Read on the Trading Floor - 08 Nov 2023
Today’s focus… US auctions, CB speak, 2024 previews and more
Macro Themes At Play
Theme 1 - Central Bank Speak ...
ECB Consumer Inflation Expectations rose to 4% in 1yr ... double the ECB's mandate and 80bps above the 3.2% staff forecast for next year.
Reuters - Euro zone consumers raise inflation expectations in headache for ECB
As a result, it puts in context why Central Bankers are pushing back (again) against 2024 cuts. BoE's Bailey, Bundesbank's Nagel and others all delivered the same message - its too early to discuss cuts, not helpful, last mile may be the hardest to get inflation sub 2%
Bloomberg - BOE Governor Pushes Back Against Market Bets on Early Cuts
Bloomberg - ECB Rate Cuts Too Soon Would Be Costly Mistake, IMF Warns
No surprises from Powell headlines.... his opening remarks did not comment on the outlook for Fed policy
Theme 2 - US Fixed Income Auctions and GDPNow > 2%
Logan / Goolsbee / Waller ... did little to derail the rates rally (10s currently 4.53%)
We've already seen a strong 3-year auction after last month's dismal tail event. Primary dealers took down 16.3% which was slightly below its 1year avg 17%
All eyes now on the 10-year auction this evening, $40bln at 18:00 (GMT) and tomorrow's $24bln 30yr auction... The Treasury is testing the waters for the first time since the QRA announcement
Atlanta GDPNow back > 2%... "The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the fourth quarter of 2023 is 2.1 percent on November 7, up from 1.2 percent on November 1". It's an extremely noisy nowcast, but this is something to keep an eye on if we trend back towards 3% growth on the back of US data showing greater resilience in Nov. This will force a rethink of the 4 cuts priced into 2024 and US10s rallying back towards 5%.... stronger data = Fed needs to do more ...
Theme 3 - China
Ahead of this evenings key inflation data from China, there is very little focus on a potential meeting between Xi and Biden at next week's APEC summit. It's odd to see such an indifference from the market. Given the elevated tensions / chip wars between the nations and the impact US corps are feeling from US regs limiting their ability to export into the Chinese consumer market, any positive headlines from their meeting is not priced by the street.
Apollo Academy - Outlook for China
Bloomberg - China's Xi Jinping to Meet US Business Executives for Dinner in San Francisco
Theme 4 - Looking into 2024 as previews start to hit Harkster.com...
TKer by Sam Ro - Here comes Wall Street's 2024 outlook for stocks 🚨
Brent Donnelly - 2024, the biggest year ever
Steno Research - Great Game - 3 key predictions for the Ukraine war in 2024
Axios - Biden's 2024 campaign team roiled by Israel-Hamas war
Visual Capitalist - The Fastest Growing Economies In 2024
ING - Banks Outlook 2024: Banks in a world of higher for longer
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