The Saturday Hark Back - 27 Jan 2024
Capturing the themes of the week when there’s more time to digest them.
The Hark Back
The key narratives that drove markets last week:
Theme 1 - CB's on hold until summer?
Theme 2 - Earning season or should it be rebranded "All Time High" season
Theme 3 - Goldilocks US data
Theme 4 - US Elections
Theme 5 - China Watch
Top 10 Reads of the Week on Harkster.com
Top 5 Podcasts of the Week
Week Ahead Previews
Bonus - Tweet of the Week
Theme 1 - CB's on hold until summer?
A week of central bank meetings but we learnt little. All the major CB's (BoJ, Norges, BoC, ECB) are waiting patiently before declaring victory on inflation. The bond market was prepared for their data dependent message after all we've heard an array of Central Bankers to start the year pushing back against market pricing of March/April cuts.
#1. BoJ:
Tokyo's Core CPI came in lower than expected (1.6% YoY vs exp 1.9%), which relieved any pressure on the BOJ to move. As a result, there is little expected now until their new financial year in April. The BoJ are patiently waiting to see if the wage agreements feed into price pressures
ING - Bank of Japan opens the door to ending negative rates, but timing uncertainty remains
Oxford Economics - BoJ on hold ahead of wage negotiation results
Across The Spread by Weston Nakamura - BOJ Policy Unchanged, Japan Equities Drop Ahead of Gov Ueda Presser
Reuters - BOJ keeps ultra-easy policy, signals conviction on hitting price goal
#2. Norges:
A repeat of the Dec MPR, like their European cousins, they're in a holding pattern and unwilling to pre-commit to a date of their first cut.
#3. BoC:
Another meeting, another push. There was little from the MPR indicating imminent action. However, like other CB's they're more comfortable in declaring their next move should be a Q2 cut.
#4. ECB:
Having sent a clear message from Davos, this meeting came with little for the market to really trade. Although there was comfort in her "limited" pushback against March/April pricing.
However, there won't be any new staff forecasts in April and it will take time for wage settlements to filter through the economy so sitting here today, it doesn't look like there is much left on the bone with April already priced at 90%. As Simkus mentioned, it will take material downside economic surprise to get more than one 25bps cut by June even if there are considerable downside risks to the staff forecasts... #datadependent. The mkt wants cuts, will the data deliver/encourage the ECB to action just after the Easter break. Data that muddles through and ECB may indeed stand tough and wait until the June staff forecasts, thus the risk reward isn't great at this juncture...
Raiffeisen - ECB Watch: The unsaid often weighs more heavily
Saxo Markets - The ECB holds rates: is the bond rally sustainable?
Nordea - ECB Watch: Towards a summer cut
Econostream - ECB Insight: Lagarde Delivers as Expected, Carefully Avoiding any Hints as More Data Awaited
Theme 2 - Earning season or should it be rebranded "All Time High" season
Some marquee names reported last week providing fresh momentum to the "ATH" narrative as we grind towards the magnetic 5000 threshold.
WSJ - The Score: Netflix, United Airlines, Tesla and More Stocks That Defined the Week
TKer by Sam Ro - At new all-time highs, the stock market has actually gotten cheaper)
Nautilus Research - Nasdaq Composite >50% Higher than 12/28/22 Low
#1. Tesla: Should it be magnificent 6 not 7?
SAXO Markets - Tesla earnings review: Between two mountain tops?
Reuters - Tesla warns of slowing growth before new model launch next year
Bloomberg - Upbeat Musk Can’t Soothe Tesla Investors’ Fears About Growth
#2. Netflix: higher growth forecasts, WWE deal and beating analysts' estimates.
Stock Market Nerd - Tesla & Netflix Earnings Reviews
#3. Intel: there has to be one AI laggard
Reuters - Intel tumbles as chipmaker falls further behind in AI race | Reuters
FT - AI-fuelled chip rally tested by semiconductor demand warnings
#4. Boeing: Pressure is mounting
Theme 3 - Goldilocks US data
It was a Fed blackout week, with limited movement in Fixed Income (US10s consolidating 4.08% - 4.18%) but the data was exactly what the goldilocks brigade would have wanted. Higher consumer spending, pending home sales increasing just as core inflation eases, we're landing the plane!!!!! Q4 GDP 3.3% vs previous 4.9% and expected 2%. As the WSJ highlighted... "the rearview window isn’t the best guide to the road ahead, but the details of Thursday’s GDP report suggest that, at least for now, the economy will keep rolling forward". What a glorious job Yellen, Powell and Biden have done (makes you wonder why they're struggling for re-election)... is it too good to be true? Does goldilocks really exist? Where is the bite coming from? Does the data need a cut...?
