Read on the Trading Floor - 12 April 2024
Today’s focus… street forecasts, earnings, commodities and much more
Macro Themes At Play
Theme 1 - The street changes their Fed forecasts
Theme 2 - Soft launch to Q1 earning season
Theme 3 - Commodities ignore USD strength
Theme 4 - Week Ahead Previews
Further reading and listening of note
Theme 1 - The street changes their Fed forecasts
Economists on the street have started to mark to market their expectations for the Fed cycle as the US economy simply does not need rate cuts given the resilient labour market, easy financial conditions, wealth effect from the AI fueled equity rally, the 5.25% coupon the US Treasury now pay savers, the last mile of disinflation stalling, 3 hot inflation prints in a row, rise in commodity prices and heightened freight costs.
For example, DB have felt the need to reevaluate their Fed view. "As we discussed in our recent note (see "(Pushed) Back to December") we now expect only one rate cut this year, at the December FOMC meeting followed by modest further reductions in 2025. A reduction in July is possible, though it likely requires a string of more favourable inflation prints than we currently forecast."
ZeroHedge - The Case For Owning Treasuries Is Evaporating
Barclays - Sept cut and 4 next year
The BondBeat - while WE slept
Bloomberg - First Fed Rate Cut Won’t Come Until December, Deutsche Bank Says
Steno Research - G3 Rates Watch: No one’s got a clue on R*, yet the market is convinced that it does!
Steno Research - Portfolio Watch: The USD wrecking ball is back
Brent Donnelly am/FX - Breakdowns
Theme 2 - Soft launch to Q1 earning season
The rise in US ISM normally projects to a rise in Q1 EPS (Source BofA via ISABELNET). This has yet to be seen with JPM profits rising 6% but their worrying outlook disappointing investors and leading to a heavy futures market on the NY open.
Saxo Bank - Q1 earnings season starts today
ISABELNET - U.S. ISM Manufacturing PMI vs. S&P 500 EPS Growth
FT - JPMorgan profits rise 6% despite $725mn regulatory charge
FT - Citigroup profits beat forecasts as bank sheds thousands of jobs
Theme 3 - Commodities ignore USD strength
Gold, silver, copper.... the flows are there, momentum is strong and it's even more impressive to see commodities outperform as global assets reset to a limited 2024 Fed rate cutting path. Financial conditions remain easy, global manufacturing PMIs are turning around but the correlation breakdown between USD and metals is extremely rare and am sure has proved costly for many a PCA fair value trading model. Everyone is focused on CB flows as JPY and Yuan weaken relative to the USD, others are focused on retail from traditional buyers in India through to Costco selling gold bricks ... social media at work again as retail investors flock to Costco?
WSJ - Gold Futures Hit New Record on Central Bank Buying, Safe-Haven Demand
Bloomberg - Copper Rally Continues With Surge to Highest in 22 Months
FT- Rio Tinto’s increasing copper exposure will add colour to its stock
The Macro Trading Floor - Yes, But What Will Break Markets?
NY Times - Gold Bar Sales Are Surging at Costco. Why?
Theme 4 - Week Ahead Previews
ABN Amro - The week ahead - 15-19 April 2024
ING - Asia week ahead: China data deluge and Japan’s inflation report
Nomura - High for Longer?
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Top Pieces
Discovered on Harkster.com
BoE - Forecasting for monetary policy making and communication at the Bank of England: a review
Axios - JP Morgan Chase, Morgan Stanley and other big banks race to get AI right
NatWest - Bucks' fizz
The New Yorker - What Phones Are Doing to Reading
FT - Police investigating Angela Rayner over council house sale
WSJ - Energy-Guzzling AI Is Also the Future of Energy Savings
ING - AI productivity gains may be smaller than you’re expecting
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