Read on the Trading Floor - 16 Jan 2024
Today’s focus… Iowa, Hawks pushback against market pricing, bank earnings and much more
Macro Themes At Play
Theme 1 - Trump vs Biden 2.0?
Theme 2 - Sticky inflation and CB chatter from Davos
Theme 3 - China... can the economic tanker be turned around?
Theme 4 - Bank earnings, 25%, Apple
Theme 5 - Regional escalation in the Middle East?
Further reading and listening of note
Theme 1 - Trump vs Biden 2.0?
Trumps resounding success in Iowa is not a guarantee he will be the next Rep nominee, but it delivers a heavy dent to the prospects of his Republican competition. With Biden lagging behind Trump in the polls despite a $5trillion fiscal spend, is the race for the WH already done?
It is for Vivek, dropping out of the race and endorsing Trump.
DeSantis (21%), will be happy to have pipped Hayley (19%) for second place having spent a considerable amount of time , energy and funds in each of the individual counties within Iowa. He had staked his candidacy’s future on overperforming (in the race for second) in Iowa.
Hayley's strategy was looking past Iowa and into New Hampshire (next up - Jan 23rd) where she is polling just 10% behind Trump (Chart below).
Hayley and DeSantis are in a very important race, given the legal uncertainty surrounding Trump. If he was deemed ineligible, second place could quite quickly become first and the presumptive Republican nominee.
Extracts from the "US Elections" feed on harkster.com
FiveThiryEight - Trump Wins Iowa. Now What?
FT - Iowa rarely predicts a winner but Trump may be the exception
Axios - Vivek Ramaswamy suspends 2024 presidential campaign and endorses Trump
Bloomberg - Trump Trounces Rivals, Advances Toward Biden Rematch
FT - Path for Haley or DeSantis upset over Trump narrows on road to New Hampshire
Source: FiveThreeEight New Hampshire : President: Republican primary : 2024 Polls
Theme 2 - Sticky inflation and CB chatter from Davos
As expected, Canadian CPI popped to 3.4% from prior 3.1% reading. In a vacuum of top tier data this has provided fuel to the broader fixed income sell off (US 10s at 4.06%) that had started with ECB Holzmann's ("lingering inflation and geopolitical risks may prevent the ECB from cutting at all") comments on MLK Day. The message from Davos is clear, the market is "premature" to expect DM central banks to be cutting in March. Even Hildebrand (once of SNB now of BlackRock) is back in the headlines "price increases in services are still prevalent and that wages are increasing rapidly" {Bloomberg - Davos 2024: Sticky US Inflation Will Wrongfoot Rate Bets}.
and if the market was in any doubt, the Fed's Waller reset March pricing (ZeroHedge)
*WALLER: NO REASON TO MOVE AS QUICKLY, CUT AS RAPIDLY AS IN PAST
*WALLER: FED CAN CUT `THIS YEAR' IF INFLATION DOESN'T REBOUND
*FED'S WALLER: WHEN CUTS BEGIN, SHOULD BE METHODICAL AND CAREFUL
Econostream Media - ECB’s Villeroy: Barring Surprises, Next Move Will Be to Cut, Likely in 2024
Bloomberg - ECB Cut Very Probable in 2024 But Timing Open, Villeroy Says
FT - ECB resists spring interest rate cut as price expectations ease
Bloomberg - Davos 2024: IMF’s Gopinath Says Market Bets on Rate Cuts Are ‘Premature’
Source: CME FedWatch tool
Theme 3 - China... can the economic tanker be turned around?
Do we need more than new stimulus? How can Chinese households gain some confidence and revert their post covid spending pattern? As stocks hit multi year lows, bearish sentiment dominates, what are the signals for MSCI China to start to outperform?
Bloomberg - China Weighs $139 Billion Sovereign Bond Sale to Boost Economy
FT - China’s economy faces ‘critical year’ to dispel deflation and revive confidence
Theme 4 - Bank earnings, 25%, Apple
MS produced solid returns in 2023, lead by a 5% rise in Q4 IB performance (FT)
Regional banks next up, potential bad news on loans and/or deposits as the GSIB's dominate the $ flows
Tesla - 25% please or I'll take my AI and robotics toys elsewhere
Apple phones on discount in China and watch patents still in disputed
Theme 5 - Regional Escalation in the Middle East?
.... Iran/Syria, Houthis/US Allies, Israel / Gaza, the clashes and proxy wars continue to spread slowly across the region.
AP News - Houthi missile hits US-owned ship off Yemen in Gulf of Aden
Bloomberg - Iran Hits ‘Israel Spy Base’ in Iraq as Mideast Tensions Grow
Steno research - When Will the Red Sea Crisis Be Over?
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Top Pieces
Discovered on Harkster.com
Man Group Views from the Floor - Markets Turn Greedy
The Daily spark by Torsten Slok - Pivot Party continues
Brent Donnelly am/FX - "Sentiment and the nominal economy have decoupled and there is no guarantee they will recouple anytime soon" (Bitcoin and EU/UK rates)
Livesquawk - ZEW German Investor Outlook Shows Surprise Increase On Rate Cut Hopes
MS: The Beat - Our Seven Key Themes for 2024
Steno Research - Peak dovishness (in the USD)?
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Please spell Nikki Haley's name right