The Morning Hark - 6 Mar 2024
Today’s focus...March Madness…..gold and Bitcoin ATHs then not so much, MAG7 not so MAG, why is Nikki still playing and The Tooth Fairy is paying less!
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 up a touch at 82.30 and 77.60 respectively with nothing new of note to report.
EQ - Asian equity markets mixed with the Hang Seng futures regaining some of their lost ground from yesterday as they trade up over a percent at 16,360. The Nikkei let the day pass it by again as it trades flat at 40,030.
The US indices little changed with the S&P and Nasdaq futures currently up smalls at 5090 and 17,980 respectively after a day of bleeding yesterday especially for the Nasdaq and Magnificent7 which had their worst day since October.
Gold - Gold hit record highs yesterday as it continues to see the future path of rates a lot lower. Maybe Powell will tell it differently today? The April futures currently trading steady at 2135.
FI - Global yields retraced a touch in Asia after yesterday’s softness with the US2y and US10y futures yields currently at 4.56% and 4.15% respectively.
European yields followed the US lower with the German 10y at 2.32% and the Italian 10y yield at 3.71%. The pair tightened yesterday to their narrowest point in 2 years at 135bps.
UK gilt 10y similarly lower at 4.10%.
FX - FX in Asia hmmmm. The USD little changed overnight as the USD Index holds steady at 103.75. The JPY, EUR and GBP currently sitting at 149.90, 1.0860 and 1.27 respectively.
Today’s FX option expiries sees in the EUR; €3bn at 1.0875 and €2bn at 1.08. Whilst in USDJPY we have $1bn at 149.80.
Others - Bitcoin and Ethereum's ride continues and how! We rang the bell with new highs for Bitcoin above $69k but soon reversed below $61k before stabilising and actually trading well since with it now back close to $66k at 65,800. Similar story in Ethereum with a peak above 3800 before a dip towards 3350 before again recovering well to 3750.
Looking ahead, there are a good number of offers appearing in the $70k vicinity so this patch could get sticky but beyond that there’s a fair amount of blue sky.
Rang the bell and retreated and how with an over 10% retracement. Rumours circulated around Blackrock and market manipulation….allegedly….surely not! Keep those dirty tactics to your TradFi world not for this “new world” if you please…….hmmm.
Probably more likely some inevitable profit taking and the even more inevitable Lagos tripping over themselves as they try to exit positions. Liquidity is never great in the cryptos at times of “crisis”.
Macro Themes At Play
Recap
Germany Services PMI for February had a small upside revision to 48.3 whilst the EU equivalent, similarly so to 50.2 spurred on by the “perceived weaker” countries of the Eurozone showing stronger growth.
The UK’s Services PMI for February were revised down to 53.8, and lower than January’s print, but still well into growth territory compared to their European counterparts.
Canada Services PMI for February pushed a touch higher to 46.6 still well in the contraction zone but, on a brighter note, its best print since September.
Finally the February US Services PMI in at a steady 52.3, down a touch from previous, but nothing to get to het up about.
US ISM Services PMI for February showed a small drop from the previous month and expectations to 52.6. The underlying measures were a mixed bag with Employment again dipping back into contraction to 48 after last month’s rebound (50.5) from December’s shocker of a print (43.8). New Orders however showed a nice increase higher to 56.1 and its best print since back in August. Meanwhile Prices, after lat month’s sharp spike to 64, has reverted back to its recent trend in the high 50s with a 58.6 print.
US Factory Orders for January fell 3.6% MoM its sharpest fall in almost 4 years.
Stories were circulating yesterday that the ECB will revise lower its inflation forecasts for this year, and possibly next, in a step which could potentially bring forward rate cuts or indeed increase the number of them in the coming year.
Sources also suggested that the BoJ is likely to maintain their forecasts for a moderate economic recovery at their forthcoming meeting however they are also seen revisiting down their assessment on consumption and output.
Super Tuesday in the US election preamble was not so Super for Nikki Haley as she took down less than a twelfth of Trump’s delegate numbers; 757 versus 62 thus far. Looks like its time for her to hand in her spurs for this rodeo as the most inevitable inevitable appears to be playing out with a Biden Trump rerun. I can hardly wait. Its going to be a long 8 months……
UK Spring Budget Preview
It would seem that the much touted Conservative pre-election tax cuts giveaway will be centred on National Insurance rather than the more politically eye catching Income Tax cut which some on the right of the party would have preferred.
