The Morning Hark - 9 Dec 2022
Today’s focus … World Cup quarter final previews and not much else.
All prices are at 7.35 GMT/2.35 EST, with changes reflecting movement from midnight GMT
Oil - Brent and Crude February futures up close to one percent in the Asian session as oil bounces after yet another tough day yesterday. The futures currently trading at 76.70 and 72.10, respectively. Oil was boosted by the news that the Keystone Canadian/US pipeline was temporarily closed due to leakage. However, the relief was short-lived as yet again fears of an economic slowdown took precedent and sent oil back towards its recent lows. The Asian session has offered some respite on position squaring but the sector still looks vulnerable.
EQ - Asia futures all up over one percent overnight, with the Hang Seng once again leading the way at 19,956, helped by a steep rise in the property sector on the hope of further support measures from the Chinese authorities next week. Whilst the Nikkei and Kospi, for once, joined the party, with the pair currently at 27,822 and 310, respectively.
The Nasdaq and S&P firmer overnight, currently at 11,694 and 3977, respectively. S&P recaptured the 3950 yesterday and hasn’t looked back. No real catalyst for the move and more likely position adjustment after a streak of down sessions for stocks came to an end.
Gold - Gold Feb futures up a touch in Asia, currently sitting at 1806. Gold back above our 1800 trading pivot, helped by a weaker USD but once again finding it hard to gain any momentum above that level. First support at 1780 with some resistance towards 1810.
FI - US yields lower by close to one percent overnight in Asia with the US2y and US10y currently trading at 4.29% and 3.46%, respectively. 3.50% in the US10y still offering resistance in the short term.
European yields opening a touch firmer with the German 10y yields currently trading at 1.832% and Italian 10y yields at 3.695%.
UK gilts rallied yesterday with the 10y yield closing at 3.094%.
FX - Another dull FX session with little new of note. The USD off a touch with the USD Index currently trading at 104.60. The majors all a touch higher, with JPY, EUR and GBP currently trading at 136.28, 1.0575 and 1.2258, respectively.
Others - Bitcoin and Ethereum look a touch rosier with the general equity bounce. They currently sit at 17,226 and 1282, respectively.
Apologies for non-football fan readers, but there is little to discuss markets wise, so the TMH is all about football today. Normal service will definitely resume next week in what will be a bumper “last week” of the year for markets with; US CPI, FOMC, ECB, BoE, SNB, flash PMIs and a whole host of other data points from the major economies.
The World Cup - Quarter Finals
A sumptuous 4 games coming up over the next two days to determine the final four for next week’s semi-finals. For those that missed it yesterday, I repost my look at the first quarter-final between Croatia and Brazil below and then go on to take a look at the other three ties.
Croatia v Brazil
According to the bookies, this is by far the most one-sided match in the quarter-finals with some shops offering 10/1 for a Croatian win in 90 minutes. Certainly, logic points in that direction but is it ever that simple? As we noted earlier in the week, the joy that the Japanese got from attacking Croatia down the flanks should be an open invitation to Vinicius Jr and co! Neymar had a nice stroll out against South Korea to prove his fitness and needs one goal to match Pele’s record 77 for Brazil, so he won’t lack for incentive.
A lot has been made in this World Cup about player tiredness and the effect that could have on the teams as they enter the business end of the tournament. Brazil have been the team that have rotated the most, both within and between games, whilst Croatia have done the least of the 8 teams remaining. Similarly, Brazil became the first team to give their whole squad minutes in some of the games. In contrast, Croatia have used only 18 of their squad thus far in the tournament and come off a 120 minutes and penalties game versus the Japanese who, as we know, just never stop pressing! But then again, that’s what Croatia do, and you just have to look at the last World Cup to see that they are very successful at finding a way.
Quite often the Brazilians flatter to deceive in the early stages of tournaments and look world beaters only to come unstuck as the business starts to get serious. Remember, they have not won the World Cup since 2002. In the last several tournaments, when they have gone out of the competition, their achilles heel always seems to be a set piece which starts the rot before their eventual exit. Thus far in the tournament Brazil have defended set pieces well marshalled by the silky Silva but who better to exploit that weakness than Modric and a tall and physical Croatian team? Remember, it was a great header from Perisic that got them back in the game versus Japan.
Will Tite go with his Fab4 again and trust his two holding midfielders to “get in amongst” the Croatian midfield pass masters? From a footballing point of view, I do hope he picks the 4. Does Modric have one last big game in him on the international stage? Whatever happens, there is much quality to enjoy, so let’s kick back and enjoy and good luck to both teams.
