The Morning Hark - 3 Jan 2023
Today’s focus …German inflation the main focus as crypto wars continue into the new year.
All prices are at 7.20 GMT/2.20 EST, with changes reflecting movement from midnight GMT
Oil - Brent and Crude March futures consolidate their late 2022 gains and are currently trading flat at 86 and 80.70, respectively. The IMF was trying to throw a spanner in the works of oil’s recent gains with predictions of a tough year ahead and warnings on growth, but oil has taken little notice thus far.
EQ - Asia equity futures mixed to start the year, with the Hang Seng up a good two percent plus at 20,181 however the Nikkei is off one percent at 25,735. Whilst the Kospi remains flat at 292.
The Nasdaq and S&P trade flat in a quiet session, with them currently at 11,037 and 3868, respectively.
Gold - Gold Feb futures on a rip to start the year, with gold trading up over one percent at 1849, a level last seen back in the early summer. Gold did the work in the “noisy” zone at 1820/25 over the Festive period and yesterday captured the 1835 level that we had flagged. It is now sitting comfortably above with 1880 the first upside target of note. Feels like an early “year ahead” move, with many analysts predicting a slowing pace of Fed hikes which will follow through into a lower USD and hence higher gold. Always a bit wary of early year moves, so proceed with caution.
FI - US yields start the year flat, with the US2y and US10y trading at 4.39% and 3.83% respectively.
European yields closed a touch lower on their first day of trading with the German 10y yields at 2.45% and Italian 10y at 4.56%.
UK gilt yields were closed yesterday. For reference, they closed the year with the 10y at 3.67%.
FX - Little of any note in the FX space with the USD flat in Asia with the USD Index currently at 103.70. EUR and GBP equally subdued at 1.0655 and 1.2066, respectively. However, JPY is the main mover, with USDJPY trading close to one percent lower at 129.94. Again feels like an early year move with a lot of chatter and attention on the BoJ after their surprise raising of the yield curve band at the tail end of last year as well as speculation over BoJ Governor Kuroda’s replacement.
Others - Bitcoin and Ethereum despite more rumblings in the space that we touch on below, the pair currently sit unchanged at 16,722 and 1216, respectively.
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Not exactly the start that the crypto sector would have wanted for the year as two of the remaining “big beasts” in the space start the year off with a rather public spat. Cameron Winklevoss, of Gemini Trust, called out Barry Silbert, from Genesis and Digital Currency Group, accusing him of commingling of funds and refusing to return close to $1bn worth of Gemini’s customer funds which had been “invested” in high interest products at Genesis.
If you remember, at the tail end of last year DCG/Genesis were under severe pressure post the FTX collapse with many commentators expecting them to be the next crypto concern to fold. It would appear that Winklevoss is somewhat covering his tracks with the open letter as he himself is facing a class action from his own investors.
I post the full open letter and the back-and-forth below for more details. The upshot is that Winklevoss is ultimately likening DCG And Genesis to FTX and Alameda. Let’s face it when public spats like this happen in crypto it tends to only end one way sadly!
Zhu Su, remember him from Three Arrows Capital fame, started to band about some rather derogatory theories too on the DCG model. Not exactly starting the year off well then in what looks like being another year of trying to rebuild credibility in the space.
Speaking of the year ahead I post here Messari’s views for the coming year. A huge read which covers all aspects of the crypto world, and its seriously well worth a read, even if you just cherry-pick the specific areas of your interest.
The Block - Gemini/DCG spar over frozen funds
CoinDesk - Genesis/DCG loan leads to class action from Gemini customers
Messari - Crypto Theses for 2023
Some points of note from yesterday
Plenty of final PMI measures to report on with German and European final manufacturing prints for December showing as expected the Eurozone contracted with an in line reading of 47.8 ticking up a touch again from the 2 year low print we saw back in October. Germany had a similar profile with an uptick from the previous month but the print failed to meet or beat consensus coming in at 47.1.
Later in the day Australia reported a pullback for their final manufacturing measure for December but remains above the 50 mark at 50.2.
Early doors this morning, China actually beat consensus but showed a slight deterioration in their manufacturing PMI at 49 for December.
ECB’s Nagel gave an interview and as ever was the hawk in the room. Little new of note from his previous uttering though. “Inflation must not become entrenched”, it has been “more persistent than many predicted we need to take further action” and he remains “optimistic that we can avoid a serious economic slump”.
The Day Ahead
On the day, a fairly quiet start to the first day proper of 2023 with German December unemployment and the UK’s final manufacturing PMI this morning. The German preliminary inflation data will be the main highlight where a cooling is expected with headline inflation anticipated to dip back down well below the previous 10% level on an easing in energy costs. In the afternoon, we get the Canadian and US equivalent PMIs and similarly overnight we shall see how Japan fares.
For those that missed it yesterday, I post the excellent FXMacro Guy’s review of the last week of the year. In addition, a podcast from a couple of our favourite contributors at TMH with Alf and Andreas discussing their thoughts for the year ahead. Finally, the week ahead calendar is below in terms of data and speakers.
