The Morning Hark - 07 Sept 2023
Today’s focus... Initial claims and a lot of Fed Speak
China's trade data was better than the markets low expectations but still deep in contraction territory. Exports were -8.8% YoY vs exp -9.2% (prior -14.5%) whilst imports dropped 7.3% vs exp -9% (prior -12.4%). (FT, Reuters)
BoJ Nakagawa speech focused on maintaining ultra loose policy which has not slowed USDJPY approach to 148, and a 10 month low for the JPY (Reuters)
In his last speech, RBA Governor Lowe focused on lifting productivity to help return inflation to target. (RBA Release: Some Closing Remarks)
PBoC continue the fixing fight against USD strength, 54 straight days is now the longest streak of stronger than expected fixings (BBG).
Equities: Heavy close for wall street has fed into Asian stocks, with Chinese data also weighing on sentiment.
US10s flirting with 4.30% (post pandemic high) after the exceptional set of ISM data prints... Beyonce, Taylor Swift, Barbie and Oppenheimer all propelled consumption. This was offset somewhat by a more balanced outlook in the Fed's Beige Book release. The weakness in Yields continues as we drift along a second-tier data calendar waiting patiently for next week's CPI print.
The Gryning Times (Energy Inflation): "return of rising year-over-year oil prices, within the inflation data, will not be in next week's report (the August CPI report). If we look at the price records from the EIA (Energy Information Administration), these August prices are still being measured against a high base of August 2022 prices ($94 oil, $7.28 natural gas, $4.08 retail gas)."
Goldman Sachs via Daily ChartBook #274: "We continue to expect core CPI and especially core services ex. housing inflation to accelerate in the coming months but to slow more quickly next spring."
Weak German data is now a daily occurrence with IP dropping from bad to worse this morning (WSJ, BBG, ING). With inflation remaining elevated, base effects supporting the "sticky inflation" narrative and many of the ECB members pointing to one more hike, Stagflation has been an ever-growing theme as inflation remains elevated but activity gapping lower. Yesterday's ISM data was a clear signal of the $5trillion fiscal support and the expanding deficit that is driving US growth relative to the slowdown that we're already seeing in Europe and China. Ahead of next week's all-important meeting, ECB Previews are starting to hit Harkster.com dedicated ECB Channel.
ING: A Final Hike
Nordea: EUR Rates: open-minded ECB pause
Nordea: Hawkish Hold
Pepperstone: Playbook For the September ECB Decision
Econostream Media: ECB's Nagel: "We Are Still Far From Meeting Our Inflation Target"
Was the market really pricing a BoE terminal rate north of 6.20% just a few months ago? The maturity wall looks like it is finally starting to encroach on consumer spending as housing prices naturally reset by 5% or so YoY. Froth maybe coming out of the market but let's be honest, we're still far from the lows seen post Covid and affordability is most certainly a concern for millennials (#generationrent). Bailey got the pound moving yesterday as once again he indicated rates are near the top (FT: BoE’s Bailey casts doubt on need for further interest rate rises), bringing some good news for those looking to refinance in the coming months. Have we seen peak UK rates? When will we see the first cut? Anecdotally there is most certainly a shift in UK behaviour as pub talk no longer centres around the search for a post covid once in a lift time trip/experience and has flipped to household survival mode and the impending credit squeeze.
Elsewhere SEK weakness is an evolving narrative on app.harkster.com
ING: Swedish krona still searching for the bottom, but the Riksbank can help
ING: Riksbank set for at least one more hike despite fragile economic backdrop
whilst in EM, the surprise 75bps NBP cut has certainly put the cats amongst the pigeons...
FT: Poland prepares pre-election rate cut despite double digit inflation
Raiffeisen: Poland Watch: The easing cycle starts with a bang
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FT: China’s ‘piecemeal’ stimulus plan stirs hope in property market
S&P Global Market Intelligence: Global PMI shows recovery fading further in August as developed world output falls
MS Thoughts on the Market: Congressional Return Raises Questions for Markets
Adam Mancini: Major Breakdown For SPX - Will The Dip Get Bought?
Follow the latest market narratives through our curated research & commentary channels on Harkster.
All times in British Summer Time (BST)
EUR (10:00): GDP Growth Rate 3rd Estimate
USD (13:30): Initial Claims
USD (13:30): Unit Labour Costs QoQ
CAD (15:00): Ivey PMI
USD (15:00): Fed Harker
CAD (19:10): BoC Gov Macklem
USD: Fed Williams (20:30), Bostic (20:45) and Bowman (21:55)
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Beyonce, Taylor Swift...The FED's getting pretty granular.....LOL !!!
The Kamikaze American Spenders......without a Dime of Retirement Savings...
Now that's REAL EXCEPTIONALISM.....LOL !!!
$ 2 Trillion Deficits, Climate Change as Religion and an Endless Ukraine War, that's
what I I call Leadership ???