The Morning Hark - 13 Nov 2023
Today’s focus...The Week Ahead and get a good book for today.
Overnight Highlights
Prices are at 7.00 GMT/2.00 EST, with changes reflecting movement from midnight GMT
Oil - Brent and Crude January futures off smalls in Asia. The pair currently sitting at 80.90 and 76.50 respectively. Continuing demand worries hold a cloud over the sector. Friday saw some welcome relief for oil with Iraq voicing support for oil cuts by OPEC+ but demand remains the major headwind.
EQ - Asian equity markets off smalls overnight with the Hang Seng and Nikkei at 17,300 and 32,615 respectively. Tech stocks had lead to a decent open for stocks as they reflected the US gains to close the week. However US yields ticking up put paid to the fragile rally.
The US indicies off smalls in Asia but still holding onto the majority of their gains from last week with the Nasdaq and S&P futures at 15,535 and 4415 respectively.
Friday saw the Nasdaq having its biggest daily gain in almost 6 months. A close above 15,600 would be significant. Santa back on?
Gold - Gold Dec flatlining once again in Asia currently at 1944. Another shocker of a week for gold with its third consecutive weekly decline. Worth noting that the 200dma comes in a round the 1935 level.
FI - Global yields firming up in with the US2y and US10y currently trading at 5.06% and 4.65% respectively.
German 10y on a firmer footing at 2.72% and the Italian 10y yield similarly at 4.57%.
UK gilt yields likewise with it closing at 4.33%.
FX - USD little changed in Asia with the USD Index currently at 105.80. The JPY, EUR and GBP all similarly dull versus the USD currently at 151.80, 1.0690 and 1.2240 respectively.
Others - Bitcoin and Ethereum off smalls overnight with them at 36,975 and 2040 respectively.
Lot going on in the space with Bitcoin grabbing the headlines but Ethereum catching up late in the week. Solana, the Eth killer, up 30% on the week and multiples of that over the last few weeks. Even FTX’s token has had a revival over the last few weeks on the back of Lazarus expectations with the thought that the exchange could be sparked up again giving it 5x spike.
Macro Themes At Play
Recap
Norwegian October inflation report came in hot and seems to have nailed on a further hike by the Norges Bank next month. MOM measures both surprised to the upside with headline and core coming in at 1% and 0.6% respectively. YoY back up to 4% and 6% respectively. Not a good look.
UK data dump offered some small encouragement with the GDP having small upside beats for q3 taking YoY preliminary growth to 0.6%. No new dresses for the baby there but small mercies and all that. Industrial and manufacturing production for September had small downside misses but both MoM measures scraped into positive territory for the first time in three months.
Preliminary UMich survey for November certainly didn’t make good reading for the Fed! The sentiment headline number ticked down to 60.4 lower than previous month and expectations and hitting a 6 month low in the process. However inflation expectations piled on the pressure further by confirming the recent upward trend in the series. Both the 1 and 5 year surprising to the upside at 4.4% and 3.2% with the 5 year printing a 12 year high.
Moody’s tried to dampen the joy by cutting its AAA outlook for the US to negative. Remember Moody’s are the outlier, in the agency world, with both S&P and Fitch both at AA+ so not a big deal in the scheme of things but still not a great look.
So bad data is good data is back? The little data we had for the US, most of it second tier at that, was uninspiring and we closed with those higher inflation expectations but yet equities quite happy to play the rally although remember a large part of that Nasdaq pump was mainly driven by MEGAs. Jury’s still out I think.
Central Bank Speakers
The ECB’s Lagarde pretty much on script. Expects to see some upticks in inflation in the coming months. If rates are held long enough at current rates then inflation target will be met but if we see major shocks then we shall have to revisit. As ever they are monitoring energy prices.
The Fed’s Bostic stuck to the Powell PowerPoint with still more work to be done on the inflation front although there is still monetary policy transmission yet to come. He felt that the Fed had hit restrictive territory about a year ago and the Fed is well positioned to let things happen.
Thats good then.
Daly came out punching a little harder. She felt that policy is significantly restrictive but unsure whether restrictive enough and on that basis it was too early to say if hiking cycle was over. She stated that the next rate decision was data dependent and if we saw the economy continuing to be strong and inflation going sideways a further hike was justified.
