The Morning Hark - 6 Feb 2024
Today’s focus...RBA retain tightening optionality and China ramps up their short selling curbs
Overnight Highlights
Prices are at 7.00 GMT/2.00 EST, with changes reflecting movement from midnight GMT
Oil - Oil having a quiet few sessions and trading flat in Asia with Brent and Crude April futures at 78.10 and 72.90 respectively.
EQ - Asian equity markets mixed with a further recovery in China after the financial regulator slapped more curbs on short selling. Hang Seng futures now up a further four percent at 16,170. There is word too that Xi will meet with the financial regulator to discuss the recent moves. Meanwhile the Nikkei futures off smalls at 36,080.
The US indicies flat in Asia with the S&P currently at 4965 and the Nasdaq at 17,740.
Gold - Gold little changed with April futures currently trading flat at 2042.
FI - Global yields retracing a touch in Asia after their sharp rally post payrolls continued into the start of the week. Indeed its the biggest rally in yields over a two day period in 18 months. Currently the US2y and US10y yields off close to one percent at 4.43% and 4.13% respectively. The topside 4.20% level in the 10y coming back into site.
European yields closely tracked the US move higher with yields closing higher. The German 10y at 2.32% and the Italian 10y yield at 3.89%.
UK gilt 10y similarly closing higher at 4.01%.
FX - The USD off smalls in Asia following the yields and after touching a 3m high. The USD Index currently at 104.35. The JPY, EUR and GBP all continuing to suffer with them sitting at 148.45, 1.0750 and 1.2550 respectively.
Post RBA the AUD is trading firmly to 0.6510.
Today’s FX option expiries sees in the Eur €2.5bn at 1.08.
Others - Bitcoin and Ethereum little changed from our opening levels yesterday at 42,750 and 2314 respectively.
Macro Themes At Play
Recap
Germany Services PMI for January saw a small uptick revision at 47.7 whilst the Eurozone equivalent was on the screws at 48.4.
The UK Services PMI for January however, showed a further uptick revision to 54.3 its best print since May and is set to outstrip all the other major global economies on this measure. Its impressive and far outstripping its European neighbours.
January’s Canada Services PMI saw an upward tick to 45.8, third consecutive monthly rise for the measure but still well in contraction.
US Services PMI Final for January saw a small downward revision from the preliminary reading too 52.5 but its highest since the middle of last year.
January’s US ISM Services PMI decent upside beat to 53.4, its best print since September. The all important Employment measure came back into growth territory `after last month’s shocker to 50.5 and back inline with the prints we saw in October and November. Its looking more and more as if December’s 43.8 print is an aberration. New Orders back on the rise again to 55 with Prices worryingly hitting their highest level since February last year at 64. This is also the measures highest MoM jump in 12 years. All in all another strong print.
Central Bank Speakers
Fed’s Kashkari echoed Powell’s comments as he saw the higher neutral rate meaning the Fed could take more time to assess upcoming data before beginning rate cuts.
Goolsbee will be getting detention! He claims that he doesn’t want to rule out a March rate cut and he won’t speculate on a 50bp rate cut! Has he seen the ISM?? However he does admit he needs more data to assess. Remember a non-voter so pinch of salt.
The BoJ’s Ueda stated that the BoJ would examine whether to continue buying risky assets and other stimulus means when sustained target inflation comes into view.
The Day Ahead
Overnight the RBA Interest Rate Decision and Press Conference held little in terms of surprises. Rates were on hold and the statement’s tone was hawkish as they retained the tightening bias with claims that further rate increases could not be ruled out given that inflation was still high.
Bullock pointed to risks being fairly balanced and the job was not yet done with regard to inflation. Indeed inflation must be convincingly addressed before rate cuts are considered.
Forecast wise they shaved their growth profile, tweaked the unemployment rate up a touch and they softened their inflation outlook a touch but predict that it will still not hit the 2/3% target until late 2025.
As we go to print the German Factory Orders showed a MoM increase of 8.9%. Where did that come from!
The rest of the day sees the Eurozone’s Retail Sales for December with the afternoon Canadian focused with their Ivey Survey and Macklem speech. Speaking of speeches there are a few lined up from the Fed today.
Overnight the NZ Labour Report for q4 plus just as we go to print tomorrow the Swiss Unemployment Rate for January as well as the German Industrial Production data for December.
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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
EU Retail Sales MoM Dec consensus -1% vs previous -0.3% (10.00 GMT)
EU Retail Sales YoY Dec consensus -0.9% vs previous -1.1% (10.00 GMT)
Canada Ivey PMI s.a. Jan consensus 55 vs previous 56.3 (15.00 GMT)
BoC Macklem Speaks (18.00 GMT)
NZ Employment Change QoQ q4 consensus 0.3% vs previous -0.2% (21.45 GMT)
NZ Unemployment Rate q4 consensus 4.2% vs previous 3.9% (21.45 GMT)
NZ Labour Costs Index QoQ q4 consensus 0.8% vs previous 0.9% (21.45 GMT)
Fed Speakers
Mester (17.00 GMT)
Kashkari (18.00 GMT)
Collins (19.00 GMT)
Early Wednesday
Switzerland Unemployment Rate Jan consensus % vs previous 2.3% (06.45 GMT)
Germany Industrial Production MoM Dec consensus -0.4% vs previous -0.7% (07.00 GMT)
Good luck.
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