The Morning Hark - 1 Sept 2023
Today’s focus...Downside expectations for NFP
Singapore bank holiday, Typhoon Saola closing HK markets, and a natural pre-NFP consolidation delivered a quiet overnight session.
Caixin PMI beat expectations, popping to 51 from 49. This was followed with more actions from PBoC and local banks (passing on depo cuts / looking to support regional property markets).
The former cut their Forex Reserve Ratio by 200ppt. After an initial USDCNH sell off sub-7.24, market is now back to pre-headline clearing rate of 7.27. Even the 200bps may not be enough to narrow the carry divergence between USD and CNH. (FT)
UK Nationwide Housing disappointed low expectations (-5.3% vs exp -4.9%). A small give back relative to the post covid surge. Affordability is an issue as the lagged impact of BoE policy finally hits credit lending. (FT: UK house prices shrink at fastest pace since 2009)
Swedish PMI also disappointed on the London open (45.8 vs exp 47.2). Riksbank managing high inflation and a property downturn, is 12.00 in play over September as equity seasonals turn negative?
Swiss CPI hotter than expected 1.6% vs 1.5%, mirroring the trend across Europe. This leaves the mkt with a 50-50 chance the SNB hike 25bps on Sept 21.
Is the Fed hiking in Sept? Or Nov?
Like the Fed, the market is data watching, and there is a risk that the Hollywood strikes as well as the Yellow trucking company filing for chapter 11 may distort the data. The market is already expecting a low number today, as per @HarksterHQ NFP One page preview. The shift in positioning this week has the market with just a 10% chance of a Sept hike and 12bps in total priced by the Nov meeting. So we enter NFP wondering if the Fed is done as the labour market shows signs of normalizing outside of course initial claims. We've had head fakes before from the resilient US data and one print won’t shift the policy direction completely. Even if the Fed is done and Nov is priced out due to soft landing vibes from today's labour data and the 13th of Sept CPI print, ultimately we then roll into higher for longer.
As PMI's in Europe remain in contraction but inflation elevated, the stagflation theme is returning to the fore on Harkster.com. UK, Sweden and most of the EU are showing early warning signs of stagflation, will the US also get hit with the bug? The risk for asset bulls cheering the end of the Fed cycle is whether higher for longer means the Fed are slow to cut in 2024 due to sticky inflation (4 cuts is already a high bar to beat). The energy base effects impacting EZ CPI data will be mirrored in the US.
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All times in British Summer Time (BST)
CHF (08:30): PMI Manufacturing exp 40.5
NOK (09:00): PMI (prior 56.7)
USD (13:30): NFP exp 170k (Harkster's 1 Page Preview Here)
USD (13:30): AHE exp 0.3% MoM and 4.3% YoY
CAD (13:30): GDP exp MoM -0.2% and YoY 1.4%. BoC on hold?
USD (14:45): Fed's Mester speaks on inflation
USD (15:00): ISM Manufacturing (exp 47),
USD (15:00): Employment Index (Prior 44.4)
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If they’re .... we shouldn’t comment
NFP numbers are Perfect.......Too Perfect ???
Is US Gov't Data being manipulated, similar to the Chinese Data, but to a lesser extent???