday
Australia GDP Growth Rate QoQ q4 consensus 0.3% vs previous 0.2% (00.30 GMT)
Australia GDP Growth Rate YoY q4 consensus 1.4% vs previous 2.1% (00.30 GMT)
Good luck.
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