The Morning Hark - 24 June 2022
Today’s focus ……Tired markets, Fed and markets dislocation and the UK’s woes continue.
Daily roundup - all prices are at 7.25 BST with changes reflecting movement from midnight BST
Oil - Brent and Crude August futures both up smalls on the day at 110.50 and 104.90 respectively. Little of note in the oil space the last few sessions with oil settling into a tight range. Once again we can’t stress enough the poor liquidity in the space.
EQ - In Asia green is the colour with all major indices up on the day the Kospi leading the way with an over two percent gain to 313 and over one percent gains for the Hang Seng and Nikkei at 21,700 and 26,500 respectively. Tech stocks have led the way across the board.
Similarly the US stock futures indices both up close to one percent on the day with the Nasdaq and S&P at 11,850 and 3,830 respectively.
Gold - Gold futures flat overnight at 1825. Gold had another round trip day as it rallied pre Chair Powell’s testimony to reach close to the previous days high at 1847 before selling off as Powell reiterated the Fed’s determination to fight inflation with higher rates. Not much to add other than a willingness to stand aside for now and let the price action speak so to speak.
FI - US yields stabilising after their sell off yesterday with the US 2y and 10y yields at 3.04 and 3.09 respectively. At one point the two year dipped below 2.90 pointing to the market anticipating Fed cuts in a worrying development as the market and the Fed start to dislocate on their future rate paths. Similar picture in Europe with the German and Italian 10y closing approximately 20bps lower at 1.429 and 3.367 respectively.
FX - Another day of large intraday swings yesterday with USDJPY having close to a 200 pip range. The USD overnight is a touch weaker at 104.25. Risk proxy currencies are fairing well with the stocks rebound with the AUD and NZD both up close to half a percent at 0.6910 and 0.6300 respectively.
Others - Bitcoin and Ethereum continue to be sidelined after all the recent fireworks with them trading at 20,900 and 1140 respectively. FTX had a quiet day as it took a break from single-handedly saving the crypto world.
Chair Powell remained on the inflation fighting front yesterday in his second appearance of the week with little to add to the narrative with him reiterating that inflation remains the enemy and it will be met with further hikes. The markets didn’t get the message with stocks rallying and rate yields selling off. This despite the Fed’s Bowman calling for a further 75bp hike in July followed by more 50bp increments. This dislocation between the Fed and the markets is somewhat worrying and something will have to give. The US flash PMIs yesterday disappointed and the market is looking for rate cuts sooner than the Fed is anticipating. Today’s Michigan survey will be keenly watched especially with the 5/10 year inflation expectations and these may give the market a nudge that rate hikes are still well on the agenda. It does feel like the sell off in yields is a touch overdone.
Far from good news on the GBP front with the government losing the two by-elections as was heavily anticipated and the Tory chairman resigning stating rather nobly that “somebody must take responsibility”. Adding to the gloom consumer confidence hit a new record low for June at -41 and retail sales came in worse thane expected at -4.7% YoY for May.
Over the weekend Russia will more than likely have a default event as the 30 day grace period ends on the 26th June for their non-payment of interest. It is anticipated that bondholders will take Russia to court to petition for the seizure of Russia’s overseas assets. To complicate matters a further $394m is due in the coming days.
📅⠀The main highlights for the day ahead in terms of data and speakers:
German IFO Jun consensus 92.9 vs previous 93 (09.00 BST)
RBA Gov Lowe Speaks (12.30 BST)
Michigan Consumer Sentiment Final Jun consensus 50.2 vs previous 58.4 (15.00 BST)
Centeno (10.30 BST)
De Cos (11.30 BST)
De Guindos (12.30 BST)
Bullard (12.30 BST)
Daly (21.00 BST)
Pill (13.30 BST)
Haskel (14.45 BST)
Good luck and a good weekend to one and all.
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📚⠀Articles discovered on Harkster or social media exploring some of the current key macro themes in more depth:
ZeroHedge - It's Official: Nomura Is First Bank To Call For 2022 Recession
Fortune - U.S. recession is more than a 50/50 possibility in 2022, Nomura says
Mish Talk - Bank of Japan Blows Record $81 Billion Defending It's No Rate Hike Pledge
ZeroHedge - Bank of Japan Spends A Record $81 Billion To Avert Collapse, But $10 Trillion JGB Market Is Now Completely Broken
ZeroHedge - "That Would Be Crossing The Rubicon": The BoJ Is About To Own More Than Half Of All JGBs
Blockworks - Voyager Digital’s 60% Slide Leads the Sell-off for Crypto Equities
Coinstack - FTX Bails Out BlockFi; Voyager Announces $661M Exposure
🔥⠀Top 5 trending links on Harkster yesterday:
The Macro Compass - Time To Buy Bonds?
LPL Financial Research - Are Commodities Cracking?
Visual Capitalist - 3 Insights From the FED’s Latest Economic Snapshot
Blockworks - Forward Guidance - A Profit Recession Is Coming, An End To Inflation Is Not | Vincent Deluard 🎧
Stuck in the Middle - Relief Before Recession Risk
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