Read on the Trading Floor - 29 Feb 2024
Today’s focus… Inflation, housing, crypto and much more
Macro Themes At Play
Theme 1 - Fed’s Favourite Inflation Indicator
Theme 2 - ECB another print closer to the first cut
Theme 3 - Housing vs CRE
Theme 4 - Crypto
Further reading and listening of note
Theme 1 - Fed’s Favourite Inflation Indicator
We're stuck in this uncomfortable state of pause, moribound consolidation now that rates mkt has converged to the Fed dots, Williams confirmed that 3 cuts are still on the table and PCE drops as expected from 2.6% to 2.4%. With the data inline with the mkts expectations and the rates curve inline with the dots, is it all priced to perfection? What can eventually knock us from this utopia of calm. Trading is a game of patience, but after 3 years of over stimulation, we've got to get used to this new and old low vol regime (until something breaks).
Steno Research - THE INFLATION TARGET IS COMING INTO SIGHT
FT - US inflation falls to 2.4%, according to Fed’s preferred measure
Bloomberg's Simon White via ZeroHedge - No Asset Class Is Remotely Ready For More Inflation
The Inflation Guy / Mike Ashton - AI: Even a Big Deal is Smaller Than You Think
The NY Time - A Key Inflation Measure Moderated in January
Axios - Fed's favorite inflation measure confirms quicker price gains in January
Theme 2 - ECB another print closer to the first cut
Germany's CPI dropped to 2.5% in Feb, from 2.9% in Jan crucially more than market expectations of 2.6%. However, did it open an ECB cut? The data from France (2.9% vs exp 2.7%) and Spain (Core at 3.4%) was more mixed, and potentially there is enough for the hawks to win out a little while longer...
ING - German disinflation continues in February, sending mixed signals to the ECB
Steno Research - EUR-flation Watch: Hands down, I was wrong..
Theme 3 - Housing vs CRE
In the UK, mortgage approvals are ticking higher as rates markets settle, tensions ease whilst in the US the wealth effect from housing is driving a larger divide between home owners and renters.
Daily Chartbook - US housing market. "The U.S. housing market gained $2.4 trillion over the last year, bringing its total value to $47.5 trillion."
.... It's still the CRE portfolios that are indicating the large loss provisions with 1 in 4 US loans now in default territory for Aareal Bank.
FT - UK mortgage approvals surge to highest level since October 2022
FT - Private equity-owned German bank hit after 25% of US office loans default
Source Redfin via Daily Chartbook
Theme 4 - Crypto
I take full responsibility for ringing the bell yesterday, as i'm a natural pessimist to the use case of crypto but I have found myself becoming more encouraged by the EM utilisation story, the ETF inflows and of course the impending halving. As is so often the case when there are no bears left, thats the top and it was hardly a surprise to see a technical failure and a 10% drop in XBT. A period of stability following a 40% rally is probably well overdue until we get the next wave of momentum into the halving.
Unchained - Is it time to take profits
Fidenza Macro - Crypto entering its parabolic phase
The Wolf Den - I can’t keep up
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Top Pieces
Discovered on Harkster.com
The Economist - Are passive funds to blame for market mania?
The NY Times - OpenAI and Sam Altman Face More Scrutiny
FT - Chancellor’s plan to scrap non-dom tax status intensifies pressure on Labour
FT - UK vows to bring legislation to create football regulator before election
MacroHive - America’s Turbo Economy
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