The gap is growing between the US and peers. Both on inflation and unemployment. Will this lead to surprising rates decisions already this week? Meanwhile, we don’t think energy prices will drop because of Israel pulling out troops.
Steno Signals #94 – Trading the FAKE business cycle
The fake business cycle keeps surprising markets and central banks and the volatility in the cyclical components of the economy will likely keep markets trading from one extreme to another in coming years.
Something for your Espresso: An eye for a head?
Fears of an outright war between Israel and Iran increased markedly yesterday, and markets sold-off. We were not convinced (of the risks), but also took notice of Neel Kashkari’s interest rate warnings.
Trade Alert: Playing the last reflation saloon and NOK technicalities
The final reflation melt-up may be right in front of us during Q2. Position accordingly.
Scandi Watch: More NOK liquidity coming, but with positive FX spot effects?
The money market working group in Norway has presented its early results. Here are the main take-aways for the NOK and NIBOR.
Something for your Espresso: Softness now also feeds reflation
Given the current feedback loop, softness feeds through to increasing reflation expectations, which is an interesting dynamic that will continue until it’s broken by an exogenous event.
Macro Regime Indicator: From Stealth QE to Stealth QT
The macro regime model has gone from ALL-IN on risk to a much more moderate scenario as the liquidity tide is turning. Find the allocation thoughts here.
Something for your Espresso: Last chance reflation saloon?
The sudden melt-up trend in commodities has a late cyclical head fake vibe to it, but commodities and steepeners probably offer the best macro value in Q2. Here is why..
Trade Alert: Profiting in Energy
With the rebound in manufacturing coming through, our energy bet has enjoyed the mix of greater demand and geopolitical tensions.
Steno Signals #93 – Material stealth QT upcoming during a war economy
The US is effectively running a war economy and the ultimate headache is typically not seen until the production pace is slowed. Meanwhile, Yellen allows for stealth QT in upcoming weeks and months.
Portfolio Watch: Inflation DIVERGENCE is growing
The inflation divergence theme is growing in importance, while the Rest of the World is catching up (or down) to the US in terms of financial conditions. Here is how we position for it..
Trade alert: Stopped out of SEK and Nat Gas
Procyclical tilt has taken a hit over the past days
Energy Cable #62: Biden is selling crude straddles, while something is cooking in China
This week we hone in on the consequences of the Ukraine’s successful attacks on Russian refiners and how to play it along with some thoughts on our profit taking in metal space as something BIG is cooking in China!
EUR-flation watch: Spain is the dovish hawk
We see relatively soft numbers out of Germany and France, while Spanish numbers will look hot due to electricity VAT adjustments. June cut is ON..
Something for your Espresso: You shall not pass!
We see intervention in Asian FX markets from the morning, but could such activity turn into a headache for the Fed? Meanwhile, European inflation data is key during the shortened Easter week!
Steno Signals #92 – The head fake reflation?
After having traveled to London last week, I am left with a vibe of a head fake reflation narrative. We are truly late in the cycle, which opens the door for super interesting bets.
Norway Watch: Cheat sheet to assessing Norges Banks rate path
The mechanical adjustments are likely going to lead to a hawkish revision of the Norges Bank rate path tomorrow unless the subjective layer is used to send another signal. Risks tilted towards a hawkish take-away.
UK CPI Watch: Softer than priced in..
We see UK CPI coming in soft relative to expectations and generally find the BoE to be priced too hawkishly compared to peers. Read along why here..
Something for your Espresso: A BoJ classic
The BoJ has once again managed to move the needle without moving the market and there are few clues on the direction from here. Well played Ueda!
G5 Rates Watch: Mirror mirror on the wall, who’s the biggest interest rate cutter of them all?
We sum up a yuge week ahead in this brief and chart-heavy update on the big central banks. Where’s the value to be found in rates space this week?
Something for your Espresso: Yuuuuuuuge week ahead!
We have an action-packed week ahead with action from almost all key countries for the global economy. Will volatility return as a consequence?
Steno Signals #91 – No more recessions ever!?
Recession chasing is getting increasingly weak as an investment strategy with fewer and fewer recessions around. Is the business cycle still alive and is it big enough to matter for markets?
Something for your Espresso: Unions paving the way for Ueda
>5% wage gains for the Rengo union members in Japan, which paves the way for policy action from the BoJ. Meanwhile, the PBOC refrained from cutting. Possibly as rate cuts are off the table in the US given the PPI developments?
Something for your Espresso: Time for commodities to shine?
Are we approaching the point in the cycle where commodities start to reflate? We have seen interesting break-outs of Copper, Silver and Oil.
Something for your Espresso: Let’s all start cutting in June, while the BoJ hikes
Strong and firm signals from Japanese wage rounds solidifying the hiking case, while markets have honed in on June as the timing for the first cut from ALL other central banks of major size. Should make for an interesting macro environment.
Something for your Espresso: Running on a broken Chinese engine?
Suddenly markets have shifted towards repricing the Chinese outlook markedly versus the rest of the World. Is the global narrative suddenly running on a broken Chinese engine? Meanwhile, USD inflation is out!
US Inflation Watch: OER a one-off?
Was the sudden reacceleration in the owners equivalent of rent a one-off? This is the KEY question ahead of a report that brings soft food prices, soft car prices, soft goods prices and hot energy prices.
Something for your Espresso: Big in China instead of Japan?
Sentiment in Japanese stocks has weakened ahead of a potential lift-off on front-end rates in March, while the JPY FX case looks compelling still. Meanwhile, Chinese sentiment is improving both directly and via proxies.
Steno Signals #90 – More liquidity to the most hated rally in recent history
It feels reminiscent of early 2021 in many ways with a very hated rally that keeps getting liquidity fuel. Central banks remain biased towards easing and will allow the economy to reflate with liquidity.
Something for your Espresso: Lagarde’s tone rhyming with easier financial conditions
The ECB is now clear that they will discuss the rate cutting cycle at upcoming meetings. This will likely allow financial conditions to ease as we saw in the US from Q4 and onwards.