The Morning Hark - 10 June 2022
Today’s focus……..US CPI data and Canadian employment data 13.30BST. BOJ/MOF meeting at 8.00BST with Kanda briefing media after. No time for the press conference yet.
Daily roundup - all prices are at 7.30 BST with changes reflecting movement from midnight BST
Oil – Both Brent and WTI futures down small at 122.75 and 121.25 respectively.
After the EIA inventories on Wednesday oil is giving back its gains slightly as the lockdowns in Shanghai take centre stage and Beijing finds Covid cases outside of the enforcement zone.
EQ –Asian stock markets lower today with Nikkei and KOSPI down 1.2% at 28,035 and 2596. Hang Seng is flat at 21,880
The US futures are flat on the day so far. Risk took a hit yesterday with a hawkish ECB putting across a not too pleasant outlook and more Covid cases appearing in China.
Gold – The precious metal is down $6 this morning at 1846. This is unsurprising following USD strength today and last night. US CPI today will move gold and we are watching with interest any further USD strength and our 1830 level down below.
FI –US10yr yield is 3.045, flat since yesterday as are Bunds. ECB delivered a hawkish announcement yesterday where they ended APP and all but confirmed a rate hike of at least 25bp in July with likelihood of same or more in September. Bunds got sold off but BTP’s took more of a hit as Lagarde spoke of fragmentation within the Eurozone. The bund/BTP spread widened out to levels last seen in 2020.
FX – Eurusd whipsawed around in between the rate announcement and the meeting, with headlines the biggest drivers. The true move came when Lagarde mentioned fragmentation within the Eurozone and the hawkish message was lost in a realisation that raising rates is not the full story. This is a case of higher rates being a catalyst for recession/stagflation and the Eur suffered as a consequence.
Usd had a good day and has continued in that vein this morning holding onto much of its gains. This morning Usdjpy printed 134.48 slightly below yesterday’s high.
At 6am BST it was announced that there will be a meeting today starting at 8am BST with BOJ and MOF officials to discuss financial markets. This sent Usdjpy lower from 134.19 While we have no details of what they will discuss the likelihood is they will be looking at the usdjpy rate.
Others – Vix is up 9% on the day as volatility returns to the market
Once again Bitcoin and ETH are unchanged on the day. Ethereum still has the big level at 1706 and we cannot move away from it. This does feel like it will break at some point.
So, the ECB came and delivered a hawkish assessment and promised rate rises in July and September with more to come. Initial Eur weakness was met with buying after the headlines about 25bp in July and possibly more in September. The ensuing rally continued until Lagarde spoke and she mentioned fragmentation across the Eurozone, the market took this as very negative amid analysis of recession or stagflation in the zone from several bank economists.
With regard to the BOJ/MOF meeting today, when you take the 6.5% move in Jpy since May 24th that we mentioned yesterday and oil’s own 11% rally since that date it must be starting to worry the Japanese somewhat. While loose monetary policy is one thing having your energy imports costing you 19% more than a fortnight previously means at the very least questions need to be asked.
📅⠀The main highlights for the day ahead in terms of data and speakers:
BOJ/MOF meeting 8.00 BST
ECB Holzmann 9.00BST
Canada Unemployment Rate May- consensus 5.2% vs previous 5.2% (13.30 BST)
US Headline Inflation MoM May - consensus 0.7% vs previous 0.3% (13.30 BST)
US Core Inflation MoM May - consensus 0.5% vs previous 0.6% (13.30 BST)
US Michigan Consumer Sentiment Prel June - consensus 58.2 vs previous 58.4 (15.00 BST)
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📚⠀Articles discovered on Harkster or social media exploring some of the current key macro themes in more depth:
LME and Nickel
ZeroHedge - Hedge Fund Elliott Sues LME For $456 Million Over Losses From Nickel Trading Halt
ZeroHedge - Global Stagflation Threat Grows As World Bank Slashes Growth Forecast, Blames Putin
Fortune - The World Bank says most countries are headed for a recession, and warns of a possible return to 1970s ‘stagflation’
🔥⠀Top 5 trending links on Harkster yesterday:
Alhambra Partners - A Volcker Pan Recession
The Macro Compass - The True Reason Why Central Banks Do QE
Doomberg - Immaculate Combustion 🔒
TFTC - Issue #1224: A consumer credit crisis seems to be building
Real Vision - Have You Heard About the Yen?
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