She continued the recent Fed theme of finding it hard to know why long term yields are rising.
The SNB’s Schlegel claimed that inflation pressures are still elevated in Switzerland despite the sharp global drop and hence hikes cannot be ruled out.
The RBA’s Kohler spoke overnight and was forthright on the RBA’s inflation fight which she claimed would be “more drawn out”. Domestically sourced inflation has been widespread and slow to decline.
The Week Ahead
Swedish Inflation Report. Last big economic print prior to the next Riksbank meeting on the 23 November and will go a long way in determining whether they follow the Norges Bank with a further rate hike. Expectations are for an uptick in both measures after last month’s welcome sharp declines. Both headline and core are expected to print above the Riksbank’s forecast levels of 6% and 4% respectively but will this just be seen as some give back from last month’s large drops or a sign that underlying inflation is still sticky and warrants a further hike.
US Inflation Report. Expectations are for the headline rate of inflation to decline both on a MoM and YoY basis mainly driven by a steep decline in gasoline prices and the effect of declining vehicle sales which should help headline YoY decline in the the low 3%. However, more worryingly for the Fed, core is expected to remain sticky with the MoM matching last month’s 0.3% print and keeping YoY above 4%
Japan q3 GDP. Payback time it would seem for the Japanese economy as a small contraction is expected for the third quarter after the strong growth witnessed in the previous quarter. Expectations are for a slowdown in the manufacturing sector to be the main headwind to growth for the quarter. As a side note, the day after GDP, we get the October trade balance which is expected to go into a deficit driven by higher commodity prices and the weak Yen.
China Data Dump. October releases for industrial production, unemployment and retail sales expected to show a mixed picture. Industrial production is expected to slow somewhat flagged by the recent contraction in the PMI series. In addition base effects are also expected to produce some headwinds. Retail sales however are expected to show an acceleration on the YoY due to last year’s Covid lockdowns dropping off as well as this year’s Golden Week holiday spending. The unemployment rate is expected to remain steady. In addition to the data we will get the PBOC 1y MLF rate announcement with no change expected to the 2.5% current level especially with the backdrop of a weak Yuan.
UK Inflation Report. Expect much trumpeting from the government that they have met their promise of halving inflation as the report is anticipated to show sharp declines for both headline and core taking them to 4.8% and 5.8% respectively. The major factor in the decline for headline is base effects relating to energy prices and is expected to trim close 2% off last month’s number. Unfortunately for the BoE, core will remain sticky and that, unlike the government, is what matters to them. Remember too this is the last inflation report prior to the December BoE.
US Retail Sales. This gives us the first look at the consumer in the last quarter of the year. Remember the strong q3 GDP print was driven heavily by consumer spending. The Fed have been quite vocal in claiming they expect to see growth slow in the last quarter of the year so, by definition, the consumer should be a key indicator. Expectations are for a contraction in sales with some payback seen from last month’s strong print especially with credit and debit card spending indicators flagging a decline.
UK Retail Sales. Last month’s shocking print to be reversed? Expectations suggest partially as all those warm clothes that remained in the shops, due to the unseasonably warm late autumn, start to appear on people’s backs as the UK enters storm season? That’s the theory anyway although some have suggested that with Black Friday, just round the corner, people will make do until they can source a discount. Always a volatile series and as you can see I have no idea! Spin the bottle time!
Other points of note. Biden and Xi will meet on a side bar from the APAC conference, in San Francisco, on Wednesday. There first meeting in a year and all the usual topics will be on deck; Ukraine, Taiwan, Israel, AI, trade and economic relations. All a touch of the “jam tomorrow” about it but nevertheless its always good to talk! That old chestnut US government shutdown will come back front and centre this week with Friday being the latest deadline. Something to look forward to.
The Day Ahead
Get a good book, prep for Black Friday, do some admin and watch the price action.