Netherlands v Argentina
History hangs heavy on this fixture, with the teams having met 5 times previously at the World Cup. Most recently was an awful semi-final in 2014, which ended 0-0 and went to penalties. The game was always on a hiding to nothing, given that it came the night after the famous 7-1 Germany drubbing of Brazil. 1998, by contrast, served up a classic with two red cards and was settled by a piece of Dennis Bergkamp brilliance. The other one that sticks long in the memory is the 1978 World Cup final which was held in Argentina. Huge controversy surrounded the tournament with claims of match fixing and political pressure in favour of the Argentinians as the country’s military junta used the event to both promote its cause and its popularity within the country. Johan Cruyff, whilst not at his peak, was still one of the best players in the world at the time and still the poster boy for the Dutch Total Football philosophy. However, he missed the tournament after being the subject of a kidnap attempt, and one wonders what the outcome might have been if he had been there. Anyway, the game went to extra time before Argentina ran out 3-1 winners helped by 2 Mario Kempes goals he of the flowing locks and the short shorts! Cue mad celebrations and an awful lot of ticker tape!
Anyway, the world is a very different place now and the Dutch Total Football model has morphed into a more pragmatic Van Gaal model who always seems to get the best out of the resources that are at his disposal. He has also managed to seemingly unite what can often be a fractured dressing room into a more cohesive, together and happy unit.
Argentina, after their Saudi Arabia debacle, seem to be slowly gathering pace and improving with every performance and Messi has even scored his first World Cup knockout stage goal. Is it as simple as can the Dutch stop Messi? It feels like there’s more to the game than that. The Dutch do not possess an obvious “man-marker” and perhaps they try to cut off the supply lines to the magician in the belief that they can handle the rest of the team.
Holland also have their talisman in the shape of Memphis Depay, who, in his last 30 appearances, is averaging more than one goal involvement per game for the national team. He has been slowly introduced back into the team after injury during the early stages of the tournament, so perhaps tomorrow we see him back to his electric best.
Which of these two Barcelona alumni will prevail? Will Messi get one step closer to emulating his hero Maradona and bring the World Cup home just like the great man did or will the Netherlands get a step closer to yet another World Cup final, which they will hope this time to not come home with the runners up medal.
Morocco v Portugal
Best defence against the best attack surely something has to give? Morocco have yet to concede a goal in the tournament by an opposition player, including a penalty shootout, whilst Portugal have scored 12 goals in their four games so far and top the table, with England, as the top-scoring team.
Both teams come into the game under a slight cloud. Morocco have several key players potentially out with injuries. Aguerd one of their impressive centre backs faces a race against time. Saiss, their other centre back is also a doubt, as is their star midfielder Amrabat.
Portugal on the other hand have the Ronaldo cloud. After being dropped to the bench he came on in their stroll against Switzerland and produced an enthusiastic display with some positive body language. However, he did appear to walk off the pitch whilst his remaining team mates were celebrating their triumph. Unsurprisingly the media is full of “Ronaldo unhappy” stories, with reports that he threatened to walk out of the camp. All, of course, have been denied.
The Portuguese have an array of attacking players probably second only to, and maybe on a par with, the Brazilians. Let’s face it, to have Ronaldo on the bench is quite a super sub to have up your sleeve. Their defence, however has conceded the most of any of the final 8 teams, and that surely must remain a worry. However, coach Santos has the upper hand, having made his decision on Ronaldo, and indeed Cancelo, and got the right result. The performance versus the Swiss was a vote of confidence in him and they will come into this game on a high and with the freedom of knowing that, despite his brilliance and goals, they do not have to carry Ronaldo. I’m sure the Portuguese fans would hope that they do not see Ronaldo coming on because, if they do, it probably means they need a goal!
The Moroccans defend and counter style is a conundrum that good teams have struggled to solve. When you look at their opponents thus far in the tournament, it is probably the highest in terms of ranking when you consider they have faced; Croatia, Belgium and Spain and yet none off them could solve the puzzle. With their style it’s fairly obvious that their possession stats are going to be low and indeed they are the lowest by far, at just over 30%, of the final 8. The drawback to the approach obviously is the lack of chances and goals they create.
A fascinating battle which will see either Morocco become the first ever semi-finalists from Africa or the Ronaldo odyssey continue on his quest to deliver the World Cup to his country and reinforce the belief that he should be crowned the GOAT.
France v England
Last up is the tie, which the bookies are calling the tightest of the quarter-finals and it’s hard to disagree with them. England have looked impressive, albeit against some fairly one-dimensional opponents. Whilst France, at times, have sparkled, they have also faced some disappointing opponents who have brought little danger.
