Morning Call Script - 01 Feb 2024

Overnight asset drivers & the impending data calendar

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What’s Moved Overnight

• Fed holds the line... not as softly spoken as doves were hoping for. Cuts are still coming (in May) but he certainly didn't sign off on March. It is simply not their base case. NFP on Friday and CPI Feb 13^th are the key data points that can bring March back onto the table. With 2s having rallied over 10bps to 4.25%, futures are now pricing in 32bps of cuts for May (25bps plus a probability of needing 50bps if real rates are too high).

  • ING - US Fed indicates March likely too soon for a rate cut

  • FT - Waiting for rate cuts 

  • Bloomberg - A Fed Rate Cut in March Is Now Pretty, Pretty Unlikely

• NYCB drops > 35% taking KBW regional bank index down 6%. Loan loss provision has soared on signs of weakening credit quality as well as expected increase in regulation scrutiny. They've become the epicentre of the risks lying underneath the surface in commercial real estate. Hawkish Fed, Regional bank sell off... markets don't repeat but they most certainly rhyme

  • Bloomberg - NY Community Bancorp Plunges as Real Estate Risks Jolt Market

  • Reuters - Moody's puts New York Community Bancorp on review for potential 'junk' downgrade

• Caixin PMI on the screws at 50.8, South Korean PMI 51.2 vs exp 49.9

• Asia followed wall street's lead... stronger USD, softer equities ... EUR 1.08, AUD 0.6540, CNH 7.1920, Gold 2043, US 10s 3.95%, Nikkei 35920 and CSI 3222.

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Have a great day, and keep smiling!

Podcast for the Commute

• Forward Guidance - Joseph Wang On “Hawkish” Fed Meeting: March Cuts Unlikely, Tapering of Quantitative Tightening (QT) To Begin In Q4 2024

The Day Ahead

• SEK (08:30): Riksbank

• EUR (08:50): French Manufacturing PMI

• EUR (08:55): German Manufacturing PMI

• EUR (09:00): Eurozone Manufacturing PMI

• GBP (09:30): UK Manufacturing PMI

• EUR (10:00): Inflation Rate

• GBP (12:00): BoE

• USD (13:30): Initial Claims

• ECB Speak: Lane (11:30) and Lagarde (13:45)

• CAD (14:30): Manufacturing PMI

• USD (15:00): ISM 

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