It seems that the inflationary nature plus the costlier elements to an Income Tax cut weighed against that route and instead its the rather more mundane National Insurance where Hunt will spend his pocket money. For reference, a 1p cut in NI is equivalent to about £5bn whilst a 1p cut in income tax is about £7bn.
Other expenditure appears to be going into an extension of the fuel duty freeze which came in a couple of years back. again the cost is about £5bn.
Where’s the money coming from well a number of sources if the papers are anything to go by; second home holiday rentals, non-doms, business class air travel and vaping have all been touted at one time or another for a Hunt “clubbing”.
However, it would appear no matter how much money the Tories try and throw at the electorate they still come up well short with the latest polls showing them languishing on 20% of the popular, or in this case not so popular, vote! That, for reference, is an all time low.
Powell Testimony Preview
Since Friday we have seen some poor US data with yields subsequently trading softer which seems a perfect moment for Powell to enter stage right, put his foot back on the throat of the market, and push the 10y back above 4.20%?
Surely it will take more than a few weak secondary data points to turn the tide of the “patient” Fed. We expect a steady as she goes performance from Powell especially given it is an election year. Economy in a good place, we have time to make the right decision, key indicators have yet to turn in a significant and sustainable manner hence it remains too early to alter monetary policy.
BoC Preview
Holding pattern meeting given the first move for a cut from the BoC looks to be in the summer. The BoC though will want to walk the fine line of preparing the market for a summer move whilst trying not to let the market get ahead of itself, especially after the recent scaling back of what had been previously priced in the curve for rate cuts. Currently the market is around 3 cuts for the year and very much in line, and in step, with the market’s thoughts on the Fed. Data, since the last meeting, has been mixed with GDP for q4 hotter than expected, labour market remaining firm and retail sales holding up well. On the flip side inflation was a lot softer than anticipated with headline now below 3%. Will they give a nod to the softer inflation profile and start chatting about easing monetary policy in the coming meetings? On the margins probably not just yet until we see some softer data playing out. So on hold, April too soon? So June just right?
In Other News
Thanks to Axios for their solid research again on inflationary trends and maybe one to watch going forward! They point out that The Tooth Fairy is paying less for lost teeth this year than she did last year. That’s the first time since 2019 pre-pandemic levels. It is actually interesting the acceleration, in what she was willing to pay, over those QE pandemic years and since……
The Day Ahead
Overnight Australia q4 GDP was pretty much in line with the QoQ at 0.2% taking the YoY to 1.5%.
Little, other than EU Retail Sales for January, for the morning.
The afternoon is jam packed though with the UK Budget kicking things off. US ADP and JOLTS employment reports for February the main data focus. With the Fed’s Powell testimony and the BoC rate decision the other major risk events.
Early doors tomorrow China Trade Balance for February and just as we go to print the Swiss Unemployment Rate for the same month and German Factory Orders for January.
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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:
Wednesday
EU Retail Sales MoM Jan consensus 0.1% vs previous -1.1% (10.00 GMT)
EU Retail Sales YoY Jan consensus -1.3% vs previous -0.8% (10.00 GMT)
UK Spring Budget (12.30 GMT)
US ADP Employment Change Feb consensus 150k vs previous 107k (13.15 GMT)
BoC Interest Rate Decision rates to be held steady at 5% (14.45 GMT)
US JOLTs Job Openings Feb consensus 8.9m vs previous 9.026m (15.00 GMT)
US JOLTs Job Quits Feb consensus m vs previous 3.392m (15.00 GMT)
Canada Ivey PMI s.a. Feb consensus vs previous 56.5 (15.00 GMT)
BoC Press Conference (15.30 GMT)
Fed Speakers
Powell (15.00 GMT)
Daly (17.00 GMT)
Kashkari (21.15 GMT)
Early Thursday
China Balance of Trade Feb consensus $103.7bn vs previous $75.34bn (03.00 GMT)
China Exports YoY Feb consensus 1.9% vs previous 2.3% (03.00 GMT)
China Imports YoY Feb consensus 1.5% vs previous 0.2% (03.00 GMT)
Switzerland Unemployment Rate Feb consensus % vs previous 2.5% (06.45 GMT)
Germany Factory Orders MoM Jan consensus -6% vs previous 8.9% (07.00 GMT)
Good luck.
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Tooth fairy deflation! Heard it @harkster first. 👊👊👊