The Morning Hark - 19 Dec 2022

Today’s focus … The Weeks Ahead and the World Cup Final

This is the last TMH of the year, where we have a look at the key data and events that are scheduled for the coming two weeks. 

We shall publish a “TMH for 2023” in the week between Christmas and New Year, so look out for some of our thoughts on the trends we think will have an influence on the markets for the coming year.

TMH will be back to full operation again on January 2.

Finally, we’d like to wish all our readers a very happy holiday season. Thank you again for all your continued support and here’s to a happy, healthy and prosperous 2023 to one and all.

---

All prices are at 7.20 GMT/2.20 EST, with changes reflecting movement from midnight GMT

Oil - Brent and Crude February futures up a touch in the Asian session, with futures currently trading at 79.50 and 75, respectively. Oil gaining some footing again after the sell-off on Friday’s poor US data, with the PMIs disappointing and especially the manufacturing measure, which fell to a 31-month low at 46.2. The recovery in oil has been fuelled once again by China demand hopes. Let’s see.

EQ - Asia futures flat as with the Hang Seng, Nikkei and Kospi currently trading at 19,300, 27,220 and 305 respectively.

The Nasdaq and S&P similarly dull at 11,370 and 3886, respectively as they steady the ship a touch after the post Powell “higher for longer” declines which were then further accelerated by the hawkish ECB and the poor US PMIs on Friday. Definitely feels like bad is bad again in terms of news.

Gold - Gold Feb futures flat overnight in Asia with gold trading now at 1802. As we said at the end end of last week not a lot to see here. 1800 remains the pivot with resistance at our noisy 1820/25 zone and first support at 1780.

FI - US yields a touch firmer overnight in Asia with the US2y and US10y currently trading at 4.19% and 3.52% respectively. 

European yields continued their post hawkish ECB rally Friday with the German 10y yields closing at 2.153% and Italian 10y yields at 4.306%. Note the spread is continuing to widen. 

UK gilt yields following the leaders with the 10y yield closing the week at 3.33%.

FX - Subdued FX markets in Asia, with the USD index currently at 104.44 off a touch in Asia to start the week. The majors all firmer with the JPY, EUR and GBP currently trading at 136, 1.0630 and 1.2180, respectively. 

One thing to note on the JPY. Reports over the weekend suggested that PM Kishida was looking to revise the decade long accord the government has with the BoJ, which may open up some flexibility on the 2% inflation target and potentially open the way for an exit of the ultra dovish central bank monetary policy stance. This obviously gave the JPY a bit of a boost, but subsequent denials by the chief cabinet secretary have unwound those gains.

Others - Bitcoin and Ethereum survived another weekend of negative headlines regarding crypto auditors and exchange issues with regards to withdrawals. The pair a touch softer, with them currently trading at 16,743 and 1182, respectively. 

---

The Weeks Ahead

1. China Prime Rate Announcements. Lot of chatter of late that with China now reopening and all that will entail, the authorities want to now focus on growth for the coming year. Already several packages to support the ailing property sector have been announced and more are expected. This has led to speculation that they will cut the prime rates to help the overall growth push. Announcement set for the early hours tomorrow.

2. Canada CPI. Canadian CPI for November prints on Wednesday and is set to ease with Headline YoY easing to 6.6% from 6.9%. Such a print would be in line with the dovish hike the BoC delivered earlier in the month. As they pointed out at the time, they felt that the 3m rate of change in core inflation is declining and indicating that price pressures may be loosening. The key phrase in the statement was “looking ahead, Governing Council will be considering whether the policy interest rate needs to rise further to bring supply and demand back into balance and return inflation to target”. The November print will hopefully, for the BoC, justify this view. 

3. Japan CPI. Late Thursday sees the Japan CPI report for November printing with Core set to show another uptick on the YoY measure to 3.7% an eighth straight month of above-target inflation for the BoJ to justify. However, it seems little will change, at least until BoJ Governor Kuroda steps down in the spring of next year. Earlier in the week, we have Kuroda speaking and the BoJ rate decision, but with no change expected in rates, we feel that Kuroda will have little new to opine on. Remember in his recent speech, Kuroda stated that the central bank would stick to monetary easing to support the economy.

4. US Core PCE Price Index. The Fed’s favourite inflation measure, printed on Friday, is expected to show a further softening and justify the Fed’s slower pace of rate hikes. The Core YoY measure is expected to come in at 4.6%, which would be the lowest print of the year, having peaked at 5.4% earlier in the year and been as high as 5.2% only two months ago. Such a print would show that some of the “stickiness” of the series is starting to abate. 

---

The World Cup - The Final

Argentina v France

Well, we had hoped for a repeat of the 4-3 game from the last World Cup but be careful what you wish for, as we got a game that surpassed that and some. At times it defied logic and seemed that we were watching a film of the two protagonists, Messi and Mbappe, trying to wrestle the power from each other’s grasp. The greatest World Cup final ever.

