The Morning Hark - 31 Jan 2023
Today’s focus …China PMIs rebound big, SBF bail bond “reveal” date set for Feb 7, Rushi on the phone to Big Sam and US ECI the market focus today.
Prices are at 7.10 GMT/2.10 EST, with changes reflecting movement from midnight GMT
Oil - Brent and Crude March futures slipping a touch again in Asia with them currently trading at 84.70 and 77.50 respectively. Rather muddied picture in oil as the year’s rally starts to fade amid fears of further interest rate increases and continuing Russian crude supply. This despite the stronger Chinese PMIs post reopening of the Chinese economy and general uncertainty in the Middle East post the Iranian drone strikes. Perhaps also more profit taking as the oil sector heads into tomorrow’s double risk events of the OPEC+ and Fed meetings.
EQ - Asia equity futures a sea of red following yesterday’s sell off in the US with the Nikkei, Kospi and Hang Seng all down at 27,318, 319 and 21,760 respectively.
The Nasdaq and S&P futures a touch lower at 11,939 and 4030 respectively. Big reversal in stocks again after the short squeeze at the tail end of last week as it appeared that the shorts started to reload again. A general risk off theme with yields ticking higher and the USD firming up added to the general sell off.
Gold - Gold Feb futures again struggling to regain any upside momentum with higher yields and USD weighing on the precious metal yesterday and again struggling overnight with us currently trading at 1915. Topside still at 1955/60. Support continues to be at 1900 then 1870. On a side note, according to the World Gold Council, central banks bought, in 2022, the most gold in 55 years.
FI - US yields off a touch in Asia after yesterday’s rally with the US2y and US10y trading currently at 4.24% and 3.54% respectively.
European yields closed higher yesterday after a surprise upside miss in Spanish CPI with the German 10y yields closing at 2.319% and Italian 10y yields at 4.192%.
UK gilt yields did little with the 10y closing at 3.338%.
FX - The USD holds onto yesterday’s gains in Asia overnight with the USD Index currently flat at 102.32. The majors mixed with JPY, EUR and GBP currently at 130.25, 1.0840 and 1.2348 respectively. AUD lower post retail sales print currently at 0.7020.
Others - Bitcoin and Ethereum both suffering in this environment with them lower currently at 22,860 and 1571 respectively.
IMF Outlook
If you were anyone other than British the IMF outlook for 2023 would be met with open arms. The release of their growth projections for 2023 showed pretty much upticks all round with the global growth measure ticking up from their last estimates to 2.9% driven by China re-opening, lower than expected energy costs (for now) and a more resilient US and EU than had previously been expected.
The US is now expected to grow at 1.4% whilst the EU is on course for a mild 0.7% growth. China has the largest revision up to 5.2% for the year.
However the UK is firmly in the relegation zone at -0.6%, the lowest by far of all the “advanced” economies, and we have visions of Rushi on the phone to Sam Allardyce to try and persuade him to come in and replace the current beleaguered manager of the UK economy Hunt. If it were only that simple!
Crypto
Couple of things to watch on the old SBF/FTX front. Sam “I only want to do good and give all my money away” BF was allegedly trying to stall FTX’s bankruptcy proceedings in the US to try to transfer assets from the exchange to foreign regulators according to the Department of Justice.
In other news, the judge in the criminal case against Sam BF ruled that the two people who signed his $250m bail bond could be made public. “Reveal” date is scheduled for Feb 7 pending of course the likely appeal. That should be a cracker!
The Day Ahead
Overnight the December Japanese data dump showed a healthy beat for retail sales, a MoM better than consensus print for industrial production, albeit still a small decline, and a steady unemployment rate.
Australia posted miserable retail sales data with a -3.9% print for December.
Elsewhere though China was the highlight with the January PMIs both rebounding strongly from the previous month with both measures moving into expansionary mode. Manufacturing scraped over the line at 50.1 but non-manufacturing soared to 54.4 on the back of the stronger construction and services sectors. This was the second biggest monthly increase ever only beaten by the initial flourish post covid back in March 2020.
Just released German retail sales for December and yet more ugly data with MoM showing a 5.3% decline adding to the country’s woes.
This morning we will get the first feel for q4 GDP growth for the EU which is expected to show a small contraction. Confidence in the number scraping a positive slant has been hit by the German data from yesterday which showed the country’s growth contracting by 0.2% as opposed to an expected small positive number. The, just released, German retail sales data will do little for confidence either.
The afternoon is taken up with the Canadian monthly GDP print but more importantly the ECI measure for q4 in the US which will give us more of a handle on wage growth as it feeds into the wider inflation profile. In all likelihood, not a dial shift for the Fed but may give Powell some ammo to temper stock market enthusiasm if the gauge remains elevated. Finally the regional Chicago PMI survey.
Overnight we start to get the final manufacturing PMI readings for January with Australia, Japan and China all printing.
FxMacro Guy - Central bank speakers summary
FxMacro Guy - Outlook for the week
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Macro Ops - If You’re Not A Little Long, You’re Wrong… [Dirty Dozen]
- - The White Collar Recession
Pepperstone - The January FOMC meeting playbook – assessing the risk to the USD
- - Mr. Powell, your move!
- - Core Inflation Woes
Follow the latest market narratives through our curated research & commentary channels on Harkster.
All times in GMT (EST+5 / CEST-1 / JST-9)
Tuesday
EU GDP Growth Rate QoQ Flash q4 consensus -0.1% vs previous 0.3% (10.00 GMT)
EU GDP Growth Rate YoY Flash q4 consensus 1.8% vs previous 2.3% (10.00 GMT)
Canada GDP MoM Nov consensus 0.1% vs previous 0.1% (13.30 GMT)
US Employment Cost Index QoQ q4 consensus 1.1% vs previous 1.2% (13.30 GMT)
US Chicago PMI Jan consensus 45.1 vs previous 44.9 (14.45 GMT)
Australia Judo Bank Manufacturing PMI Final Jan consensus vs previous 50.2 (22.00 GMT)
Early Wednesday
Japan Jibun Bank Manufacturing PMI Final Jan consensus vs previous 48.9 (00.30 GMT)
China Caixin Manufacturing PMI Final Jan consensus 49.5 vs previous 49 (01.45 GMT)
Good luck.
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I remember when Sam Allardyce said he could manage any club in Europe.
Thank you ✌🏼 Tbh, your daily newsletters are such an important part of my trading experience. I know I've said it before, but you have a knack for distilling lots of information into concise and digestible paragraphs. I also appreciate the occasional shout out to other macro analysts. Keep up the excellent work 🙌