MARKET REPORT
Review:
– Headline CPI rose 0.3% in Dec
– 0.2% forecast, 0.1% prev in Nov
– Annual rate rose 3.4% Y/Y
– 3.2% forecast, prior 3.1%
– likely see the Fed continue to push-back on market pricing for early rate cuts
– money markets still price a 65% probability of a 25bps rate reduction in March, down from around 70% pre-release
– Fed’s Goolsbee (nv) and Barkin (v) noting the data was in line with expected
– Fed’s Mester (v, retiring) stressed that it shows the Fed’s job is not done yet
– Iran seizes oil tanker, Crude higher
– UK to join US airstrikes on Houthi military positions
– Dollar ramped but gave back gains
– Gold sold back made back losses
– ETH notably higher again (although parred from highs)
– Equities Sold over data but recovered
DOLLAR flat:
– AUD down small: 66.88 -0.23% (67.15 – 66.48) close mid rge
– EUR flat: 91.14 UNCH (90.98 – 91.45) close off bottom rge
– GPB up smalls: 127.60 +0.15% (127.70 – 126.90) close top rge
– JPY down smalls: 145.26 0.26% (145.26 – 126.37) close bottom rge
GOLD up small $2033 +0.26% (2043 – 2018) close mid rge
DOW/ES/ND: 37910 UNCH, 4812 -0.1%, 16958 +0.08%
CRYPTO: BTC/ETH: +372/+0.8% 46300, +95/+3.75% 2610
CRUDE: $72.85 +$1.48/+2.07%
Upcoming:
– CH; CPI, PPI, Trade Balance
– Australian Owner-Occupied Housing Final
– US PPI
Speakers: ECB’s Lane; Fed’s Kashkari
Earnings: JP Morgan, BlackRock, Wells Fargo, Citi, Bank of America, Delta Airlines.
MAJORS:
DX:
Significant spike over CPI was completely retraced. Post CPI Fed’s Mester said the Fed’s job was not done Barkin stated he wouldn’t prejudge the outcome of the Mar meet noting todays CPI was as expected. The market was EXPECTING a firmer number so the sell-off post the knee-jerk was expected.
We were trading 101.91 pre data, hitting 102.56 post before giving back gains to close 102.06, almost Unch on the day.
Has 102 become a base or a ceiling is the question. My personal opinion is that Inflation wont reduce sufficiently in order to meet market rate cut expectations. But will this come sooner or later? And what role does the Election play in Fed decision making? (nothing, cough cough)
We could see a little washy here for a while with no clear direction. Still favour 101 as longer term floor.
No shorter term range.
1-
AUD:
AUD was a cyclical laggard despite posting a wider-than-expected surplus in the trade data. However, Credit Agricole highlighted that it is not a big upside for the AUD given it is more evidence the economy is slowing.
I favour a ceiling at 68.
65 handle for support.
Sell a bounce, go with downward.
67.39 – 66.12
EUR:
91 the figure up to 91.50 before grinding off. Think we could wash around the 91 handle a little. Id be looking at a turn sub high 90’s to return to 91.45
Look for a turn late 90’s.
90.84 – 91.44
POUND:
UK GDP Friday.
No call pre.
No call pre GDP
12-
YEN:
Yen hit a high of 146.41 in wake of the data before paring to 145.60 throughout the remainder of the session as US yields eased from highs.
Jiji reported that the BoJ is considering lowering its price outlook for the FY2024 to the middle 2% range (via Reuters), although Citi analysts highlight there was little reaction given dovish BoJ expectations being already well-established.
Could wash around 145 handle but longer think it will hold.
144.31 – 145.88
GOLD & SILVER:
“Gold nearing 2020 which is support…”
Yest Mkt Report.
Gold did touch 2018 in knee jerk over CPI but the 2020 level did hold for a push to close mid 2030’s.
Stronger CPI was more or less expected so instruments across the board paring reactions with Dollar, Metals and Equities effectively Unch on the day.
