The Saturday Hark Back - 09 Dec 2023

Capturing the themes of the week when there’s more time to digest them.

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The Hark Back

The key narratives that drove markets last week:

It is the season for trending, and last week saw a continuation of some of the core end of year 2023 trends 

1. Softer EUR-XXX: ECB to lead the cutting cycle by March / April (they just haven't admitted too it yet), disinflation, weaker growth and German fiscal hole.

2. JPY acceleration as US10s rally to 4.2%, US economy slows from its Q3 peak and of course the year ahead pieces that expected BoJ to tighten got a boost from Ueda's comments

3. Crypto ETF euphoria - we're back!!!!!! $150k price targets permeate across FinTwit

4. Soft landing vibes have equities flying, wage gains, resilient labour market, lower inflation expectations... what's not to love? Homebuilders most certainly do… +27% since October lows.... 

5. Oil's slide off its September highs continues, and is now down 20%. There doesn't seem to be much OPEC can do if China imports less, Europe heads into a recession, EV caps its  available market place ... demand destruction continues unabated.

6. Chinese stocks at multi year lows which leads to some key questions. 

   1. Is all the bad news now in the price? 

   2. Will we see a turnaround in the Chinese economy in 2024? 

JPY, JPY and more JPY

A confluence of factors hit cross-JPY and lead to some short gamma fireworks (Across The Spread by

Weston Nakamura

 - Heads up: Potential JPY Surge In Immediate).... CTA stops as the yield differential changes (Ueda exit chatter led to Jgbs selling off whilst US 10s are down almost 100bps from their Oct wide’s (520bps to 420bps), oil's slide lowers the JPY current account deficit and one of the key year ahead trades was long JPY.  

Some of the key pieces curated from Harkster.com during the past week on the JPY move

• Across The Spread by Weston Nakamura - Is The Yen Broken?

• MacroHive - 2024 Grey Swan: USD/JPY Collapses

• Brent Donnelly am/FX - JPY and CHF

• Steno Research - Wrongfooted by Ueda and Gas

Mr Price vs H4L

The year is certainly not over yet with next week set to see two heavy weight camps going to battle. Mr Price enters the contest with heavy discounting of cuts, how will it react to a potential onslaught from Team "higher for longer". Powell and Lagarde have been left with the most to do, but we could also see some surprises from SNB and Norges. Lagarde is being squeezed by the 5/6 cuts priced into the Euro curve whilst JPow also has his work cut out to get the mkt to believe there will not be significant cuts next year from the US (maybe the data will do it for him....)

Fed - how will the SEP be used to re-enforce Higher for Longer

• Apollo - The Market Is Underestimating the Fed’s Commitment to 2% Inflation

• ING - We expect another Fed hold, but with pushback on rate cut prospects

• The MacroTourist - THE REASONS WHY THE FED BLINKED

• Nordea - Does the US need rate cuts in March?

ECB - Will Lagarde accept the markets first cut by March? Seems highly unlikely she will want give firm forward guidance of the timing of the first rate cut.

• Pepperstone - Playbook For The December ECB Decision

• ING - December’s ECB cheat sheet: A reality check for ultra-dovish expectations

• Bloomberg - ECB to Clash With Markets Over Rate-Cut Timing, Survey Shows

• Reuters - ECB hawk Schnabel scraps more rate hikes after 'remarkable' inflation drop

• Nordea - EUR rates: six rate cuts in 2024

• Bloomberg - "ECB's new projections alongside its decision on rates. Respondents expect growth and inflation predictions to be trimmed for this year and next, and left unchanged for 2025"

The US and Europe couldn't be further apart to start 2024.

What continues to surprise @HarksterHQ is the cuttings cycles are so similar, in timing and depth... Why does the US need so many cuts? The SAHM Indicator has dropped to 0.3% following Friday's labour data (

Claudia Sahm

- The Sahm rule: step by step) whilst Bloomberg's Kristine Aquino (@krisaqnews) points out that  "Outside of the Covid pandemic, the last two instances where the Fed pivoted on policy -- in 2007 to 2008 and in 2001 to 2003 -- coincided with the beginning of at least a year of negative payrolls prints."

Source: Five Things You Need to Know to Start Your Day (Dec 08)

Some new 2024 previews ...

• JPM - Global FX: A lot of 2024 optimism is in the price

• ABN Amro - Key views Global Outlook 2024

• Macro Hive - 2024 Grey Swans: The Complete List

Top 10 Reads of the Week on Harkster.com:

1. Bloomberg - US Jobs Report November 2023: Labor Market Strengthens as Hiring Gains

2. MacroVisor - Charts of the Week - Has the Fed's hiking cycle peaked?

3. Adam Mancini - Has The Next Leg Higher In SPX Begun? Not So Fast. (Dec 11th Plan)

4. Brent Donnelly - Friday Speedrun: December 8, 2023

5. Bloomberg - Good News — The UK’s Pensions Black Hole Is No More

6. FT - Claudia Sahm: it’s clear now who was right

7. The Felder Report - Will The ‘Vibecession’ Ever Catch Up With The Magnificent 7?

8. Cubic Analytics - Bitcoin Hits New All-Time Highs

9. Fed Guy - Crash Up

10. The Gryning Times - Fed's New Financial Conditions Index

The majority of these links appear in our new "HarksterPro - Intraday Market Colour" channel. If you click on "Select Channels", you should find under "Added Recently" our latest additions to the app. @HarksterHQ will use this new channel to flag good articles/sources of content as well as headlines/market moving events. 

Top 5 Podcasts of the Week: 

1. DB CIO - Don't wind down yet

2. The Blind Squirrel Macro (Podcast) - Scooby-Doo and Vincent Vega walk into a bar.

3. Real Vision - Mike Novogratz on 2023 and Beyond

4. MS - David Adams: Contrarian Call on the U.S. Dollar

5. WSJ - Does Nikki Haley Have a Chance At Beating Trump?

The Week Ahead

Looking forward to next week... 

• Nomura - Final FOMC Meeting of The Year, ECB and BOE Meetings, and the Japan Tankan Report

• Newsquawk - Week Ahead highlights include: FOMC, ECB, BoE, SNB; US CPI, China activity data

• SEB - All eyes on inflation and central bank guidance

• Hobas Econ Calendars - New York: Next week's G10 & China Economic Calendar

• Scotiabank - The Global Week Ahead

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