The Weekly Hark - 1 July 2023
The USofA is Exceptional
The focus has returned to the US exceptionalism trade as soft sentiment data from Europe surprises to the downside (PMI, IFO) as well as the lack of Chinese fiscal stimulus leaving the US outperforming the RoW.
The AI halo and the $1.2 trillion Inflation Reduction Act have softened the blow of higher real rates on the economy. Labour hoarding has also contributed, with initial claims dropping this past week whilst consumer sentiment is back to 109 as the debt ceiling and regional bank crisis have been resolved.
Powell indicated at Sintra that two more hikes is most likely, whilst there is a high degree of uncertainty if credit to the economy is indeed tightening following the regional banking crisis. As a result, the North America complex is starting H2 on the front foot, offering carry (MXN, USD, CAD) and growth. This is in stark contrast to some parts of Europe (GBP, SEK) that forecast growth around flat, from (-0.5% to +0.25%). Low yielders are particularly vulnerable with USDJPY trading back towards the 145.00 intervention zone from Q4 last year whilst countries like THB with limited yield and disappointing tourist numbers (they won't see 5mio Chinese visitors this yr) are also suffering.
One reprieve for the mkt was US Core PCE showing signs of cooling (4.6% YoY) with the Fed's Super Core rising by the smallest amount since July 2022 (+0.23% to 4.5% YoY).
Equities enter H2 on the front foot with the seasonally positive month (buybacks) of July adding to the momentum whilst some of the air has been taken out of the recent crypto rally, as the SEC pushed back on the Fidelity / Blackrock applications. These themes and more are captured in the Hark Back. The key pieces that have been harvested over the past week from Harkster.com.
The key pieces that capture last week's defining narratives
Chris Weston (Pepperstone) Breakouts in US Bond Markets a Tailwind for the USD
The Last Bear Standing: Five Themes of 2023
Brent Donnelly via Real Vision: Central Bankers Spoke... Are Investors listening?
ING: Why is the Riksbank thinking about hedging its fx reserves
Christophe Barraud: Top 10 Macro/Financial Charts of the Week
Daily Chartbook: Catch up on the day in 29 charts
Nordea: Macro & Markets: Holiday hiking
Christophe Barraud: Latest Monetary Developments in the Eurozone Point To A Gloomy Outlook
JPM: EM Fixed Income Focus: Mid year debates around value in local markets and hard currency
Odd Lots: What Ben McKenzie Learned When He Started Investigating Crypto
Jobs, Jobs, Jobs.
Next week is shortened due to July 4th independence day holiday but the focus from the US (with real rates breaking key lvls) is on ADP, Jolts, Initial Claims and of course NFP.
Scotia Bank: The Global Week Ahead: Fire up the Grill!
Adam Mancini's S&P 500 Trade Companion: Massive Breakout For SPX. What Is The Target Now?
Nomura: US Jobs, RBA, BNM meetings, inflation in SZ, KR, PH, TH, ID and Scandi PMIs
Econostream Media is a financial media and analysis company with a mission to improve understanding of monetary policy and debt issuance by reporting on and analysing the central banks and debt issuance agencies, their policies and how they impact the financial markets.
Stay on top of ECB member’s latest comments with their overview page: They Said It - Recent Comments of ECB Governing Council Members
Follow in the Harkster ‘Feed of the Week’ channel.
Source: Nordea
Euro-area data has started to surprise to the downside (just as US Real Rates are breaking higher)
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Excellent newsletter, with great linking articles !!!