My opinion the bridge between market expectations in dovish policy and Fed pricing is one of significance which will flow through to dollar support. I think this could cap gold.
Although IT IS an election year and the modern Fed is as partisan a political instrument as the modern DoJ, or any other arm of the Federal government these days so it would NOT surprise to see aggressive dovish Fed policy this year which could see this stuff, go to the moon. Take out the election and it’s a different ball game. But we cant so it isn’t.
Silver weaker than its bigger brother hitting 22.70 from 23.30 pre number, closing at 22.90. Could wash around $23 for a little.
No call, washy on both.
EQUITIES:
US:
– SPX -0.07% 4,780
– NDX +0.17% 16,820
– DJI +0.04% 37,711
– RUT -0.75% 1,955
EUR:
– DAX -0.86% 16,547.03
– FTSE 100 -0.98% 7,576.59
– CAC 40 -0.52% 7,387.62
– Euro Stoxx 50 -0.62% 4,441.25
SECTORS (W to S): Utilities -2.34%, Real Estate -0.96%, Financials -0.41%, Materials -0.32%, Communication Services -0.26%, Industrials -0.2%, Health -0.11%, Consumer Discretionary -0.03%, Consumer Staples -0.02%, Energy +0.16%, Technology +0.44%
– Tesla -3%: Saw weakness prior to the story, but it is forced to suspend vehicle production in gigafactory Berlin-Brandenburg from Jan. 29th-Feb. 11th with exception of a few sub-areas due to red Sea conflict; production will resume in full on February 12th.
– Citigroup -1.7%: Faces USD 3.8bln of charges in its Q4 earnings; warned investors of a possible quarterly loss due to the decline of the ARS and restructuring charges. Scheduled to release Q4 earnings results Friday morning.
– Apple -0.3%: US ITC opposed Apple’s motion for a stay pending appeal in a case involving sales of Cos. flagship smartwatches.
– Paramount -5.5% Downgraded at Redburn Atlantic
– Warner Bros. Discovery -4% Downgraded at Redburn Atlantic
– Netflix +3%: Advertising President Reinhard said it is seeing strong growth of its ad-based plan and is now over 23mln global MAUs. Note, approx. two months ago it was over 15mln
OIL:
WTI (G4) SETTLES USD 0.65 HIGHER AT 72.02/BBL; BRENT (H4) SETTLES USD 0.61 HIGHER AT 77.41/BBL
The crude complex initially saw strong gains through the European morning amid heightened Middle East tensions, before paring a large part through the US afternoon. WTI and Brent peaked at USD 73.91/bbl and 79.10/bbl, respectively, as geopolitical worries continued to escalate after Iran seized an oil tanker’ off the coast of Oman, which later source reports pointed it towards a US tanker. In addition, but separately, the US Military said Iranian-backed Houthis fired an anti-ship ballistic missile into international shipping lanes in the Gulf of Aden on Thursday, but there were no injuries or damage reported. However, as mentioned, through the NY session with the risk events (such as US CPI) in the rear view oil retraced from highs, albeit on thin headline newsflow while the dollar sold from peaks. Looking ahead, participants will remain cognizant of any further geopolitical updates, as well as Chinese inflation and trade data (Dec), US PPI (Dec), the beginning of US earnings season, and the weekly Baker Hughes rig count.
Oil report courtesy of zerohedge.com
BOND YIELDS:
US 1-MO 5.378 UNCH US 6-MO 5.238 -0.015 US 1-YR 4.76 -0.072 US 5-YR 3.888 -0.093 US 10-YR 3.975 -0.055 US 30-YR 4.181 -0.019
CRYPTO
ETH continued its run on ETF speculation putting on 65 pips/2.65%, although at one stage it was up nearly 140 pips and over 5% Before the a brutal 100 point crash squeezed those late to the game out.
BTC had a huge ramp to 49k for CRASHING back to 46k.
No call on short term. Extended periods of vol. Surpise
No call on direction.
Best of luck out there. Let the market come to you
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