Read on the Trading Floor - 06 Dec 2023
Today’s focus… ECB the only story in town
If you haven’t upgraded yet, subscribe now for just $24 to continue reading all four HarksterPRO newsletters.
Read on the Trading Floor will gradually move behind a paywall over the next week with limited free content. From December 11th, we will only send the newsletter to paid subscribers.
Macro Themes At Play
Theme 1 - Wake me up at Friday 13.30GMT
Theme 2 - ECB Hike, Pause and then Cut
Further reading and listening of note from Harkster.com
Theme 1 - Wake me up at Friday 13.30GMT
Holiday party season has started with Londoners flocking to Mayfair to pay over £7 for a pint (sigh) and it feels like the broader market is also hungover, suffering from November's exuberance. With NFP, CPI and Fed ahead of us, as well as the prospect of the year end pnl mark, the bar to trading on second tier data is simply too high to get participants excited.
German factory orders didn't even come close to the exp 0.2% print, dropping 3.7% MoM (-7.3% YoY). Hardly a surprise when construction PMI is at 36.2 vs prior 38.3.
Bailey - second half of inflation battle will be 'hard work'... (Bloomberg - BOE’s Bailey Resists UK Rate Cuts for ‘Foreseeable Future’)
30 yr mortgage rates now down to 7.17%
ADP 103k vs exp 130k and prior 106k.
BoC - a hawkish hold @ 5% (ING - BoC retains its hawkish bias)
Theme 2 - ECB Hike, Pause and then Cut
Coming on the back of Schnabel's turn (Reuters), cuts cuts and more cuts are landing in the Eurozone, with a 90% chance of a Q1 cut...
Reuters - Deutsche Bank expects ECB to cut rates by 150 bps in 2024... 50bps in April and June, 25 in Sept and Dec.
Nordea - EUR rates: six rate cuts in 2024
The Lead - Lag Report The ECB Is Next
Bloomberg - When Will the ECB Cut Interest Rates: Markets Ramp Up Bets
Econostream - ECB Insider A Rate Cut Is Our Likeliest Next Move, But Won't Come Soon
However, Brent argues we may not be at the best location for a short EUR trade... (am/FX - Euro Support). Furthermore, ECB's Kazaks pushed back against H1 cuts (Bloomberg - ECB: Inflation Path Likely To Remain 'Bumpy' Says Kazaks) and Pictet don't see a cut delivered until Q4 (Bloomberg - When Will ECB Interest Rates? Not Soon, Pictet Says). Finally, may the force be with you if your long bunds..... ECB’s Kažimír ‘Expecting a Cut in q1/24 is Science Fiction.
ㅤㅤㅤ
👏 If you found this briefing helpful, please show the desk some appreciation by giving it a ‘Like’ or a ‘Comment’ at the bottom of the page.
Top Pieces
Discovered on Harkster.com
FT - BlackRock to roll out first generative AI tools to clients next month
Steno Research - Something for your Espresso: USD liquidity stress. Will the Fed panic?
Govt takes an approx. $6bln hit on CB bond purchases that did little to inflate assets
Blockchain and tokanisation in TradFi
Reuters - ChatGPT one year on: From viral AI bot to OpenAI's boardroom battle
Bloomberg - Corporate Defaults: Companies Are Going Broke Gradually, Not Suddenly
ZeroHedge - US Treasury Rally Is Starting To Look Long In The Tooth
We didn't see these stories in Oct when 10s where above 5.20%
ㅤㅤㅤ
Stay informed throughout the day with our new commentary channel (‘Intraday Market Colour’) highlighting key notes, topics du jour, and HarksterHQ’s market updates around key data points and headlines.
Available on the Harkster Research Platform.
ㅤㅤㅤ
ㅤㅤㅤ
ㅤㅤㅤ
The information provided in this post is for general information purposes only. No information, materials, services, and other content provided in this post constitute solicitation, recommendation, endorsement or any financial, investment, or other advice. Seek independent professional consultation in the form of legal, financial, and fiscal advice before making any investment decision.
how about a December cut by Lagarde and co? that would get things going!