UK and EU aim to seal N Ireland deal today, apparently...
This week we focus on UK/EU Brexit deal, BoE's Bailey and U.S ISM manuf on Wed, and the usual RU/China/UKR/EU headlines
U.S core PCE higher 4.7% YoY, with pretty high wage growth it should hardly be a surprise...it's an ''acceleration higher'' though for markets (namely 0.6% MoM vs 0.35% expected) and they could stay pretty elevated the whole of 2023..which is good for the workers and not so great for high growth, high leverage type names
FED Collins seemed to shift toward the hawkish side by saying that she anticipates "further rate increases to reach a sufficiently restrictive level," then "holding there for some, perhaps extended, time."
“So in my view, at this point, with the labor market still strong, the costs of undershooting on policy or prematurely loosening policy still outweigh the costs of overshooting," said Cleveland Fed President Loretta Mester
More tightening will be required if fiscal cooperation is absent: Christine Lagarde
Revolut set to secure UK banking licence within weeks after releasing late accounts
Solar set to overtake other energy sources by 2027. Cheaper installation costs and energy security concerns are driving expansion
IMF urges Central Banks to ‘stay the course’ till prices tamed
Markets :
Copper looks to be breaking down (techs)
BONDS are pricing in more inflation vol than equities >> MOVE index vs VIX >> bonds lead everything these days, as they should, so continue to follow BONDS on macro basis. Worth noting that the large ETF's like JNK, HYG, TLT, LQD and AGG are trading heavily on tech side of things/Saxo chart below
SPX500 testing/holding that 3960/3990 support area, decent sell-off on Friday on PCE, but no real sign of panic/vols staying relatively well behave >>> having said all this, ''short-term momentum is ALL or mainly driven by 'daily option flows, 0DTE's'', so the reality is, sentiment can swing petty swiftly, either way. DAX bouncing right back up, pretty easily too.
USD higher (still) on PCE data, lead by USDJPY as BoJ apparently not bothered to move on YCC and JPY weakness, Ueda this morning 'balanced' ion his speech, eventually they will have to move, but not yet. GBP might/should see a positive reaction to 'the deal' finally
BONDS sold off as you would expect, hikes extending, Terminal rate around 5.5% does not seem to worry equity markets too much
Explainer: The rise of 0DTE stock options and how they could be a risk to markets (yahoo.com) >>> bottom line, it's like 'meme' stocks, it works both ways
The week ahead in Asia
George Magnus on Twitter: "This is an interesting theme that merits a bit of delving, as I shall do now. There are close similarities, several differences, same ending? 1/10 China’s economy is looking at a new wave of Japanification https://t.co/NC0ZRJKcZs" / Twitter >>> great insight, have a read >>> Japan offers a useful, if inexact, template for modern China. Both feature a similar development model, systemic bop surpluses, property boom and bust, and a growth to debt transition
Have a great start to the week
Team PVM
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