Read on the Trading Floor - 09 Nov 2023
Today’s focus… Less talk more data please….
Macro Themes At Play
Theme 1 - WeWork, CRE, Maturity Wall
WeWork has brought the inevitable focus back onto commercial real estate, with 20 contracts broken in NYC already an example of the knock-on impact the company will have on the much-maligned CRE market.
ZeroHedge - WeWork Files For Bankruptcy, Roiling Already-Stressed Office CRE Market
WSJ - WeWork Flopped. Have Flexible Offices?
FT - SoftBank posts unexpected $6.2bn loss after WeWork bankruptcy
Fortune - WeWork founder Adam Neumann is still worth $1.7 billion even after the company's stunning bankruptcy
30 Year Mortgage Rates are also back in the headlines, this time for "better news" - as soon as 8% was clipped, we’ve had one of the fastest drops in US mortgage rates history, back to ~ 7.5%… (tight but another example of the market no longer doing the Fed’s work)
Mauldin Economics - The Housing Market Is Terrible Up until recently, the housing market was holding up reasonably well, but prices are starting to come down.
WSJ - How Work From Home Has Reshaped What Americans Buy
2023 was meant to be the year of the maturity wall, but it looks like that has been delayed until 2024 by covid savings, reopening euphoria in the leisure and service sector and the tailwind of fiscal support. 2024 year ahead pieces will start to focus on GBP and CAD weakness...stagflation, recession, credit contraction, mortgage rate average tied to the front end of the curve etc etc...
FT - Taylor Wimpey’s profit update suggests worst is over for housing sector
Deer Point Macro - Oh Canada???
Theme 2 - All talk, no action
Lagarde, Powell, Bailey, Ueda, Logan, Bowman, Lane, Nagel, … there has been more central bank interviews this week than major data points … The “signal” or hymn sheet they’re all focused on is “sticky inflation” and it being way too early to consider / talk about about cuts. The same group think that focused on transitory inflation are all now firmly in the higher for longer camp.
BoE Bailey - policy is restrictive but it’s optimistic that inflation will hit 2% in their two-year horizon.
BoJ Ueda - Warns unwinding ultra loose monetary policy is a 'serious challenge'.. FT
Bloomberg - ECB’s Villeroy ECB Won’t Hike Rates Again, Barring Shocks
Econostream - ECB’s Lane: Central Bank Reserves Should Remain Much Larger Than Pre-GFC
Econostream - ECB’s de Guindos: Any Discussion of Rate Cuts ‘Clearly Premature’
Fed - who hasn’t spoken? … Given the message is the same, it doesn't seem likely there will be large revisions in their Dec SEP dots …
MishTalk - Only 18 speeches by Fed Presidents this Week. Is that Possibly Enough?
BoC Summary of deliberations - longer term inflation expectations become well anchored.. wary consistent wage growth, sticky core
Nagel summed it up well… the final phase, last stretch maybe the hardest….. how do we trade this regime? Whats going to break? How do we protect portfolio downside of a CB policy mistake … The Fed are selling call spreads on assets as QT continues to drain liquidity from the background and lower their appeal, especially for dwindling EPS and dividend yields of equities relative to the front end of the US.
The message remains higher for longer, the market is comfortable in believing a Fed put is near as peak rates narrative engulfs the global financial system. The question then becomes, how comfortable is the market believing their is a Fed put … will the market test where it sits? Will the Fed deliver the 4 cuts in 2024 when inflation is still forecast to be above their target of 2%. At what point in time, or inflation rate will the Fed be willing to cut? Can they cut if inflation is still north of 2.5% but the 2yr forward is forecast to be lower than their mandate? Is that what the market is asking of them today as FCI loosens and the Santa rally crowd is cheered on by the soft landing cohort????? ….. err who is left to do the heavy lifting this week?
Given the European’s are closer to a recession and have their unique periphery refunding concerns … the tone of Lane, Lagarde, Nagel et al is significantly hawkish. CB’s are leaning back against the softer FCI.. but given the Nov seasonals are so strong, positioning on the back foot after the aggressive bear market rally .. what is the trigger for SPX to trade 4250 before 4550 …????
ㅤㅤㅤ
👍 If you found this piece helpful, please give it a ‘Like’ at the bottom of the page. It only takes a few seconds and helps our free commentary reach a wider audience.
Top Pieces
Discovered on Harkster.com
Axios - Mike Johnson's 10-day shutdown test threatens to end speaker honeymoon
FiveThirtyEight - Haley Takes On Ramaswamy And DeSantis
MacroHive G10 FX Weekly - USDJPY Heading into the Danger Zone
Adam Mancini - SPX Is Consolidating/Resting To Setup A Large Leg; What Way? November 9th Plan
Axios - Oil prices drop to 3-month low amid record U.S. production
The New York Times - Why Are Oil Prices Falling While War Rages in the Middle East?
ㅤㅤㅤ
Stay informed throughout the day with our new commentary feed (‘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.