Oil, USD and rates are up on the back of the increased Geopolitical risks. Will the fundamentals back up a continued move in that direction over the week?
Daily Post
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
Something for your Espresso: More fuel (for recessionistas)
The EIA report shocked oil and gasoline markets and the big question is whether the weak demand is a harbinger for the broader US economy.
Something for your Espresso: Steep, steeper, steepest?
The curve steepener remains the best risk/reward trade in global macro as the Asian doom loop now adds to steepening pressures. With the PBoC, the BoJ and the CBI in intervention territory, should we expect further pressures?
Something for your Espresso: From a USD-wreckingball to an Oil-wreckingball
The USD wrecking ball haunts again and several Asian Central Banks now actively intervene. The issue is that the USD is not the trigger of this move. Energy is.
Something for your Espresso: The Manufacturing versus Services conundrum continues
There are signs of a pick-up in German activity in the details from the IFO survey. A long in Nat Gas looks increasingly compelling, while US Manufacturing keeps rebounding as well.
Something for your Espresso: Bye bye Oprahnomics?
The IRA has saved the US from entering a recession alongside peers this year. If the appropriations negotiations this week lead to a bye bye to Oprahnomics, then we consider a recession a done deal for 2024. Buckle up!
Something for your Espresso: Waiting for a German restocking cycle amidst a shutdown
A crucial week is ahead of us in global macro as the only remaining bastion in the global economy may be heading into a shutdown. Meanwhile, we are watching for signs of an emerging restocking cycle in Germany.
Something for your Espresso: A diesel crisis is brewing
The Russian curbs on diesel exports arrive at a bad timing with already low inventories ahead of peak demand season. Central banks trying to pause amidst this will feel the wrath from long bond yields.
Something for your Espresso: “We will carefully hike rates (at least) once more”
Ultimately markets got the memo from the Fed. The rate hikes are not necessarily over, but they will not promise anything at this stage. USD bullish (again).
Something for your Espresso: Biden sippin’ luxury OJ in the SPR trial balloon?
Did the Biden admin send up a trial balloon on the SPR strategy without major success? Meanwhile, energy- and foodflation sadly continues across traded markets. It will not be an easy afternoon for the Fed.
Something for your Espresso: Central Bank Bonanza
It’s a big week in global central banking and both the Fed, Norges Bank, the Riksbank and the BoE will decide on rates this week. Some of the trends towards weakness/softness in European FX and rates seem a bit exhausted ahead of this week (confirmed by the market opening this morning), but with a few days of consolidation we may be back in a scenario that allows for renewed bets on weakness/softness from European central banks. Overall, we see a decent risk/reward in expecting European central banks to sound somewhat more balanced after the ECB made the pause the explicit base-case, while the Fed is likely not willing to accept a notion that a pause is a base case from here with the recent reacceleration of inflation numbers. Fed pricing hints of a roughly 40% chance of a hike in December, which is probably also the timing of the still intended rate hike from the dot plot in June. We expect Powell to solidify the expectations of that hike still being the modal outcome from the Fed. Chart 1: Fed fwd pricing BoE market pricing has been falling off a cliff lately with March-2024 peak SONIA pricing falling from 6.50% down to only 5.54%. We have earlier labeled UK rates pricing to be the biggest misallocation in global fixed income and we continue to lean that way given the weakness seen lately in services related gauges in the UK. We ought to remember that the smoking hot wage growth numbers […]
Something for your Espresso: An (almost) explicit pause from the ECB?
The ECB seems closer to softening up than the Fed even if they delivered a hike yesterday. An almost explicit pause was promised in the written statement. ECB pricing for 2024 looks ODD compared to Fed pricing still.
Something for your Espresso: The Mexican standoff between inflation expectations and oil prices.
With all eyes on the ECB and President Lagarde today, it’s crucial to factor in yesterday’s US CPI data and the ongoing oil shortage as we delve into our morning analysis below.
Something for your Espresso: Energy not yet a consensus bet, being short Europe is..
Energy keeps performing against all peers and it seems like positioning is still underweight despite the recent bullishness. European positioning is getting short, but data keeps backing up that view.
Something for your Espresso: Is the stabilization in Asian FX sustainable?
Rhetorical intervention in JPY and CNY helped risk assets and high beta stocks perform yesterday, but is the stabilization sustainable or still fundamentally challenged? We lean towards the latter.
Something for your Espresso: A trial balloon from Ueda
Ueda giving an exclusive interview for the first time since April trying to talk up the JPY but will he succeed? We doubt it. The global steepener pressure remains intact.
Something for your Espresso: The Dollar and the Decoupling
The global macro environment remains tumultuous in 2023, with little consistency across regions and assets prices. Here are some morning charts and thoughts to start your Friday
Something for your Espresso: Murica firing on ALL cylinders
The US keeps performing while China is in damage control and Europe is looking to be on the doorstep of a crisis.
Something for your Espresso: The Japanese fear of becoming a release valve
Masato Kanda threatens with intervention in JPY as the Japanese case risks becoming the release valve for pressures in China. Equity markets behave as we expected given the renewed pressure >7.30 in USDCNY.
Something for your Espresso: Are Chinese services falling apart as well?
Kind of a shocker for markets with weakness in Chinese Services despite a weekend of benign news. The reopening impulse in Services is fading, which shows how important it is to stabilize Construction/Manufacturing.
Something for your Espresso: Services week!
With more and more (admittedly early) signs of a restocking phase ahead in Manufacturing, we shift our focus to Services this week.
Something for your Espresso: Month-end or trend?
The EURUSD reversal on the back of hot inflation in Europe was a surprising move, but one we fancy. The Chinese stabilization is walking a tightrope despite efforts from the authorities to prop up CNY asset values.
Something for your Espresso: EUR-flation back on the table
Markets seem to perceive EUR-flation as stickier than the USD-flation. We find the assessment unwarranted but also admittedly have to see it as a sign of positioning.
Something for your Espresso: Energy is back
Early evidence from Germany suggests that energy is back wreaking havoc with the disinflation momentum. Meanwhile markets see the landslide in job openings in the US as recessionary, but is it really?
Something for your Espresso: Everything you better watch while ISM Manufacturing rebounds
There are admittedly early signs that the Manufacturing sector rebounds in the US with the Dallas Fed PMI confirming the stabilization narrative. We tend to agree on the direction of travel in Manufacturing, but here is everything you need to watch outside of that sector.
Something for your Espresso: The cyclical litmus test
Focus on cyclical indicators from Europe and the US this week while China is trying to prop up local assets again. Make or break time!
Something for your Espresso: AI tiltering & Bundesbank boomers
All eyes are on Jackson Hole this morning as is ours. But if we look beyond Powell what is the temperature in equities and at the ECB this morning? Read below for context
Something for your Espresso: The gas trade (and proxies) running out of gas?
The spike in Nat Gas prices looks like a dead-cat-bounce for now, but the recent retracement may hide the underlying improving price fundamentals for the energy space. Orders to inventories are improving, even in the most bombed out sectors in Germany.
Something for your Espresso: Wyoming is not only full of cowboys
How many hawks and doves will arrive in Wyoming for the Jackson Hole conference? The doves have received a perfect excuse from China and the PBoC will hope and pray that Powell announces an explicit pause, but he won’t.
Something for your Espresso: The JPY and the CNY in the (Jackson) Hole?
Will the Jay-Man alleviate some of the pressures on the PBoC at Jackson Hole? And will the ECB strike a different tone than the Fed?