Morning Call Script - 13 Oct 2023
Overnight asset drivers & the impending data calendar
4.67% and US10s back in focus after PPI and CPI failed to deliver a comforting message to the market. Rent increases, core services inflation accelerating again, combined with a strong labour market and a resilient economy have forced a repricing of Dec odds to ~40% (more here Read on the Trading Floor).
We can all see the leading activity indicators turning lower (looking at you housing) but the fiscally fuelled US economy is just too strong and the labour market too resilient for the Fed not to worry about re-igniting inflation and wages pressures. This week's PPI/CPI data set does not give a high degree of confidence or project with comfort a return to 2% inflation target.
After recent losses, USD has rallied back to target 150.00 in USDJPY, is on a 1.05 handle vs EUR and putting upward pressure on ADXY. Yesterday's USD gains have been maintained/consolidated overnight with AUD 0.6315, GBPUSD 1.2205 and NZDUSD 0.5920.
China continues to show the opposite to the US, consumer inflation unchanged in September, below the +0.2% street forecast (Reuters). Exports remain weak but not as bad as expected, -6.2% vs -7.6% forecast.
The mixed Chinese trade data and the increase in Fed hiking odds has weighed on global equities, curbing the 3-day rally to start the week. MSCI Asia-Pacific ex Japan down 1% overnight, European futures also looking softer into the open.
Earning season is also upon us, JPM / Citi / Wells Fargo to kick us off. Focus will be the extent of loss provisions around "hold to maturity" portfolios.
Have a great day, and keep smiling!
EUR (07:00): Inflation - Sweden
EUR (07:45): Inflation - France
EUR (08:00): Inflation - Spain
EUR (10:00): Eurozone Industrial Production
EUR (14:00): ECB Lagarde
USD (14:00): Fed Harker
USD (15:00): University of Michigan Inflation Expectations and Consumer Sentiment
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