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The Morning Hark - 29 June 2022
Today’s focus ……Sintra last orders, US PCE, German inflation and bring back Mark/Paris
Daily roundup - all prices are at 7.25 BST (British Summer Time) with changes reflecting movement from midnight BST
Oil - Brent and Crude August futures down smalls on the day at 117.30 and 111.50 respectively. Ongoing discussions in G7 regarding the Russian oil price cap with lots of positive noises but little of substance revealed. Talks are also ongoing to “encourage” India and China to participate in the policy which have said to be “positive” and “productive”. As we approach the OPEC meeting their stats continue to show a disappointing shortfall in their targeted production quotas with a particularly steep shortfall in the last two months. After Macron revealed that the UAE are close to their ceiling and the Saudis are at historic levels it looks like all roads lead to Iran for any oil relief trade.
EQ - Asia stocks weaker on the day following the US markets sell off yesterday. All major indices in the region in the red with Kospi, Nikkei and the Hang Seng trading at 314, 26,800 and 21,940 respectively.
The US stock futures indices steady a touch with the futures holding onto small gains with the Nasdaq and S&P currently at 11,700 and 3,830 respectively. The pattern is there to see with the squeezes to the topside enough to get people sucked in only to disappoint and destroy PnL. The bear trend looks to continue its just having the nerve to fade the rallies that’s the hardest bit.
Gold - Gold futures flat overnight at 1821. Gold remains caught in the crosswinds of a hawkish central bank environment and the recessionary fears that seem to grow on a daily basis. Feels like a step aside market for now.
FI - Global yields continued their slide overnight in Asia with the US 2y and 10y yields now at 3.07 and 3.14 respectively as the economic prints continue to disappoint and recessionary fears continue to rise.
FX - The USD has held onto its hard earned gains from yesterday with the USD Index steady at 104.64. Similarly all the majors are flat on the day with USDJPY trading a touch below 136, the EUR at 1.05 and GBP 1.2190. ECB Lagarde’s speech did little to boost confidence in the EUR with it selling off close to a big figure after her speech. Although given she said nothing really new it seems it was more in hope than judgement that the EUR had rallied so much. She all but confirmed a 25bp hike for July, told us that inflation was undesirably high and that September’s hike may need to be bigger in magnitude depending on the incoming data. So nothing new. However, the anti-fragmentation corner which they have backed themselves into hangs over the zone with no clear policy or measure which is worth the paper it’s written on. Remember pre the EUR the troubles that previous generations of policy makers had at keeping the individual EU currencies within their fluctuating bands. How is this going to be any different when they try to do the same with asset prices? Do we go to a two speed EUR with a two speed monetary policy? I’d like to see them try or why not go the whole hog and get Mark/Paris and Mark/Lira back in play?
Others - Bitcoin and Ethereum followed stocks lower yesterday but still remain well above their recent lows. Interestingly they did not participate in the recent equity rally but were happy to sell off when things turned around albeit in a smaller magnitude. The lows certainly don’t feel in yet in the space. The pair are currently trading at 20,100 and 1130 respectively.
At the risk of sounding boring again, there was another regional print which did little for the market’s confidence yesterday with the Richmond Fed Manufacturing print for June coming in at -19 another full 10 points miss on expectations. Again we have US ISM on Friday and, although we are not saying we’ll get a sub 50 print that soon, if these surveys continue in this vein it can’t be long before that transpires. Rates looking soft and will it be soon time for the rates market to test the Fed’s nerve as it continues to hike aggressively with ISM flirting with the 50 level. All roads point to a summer blockbuster with the market squealing for cuts but the Fed holding firm with their inflation fighting commitment.
Highlights today will be from the Sintra Forum where the final day brings us a policy panel with the ECB, BoE and Fed top dogs speaking which will be fun for all the family I’m sure. Fed to stay on track, the BoE question would be whether 50bp in August is now closer to the base case and the ECB will be all about anti-frag and what more details they can add. In addition, we have the Fed’s favourite gauge for inflation the PCE prices gauge which will give the market some focus but given its a final measure and is for Q1 I think we know the story. In addition, we also get a first look at German inflation for June. Remember too we are at the month/quarter/half year end so flows can be exaggerated and illogical. Large US equity buying is being anticipated with USD buying also being touted. How much has already been done is another matter.
📅⠀The main highlights for the day ahead in terms of data and speakers:
German Inflation Rate YoY June consensus 7.9% vs previous 7.9% (13.00 BST)
US GDP Price Index QoQ Final Q1 consensus 8.1% vs previous 7.1% (13.30 BST)
US GDP Growth Rate QoQ Final Q1 consensus -1.5% vs previous 6.9% (13.30 BST)
US Core PCE Prices QoQ Final Q1 consensus 5.1% vs previous 5%
US PCE Prices QoQ Final Q1 consensus 7% vs previous 6.4%
Mester (11.30 and 16.30 BST)
Powell (14.00 BST)
Bullard (18.05 BST)
De Guindos (08.45 and 09.45 BST)
Schnabel (11.00 BST)
Lagarde (14.00 and 16.00 BST)
Bailey (14.00 BST)
Japan Industrial Production MoM Prel May consensus -0.3% vs previous -1.3% (00.50 BST)
China NBS Manufacturing PMI Jun consensus 48.6 vs previous 49.6 (02.30 BST)
China NBS Non Manufacturing PMI Jun previous 47.8 (02.30 BST)
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📚⠀Articles discovered on Harkster or social media exploring some of the current key macro themes in more depth:
Goldmans / Celsius / Coinbase / FTX / Robinhood
BoJ / JGBs
🔥⠀Top 5 trending links on Harkster yesterday:
Alhambra Partners - It’s Inventory PLUS Demand
Real Vision - Are Markets Right To Dismiss Russia's Default?
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