The Morning Hark - 17 Oct 2023

Today’s focus...Iranian sabre rattling continues, on-deck a big CPI print for Canada, a plethora of central bankers and SBF Day 9 another singing canary and who knew…the SEC has a sense of humour.

Overnight Highlights

Prices are at 7.05 BST/2.05 EST, with changes reflecting movement from midnight BST

Oil - Brent and Crude December futures little changed in Asia with them currently sitting at 89.70 and 85.20 respectively. Despite continued sabre rattling by the Iranians with much talk of preemptive action oil backed off a touch from their recent highs. The main catalyst was the potential for easing of sanctions on Venezuelan oil companies in return for a “competitive and monitored” presidential election next year. Im not sure if that means in Venezuela or the US?

EQ - Asian equity markets followed the bid tone from the US yesterday on hopes of a continuing strong earnings season with the Nikkei,  Hang Seng and Kospi all up currently at 32,030, 17,800 and 329 respectively.

The US indicies marking time again in Asia with the Nasdaq and S&P futures flat at 15,270 and 4395 respectively.

Gold - Gold Dec backing off a touch again in Asia but still well above Friday’s breakout level of 1900. Currently at 1930.

FI - Global yields continued their bid tone from yesterday with the US2y and US10y trading firmly at 5.11% and 4.76% respectively.

European yields following the bid tone with the German 10y yield closing at 2.79% and the Italian 10y yield at 4.76%.

UK gilt yields similarly at 4.48%.

FX - Generally quiet session in FX overnight with the USD Index currently at 106.36. The JPY, EUR and GBP equally steady with them currently at 149.65, 1.0545 and 1.2195 respectively.

USDILS continues with a bid tone and trading comfortably above 4 now at 4.02.

FX expiries of note today sees in the EUR €1.3bn rolling off at 1.05. USDJPY has a $1bn at 150.

Others - Bitcoin had some fun and games yesterday with a false headline alleging that BlackRock had got approval for its ishares Bitcoin ETF from the SEC. The headline was the catalyst for a 10% spike taking Bitcoin to 30,000 before a subsequent denial taking it back to the 28,000 level. As things stand the application is still under review.

Cointelegraph, who published the headline, eventually released their explanation for the false headline claiming that it came from a user on X who “claimed it was from the Bloomberg terminal” and they published it without a source or checking.

Great video, from the ever intuitive Autism Capital, below of the editor in chief of Cointelegraph blaming society rather than poor journalism for the error.

Quote of the day on all this from the SEC; “careful what you read on the internet. The best source of information about the SEC is the SEC”. Who knew someone in there had a sense of humour?

AutismCapital - Editor in Chief of Cointelegraph

Binance’s travails continue in what seems to be a death by a thousand cuts. Due to new UK regulations on financial promotions they will temporarily stop accepting new users in the UK.

Bitcoin and Ethereum trading currently at 28,160 and 1585 respectively.

Macro Themes At Play

Recap

Little data to recap yesterday with the NY Empire State Manufacturing Index for October beating both previous and consensus but printing in negative territory at -4.6.

The Bank of Canada’s third quarter survey seemed to lessen the urgency for a BoC rate hike, albeit with the pivotal CPI today. Some highlights:

More firms saw inflation easing over the next two years than the previous quarter

On the flip side business outlook fell to its lowest level since the pandemic

A third of firms expect a recession over the coming year which was the same as last quarter

Full text here for those that are interested.

BoC - Business Outlook Survey

Central bank speakers

BoE’s Pill was aware that the BoE never want to overshoot on tightening but it remains determined to get to the inflation target. Whilst the Bank has “done a lot” on interest rates, falling inflation is not enough to say that the job is done. Rather amusingly he commented that “the top of table mountain, on rates, is rather cloudy”.

ECB’s Lagarde said that the ECB was “vigilantly” monitoring oil for inflation risks.

Lane reiterated that the ECB was “quite some distance” from rate cuts and will keep rates high as long as necessary.

Fed’s Goolsbee, in an article in the FT, claimed that the fall in US inflation is not just a blip although he added housing costs are a negative surprise but the trend is still down. He denied that the fight against inflation was stalling.

Harker thought that the Fed should not be considering more rate hikes. Furthermore high interest rates are closing off housing for new buyers. However it will not accept a re-acceleration in prices.

Japan’s top currency diplomat Kanda was banging on again about needing to respond appropriately to “odd moves” in FX markets. Probably more interestingly, in light of the IMF comments, he explained that a rate hike is one option when excessive FX moves are seen although I guess nobody told him that’s not within his remit. More appropriately he did point out that intervention is also an option.

Speaking of the IMF I post here again, for those that missed it yesterday, the excellent Robin Brooks’s succinct summary of the meeting with all the key themes. A great read.

Robin Brooks - IMF

SBF Trial

Nishad Singh, former head of engineering at FTX, up on stand and he was indeed singing like a canary (sorry couldn’t resist). He claimed that SBF directed him to provide misleading financial information to auditors to make it appear as if the company’s revenues were higher than they actually were.