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Main Highlights Ahead
All times in GMT (EST+5 / CET-1 / JST-9)
The main highlights for the week ahead in terms of data and speakers:
Monday
Fed Speakers
Cook (13.50 GMT)
BoE Speakers
Breeden (11.55 GMT)
Mann (16.05 GMT)
Tuesday
Sweden Inflation Rate MoM Oct consensus % vs previous 0.5% (07.00 GMT)
Sweden Inflation Rate YoY Oct consensus 6.7% vs previous 6.5% (07.00 GMT)
Sweden Core Inflation Rate MoM Oct consensus % vs previous 0.4% (07.00 GMT)
Sweden Core Inflation Rate YoY Oct consensus 4.4% vs previous 4% (07.00 GMT)
UK Unemployment Rate Sept consensus % vs previous 4.3% (07.00 GMT)
UK Ave Earnings incl Bonus Sept consensus 7.4% vs previous 8.1% (07.00 GMT)
UK Claimant Count Change Oct consensus k vs previous 20.4k (07.00 GMT)
EU Employment Change QoQ Prel q3 consensus % vs previous 0.2% (10.00 GMT)
EU Employment Change YoY Prel q3 consensus % vs previous 1.3% (10.00 GMT)
EU GDP Growth Rate QoQ 2nd est q3 consensus -0.1% vs previous 0.2% (10.00 GMT)
EU GDP Growth Rate YoY 2nd est q3 consensus 0.1% vs previous 0.5% (10.00 GMT)
EU ZEW Economic Sentiment Index Nov consensus vs previous 2.3 (10.00 GMT)
Germany ZEW Economic Sentiment Index Nov consensus 5 vs previous -1.1 (10.00 GMT)
US Inflation Rate MoM Oct consensus 0.1% vs previous 0.4% (13.30 GMT)
US Inflation Rate YoY Oct consensus % vs previous 3.7% (13.30 GMT)
US Core Inflation Rate MoM Oct consensus 0.3% vs previous 0.3% (13.30 GMT)
US Core Inflation Rate YoY Oct consensus 4.1% vs previous 4.1% (13.30 GMT)
Japan GDP Growth Rate QoQ prel q3 consensus -0.1% vs previous 1.2% (23.50 GMT)
Japan GDP Growth Rate Annualised prel q3 consensus -0.6% vs previous 4.8% (23.50 GMT)
Japan GDP Capital Expenditure QoQ prel q3 consensus 0.3% vs previous -1% (23.50 GMT)
Japan GDP External Demand QoQ prel q3 consensus -0.1% vs previous 1.8% (23.50 GMT)
Japan GDP Private Consumption QoQ prel q3 consensus 0.2% vs previous -0.6% (23.50 GMT)
Japan GDP Price Index YoY prel q3 consensus % vs previous 3.5% (23.50 GMT)
Fed Speakers
Jefferson (10.30 GMT)
Barr (15.00 GMT)
Mester (16.00 GMT)
Goolsbee (17.45 GMT)
ECB Speakers
Lane (08.00 GMT)
Enria (08.45 GMT)
Elderson (13.15 GMT)
BoE Speakers
Dhingra (12.00 GMT)
Mills (13.45 GMT)
Wednesday
Australia Wage Price Index QoQ q3 consensus 1.3% vs previous 0.8% (00.30 GMT)
Australia Wage Price Index YoY q3 consensus 3.8% vs previous 3.6% (00.30 GMT)
China Industrial Production YoY Oct consensus 4.3% vs previous 4.5% (02.00 GMT)
China Retail Sales YoY Oct consensus 7% vs previous 5.5% (02.00 GMT)
China Unemployment Rate Oct consensus % vs previous 5% (02.00 GMT)
China PBoC 1y MLF Rate Announcement consensus 2.5% vs previous 2.5% (02.00 GMT)
Japan Industrial Production MoM Final Sept consensus % vs previous -0.7% (04.30 GMT)
Japan Industrial Production YoY Final Sept consensus % vs previous -4.4% (04.30 GMT)
Japan Capacity Utilisation MoM Sept consensus % vs previous 0.5% (04.30 GMT)
UK Inflation Rate MoM Oct consensus 0.1% vs previous 0.5% (07.00 GMT)
UK Inflation Rate YoY Oct consensus 4.8% vs previous 6.7% (07.00 GMT)
