The Morning Hark - 9 Aug 2022
Today’s focus ……Singapore holiday adds to the “sit on your hands” mode for markets
All prices are at 7.00 BST with changes reflecting movement from midnight BST
Oil - Brent and Crude October futures flat on the day at 96.80 and 90.10 respectively. Oil held onto yesterday’s gains as a weaker USD and a Goldman note suggesting it should be higher helped the overall tone but volumes were light and ahead of CPI and any firm news on the US/Iranian talks commitment to any position seems a recipe for a loss.
EQ - Equity markets in Asia show us a mixed bag with the Nikkei off over half of one percent at 27,995 with earnings misses weighing on the index but the Hang Seng and Kospi trading up smalls at 20,000 and 329 respectively.
The Nasdaq and S&P steady at 13,211 and 4150 respectively. The S&P made a break for the border yesterday as it broke back into our 4150/4200 zone with gusto on the back of a better risk appetite as the market seems to be focused more on growth prospects than the impending Fed hikes. The euphoria had its wings clipped somewhat with a profit warning from Nvidia, the chip maker, stating that its q2 revenues would drop by close to 20% as well as cutting guidance and expressing concerns for q3.
Gold - Gold futures flat on the session at 1805. Gold back playing with the 1800 pivot as we mark time before tomorrow’s CPI print. Ultimately it’s trading as a hostage to the USD for now.
FI - US yields off a touch overnight with the US2y and 10y yields currently trading at 3.21% and 2.76% respectively. The US2y10y yields continue to invert and push for the 50bp target.
European yields have also had a quiet few sessions with the German and Italian 10y yields closing at 0.898 and 2.843 respectively.
FX - The USD flat overnight with the USD Index flat at 106.34. The majors all steady versus the USD with the JPY, EUR and GBP trading at 135.04, 1.0201 and 1.2086 respectively. One thing to note, with the recent USD correction, is that the market is a lot cleaner in terms of USD longs with positioning closer to neutral for the first time in quite a while. With rate differentials continuing to widen in the US’s favour and the other major economies showing greater recessionary worries the USD still looks a buy on dips, albeit that the “easy yards” have gone from the trade.
Others - Bitcoin and Ethereum gave back some of their gains from yesterday which saw the pair breach 24,000 and 1800. Currently they are trading at 23,900 and 1780 respectively. Since the correction through 30,000 in Bitcoin, in the early part of June, the 24,000 level has been a tough nut to crack with several failed attempts now. If it can eventually break and close above then it would open up a revisit to the 28,000 level.
Shocker of results from Galaxy Digital who put on a bold face in the face of a $500m+ loss in q2 although on the bright side, unlike some recent stories on this page, they remain in business and solvent. Equally they could have been SoftBank who reported a cool $23.4bn q1 loss (April-June). Further reading on both at the bottom.
Ethereum meanwhile looked perky with its break of 1800 making 2200 a viable target. Its since pulled back but we think that it will remain underlying bid over the next few weeks in the run up to the merger. Perhaps its a perfect set up for a buy the rumour sell the fact? In the next few days whilst Ethereum moves along its path from a proof of work to a proof of stake protocol it will hopefully cross off another major milestone. The Goerli test will take place this week which in effect is the merger of the third and final test network environment. This test will be crucial for the viability of the main merge to proof of stake which happens next month. I post an article at the end with more details.
One point of (small) note overnight was the UK BRC retail sales print for July which saw a jump of 1.6% YoY breaking a four month losing streak. Digging in further however it would seem that the record temperatures, we saw in mid July in the UK, caused a jump in clothing (loose I assume) and hot weather essentials. Hardly a cause to get the bunting out but the UK will take any win it can get just now.
Nothing on the slate for today but a reminder that in the early hours of tomorrow morning we have China inflation data for July.
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China Inflation Rate YoY Jul consensus 2.9% vs previous 2.5% (02.30 BST)
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