Something for your Espresso is the Daily morning research letter from Steno Research. Occasional morning letters for the US based audience is also send out under the name Good Morning America
As long as “nothing happens” it is bond bearish as it alleviates fears of an immediate recession. Recent data is not bad enough to prompt further bond buying as of now.
This week’s economic data is unlikely to be able to rock the narrative in a major way. We watch permits, LEI, and South Korean trade data, but find it unlikely that the crisis mood is going to resurface.
Flows into money market funds are slowing, while only survey data truly hints of an upcoming credit crunch. Watch the H8 data on bank balance sheets end of business today.
The inflation report made for benign reading for monetary policy doves as a slightly more broad-based disinflation picture is starting to emerge. Will the Fed acknowledge the trend and pause in May? We think so.
It is show- time for inflation but the sudden lack of interest in inflation is striking. The “street” whisper clearly expects a hot core inflation number, which makes us lean dovish for the report.
Will Biden strike back on OPEC+ with an SPR release this week? We watch the EIAs short-term energy outlook today ahead of an interesting inflation week.
It is the big NFP day, which will keep market participants busy on Good Friday. Here are the four labour market charts of relevance ahead of the release. We see DOWNSIDE risks to NFP.
Everything released from the US economy this week speaks in favour of a pause. The NFP and CPI reports hold the potential to alter that view but the bar is high. We think the hiking cycle is over.
The RBNZ did a major hawkish move by lifting the policy rate by 50bps. G10 rates still look peakish across the board despite the recent repricing of oil.
The RBA paused with a hiking bias intact. Is this the short-term playbook for other Western central banks? RBNZ comes up later, while the ECB members have started to sound the alarm.
Is the massive OPEC+ cut bullish for oil? Or will the price action resemble former supply cuts? Empirical data suggests that it is not bullish oil, but a recession is needed to bring oil lower now.
Inflation surprised on the downside in Spain, which is comforting news for the ECB. Inflation will prove to be of secondary relevance in coming months.
It is quite before the storm in the global economy, and this may allow a short-term window of hopetism to arise again.
Another day, another direction for rates. Banks are driving the show and the underlying question remains. Is this a true banking crisis or is it a tempest in a teapot? As true macro investors, we prefer to take a step back from the daily noise and watch the underlying trends. Amidst a renewed hawkish repricing yesterday the M2/M3 money growth measures were released in the Euro area. We have never seen the kind of destruction of money (and hence deposits) in the history of the Euro zone and if we look at similar data in the US, it looks even worse. The underlying quarterly growth numbers of money in Europe and the US are running at historically destructive levels. This is the true underlying reason for the deposit flight/destruction and the monetary policy is simply too tight by now. Chart 1: The quarterly pace of negative money growth in Europe is historic The trend remains very uniform across the West. Money growth is falling of a cliff from a sequential perspective and the banking crisis is likely to accelerate the trend as M2 growth is linked to the risk appetite of credit departments of banks. When various emergency facilities at the Fed (and other central banks) are getting maxed out, it is not a signal that banks are willing to add to the risk profile, rater the contrary. We know this drill and it is not reflationary. There is one spot on earth, and basically one spot only, with a […]
European inflation numbers are out this week, while most focus will gather around the weekly numbers from the Fed and Money Market Funds.
Both weekly and daily indicators of deposit flight continued to show signs of money leaving the banking system for money market funds, while banks continue to underperform. Will the Fed come to accept new all-time highs for the balance sheet?
The Fed is semi-cornered in the discussion on deposit flights and decided to neglect it in practice. Issues are likely going to accelerate on the back of the 25-bps hike. The hiking cycle is over.
It is Fed day and the last few days of increasing market stability will allow them to hike interest rates. The question is if Powell will decide to address the root cause of the deposit flight… Fed Funds is too high relative to bank deposit rates.
Calm is temporarily restored while First Republic Bank continues to suffer. Tech and Consumer Discretionary are underperformers when the calm is restored. The world is truly upside down right now.
Another hectic week is in the making and we don’t find risks to be contained yet. The Fed is likely to hike on Wednesday even if markets are screaming that they should rather cut. The first stages of the crisis playbook are playing out. The next will be true pivots from central banks.
Up, down, up, down. Front-end rates are schizophrenic these days and the hiking cycle is close to being over consequently. The banking crisis “complicates communication”.
Goldilocks data keeps coming from the US economy, while the ECB rhetoric hints of the hiking cycle potentially already being over. Here are our take-aways. The steepening will CONTINUE as the cycle is (almost) over.
The US inflation print yesterday would have been a CLEAR 50bp data print, but markets and we remain convinced that the credit event will force the Fed to rethink. The ECB is, on ther other hand, not awake yet.
The market is convincing itself that the hiking cycle is over in the US, but will anyone care about inflation today? Long gone are the calls for higher(er) for longer(er) and the curve is steepening fast.
The hiking cycle seems over, even if inflation is running too hot. Lower rates are likely needed to resteepen the curve and tempt money back into deposits from bills and money market funds. The Fed is caught between a rock and hard place.
Will Kuroda-san rock the boat on his last meeting in charge of the BoJ? And will Janice Eberly prove to be a dovish VP of the Fed? 3% inflation targets soon to be discussed.
Powell is back as the hawk we knew from 2022, but the extreme data-dependency is volatility creating by design. One soft inflation and/or job report and we will back at where we were just a few weeks ago. Buckle up.
RBA echoed other major central banks by clearly stating that inflation has peaked. This is a potential interesting harbinger ahead of Powell’s appearance in the US congress
The Chinese politburo aims for 5% annual growth in 2023. This leaves room for an upside surprise from China for once. We have a big week ahead of us. Find our expectations here.
Bostic from the FOMC surprisingly hinted of only 25bp steps and a pause this summer. This is a surprise and something that will be tested unless price pressures fade fast this spring.
