Read on the Trading Floor - 26 Oct 2023
Today’s focus… ECB, Nasdaq, Bitcoin, US data and more
Macro Themes At Play
Theme 1 - ECB Review ...
As expected, it wasn't the main event of the day, with gamma barely performing. G10 FX remains dormant relative to the “fun” being had in Nasdaq / US fixed income (more below). The board acknowledged September's marked drop in inflation and Lagarde mentioned the weakening economy several times. Crucially there were no amendments to the minimum reserve requirement ratio or PEPP reinvestment programme. In fact, Lagarde indicated that neither of these potentially hawkish risks were talked about today. Leaving us with a data dependent, potentially choppy market for EUR and bunds until we see the Dec staff forecasts.
ABN Amro - Key takeaways from the ECB meeting
Nordea - ECB Watch: Permanent Pause
With Italian-German spreads widening out past 200bps, one of the key focuses / risks is if the ECB step back from PEPP earlier than their end 2024 forecasted end date. It's worth flagging a well-timed piece from Chris March, Money: Inside and Out - Italian households keep the faith. "Net ECB purchases from the PEPP picked up in the Spring of 2022, but have since been a fairly small and cannot explain BTP performance; The big buyers have been Italian households and corporates, who have rotated out of broad money into direct holdings of government securities."
Finally battling stagflation is not the only concern for central banks as they look into 2024. Riksbank have already asked for capital support, the QE bump CB's gave government budgets is now being reversed by the large IR moves. Will politican's pay? Steno Research have been leading this narrative ...
- Central banks are insolvent. How do we deal with it?Theme 2 - Bitcoin holding onto gains despite Nasdaq correcting 10%
It's been a difficult October for Meta, Alphabet, Tesla, Nvidia and many more, in fact ZeroHedge are reporting Zuckerberg has already spent 50bln on the metaverse project. @HarskterHQ are not equity experts, so we're happy to delegate the task to The MacroTourist by
- WHEN THE MATH CHANGES... "30-year bond yields 0.6% more than the Nasdaq forecasted earnings yield!... Why buy stocks with an uncertain future when you can buy bonds with a more certain cash flow?"Since covid hit, Nasdaq and Bitcoin's correlation has been quite high, however the force is most certainly with "electronic gold" despite the tech heavy equity sell off, whether it's the halving, it's prominence once again during periods of geopolitical tension or anticipation of a wave of ETF's being launched, it's been a remarkable strong period for XBT. Will it continue?
Nautilus Research - Some Thoughts on Bitcoin
An excellent new source of research that has come to our attention over the past few weeks is
. The Nautilus team have on average over 20 years experience in research and the investment management industry. They have been publishing their systematic signals for their hedge fund clients for over a decade, with a stellar track record and @HarksterHQ is looking forward to following their recently launched Substack here…..
Theme 3 - US Data, Strikes and Politics
GDP exceeded expectations but PCE softened
A blow off top in growth? Potentially driven by one off growth frenzy from Barbie / Oppenheimer / Taylor Swift / Beyonce etc etc
Scotiabank - U.S. Economy Beats, Core PCE Misses — Which One To Emphasize?
MishTalk - Blowout 4.9 Percent Increase in GDP But Real Disposable Income Declines 1.0 Percent
Apollo Academy (Torsten Slok) - Inflation Reaccelerating in Recent Months
We've ended the day with a good 7yr auction after a shocking 5yr print earlier in the week. rates markets are happier with 10yr once again consolidating below 5% after threatening to break higher.
The market is happy to see positive movement in the House and towards the end of the UAW strike
Gzero Media - A speaker at last
Axios - Mike Johnson's 20-year paper trail is an opposition researcher's dream
FT - Ford reaches deal with union to end US strike and raise wages
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