The Morning Hark - 27 Jan 2023
The Morning Hark - 27 Jan 2023
Today’s focus …Robust headline US data but under the hood not so good.
Prices are at 7.20 GMT/2.20 EST, with changes reflecting movement from midnight GMT
Oil - Brent and Crude March futures steady in Asia with them currently trading at 87.70 and 81.30, respectively, near their recent highs. Stronger headline US data helped oil capture new highs for the year yesterday with the hope that a soft landing for the economy was back on the table. Although they didn’t do the full due diligence as the underlying data was less than stellar.
EQ - Asia equity futures a mixed bag with the Nikkei off smalls at 27,358. The Kospi up close to a percent at 329 whilst the Hang Seng flat at 22,624.
The Nasdaq and S&P futures giving back a touch after their strong gains post data yesterday, with them currently sitting at 12,022 and 4060 respectively.
Gold - Gold Feb futures struggled to break above 1950 yesterday after reaching a nine month high. It has subsequently lost some momentum and sold off sitting currently at 1925. The better headline US data seems to have been the catalyst for the retreat. However more likely an overly long short-term trading community taking a bit of risk off the table after a healthy start to the year would seem a more likely reason for the retreat. Topside still at 1955/60. Support continues to be at 1900 then 1870.
FI - US yields bear steepened in Asia with the US2y and US10y trading currently at 4.20% and 3.53% respectively continuing their trend higher from yesterday.
European yields followed rates higher with the German 10y yields closing at 2.216% and Italian 10y yields at 4.037%.
UK gilt yields similarly so with the 10y closing at 3.317%.
FX - Little of note in the FX space in Asia overnight, with the USD Index currently at 102. The majors mixed with JPY, EUR and GBP currently at 130.04, 1.0874 and 1.2378, respectively. USDJPY was little changed surprisingly given the hot Tokyo CPI print which showed Core CPI at 4.3% YoY for January again higher than consensus and an eighth straight print above the BoJ’s target.
Others - Bitcoin and Ethereum marking time at 22,986 and 1580 respectively. Another big green Asian candle this weekend?
Yesterday’s Data
Overall a robust showing from the US data on the headlines at least with GDP and durable goods both beating consensus forecasts however underneath the hood the data is not as good as it would first seem.
GDP for q4 was boosted by consumer spending but momentum, going into the year-end, was slowing on the back of higher interest rates in the US. I post a few reads on the data and I’d particularly recommend EPB’s Eric Basmajian’s take on the GDP print where he points to “irregular” factors supporting the headline print but actually the engine of the economy is in recession.
Similarly when we look at durables, whilst we saw the biggest jump in the headline print in two and a half years, the biggest driver of that surge was aircraft purchases. If we look at purely the core measure we find it to be the weakest in two years. More below.
Just to add to the Fed’s misery, initial claims hit a nine-month low and taken alone suggest no “BoC type” pause is in the offing.
ZeroHedge - Core durables weakest in 2 years
Crypto
Little news other than the release of the full FTX creditor list which is always a good read! Plus unsurprisingly SBF’s tax lawyer parents are to be questioned on their wealth and the “gifted” apartment they used in the Bahamas.
ZeroHedge - SBF's parents to be questioned on their wealth and the full creditors list
The Day Ahead
All eyes on the Fed’s favourite inflation measure. Core PCE where expectations are for MoM to tick up a notch to 0.3% but the YoY measure to soften a touch to 4.4%. Compared to its bigger cousin the CPI report this tends to be a less volatile print but with the market in the mood it’s in just now, who knows?
On what looks like a fairly mundane morning. Arthur Hayes is always a good read and I post his latest take on the markets below where he discusses the potential for a Fed pivot/pause.
If you found this morning’s briefing useful, please give it a ‘Like’ at the bottom of the page to help us reach a wider audience. It will only take a few seconds 🙏
- - Risk On Appetite
- - Daily Chartbook #127
SEB - Fed to slow the pace further; likely to signal a need for more hikes
Follow the latest market narratives through our curated research & commentary channels on Harkster.
All times in GMT (EST+5 / CEST-1 / JST-9)
Friday
US Personal Income MoM Dec consensus 0.2% vs previous 0.4% (13.30 GMT)
US Personal Spending MoM Dec consensus -0.1% vs previous 0.1% (13.30 GMT)
US PCE Price Index MoM Dec previous 0.1% (13.30 GMT)
US PCE Price Index YoY Dec previous 5.5% (13.30 GMT)
US Core PCE Price Index MoM Dec consensus 0.3% vs previous 0.2% (13.30 GMT)
US Core PCE Price Index YoY Dec consensus 4.4% vs previous 4.7% (13.30 GMT)
US Pending Home Sales MoM Dec consensus -0.9% vs previous -4% (15.00 GMT)
US Michigan Consumer Sentiment Final Jan consensus 64.6 vs previous 59.7 (15.00 GMT)
US Michigan Inflation Expectations Final Jan previous 4.4% (15.00 GMT)
US Michigan 5y Inflation Expectations Final Jan previous 2.9% (15.00 GMT)
ECB Speakers
Lagarde (10.30 GMT)
Balz (17.00 GMT)
Good luck and a good weekend to one and all.
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.
Looking for 25, on Feb. 1 another 25 in March, then Pause.....
Thanks for your great work.....