The Morning Hark - 12 May 2022
Today’s focus……..Quieter day today with US initial claims and PPI at 13.30 BST
Daily roundup - all prices are at 7.40 BST with changes reflecting movement from midnight BST
Oil - Both Brent and WTI futures down in early trading around 1.25% at 106.15 and 104.30 respectively. Weakness re-entered the oil market following yesterday’s rally. Shanghai reported 2 Covid19 cases in the community after none being reported for the last few days. Hungary still opposes a Russian oil ban in the EU and US EIA data showed a large increase in crude inventories although distillate inventories all showed a fall.
EQ – Asian stock markets all lower today with Nikkei down 1.8% at 25,760 and Hang Seng and KOSPI are down 2% and 1.65% at 19,405 and 2550 respectively. The US futures are flat on the day so far.
Gold - Gold had a volatile day yesterday following the US CPI print. It lost around $20 post the number before rallying $14 at the close due mainly to fed speakers retreating from the possibility of 75bp. It is currently sitting unchanged on the day at 1853.
FI – CPI came in stronger, and yields jumped towards the 3.2% on the US10yr yesterday. Those levels could not be maintained, and the turnaround was sharp. US 10yr yield currently sits at 2.85 following comments from Bostic and Bullard late yesterday that 50bp is their base case and 75bp is not. Known hawks this took some of the shine off US yields.
This morning Bund yields are sharply off in early trading losing 9bp at 0.91%.
FX – The round trip in the USD yesterday meant that individual currency stories could come to the fore. GBP has maintained its weakness whereas JPY has not. AUD which took the brunt of the CPI move yesterday and then retraced to make new highs has today, along with its antipodean cousin, made the worst start. Both are down 0.60%. This may be part due to China covid numbers as mentioned above.
USDCNH pops above the 6.8000 level with another higher yuan fix today and PBOC noting that they are moving to decline loan rates.
SEK saw its CPI print at 07.00 BST coming slightly higher at 0.6% versus 0.5% which with a suddenly hawkish central bank and a $16bln takeover of Swedish match by Philip Morris means interest in the currency is high.
Others – MOVE and VIX have dropped on the day with the MOVE index losing nearly 7% which is not unexpected due to the retracement in US yields from 3.20%.
Bitcoin follows a bad day with a bad day which again is not surprising given the Luna/UST shock. It’s being described as Crypto’s Lehman moment but without the government bailout of the industry. Rumours also abound of a concerted attack on the stablecoin market with conspiracy theories everywhere. This will continue to be discussed like the LME debacle recently.
If it was a concerted attack launched by Govt, hedge funds, banks (delete as applicable) then I guess that is fair game in an unregulated market.
We have added a couple of interesting articles on the event in the links below.
📅⠀The main highlights for the day ahead in terms of data and speakers:
De Cos 09.05 BST
Makhlouf 12.00 BST⠀
📚⠀Articles discovered on Harkster exploring some of the current key macro themes in more depth:
The Defiant - Terra’s LUNA Crashes 95% As Investors Mull Recovery Plan
Bloomberg - ‘Everything Broke’: Terra Goes From DeFi Darling to Death Spiral
Coindesk - What Is LUNA and UST? A Guide to the Terra Ecosystem
The Block - Binance suspends LUNA and UST withdrawals amid market turbulence
ZeroHedge - Did The Biggest Recent Buyer Of Bitcoin Just Become A Forced-Seller?
🔥⠀Top 5 trending links on Harkster yesterday:
Employ America - April CPI Preview: Subtle Headline CPI Upside, But Core PCE Should Reveal More Disinflation
Real Vision - Selling Will Soon Create Opportunity But When?
Stuck in the Middle - Ripe for Relief
TS Lombard - The cycle starts to bite
Brent Donnelly - Trade 14: BTC Slingshot
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