The Morning Hark - 23 Aug 2022

Today’s focus ……Early Composite PMI’s from Australia and Japan miss, leading the way for the later shows from Germany 08.30BST, EU 09.00BST, UK 09.30BST and US 14.45BST

All prices are at 7.40 BST with changes reflecting movement from midnight BST

Oil – In Asia this morning, Brent and Crude October futures are 0.5% higher at 96.90 and 90.70 currently. Rumours of OPEC supply being cut at the next meeting in September. Saudi oil minister stating the extreme volatility of the oil market as a reason for the possible move. The Iran nuclear deal is still awaiting a US response after comments made by Iran on the final draft set out by the EU.

Gas markets in Europe were shaken yesterday and surged more than 10% on news that the Gazprom pipeline is to be shut for maintenance on 31st August and fears from German politicians that Putin would close it for a longer period than the stated 3 days. This potential news is being blamed for possibly pushing Germany into recession.

EQ – A bad day for equities yesterday in the US and so far today markets have continued with the Nikkei close to down 1.2% at 28,452. The Kospi is down 1.1% at 2436 and the Hang Seng down 1.25% at 19,413. The early European trading has moved the dial down the most on the DAX and FTSE with those markets catching up to the US move, down 2.3% and 1.65% respectively. These markets will not be helped by the PMI’s printing today if they follow the lead of the Japanese and Australian prints that showed the composite numbers both falling into contracting territory. Australia composite PMI slips below 50 for the first time in 7 months.

Gold - Gold Dec futures are flat in Asia at 1748.5 after a 4-week low was printed yesterday.  Jackson hole looms large for the yellow stuff and with investor interest weak and technicals all leaning lower this could be a tough week for the gold market.

FI - US yields are very slightly lower overnight with the US2y and 10y yields currently trading at 3.2955% and 3.0020% respectively. Curve still steepening as 10 years outperform very slightly.

European Bund/BTP spreads widened again yesterday to a new high in August of 2.33%.

FX - The FX market is quiet today albeit with an underlying USD strength with USDJPY printing new August highs and EURUSD taking out its previous yearly low without even blinking. Early London trading has continued to see the market buy USD’s with EURUSD on it’s lows and GBPUSD following suit. Currently 0.9904 and 1.1720

CNH continues on its merry way towards 7.00 versus the USD currently at 6.8835. Power cuts due to drought in Sichuan province adding to its headwinds. We post a couple of articles below about that issue. Adding to that is the obvious interest rate differential with the US.  CNH is beginning to look like the JPY. In a market where there is so much information and data there is nothing in FX that matters as much as yield differentials.

PMI’s will show the direction in early European trade and weak numbers will likely push EUR and GBP lower again. Both these currencies are probing new lows and technical targets are tough to find. 1.1412 is GBPUSD is the only real level we see and with the current rate of decay we will be there by Friday afternoon!

Others – Ethereum and Bitcoin down on the day losing their shine since London sat down. Eth at 1,573 and BTC at 21,040

Since London open Eth has lost 2.5 % as European market continue to sell risk.

 

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Tuesday

German S&P Global Manufacturing PMI Flash Aug consensus 48.3 vs previous 49.3 (08.30 BST)

German S&P Global Services PMI Flash Aug consensus 49 vs previous 49.7 (08.30 BST)

EU S&P Global Manufacturing PMI Flash Aug consensus 49 vs previous 49.8 (09.00 BST)

EU S&P Global Services PMI Flash Aug consensus 50.5 vs previous 51.2 (09.00 BST)

UK S&P Global Manufacturing PMI Flash Aug consensus 51.3 vs previous 52.1 (09.30 BST)

UK S&P Global Services PMI Flash Aug consensus 52 vs previous 52.6 (09.30 BST)

US S&P Global Manufacturing PMI Flash Aug consensus 51.9 vs previous 52.2 (14.45 BST)

US S&P Global Services PMI Flash Aug consensus 49.1vs previous 47.3 (14.45 BST)

EU Consumer Confidence Flash Aug consensus -28 vs previous -27 (15.00 BST)

Richmond Fed Manufacturing Index Aug consensus  vs previous 0 (15.00 BST)

ECB Speakers

• Panetta (12.00 BST)

  

Good luck.

  

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1. Fed Guy - Fed Balance Sheet FAQs

2. Pinecone Macro Research - Inflation Update 🔒

3. The BondBeat - while we slept

4. Saxo Markets - FX Update: EURUSD parity unlikely to hold the line for long.

5. Notayesmanseconomics - The China property crisis will not be helped by another interest-rate cut

Discover more market commentary & research from 450+ curated sources on Harkster.com.

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Power issues in China

• ZeroHedge - Power Crunch Threatens Growth, Reinforces Weak Yuan

• South China Morning Post - China heatwave: Sichuan warns of ‘particularly severe’ power shortages as heatwave and drought continue

Crypto

• Arthur Hayes - ETH-flexive

• NY Mag - The Crypto Geniuses Who Vaporized a Trillion Dollars

Jackson Hole Previews

• Stay Vigilant - Action Jackson

• SriKonomics - Fed: Importance of Jackson Hole

Oil and Iran

• Al Jazeera - Leaders of US, UK, France, Germany discuss Iran nuclear deal

• CNN - Iran drops key 'red line' demand as progress on a revived nuclear deal edges forward

  

  

  

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