FxMacro Guy - Review of week 52/2022
2023 Global Macro Outlook - Alfonso Peccatiello & Andreas Steno Larsen
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Macro Ops - Your S&P Targets Are All Wrong… [Dirty Dozen]
- - Ecoinometrics - Lead time to a recession 🔒
The Macro Trading Floor - A 2023 Global Macro Outlook | Alfonso Peccatiello & Andreas Steno Larsen
- - Olivier throws it down: the Fed does not decide what is inflation is, we do
- - 2023 Market Outlook
Follow the latest market narratives through our curated research & commentary channels on Harkster.
All times in GMT (EST+5 / CEST-1 / JST-9)
German Unemployment Change Dec consensus 15k vs previous 17k (08.55 GMT)
German Unemployment Rate Dec consensus 5.6% vs previous 5.6% (08.55 GMT)
UK S&P Global/CIPS Manufacturing PMI Final Dec consensus 44.7 vs previous 46.5 (09.30 GMT)
German Inflation Rate MoM Prel Dec consensus -0.3% vs previous -0.5% (13.00 GMT)
German Inflation Rate YoY Prel Dec consensus 9.1% vs previous 10% (13.00 GMT)
Canada S&P Global Manufacturing PMI Dec previous 49.6 (14.30 GMT)
US S&P Global Manufacturing PMI Final Dec previous 47.7 (14.45 GMT)
Japan Jibun Bank Manufacturing PMI Final Dec consensus vs previous 49 (00.30 GMT)
Swiss Inflation Rate MoM Dec consensus -0.2% vs previous 0% (07.30 GMT)
Swiss Inflation Rate YoY Dec consensus 2.9% vs previous 3% (07.30 GMT)
Germany S&P Global Services PMI Final Dec consensus 49 vs previous 46.1 (08.55 GMT)
EU S&P Global Services PMI Final Dec consensus 49.1 vs previous 48.5 (09.00 GMT)
US ISM Manufacturing PMI Dec consensus 48.5 vs previous 49 (15.00 GMT)
US ISM Manufacturing Employment Dec consensus vs previous 48.4 (15.00 GMT)
US ISM Manufacturing New Orders Dec consensus vs previous 47.2 (15.00 GMT)
US ISM Manufacturing Manufacturing Prices Dec consensus 42.3 vs previous 43 (15.00 GMT)
US FOMC Minutes (19.00 GMT)
Australia Judo Bank Services PMI Final Dec consensus vs previous 47.6 (22.00 GMT)
China Caixin Services PMI Dec consensus vs previous 46.7 (01.45 GMT)
UK S&P Global/CIPS Services PMI Final Dec consensus 50 vs previous 48.8 (09.30 GMT)
US S&P Global Services PMI Final Dec consensus 44.4 vs previous 46.2 (14.45 GMT)
Japan Jibun Bank Services PMI Final Dec consensus vs previous 50.3 (00.30 GMT)
Germany Factory Orders MoM Nov consensus -0.5% vs previous 0.8% (07.00 GMT)
Germany Retail Sales Nov consensus 1% vs previous -2.8% (07.00 GMT)
EU Inflation Rate MoM Flash Dec consensus % vs previous -0.1% (10.00 GMT)
EU Inflation Rate YoY Flash Dec consensus 9.7% vs previous 10.1% (10.00 GMT)
EU Core Inflation Rate YoY Flash Dec consensus 5% vs previous 5% (10.00 GMT)
EU Retail Sales MoM Nov consensus 0.5% vs previous -1.8% (10.00 GMT)
EU Retail Sales YoY Nov consensus -3.3% vs previous -2.7% (10.00 GMT)
EU Economic Sentiment Dec consensus 94.7 vs previous 93.7 (10.00 GMT)
Canada Employment Change Dec consensus 7.5k vs previous 10.1k (13.30 GMT)
Canada Unemployment Rate Dec consensus 5.2% vs previous 5.1% (13.30 GMT)
Canada Average Hourly Wages YoY Dec consensus % vs previous 5.4% (13.30 GMT)
US NFP Dec consensus 200k vs previous 263k (13.30 GMT)
US Unemployment Rate Dec consensus 3.7% vs previous 3.7% (13.30 GMT)
US Average Hourly Earnings YoY Dec consensus 5% vs previous 5.1% (13.30 GMT)
US ISM Non-Manufacturing PMI Dec consensus 55 vs previous 56.5 (15.00 GMT)
US ISM Non-Manufacturing Employment Dec consensus vs previous 51.5 (15.00 GMT)
US ISM Non-Manufacturing New Orders Dec consensus vs previous 56 (15.00 GMT)
US ISM Non-Manufacturing Prices Dec consensus vs previous 70 (15.00 GMT)
US Factory Orders Dec consensus -0.8% vs previous 1% (15.00 GMT)
Cook and Bostic (16.15 GMT)
Barkin (17.15 GMT)
Bostic (20.30 GMT)
Centeno (10.35 GMT)
Lane (16.15 GMT)
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