The game had everything, with first Scaloni getting the upper hand with his initial team selection. Di Maria’s seemingly surprise selection made the French defence forget to mark him throughout the first half to their cost. Deschamps slowly regained the tactical higher ground with his double double substitutions as the fresh French youngsters managed to inject some much needed energy into the French team.

We had individual brilliance, outwith the two Ms, with Upamecano making more last ditch blocks than I care to remember, Mac Allister, the Brighton legend, metronomic control of the Argentinian midfield and of course, the “shithousery” of Martinez in the Argentinian goal. For all his antics in the penalty shoot out he made the crucial save of the match with 60 seconds to go. Remember, this is a guy who has played for Oxford and Rotherham and there’s no disrespect intended to those two teams, but….

The drama was incredible, with France not showing up for three quarters of the game by which time Argentina had strolled to a 2-0 lead through a Messi penalty and di Maria’s finish to a fine break away goal. Somehow then, France exploded into life unbelievably, they had their first shot in the 71st minute, but then Mbappe decided to take things into his own hands with a penalty and a sublime volley.

Extra time ensued, and unusually we got as good a 30 minutes as we had seen in the preceding 90. Argentina seemed to find some fresh legs and Messi turned in what appeared to be the winner. However, another Mbappe penalty squared things up again and also completed only the second-ever hat-trick in a World Cup final. That set up the drama of the last 90 seconds when France’s Kolo Mani was through on goal only for Martinez to save with his outstretched left leg. The drama was not over, however as the Argentinians broke upfield and a Messi chipped cross saw Lautaro Martinez with a free header from ten yards out, heading it well wide. 

Penalties followed with the inevitable drama, Martinez antics and the Argentinians seal the deal. Messi’s penalty was incredibly cool for the high stakes and how Mbappe converted three penalties in the match with such precision shows the steeliness of the young man.

The final moments pretty much encapsulated, for me, Messi and his career. For a man who has thrived on finding space, he managed to finish the game, and maybe his international career, doing just that. As the final penalty hit the net his teammates exploded forward to celebrate, but Messi just dropped to his knees and was in space for those crucial few seconds before he was engulfed by 5 of his teammates who knew what debt they owed him. 

Finally, my team of the tournament based on the games I’ve watched, which to be honest, has been quite a few, and only considering teams that made it to at least the quarter final stages. On that basis, honourable mentions to Musiala from Germany, who I thought was excellent and will come again, who could not be charmed by the Australian giant Souttar and also the two Japanese defenders Mitoma and Yoshida, who were rocks throughout their group stages campaign. 

🇭🇷 Livakovic - Croatia. Penalty shoot out specialist

🇲🇦 Hakimi - Morocco. Excellent throughout for the Atlas Lions both in attack and defence

🇲🇦 Aguerd - Morocco. Inspirational defender who leads from the front

🇭🇷 Gvardiol - Croatia. 20 years old but played like an old pro apart from that “dance” with Messi

🇦🇷 Acuna - Argentina. Built like an Argentinian bullock with endless energy

🏴󠁧󠁢󠁥󠁮󠁧󠁿 Bellingham - England. Another youngster who by the end was leading his team

🇭🇷 Modric - Croatia. The metronome

🇲🇦 Amrabat - Morocco. Rock solid Moroccan midfielder playing with a back injury throughout

🇫🇷 Greizmann - France. Disappointing final, but did so much for the French team up to then

🇫🇷 Mbappe - France. At times unplayable. Surely he will lift the trophy again

🇦🇷 Messi - Argentina. GOAT

---

The Day Ahead

Very little to excite today. German Ifo and the US NAHB for December will hardly keep the wolf from the door. Oh and a couple of ECB Speakers.

I post at the bottom FXMacro Guy’s excellent review of last week, which, as ever, is a great summary of the week gone by and a great source for all the central bank comments in what was a busy week for them.

On a dull day great timing that Lyn Alden’s monthly has just hit the tapes. Plenty of time to digest and learn from what is an excellent publication. 

 

👍 If you have found The Morning Hark’s daily briefing useful this year, please consider giving it a ‘Like’ at the bottom of the page. It only takes a few seconds and helps our free commentary reach a wider audience.

---

All times in GMT (EST+5 / CEST-1 / JST-9)

Monday 19th

Germany Ifo Business Climate Dec consensus 87.4 vs previous 86.3 (09.00 GMT)

US NAHB Housing Market Index Dec consensus 34 vs previous 33 (15.00 GMT)

ECB Speakers

• de Guindos and Simkus (08.00 GMT)

 

Tuesday 20th

RBA Meeting Minutes (00.30 GMT)

China Loan Prime Rate 1y  consensus  vs previous 3.65% (01.15 GMT)

China Loan Prime Rate 5y consensus vs previous 4.3% (01.15 GMT)

BoJ Rate Decision no change expected keeping rates at -0.1% (03.00 GMT)

Canada Retail Sales MoM Oct consensus 1.4% vs previous -0.5% (13.30 GMT)

