Read on the Trading Floor - 18 Mar 2024
Today’s focus… BoJ-eve, politicians manoeuvre and much more
Macro Themes At Play
Theme 1 - BOJ-eve
Theme 2 - The Campaign Trail
Further reading and listening of note
Theme 1 - BoJ-eve
Extract from The Morning Hark (18 March) - "Main focus for the week is the BoJ meeting and will this be the one, after eight years of negative rates, to see Japan return to a positive, or at least zero, rates? If the leaks in the Nikkei and Jiji news services are to be believed then yes as they have been full of headlines proclaiming that the BoJ members are readying themselves for such an event. If so then this would be the first rate rise for Japan in 17 years. However the flip side, lead by Governor Ueda’s latest dovish comments, would suggest otherwise. He recently proclaimed that the BoJ was “not yet in a position to foresee the achievement of a sustainable and stable inflation target”. If they go I guess he will face some tricky questions; after 8 years what has changed his mind in 2 weeks? Whatever happens rates seem set to move higher in either March or April. March is favoured on the back of the first wage deal announcements which point to a general consensus of over 5% wage hikes. In addition a hotter profile for CPI is expected, with this week’s print for February YoY getting close to 3%. April’s arguments centre around the fact its the start of the new financial year, government fuel subsidies will end giving a further “boost” to inflation and the BoJ will release a new set of economic projections. In addition there is still an economic hangover from the earthquake back in January. If they do go this week what to expect? Consensus seems to be gathered around a 10bp hike. YCC are also expected to go but will they go cold turkey or offer the markets some methadone? Some have pointed to them offering a package of buying a fixed amount of bonds rather than targeting a yield level to avoid any market turbulence and an unwarranted spike in rates. Alternatively they continue to buy with a commitment to slowly decrease the amount of purchases and a commitment to not reinvest proceeds. Finally do they just cease from buying but commit to intervening as and when necessary? There is also the small matter of the risky asset purchases (ETFs and Real Estate Funds) which again will probably cease. On forward guidance again any mention of the massive stimulus package to achieve the 2% target will probably be removed but an accommodative stance will be retained for the time being. One things is for sure, not matter what they do this week the BoJ are not going on a long rate hiking program its going to be very slow and steady. Buy the rumour sell the fact!"
Further reading from Harkster, your research inbox...
Blind Squirrel Macro - Big in Japan
The Lead-Lag Report - That "Something" That Could Change Everything
ING - FX Daily: The yen needs a dovish Fed more than a hawkish BoJ
Bloomberg - What Happens When the BOJ Kicks the Football
Bloomberg - BOJ Rate Hike on Tuesday Is Now Widely Expected After Wages Jump
MacroHive - Markets to Watch: USDJPY To Rise Despite BoJ Rate Hike
Nikkei Asia - Japan's wage hikes create game-changing inflation dynamic as BOJ meets
Theme 2 - The Campaign Trail
Trump lines up Powell’s replacement, Biden to call Netanyahu, Sunak is trying to keep the band together and have Labour misjudged the benefit of adding VAT on fees?
Capital flows and Asset Markets by Russell Clark - TRUMP OR BIDEN? DOESN'T MATTER - THE POLITICS IS THE SAME
The Telegraph - Labour’s private school tax raid ‘could cost taxpayer £1.6bn a year’
WSJ - Trump Economic Advisers Float Three Names for Fed Chair
Axios - Biden and Netanyahu to hold first call in a month amid public split
FT - Sunak to promise help for Britain’s small businesses in effort to woo voters
FT - Rishi Sunak struggles to maintain grip on power as 65th Tory MP calls it quits
The Telegegraph - Sunak urges Tories to ‘stick with the plan’ as leadership talk grows
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Top Pieces
Discovered on Harkster.com
TKer by Sam Ro - The truth about the hundred of billions of dollars worth of stock buybacks
Bloomberg - Apple Is in Talks to Let Google Gemini Power iPhone AI Features
Steno Research - CRYPTO CRISP: PROFIT-TAKING
Reuters - SNB to wait until at least June before cutting rates modestly - Reuters poll
Steno Research G5 Rates Watch - Mirror mirror on the wall, who’s the biggest interest rate cutter of them all?
Man Institute - Center Stage: What’s Next for Credit in 2024?
UBS CIO Strategy Snapshot - Speed bumps
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