His testimony seems to be a basically repeating a list of celebrities SBF lavished money on to promote his and FTX’s brand even as the company was going under using Michael Kives’ network;  Katy Perry, Orlando Bloom, Hilary and Bill Clinton, Bryan Baum, Kate Hudson, Tom Brady, Gisele, amongst others

Adderall Gate is still going on with the defence team trying to shut down the trial until Sam receives his medication. The hero of the hour, Judge Kaplan who seems to be the only sane one in the building, bats it away.

Laura Shin’s excellent companion podcast reviewing yesterday’s events in full below for those with a further need to scratch that itch. There’s a lot to scratch!

Unchained - Day 9

Caroline Ellison's Nov 9 "all hands" meeting at FTX just prior to collapse

The Day Ahead

NZ inflation for q3 quite a bit softer than expected for both QoQ and YoY; 1.8% vs 2% and 5.6% vs 5.9%. The print probably takes a RBNZ hike off the table for the remainder of the year and NZD has been offered since down half a percent at 0.59.

RBA minutes shed little new on proceedings.

They considered hiking again but felt there was insufficient new data

Reiterated tightening bias

Low tolerance for higher than forecast inflation

Will reassess at 7th November meeting when they will have more data and the new forecasts

AUD bid on the news. Currently up 25bps at 0.6355.

Just hit the tapes the UK labour report for August and late as usual. Average earnings incl bonus had some encouragement for the BoE with a print below previous and consensus although still elevated at 8.1%.

Later this morning we get the ZEW sentiment index for October for both the EU and Germany.

The big data point is the binary Canadian CPI report particular given Macklem’s chat on Friday upping the stakes. The BoC have been recently concerned with broad based inflationary pressures, emphasised further by Macklem’s speech, and will have to weigh up if any tick up in inflation due to higher energy costs is short term or needs addressing with further hikes.

US wise retail sales and industrial/manufacturing production for September is the highlight of the week data wise from that region.

Usual plethora (thanks Andy) of central bank speakers throughout the day.

Early doors Wednesday the RBA’s Bullock and Smith speak followed by the Chinese data dump.

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Main Highlights Ahead

All times in BST (EST+5 / CEST-1 / JST-8)

The main highlights for the day ahead in terms of data and speakers:

Tuesday

EU ZEW Economic Sentiment Index Oct consensus -8 vs previous- 8.9 (10.00 BST)

German ZEW Economic Sentiment Index Oct consensus -9.3 vs previous-11.4 (10.00 BST)

Canada Inflation Rate MoM Sept consensus 0.1% vs previous 0.4% (13.30 BST)

Canada Inflation Rate YoY Sept consensus 4% vs previous 4% (13.30 BST)

Canada Core Inflation Rate MoM Sept consensus 0.3% vs previous 0.1% (13.30 BST)

Canada Core Inflation Rate YoY Sept consensus 3.3% vs previous 3.3% (13.30 BST)

US Retail Sales MoM Sept consensus 0.3% vs previous 0.6% (13.30 BST)

US Retail Sales YoY Sept consensus 1.5% vs previous 2.5% (13.30 BST)

US Industrial Production MoM Sept consensus 0% vs previous 0.4% (14.15 BST)

US Industrial Production YoY Sept consensus -0.8% vs previous 0.2% (14.15 BST)

US Manufacturing Production MoM Sept consensus 0.1% vs previous 0.1% (14.15 BST)

US Manufacturing Production YoY Sept consensus -1% vs previous -0.6% (14.15 BST)

RBA Bullock speaks (23.30 BST)

Fed Speakers

Williams (13.00 BST)

Bowman (14.20 BST)

Barkin (15.45 BST)

ECB Speakers

af Jochnick (12.50 BST)

de Guindos (18.00 BST)

Nagel (18.00 BST)

BoE Speakers

Dhingra (10.05 BST)

Early Wednesday

RBA Smith speaks (00.40 BST)

China GDP Growth Rate QoQ q3 consensus 1% vs previous 0.8% (03.00 BST)

China GDP Growth Rate YoY q3 consensus 4.4% vs previous 6.3% (03.00 BST)

China Industrial Production YoY Sept consensus 4.3% vs previous 4.5% (03.00 BST)

China Retail Sales YoY Sept consensus 4.9% vs previous 4.6% (03.00 BST)

China Unemployment Rate Sept consensus 5.2% vs previous 5.2% (03.00 BST)

China Industrial Capacity Utilisation q3 consensus 74.6% vs previous 74.5% (03.00 BST)

UK Inflation Rate MoM Sep consensus 0.5% vs previous 0.3% (07.00 BST)

UK Inflation Rate YoY Sep consensus 6.6% vs previous 6.7% (07.00 BST)

UK Core Inflation Rate MoM Sep consensus 0.5% vs previous 0.1% (07.00 BST)

UK Core Inflation Rate YoY Sep consensus 6% vs previous 6.2% (07.00 BST)

Good luck.

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