Purity Macro - Big Picture: The Bond market is vulnerable
BMO - U.S. Consumer Spending Growth Accelerates in December, But Core Inflation Eases
ING - Weak inflation and strong growth underscore the goldilocks US economy
Calculated Risk - New Home Sales increase to 664,000 Annual Rate in December
Theme 4 - US Elections
Will Haley stay in the race? Will she run out of funding? She's already polling second in her home state of SC (primary late Feb) and she will struggle to turn around the momentum given Trump has the support of the Governor and the states two senators. Without a legal surprise or a different reason why Trump can't run, it seems like the trade is the fight for VP. Be there to take over from Trump if he has to drop out closer to election day... maybe that's why Vivek / Scott / Burgum all appeared on stage during Trump's NH victory rally. As the GOP is converging around Trump, will she withstand the pressure to drop out? For now, money will talk, and she still appears to have the public backing of the Koch brothers.
WSJ - Trump Won the New Hampshire Primary, but There Are Warning Signs for the 2024 Election in November
WSJ - Nikki Haley Says ‘Dozens of States Yet to Go,’ Stays in Race
The NY Times - G.O.P. Donors Face a Dilemma as Another Trump Rival Falls
Axios - RNC considering whether to declare Trump as presumptive Republican nominee
Despite his legal issues (Politico - Trump ordered to pay $83.3mio for defaming E. Jean Carroll) Trump is dominating the Rep primaries as well as having a clear lead over Biden in the polls. As a result, participants are researching what Trump 2.0 means for markets.
The Rest is Politics - Why Trump's return wasn't inevitable
The New Yorker - The 2024 Republican Primary Was Over Before It Began
The Wolf Den #888 - Trump vs Biden
MS Thoughts on the Markets - Will the US Presidential Elections change Fed policy?
David Woo - How to Trade a Second Trump Presidency
Bloomberg - Fed Fears Being Sucked Under a Trump Riptide
MS Thoughts on the Market - What Matters Most to Markets in the U.S. Election
Theme 5 - China Watch
After Premier Li Qiang chaired a cabinet meeting were officials mulled over the possibility of converting 2trillion Yuan offshore back into domestic assets (not a bad order, mine $278bln of the index pls... Reuters), we've now had a "surprise" 50bps RRR cut as well as last week's "short sale ban" from one of the key local brokers. Coordinated economic support? Is this enough to turn the tide? Sceptics believe the deflationary spiral needs a lot more than "patchwork" liquidity pumping and its longer-term regulation changes in the tech sector, confidence boost for Chinese households and direct intervention/clean-up of the property sector that will turn the long-term trend, not generate a short-term squeeze.
Bloomberg - China May Need a Bigger Bazooka
FT - EU scales back China investment screening plans to avoid ‘turf war’
The Lead-Lag Report - Catching China's Falling Knife
Steno Research - CHINA WATCH: FROM A CONTROLLED DEMOLITION TO ANOTHER ROUND OF DAMAGE CONTROL?
WSJ - China's Stock-Market Rout Has Become a Political Problem
The NY Times - China Appears to Backpedal From Video Gaming Crackdown
Alexander Campbell - Time for a Bottom in Chinese Stocks?
Bonus - Tweet of the Week
Top 10 Reads of the Week on Harkster.com:
The BondBeat - Weekly Observations
The Next Economy by Florian Kronawitter - Two Pivotal Events
Steno Research - Shipping Watch: Consider buying your Christmas presents now!
Paulo Macro - Crossing the Event Horizon on Labor and Wages
The Lead-Lag Report - Catching China's Falling Knife
Stay At home Macro - The "worst possible outcome" for the Fed is an unnecessary recession, not reversing a cut
Liberty's Highlights - 473: Zuckerberg King of GPUs, Meta's AGI
Reuters - Plan for one-month Gaza truce makes progress as Israel hits Khan Younis
Christophe Barraud - Top 10 Macro/Financial Charts of the Week
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:
Jim Bianco - “No Landing” Economy, Sticky Inflation and Powell Pivot - Episode #149
BlackRock - Is Japan At An Inflection Point
JPM EM Fixed Income - From giant leaps to small steps
Unchained - So It Was a 'Sell the News' After All
The Week Ahead
Looking forward to next week...
Brent Donnelly am/FX - Huge weeks awaits
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