Market in Review 1/17/2024

MARKET REPORT

Review:
– US Retail sales – Strong (+.6 Exp +0.4)
– US Homebuilder optimism jumped
– US Industrial Production better than expected
– UK Inflation HIGHER (CPI Exp +3.8% Act +4.0%)

– US 10yr above 4%
– Mar rate cut odds tumble
–  57% chance the Fed cuts, down from a 67% chance last week and 71% a month ago.
– ECB president Christine Lagarde warned expectations of loosening are too high
– Disappointing Chinese GDP suggesting that China’s growth is flagging despite stimulus measures
– Dollar rallied but gave back
– Gold off

DOLLAR:
– AUD DOWN: 65.53               -0.5% (65.85 – 65.27) close off lows
– EUR FLAT: 91.87                   UNCH (91.87 – 92.15) close on lows
– GPB UP: 126.79                     +0.3% (125.99 – 126.93) close off highs
– JPY UP: 148.20                       +0.75% (147.35 – 148.50) close mid high

GOLD DOWN: 2009              -1.0% (2032 – 2005) close on lows
DOW/ES/ND:                          37450 -0.3%, 4770 -0.6%, 16860 -0.6%
CRYPTO: BTC/ETH:                -800/-1.84% 42685, -72/-2.9% 2532
CRUDE: $72.75                       +$0.35/+0.5%

Upcoming:

JAP: Industrial Production, Auctions, Machinery Orders, FBI

AU EMPLOYMENT!

CHI Foreign Direct Investment (FDI)

US: Building Permits, Weekly Jobless, Philly Fed, oil inventories.

SPEAKERS:
US: Fed Bostic
EU: Lagarde

MAJORS:

DX:
“With a floor under the dollar. As Ive been speaking about for a while now the MASSIVE difference in rate cuts between market expectations and Fed policy is coming to light (3 Fed vs 6 market. NOT a small diff). The index started out mid 102’s and closed SOLIDLY 103+. 101 is now a solid floor (and a long way away). Momentum has stopped from downward movement (sell bounces) and reversed (buy dips)

Buy weakness.”
Yest Mkt report.

Strong US data, coupled by persistent UK inflation, Lagarde calling rate cuts over expected pushed Bonds higher driving the dollar (Pound ((Inflation)) & EUR ((Lagarde)) excluded). Retail Sales, Homebuilder optimism and Industrial Production numbers all came in higher-than-expected driving DOWN market expectations of a Mar cut to a coin flip.
I’ve been saying for several days the imbalance between the Fed’s position and market expectations are VAST. 6 rate cuts this year, is a HUGE stretch with data of this nature (NO cuts would be the pertinent ‘action’).

My position is the same as yesterday. The Dollar has a floor for the foreseeable, buy dips.

102.65 – 103.44

AUD:
Futher weakness in the AUD. I advised selling bounces, which never came as the AUD steadily drifted off overnight from 65.90 to 65.40 by 5am. A bounce on the open to 65.65 was brief lived and the AUD fell in afternoon trade lows of 65.27 before recovering to 65.52.

Aussie employment Data this morning for direction.

No call

6 –

EUR:
Strong UK inflation data coupled with Lagarde calling market expectations for rate cuts overblown helped put a floor under the EURO and cap Dollar strength. Lagarde noted inflation is not where the ECB wants it to be, though it is likely the ECB will cut rates by the summer. Knot and Vasle were downplaying market expectations of rate cuts while Villeroy said their job is not finished yet, with both Villeroy and Panetta stating it is premature to say when the ECB will cut rates and more data is needed to confirm the disinflation outlook.
Moderate early dollar strength pushed the Euro to 92.15 before drifting back to close with a 91 handle. Relatively subdued trading day considering.

Buy Dips

91.44 – 92.36

POUND:
We did drift off to see a 125 handle overnight (albeit by one pip!) before Strong UK CPI (Forecast 3.8% Actual 4%) sent the Pound racing to session highs of just under 127 the handle. By the US open it had retreated under strong US data to 126.40 before grinding higher to 126.74 close.

In response to the inflation report market pricing saw a hawkish shift with now just 100bps of easing priced by year-end vs 123bps priced pre-data.

No call.

1

YEN:
YEN saw notable weakness throughout the session, accelerating after the US retail sales report which eventually took USD/JPY to rise above 148.00 with US yields rising, particularly the front end on less dovish Fed prospects.
If momentum extends, 150 comes into play, and with it, BoJ intervention speculation. Note, on inflation expectations, a BoJ quarterly survey found 79.3% (prev. 86.8%) of Japanese households expect prices to increase a year from now and 76.5% (prev. 80.7%) of households expect prices to increase 5 years from now. JGB yields on watch on Thursday amid the 20yr JGB auction.

