Read on the Trading Floor - 02 Oct 2023
Today’s focus… quiet session, with China on holidays, quarter end moves reversing in USD/Rates and NFP back on the data docket
Theme 1: Funding approved for the US government (well until Nov 17th at least)
McCarthy's future now with the Dems ... will they support or remove him? The internal civil war between McCarthy and the Freedom Caucus is a key determinant of how the GOP would like to align itself and what its message will be to the electorate on the 2024 POTUS campaign trail. Afterall, a shutdown did not play well in the opinion polls (77% objected)
Ukraine funding has become a topic of debate in US politics. Will this spread around the world as stagflation hits economies hard?
Reuters - Biden presses Republicans on Ukraine, says 'brinkmanship has to end'
FT - Robert Fico wins Slovakia election with anti-Ukraine stance... The former prime minister is set to try to form a coalition that could undermine EU support for Kyiv and brings another anti-Ukraine voice into the EU alongside Hungary's Orban. To avoid a hung parliament, Fico needs to galvanise enough support amongst Slovakia's fragmented political landscape.
WSJ - As U.S. Aid to Ukraine Falters, Europe Faces Its Own Limits on Help
Theme 2: with the shutdown averted for 45 days, the focus returns to the US data...
The docket is filled with key leading indicators (ISM Services and Manufacturing) as well as an update on how further along the economy is rolling down the labour market normalisation trail (Initial Claims, Jolts, ADP, AHE and NFP). Elsewhere, OPEC is the main event for oil (ING), RBA meeting (Westpac), RBNZ Oct MPR (Westpac) and not to be forgotten, Canadian Employment prints.
The Morning Hark - Oct 02
Christophe Barraud - Week Ahead Preview: Central Bankers’ Speeches; U.S. Employment Report; BOJ Minutes; RBA, RBNZ and RBI Meetings
Pepperstone - The Marquee Event Risks to Navigate This Week
Yardeni Research - The Economic Week Ahead: October 2-6
Theme 3: last mile of disinflation is the hardest .... (not quite a line from a Xmas number one)
The market saw a decent moderation in inflationary readings to end last week from Tokyo, Europe and PCE in the US. However, victory has not been declared yet, oil prices continue to cause concern and i'm sure the wave of CB speak this week, especially from the Fed, will reiterate the "Higher for Longer" mantra. It will only be the aforementioned data docket that can reverse this trend in the long end, not the forward guidance. They are trying their best to not signal the end of hiking cycle and unleash the markets animal spirits. (WSJ - The Bond Regime Change That Is Whacking Stocks, in Six Charts)
FT - 'Last mile' of disinflation the hardest, warns ECB deputy head
Econostream Media - ECB Insight - De Guindos Attempts to Beat Back Dovish Expectations
Odd Lots - The Fed's Barkin appears on Odd Lots
Bloomberg - Why a US Recession Is Still Likely - and Coming Soon
H/T
The MacroTourist Weekly Wrap (link) had one outrageous nugget... "I would like to highlight a trade done earlier in the week by some whale of an account. They sold over 100,000 contracts of the November Fed Funds Future. This trade had a notional of $475 billion! This trade benefits if the market’s expectation about the chance of a November hike increases."Theme 4: Blind Squirrel Macro
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- Seeing Red over Red Tapeㅤㅤㅤ
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Some further reading of note as SBF's trial commences (Lewis also launches his book), Italian yields come under pressure, China goes on holiday, Hunt / Sunak to cut taxes via "lowering inflation" and
reviews their most talked about plays in 2023...CBS - Michael Lewis Interview ahead of his book (Going Infinite)
Coindesk - Sam Bankman Fried Goes on Trial Tomorrow
ING - Italian bonds and the euro: Will it be different this time?
SCMP - China sees travel booming in first golden week holiday since end of covid restrictions
FT - Rishi Sunak will not commit to tax cuts as fractious Tory conference starts
- - Monday Morning in the Coop.
Have a great day and keep smiling
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Wow! Thank you Team Harkster!
It's true, he seems to gather more than his fair share of nuts despite his ostensible lack of vision.