The press are very much bigging it up as the Mbappe v Walker show, with whoever gets the better of that duel likely to lead their team onto victory. Both players are quick to say the least but remember, Walker is just back from a long injury lay off and the way he was tricked by Senegal’s Sarr in the last round must have created some doubts. However, history tells us that whenever he faces Mbappe in the Champions League he has more than held his own.
I find the notion that this battle holds the key as way too simplistic, especially as what is stopping Mbappe from just switching flanks and attacking the considerably slower Shaw? In addition, it’s rather demeaning to the other great players that both teams possess.
France have their all-time leading goalscorer leading their line in Giroud, Dembele is having a great tournament and is a constant threat down the other flank to Mbappe, whilst Greizmann is a revelation in his deeper lying role. They also have Lloris in goal, who will become the most capped Frenchman of all time on Saturday when he takes to the field.
England equally have one of the players of the tournament in Bellingham, Kane the golden boot winner of the last World Cup and an array of other attacking players that most teams can only dream of.
For England, it could all be down to selection and whether Southgate reverts back to his tried and tested, and more cautious, three-man defence or does he stick with what has worked thus far in the tournament and play four at the back. His general rule of thumb has been to revert back to the more cautious approach when he comes up against better opponents. However, the introduction of Bellingham into the team has offered him another dimension as he can link the midfield and attack in a much more progressive manner than they were able to do previously. This leaves Southgate still able to field two more “holding” type players in the midfield to give him the insurance he always seems to want. From a neutrals point of view, I’d hope he opts for a four man defence rather than Trippier coming back into the team at the expense of a more attacking player.
France, despite being riddled with injuries to key players prior to the tournament, have looked impressive to say the least and have, in Mbappe, a player who is at the peak of his powers. They also have the revelation that is Griezmann who has been refashioned, out of necessity, as a number 8, and boy has it worked. He always had a football brain, but he also has great energy and has helped to patch up the French midfield, which is missing the great talents of both Kante and Pogba.
Perhaps, given the attacking flair on show, it will be which defence manages to stand up to the assaults. Both defences have their frailties. England’s Maguire, despite having done little wrong so far, has not been fully tested on the turn as yet. Meanwhile, France’s defence misses a real authority figure shown by the fact that they have conceded in every game of the tournament so far. They also miss Lucas Hernandez’s height and experience at set pieces where England have had much success over recent years.
Will France prevail and get a step closer to being the first team in 60 years to retain the World Cup or will England continue their impressive record of the last two major tournaments where they have reached at least the semi-final stage.
Hopefully, it’s a cracker.
Good luck to all teams involved and whoever you are supporting.
The Day Ahead
Overnight China inflation for November came in on expectations showing a cooling from the previous month’s print.
Later in the day, we get the November US PPI report which is expected to show further YoY declines and later, the UMich survey for December with the all-important inflation expectation measures. One point to note is that CPI is normally released before PPI in the economic calendar, but a couple of months a year, they flip. This is one such occasion, so it could be a “noisier” print than normal, given it could be seen as a CPI preview.
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All times in GMT (EST+5 / CEST-1 / JST-9)
Friday
US PPI MoM Nov consensus 0.2% vs previous 0.2% (13.30 GMT)
US PPI YoY Nov consensus 7.2% vs previous 8% (13.30 GMT)
US Core PPI MoM Nov consensus 0.2% vs previous 0% (13.30 GMT)
US Core PPI YoY Nov consensus 5.9% vs previous 6.7% (13.30 GMT)
US Michigan Consumer Sentiment Prel Dec consensus 56.9 vs previous 56.8 (15.00 GMT)
US Michigan Inflation Expectations 1y Prel Dec previous 4.9% (15.00 GMT)
US Michigan Inflation Expectations 5y Prel Dec previous 3% (15.00 GMT)
ECB Speakers
Enria (07.45 GMT)
McCaul (20.10 GMT)
World Cup - Quarter Finals
Croatia v Brazil (15.00 GMT)
Netherlands v Argentina (19.00 GMT)
Saturday
World Cup - Quarter Finals
Morocco v Portugal (15.00 GMT)
France v England (19.00 GMT)
Good luck and a good weekend to one and all.
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Great World Cup analysis! I hope we will have Argentina - Brazil classic in semifinal
Thank you for beautiful game analysis. First time I get football pointers from a markets write up. Quelle surprise! Whatever happens it will be a good weekend.
Be safe everyone