“Trend is your friend, watch for a ‘take-profit’/pullback to jump onboard.”
Yest Day Mkt Report

I was hoping for a pullback to provide an opportunity to get onboard but the US data never allowed with both the YEN and AUD hit hard. Again. A raft of Japanese data out today, as with Aussie.

No call

1

GOLD & SILVER:
“Dollar strength = Metals weakness.
You know the drill.

Dollar strength drew money from safe-have gold, put it into Treasuries. Gold and SI down.

With Dollar finding a floor I cant see much short term upside for metals.

Sell bounces. 2044 Cap
No call on range, sell strength, go with down flow.”
Yest Mkt Report.

Gold touched 2033 pre the open and pre US data which saw it sold off solidly to 2005, where it stayed. Hawkish fiscal policy caps the yellow stuff for the foreseeable and I expect 2000 to break and hold shortly.

“No call on range, sell strength, go with down flow.”

Silver same story. $23 now a ceiling. Id be selling any bounce close to $23, but unlikely to see. More downside to follow. Expect $22 shortly and on to Oct low of $21.34

$22.88 – $22.11

EQUITIES:
US:
– SPX -0.56% 4,739
– NDX -0.56% 16,736
– DJI -0.25% 37,267
– RUT -0.73% 1,913

EUR:
– DAX -0.84% 16,431.69
– FTSE 100 -1.48% 7,446.29
– CAC 40 -1.07% 7,318.69
– Euro Stoxx 50 -1.00% 4,401.85

SECTORS (W to S): Real Estate -1.87%, Utilities -1.52%, Consumer Discretionary -0.91%, Energy -0.84%, Materials -0.80%, Industrials -0.67%, Communication Services -0.63%, Technology -0.50%, Financials -0.28%, Health -0.24%, Consumer Staples -0.12%

– Tesla -2%: Reduced Model Y prices in Germany, following a similar move in China
– Spirit Airlines  -23%: continued on its slump seen on Tuesday after JBLU proposed USD 3.8bln acquisition of the Co. was blocked. Since then, Spirit has been downgraded at BofA, Susquehanna and Seaport.
– JetBlue -9%: See above
– Boeing +1.3%: US FAA said the first 40 inspections of grounded 737 MAX 9 airplanes are complete and the agency will thoroughly review the data
– Apple -0.5%: US Appeals Court says ban on US Apple (AAPL) watch imports to be reinstated on Jan 18th after the pause. Meanwhile, US DoJ is preparing to file antitrust case against the co. as soon as March, via Bloomberg.
– Morgan Stanley -1.8%: Downgraded at KBW and JPM post-earnings

OIL:
WTI (G4) SETTLES USD 0.16 HIGHER AT 72.56/BBL; BRENT (H4) SETTLES USD 0.41 LOWER AT 77.88/BBL

Oil prices were ultimately little changed after paring initial losses on Wednesday. The downside began at the APAC/Europe handover with desks pointing to the mixed China activity data and pullback in pricing of central bank easing, seeing WTI and Brent trough in the NY morning at USD 70.50/bbl and 76.50/bbl, respectively. There were also some comments from Saudi Aramco’s CEO saying the Red Sea attacks are manageable in the short-term but may create tanker shortage and weigh on the market if it lasts longer. Crude futures recovered gradually through the NY session in the absence of an obvious catalyst, potentially finding some demand support from the stronger-than-expected US industrial production and retail sales figures. Possibly some geopolitical risk too with the Iranian Foreign Minister saying “We are witnessing an expansion of the conflict in the Middle East”. Meanwhile, a US DoD official told Sky News Arabia that “Houthis in Yemen have prepared plans to target US bases in the Arab region”. Traders are now looking ahead to the US energy inventory data, with the private release due later Wednesday. Current expectations (bbls): Crude -0.3mln, Gasoline +2.2mln, Distillates +0.9mln.

Oil report courtesy of newsquark

BOND YIELDS:
US 1-MO 5.3.86 -0.011 US 6-MO 5.223 +0.024 US 1-YR 4.842 +0.111 US 5-YR 4.031 +0.087 US 10-YR 4.106 +0.04 US 30-YR 4.313 +0.008

CRYPTO
“Could be washy for a while, 41.5 – 45.5 & 2400 – 2700. Longer I still favour upside.”
Yest Mkt Report.

42,200 – 42,900 Relatively tight range.
40.8 – 45.250 expect more washy ness.

ETH Could head back to 2375, immediate itll wash around 2500.

Best of luck out there. Let the market come to you

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