The Morning Hark - 17 Aug 2023

Today’s focus... Fed Mins, US10s at multi decade highs, Chinese shadow banking system, Pres election

• The minutes showed the Fed (CNBC, FT, ZeroHedge, ING) still has their eye on "significant upside risks to inflation", with tight labour mkt and economy showing resilience ...which "may merit more hikes". More often than not, the minutes can be stale given how many Fed speeches and data we see between their publication and meeting. 

• The big news for Harkster HQ yesterday was the Fed's Q3 Atlanta GDPNow forecast which hit an incredible 5.8% ... who can argue against them doing more!!! The forecast has risen 2% over the past 3weeks and is highly volatile, but the US exceptionalism story is clear as the data outperforms a low bar. As a result, 10yr yields hit 4.27%, a lvl last seen 15yrs ago. The mkt is still reluctant to price in a Sept hike, but the higher for longer vibes are certainly there as the curve steepens.

• It's a different picture for the antipodeans. RBNZ's Orr indicating a "recession is the bare minimum to tame inflation" (BBG TV Interview) whilst the pressure has been taken off the RBA overnight. The rise in UER from 3.5% to 3.7% (exp 3.6%) leaves the mkt expecting them to remain on hold for the Sept meeting (WSJ, Westpac).

• What happens in Japan never stays in Japan ... Japanese 20yr bond auction had the longest tail since 1987 overnight, which induced a buyers strike globally in duration and, in particular, aided the steepening of the US2s10s curve. If the Japanese investors are getting more yield at home, then their compression of global yields will be less... more from The Gryning Times

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1. China balance sheet recession, minimal policy response to date and known unknown risks around the shadow banking system.... 

   1. FT: Turmoil at Zhongzhi sparks alarm over China's $3tn shadow financing industry. JPM warned of "a vicious cycle on real estate financing, intensifying liquidity stress for developers and their non-bank creditors"

   2. MS see China missing their growth target this year (BBG)

   3. BBG: China's Troubled $137bln Shadow Bank Plans Debt Restructuring, Taps KPMG

   4. FT: New pain for China's property sector

   5. CNY fixing at 7.2076 vs exp 7.3047 (prev 7.1986)... continues to push back against weakness of the Yuan (Newsquawk)

2. Fed's Q3 Atlanta GDPNow forecast is at 5.8%... Whoa! 

   1. Yardeni Research: The economy isnt landing, its flying high

3. Where has all this performance come from? Inflation reduction act has certainly helped...

   1. WSJ: Bidenomics and the New Political-Subsidy Economy

   2. WSJ: A Prosperous Year for the Inflation Reduction Act

   3. FT: Inside the $220bn American cleantech project boom

4. It's hard not to wonder if we're at peak "just be long USDCNH" ... but what can turn the clear divergence between the US and Chinese growth profiles, equity markets and relative interest spreads?

5. Trump Indictments a week out from the 1st Rep GOP debate.

   1. FiveThirtyEight: Why Trump's Fourth Indictment May Be The Most Serious Yet.

   2. Axios: Here are Trump's 18 co-defendants in the Georgia indictment

   3. Politico Playbook: Why Biden won't touch on Trump

6. Japanese National Inflation ... many expect the BoJ to be done, unlikely to adjust again this year, will inflation settle?

7. Norges the key event in the European session... If you want to consume previews from BNY, SEB, Nordea and more, then visit Harkster.com "Bank Publication" channel. All the content curated into one space to improve latency and remove algo/spam from the research experience. 

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1. GS: BlackRock's Rick Rieder on his career, the markets, and investing in the current environment

2. Adam Mancini: Multi-Month Breakdown Follows Through In Spx. Relief Bounce Time Now?

3. Prometheus Research - Andy Constan: Higher For Longer, Short Twoos & Spoos

4. ING: US housing market in gridlock, with risks emerging

5. Topdown Charts: Chart Of The Day - VIX Seasonality

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Follow the latest market narratives through our curated research & commentary channels on Harkster.

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All times in British Summer Time (BST)

NOK (09:00): Norge's Bank

USD (13:30): Philadelphia Fed 

JPY (00:30): National Inflation 

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