The Morning Hark - 14 Nov 2023
Today’s focus... Put the book down data’s back. US CPI the highlight plus a Reshuffle Kerfuffle.
Overnight Highlights
Prices are at 7.05 GMT/2.05 EST, with changes reflecting movement from midnight GMT
Oil - Brent and Crude January futures holding onto their gains from yesterday in Asia. The pair currently sitting up smalls at 82.80 and 78.40 respectively. The OPEC monthly report came to the assistance of the ailing oil market yesterday with a positive spin for the sector going forward. No signs of a manipulated cartel type market here then! More details below.
EQ - Asian equity markets off smalls overnight with the Hang Seng and Nikkei at 17,450 and 32,700 respectively.
The US indices marking time ahead of the CPI print in a quiet Asia session. The Nasdaq and S&P futures at 15,570 and 4425 respectively.
Gold - Gold Dec flatlining once again in Asia currently at 1950. Remember the 200dma comes in at round the 1935 level.
FI - Global yields doing little ahead of the data with the US2y and US10y currently trading at 5.04% and 4.63% respectively. Chart wise looks like the big trend line in the US10y comes in now at 4.50% with the 50bps just ahead of it around the 4.60% level.
German 10y little changed at 2.72% and the Italian 10y yield similarly at 4.56%.
UK gilt yields likewise with it closing at 4.32%.
FX - USD little changed in Asia with the USD Index currently at 105.70. The JPY, EUR and GBP all similarly dull versus the USD currently at 151.70, 1.07 and 1.2275 respectively.
Others - Bitcoin and Ethereum little changed overnight with them at 36,645 and 2060 respectively.
Macro Themes At Play
Central Bank Speakers
The ECB’s de Guindos noted that there was uncertainty on policy transmission to the economy. Furthermore he maintained that the ECB will ensure that their policy rates will be set at sufficiently restrictive levels for as long as necessary. He expects a temporary rebound in inflation in the coming months but for growth to stay subdued. The ECB will not prejudge further rate movements and forward guidance is out of fashion. Coming from the Giorgio Armani of central banking!
Kazak said it was too soon to say that the terminal rate has been reached and there was no “automaticity” about the next rate move. On wage growth he saw no clear peak yet.
Japan’s finance minister Suzuki was rolling out all the usual rhetoric; sudden FX moves are undesirable, FX should be determined by fundamentals, we will monitor markets and respond with a sense of urgency.
OPEC Monthly Report
OPEC was fairly upbeat claiming that, despite the negative sentiment, China’s oil demand remains very healthy. The overall global fundamentals remain strong too and as such they raise their 2023 oil demand growth forecasts to 2.46m BPD from 2.44m and leave their 2024 unchanged at 2.25m BPD.
UK Cabinet Reshuffle Kerfuffle
Home Secretary Braverman getting the boot unbelievably doesn’t get the main headlines. That’s reserved for…….Cameron’s back! Left field or what. So as we try to navigate the ever troubling geo-political waters, with Ukraine, Gaza, the ever present Taiwan question amongst other things, the powers that be think its a good idea to appoint the man who basically waved through Brexit by approving a majority vote! Remember too he is a pro-China, was at the heart of one of the biggest lobbying scandals in modern parliamentary history and was a very vocal critic of PM Sunak’s decision to scarp the northern leg of the HS2 rail network. So not much can go wrong there then i guess. Big gamble from Sunak in what feels like a last roll of the dice before the election next year and a definite lean back to the centre ground.
The cynics amongst us might suggest the announcement was a ploy to distract the media from the Braverman boot! But given her track record of outspokenness its hard to see her going quietly. Next stop on the Tory rollercoaster is the Supreme Court ruling on the government’s policy of sending asylum seekers to Rwanda. If it were to rule against the government then the right of the party will push for the UK to leave the European Convention on Human Rights. They now have a lightening rod in Braverman to rally round.
As ever Politico has the best coverage for those interested.
The Day Ahead
Action packed day ahead.
Swedish inflation report for October has just printed and came in softer than expected. The YoY measures now at 6.5% and 4.2% for headline and core respectively. Still a touch above the Riksbank forecast but slightly more encouraging than anticipated. However they still give the Riksbank a question to answer on rates.
UK labour report likewise just out and saw unemployment at 4.2% for September but earnings including bonuses lower than previous at 7.9% but well above expectations. Not the best but remember the data is part of the revamping of the labour statistics so probably the series needs to settle before any proper conclusion can be garnered.
Later in the morning we get the Eurozone’s q3 preliminary GDP report alongside the ZEW surveys.
The afternoon is dominated by the US’s October inflation report. Where expectations are for a drop in the headline but core remaining sticky. However despite inflationary expectations picking up also we expect the Fed continue with the same rhetoric of late; higher for longer and options open. Remember we have a further payroll and CPI report before the next FOMC.
Throughout the day we get a plethora of central bank speakers. Yes them again!
Overnight we get Japan’s preliminary q3 GDP report, Australian q3 wages data, a China data dump, a less significant Japanese one and the UK inflation report for October as go to print tomorrow morning.
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Main Highlights Ahead
All times in GMT (EST+5 / CET-1 / JST-9)
The main highlights for the day ahead in terms of data and speakers:
Tuesday
EU Employment Change QoQ Prel q3 consensus 0.1% vs previous 0.2% (10.00 GMT)
EU Employment Change YoY Prel q3 consensus 1.2% 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 3.3% 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)
Early Wednesday
Australia Wage Price Index QoQ q3 consensus 1.3% vs previous 0.8% (00.30 GMT)
Australia Wage Price Index YoY q3 consensus 3.9% vs previous 3.6% (00.30 GMT)
China Industrial Production YoY Oct consensus 4.4% 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)
Good luck.
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