The Morning Hark - 6 Apr 2022
Today’s focus ……..FOMC minutes at 19:00 BST, (the highlight of the week), ECB speakers during the morning and Poland announce base rates.
Daily roundup - all prices are at 7.00 GMT/8.00 BST with changes reflecting movement from midnight GMT
Oil - Brent and WTI futures rallied off their lows in early trading sitting at 107.05 and 102.29 respectively. No news to note yesterday although Shanghai continues to show high Covid 19 infections. The EU yesterday announced they would stop using Russian coal, but oil seems to have escaped that round of sanctions. Oil appears to be settling into a new range for now.
EQ - Equity markets are lower across the board in Asia with the Hang Seng and the Nikkei up to 22,474 and 27,350 respectively. Nikkei is the biggest loser so far today.
Gold - Futures are unchanged today at 1922 following the sell off yesterday.
Gold is not able to take back any of its losses from yesterday as US 10yr yields continue to move higher.
FI - The US10y yield sits at 2.60 with prices sitting at 120.17. Fed speakers sent yields spiralling yesterday in particular arch dove Brainard who spoke of a possible rapid pace of balance sheet reduction. The market has the bit firmly between its teeth and only FOMC minutes can spoil the party.
This is the story of the week so far usurping the RBA from yesterday although AUD bonds have been routed again today.
FX – On the day currency pairs are pretty flat at the time of writing with the rise of the USD post Fed speakers taking a breather. AUD has continued its rally since the RBA yesterday and the JPY took the brunt of yesterdays losses as the ever-increasing gap between FOMC and BOJ rate paths takes hold with USDJPY back to 123.90(124.05 high on the day).
We see Polish base rate announcement today. As always, the heads up will come from Reuters/Bloomberg headlines for specific timing,
Others – Bitcoin is lower today at 45470 having breached the 45,000 earlier in the session. A nasty spike lower and then back up which if you watch BTC is par for the course. As it sits in the risk asset class currently, and not the inflation hedge it wants to be, the move is perfectly explainable with the US yield moves we have seen.
The volatility measure for equities (VIX) has rallied today, up 13.25% at 21.03 and rates (MOVE) is up 7.38%.
Today’s Chinese PMI services was not good at all, coming in at 42 against expectations of 49.7 and a previous print of 50.2. That married with the Shanghai lockdown and a fresh mass testing programme as Covid 19 cases spiral ensures the outlook remains bleak. Shanghai is also moving cargo containers to nearby ports due to Covid 19 restrictions in the city.
Well, we called it. Brainard was the most important speaker yesterday although she didn’t hint at 50bp but instead mentioned the idea of a rapid pace to balance sheet reduction. Either way, the USD loved it while bonds and stocks obviously didn’t. We get more of the same today from FED minutes but when the dovish member isn’t dovish, how can anyone else be?
📅⠀The main highlights for the day in terms of data and speakers:
The main feature tonight will be the balance sheet reduction chatter with how they structure monthly run-offs being important. The market has been predicting, (and wants) an aggressive FED.
Poland is expected to raise its base rate from 3.5% today but the market is split on whether it’s 50 or 75 BP.
We get a few ECB speakers today but they are not going to be able to compete with the FOMC, RBA or BOJ this week. Look for reasons to hike or to not hike but with the caveat that it will be months before they do or do not.
We are including an article below about Ukrainian Wheat which we found interesting.
Good luck.
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📚⠀Articles on Harkster and from outside exploring in more depth some of the themes above:
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US rates
Pepperstone - Will an inverted yield curve spell impending doom?
Zerohedge - The Yield Curve Inverts: What Happens Next
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Gold and The Rouble
Zerohedge - #GotGoldorRubles? Did Russia Just Break The Back Of The West?
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LME
Front Month - LME: The Aftermath
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Bitcoin and tax season
MacroTactical Crypto - MacroTactical Crypto #15
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Ukrainian Wheat
Bloomberg - Ukraine Is Sitting on 15 Million Tons of Grain it Can't Move
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🔥⠀Top 5 trending links on Harkster from yesterday:
Timothy Ash - Russia moves closer to default
Bond Economics - What Is The Trend, Kenneth?
Alhambra Partners - How This Russia/SWIFT Mess Might Mean More Shadows, And That Could Be A Good Thing
LPL Financial Research - What the Yield Curve Is, and Isn’t, Signaling… Yet
ING - The Commodities Feed: Saudi OSP raised to record highs
Discover more on harkster.com
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