UK Core Inflation Rate MoM Oct consensus 0.4% vs previous 0.5% (07.00 GMT)
UK Core Inflation Rate YoY Oct consensus 5.8% vs previous 6.1% (07.00 GMT)
EU Industrial Production MoM Sept consensus -0.7% vs previous 0.6% (10.00 GMT)
EU Industrial Production YoY Sept consensus -6.3% vs previous -5.1% (10.00 GMT)
US PPI MoM Oct consensus 0.1% vs previous 0.5% (13.30 GMT)
US PPI YoY Oct consensus % vs previous 2.2% (13.30 GMT)
US Core PPI MoM Oct consensus 0.2% vs previous 0.3% (13.30 GMT)
US Core PPI YoY Oct consensus % vs previous 2.7% (13.30 GMT)
US Retail Sales MoM Oct consensus -0.1% vs previous 0.7% (13.30 GMT)
US Retail Sales YoY Oct consensus % vs previous 3.8% (13.30 GMT)
US NY Empire State Manufacturing Index Nov consensus -2.6 vs previous -4.6 (13.30 GMT)
Japan Balance of Trade Oct consensus -JPY735.7bn vs previous JPY72.1bn (23.50 GMT)
Japan Exports YoY Oct consensus 1.2% vs previous 4.3% (23.50 GMT)
Japan Imports YoY Oct consensus -12.2% vs previous -16.3% (23.50 GMT)
Japan Machinery Orders MoM Sept consensus 0.9% vs previous -0.5% (23.50 GMT)
Japan Machinery Orders YoY Sept consensus -7.7% vs previous -3.6% (23.50 GMT)
Fed Speakers
Barr (14.30 GMT)
BoE Speakers
Haskell (18.00 GMT)
Thursday
Australia Unemployment Rate Oct consensus 3.7% vs previous 3.6% (00.30 GMT)
Australia Employment Change Oct consensus 20k vs previous 6.7k (00.30 GMT)
US Philadelphia Fed Manufacturing Index Nov consensus -11 vs previous -9 (13.30 GMT)
US Philadelphia Fed Employment Nov consensus vs previous 4 (13.30 GMT)
US Philadelphia Fed New Orders Nov consensus vs previous 4.4 (13.30 GMT)
US Philadelphia Fed Prices Paid Nov consensus vs previous 23.1 (13.30 GMT)
US Industrial Production MoM Oct consensus -0.4% vs previous 0.3% (14.15 GMT)
US Industrial Production YoY Oct consensus % vs previous 0.1% (14.15 GMT)
US Manufacturing Production MoM Oct consensus % vs previous 0.4% (14.15 GMT)
US Manufacturing Production YoY Oct consensus % vs previous -0.8% (14.15 GMT)
US Capacity Utilisation Oct consensus 79.4% vs previous 79.7% (14.15 GMT)
Fed Speakers
Cook (11.00 GMT)
Barr (12.10 GMT)
Mester (13.30 GMT)
Williams (14.25GMT)
Waller (15.30 GMT)
Barr (15.35 GMT)
Mester (17.00 GMT)
ECB Speakers
Lagarde (11.30 GMT)
Enria (12.10 GMT)
de Guindos (14.15 GMT)
BoE Speakers
Kroszner (15.00 GMT)
Ramsden (15.45 GMT)
Friday
UK Retail Sales MoM Oct consensus 0.3% vs previous -0.9% (07.00 GMT)
UK Retail Sales YoY Oct consensus 0.5% vs previous -1% (07.00 GMT)
EU Inflation Rate MoM Final Oct consensus 0.1% vs previous 0.3% (10.00 GMT)
EU Inflation Rate YoY Final Oct consensus 2.9% vs previous 4.3% (10.00 GMT)
EU Core Inflation Rate YoY Final Oct consensus 4.2% vs previous 4.5% (10.00 GMT)
US Building Permits Prel Oct consensus 1.45m vs previous 1.471m (13.30 GMT)
US Housing Starts Oct consensus 1.345m vs previous 1.358m (13.30 GMT)
Fed Speakers
Daly (15.00 GMT)
ECB Speakers
Lagarde (08.30 GMT)
Cipollone (15.00 GMT)
BoE Speakers
Ramsden (13.10 GMT)
Greene (13.15 GMT)
Good luck.
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