Canada Retail Sales YoY Oct consensus  % vs previous 6.9% (13.30 GMT)

US Building Permits Nov consensus 1.483m vs previous 1.512m (13.30 GMT)

US Housing Starts Nov  consensus 1.4m vs previous 1.425m (13.30 GMT)

ECB Speakers

• Kazimir and Muller (09.00 GMT)

 

Wednesday 21st

Canada Inflation Rate MoM Nov consensus -0.1% vs previous 0.7% (13.30 GMT)

Canada Inflation Rate YoY Nov  consensus 6.6% vs previous 6.9% (13.30 GMT)

Canada Core Inflation Rate MoM Nov consensus % vs previous 0.4% (13.30 GMT)

Canada Core Inflation Rate YoY Nov  consensus % vs previous 5.8% (13.30 GMT)

US Existing Home Sales Nov consensus 4.2m vs previous 4.43m (15.00 GMT)

 

Thursday 22nd

UK Current Account q3 consensus -£20.1bn vs previous-£33.8bn (07.00 GMT)

UK GDP Growth Rate QoQ Final q3 consensus -0.2% vs previous 0.2% (07.00 GMT)

UK GDP Growth Rate YoY Final q3 consensus 2.4% vs previous 4.4% (07.00 GMT)

US GDP Growth Rate QoQ Final q3 consensus 2.9% vs previous -0.6% (13.30 GMT)

US Core PCE Prices QoQ Final q3 consensus 4.6% vs previous 4.7% (13.30 GMT)

Japan Inflation Rate MoM Nov consensus  % vs previous 0.6% (23.30 GMT)

Japan Inflation Rate YoY Nov consensus % vs previous 3.7% (23.30 GMT)

Japan Core Inflation Rate YoY Nov consensus 3.7% vs previous 3.6% (23.30 GMT)

BoJ Monetary Policy Meeting Minutes (23.50 GMT)

 

Friday 23rd

Canada GDP MoM Oct consensus 0.1% vs previous 0.1% (13.30 GMT)

US Personal Income MoM Nov consensus 0.3% vs previous 0.7% (13.30 GMT)

US Personal Spending MoM Nov consensus 0.2% vs previous 0.8% (13.30 GMT)

US Durable Goods MoM Nov consensus -0.8% vs previous 1% (13.30 GMT)

US PCE Price Index MoM Nov consensus % vs previous 0.3% (13.30 GMT)

US PCE Price Index YoY Nov consensus % vs previous 6% (13.30 GMT)

US Core PCE Price Index MoM Nov consensus 0.2% vs previous 0.2% (13.30 GMT)

US Core PCE Price Index YoY Nov consensus 4.6% vs previous 5% (13.30 GMT)

US New Home Sales Nov consensus 0.595m vs previous 0.632m (15.00 GMT)

US Michigan Consumer Sentiment Final Dec consensus 59.1 vs previous 56.8 (15.00 GMT)

US Michigan Inflation Expectations Final Dec consensus  vs previous 4.9% (15.00 GMT)

US Michigan Inflation Expectations 5y Final Dec consensus  vs previous 3%(15.00 GMT)

 

Monday 26th

Japan Unemployment Rate Nov consensus  % vs previous 2.6% (23.30 GMT)

Japan Retail Sales MoM Nov consensus % vs previous 0.2% (23.30 GMT)

Japan Retail Sales YoY Nov consensus % vs previous 4.3% (23.30 GMT)

BoJ Kuroda speaks

 

Tuesday 27th

Japan Construction Orders YoY Nov consensus  % vs previous 7.9% (05.00 GMT)

Japan Industrial Production YoY Prel Nov consensus  % vs previous 3% (23.50 GMT)

 

Wednesday 28th

US Pending Home Sales MoM Nov consensus  % vs previous -4.6% (15.00 GMT)

 

Thursday 29th

 

Friday 30th

US Chicago PMI Dec consensus  vs previous 37.2 (14.45 GMT)

 

Good luck and happy holidays to one and all.

---

1. J.P. Morgan - Global FX and Treasuries—Read-through from FOMC and China re-opening 🎧

2. The BondBeat
   - sellside observations for the week ahead (12/19th) -- "Recessions's Greetings" -TIME (1974)

3. fx:macro
   - Review of Week 50/2022

4. Apricitas Economics
   - The 2023 Macro Outlook

5. Notayesmanseconomics - UK Inflation pressure starts to ease

Discover more market commentary & research from 500+ curated sources on Harkster

---

FXMacro Guy Weekly Review

• fx:macro
  - Outlook for Week 50/2022

Lyn Alden Monthly Newsletter

• Lyn Alden - December 2022 Newsletter: The World’s Money Problem

 

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

 

 

 

The information provided in this post is for general information purposes only. No information, materials, services, and other content provided in this post constitute solicitation, recommendation, endorsement or any financial, investment, or other advice. Seek independent professional consultation in the form of legal, financial, and fiscal advice before making any investment decision.