As the NA session begins, the AUD is the strongest and the CHF is the weakest. The USD is stuck in the middle of the rankings with mixed changes vs the major currencies. However, the changes are relatively modest across the board in the currencies.
Overnight in Australia, the RBA kept rates unchanged at 4.35%. The Reserve Bank of Australia (RBA) and Governor Michelle Bullock, highlighted a cautiously optimistic view on the country's inflation trajectory. Inflation is noted to be easing, particularly in the December quarter, with a reported rate of 4.1 percent, indicating progress yet acknowledging the figure remains above the desired target. The easing was more pronounced in goods price inflation, which fell below the RBA's November forecasts, while services price inflation has seen a more gradual decline, in alignment with expectations, and continues to be elevated. The persistence of services price inflation, both domestically and internationally, along with a moderate pickup in wages growth that aligns with the inflation target, underscores the complex inflationary landscape that the RBA is navigating.
Despite these challenges, the RBA remains vigilant, emphasizing the need for inflation to move sustainably towards the target range and they did not take out the optionality from the comment that 'further increase in interest rates cannot be ruled out'. The outlook, fraught with uncertainty, requires balanced risks management and a close monitoring of inflation expectations, which, to date, align with the target. The approach to policy remains open, with no specific actions ruled in or out, as the RBA seeks further data to ensure inflation's return to target without necessitating future policy reversals. Bullock expressed measured confidence in achieving the 2.8% inflation forecast by 2025 but also highlighted the need for more data to bolster this confidence level. She said that the midpoint of 2%-3% is where the RBA wants to be, but needed to be sure that inflation will get there and stay there. She emphasized the need to avoid undue pain in the labor market while striving to balance employment growth and inflation.
Overall, it did not rule out further rate hikes which tilts the bias a little more to the upside. However, the AUDUSD rise did stall ahead of a key swing level at 0.6523 and also remains below the 100 day MA at 0.65283. Both those levels are topside resistance that would need to be broken to increase the bullish bias (on the failed break).
ECBs Vujcic sad that the ECB should not rush the cutting cycle.
Dovish dissenter Bank of England's Dhingra expressed a nuanced stance on the current economic and monetary policy landscape. Highlighting the lengthy process of increasing interest rates, Dhingra pointed out the continued restrictive impact of monetary policy due to transmission lags, even as considerations for moderation begin. This perspective underscores an expectation that tightening effects will persist in the near term. Dhingra conveyed confidence that the recent decrease in prices extends beyond energy costs alone, with a significant portion (97%) of annual CPI inflation items showing a downturn. This broad-based softening of inflation contrasts with the unexpected and substantial fall in retail sales, suggesting complexities in the demand-side dynamics of the economy. Dhingra expressed skepticism regarding the presence of sharp excess demand, particularly from consumption, and questioned the merit of compromising on weak consumption at a time when inflation appears to be on a sustainable downward trajectory. Emphasizing the importance of policy integrity, Dhingra argued that well-justified policy decisions, even if they deviate from the norm, would be understood by the public. This reflects a balanced approach to policymaking, where the timing of rate cuts and the broader implications of monetary policy adjustments are carefully weighed against the evolving economic backdrop.
In Europe this morning:
German Factory Orders m/m
- Detail: Orders surged by 8.9%, significantly outperforming expectations of a -0.1% change, and marking a sharp increase from the previous 0.0%.
UK Construction PMI
- Detail: The index rose to 48.8, above the forecast of 47.2 and improving from the prior 46.8, signaling a slower contraction in the construction sector.
Eurozone Retail Sales m/m
- Detail: Sales fell by -1.1%, slightly more than the anticipated -0.9% decrease, and down from the previous month's growth of 0.3%
The US stock indices are mixed/modestly lower in pre-market futures trading. The major earnings released this morning showed:
Eli Lilly and Co (LLY) Q4 2023
- Adjusted EPS: $2.49 vs. expected $2.22. Beat
- Revenue: $9.5 billion vs. expected $8.93 billion. Beat
- Shares are up 3.44% in premarket trading
DuPont (DD) Q4 2023
- EPS: $0.87 vs. expected $0.85. Beat
- Revenue: $2.9 billion vs. expected $2.93 billion. Miss
- Shares are up 1.29% in premarket trading
Spotify Technology (SPOT) Q4 2023
- EPS: -$0.36 vs. expected -$0.21. Miss
- Revenue: €3.67 billion vs. expected €3.72 billion. Miss
- Despite the miss, shares are up 5.6% on upbeat expectations going forward.
Centene Corp (CNC) Q4 2023
- EPS: $0.45 vs. expected $0.44. Beat
- Revenue: $39.46 billion vs. expected $36.14 billion. Beat
- Shares are up 2.34% in premarket trading
Carrier Global Corp (CARR) Q4 2023
- EPS: $0.53 vs. expected $0.51. Beat
- Revenue: $5.1 billion vs. expected $5.22 billion. Miss
- Shares are up 1.14% in premarket trading
For the rest of the day/week:
- Tuesday: Ford, Chipotle, Snap, Fortinet report after the close today.
- Wednesday:Alibaba, Uber, CVS Health, Paypal, Disney
- Thursday: Conoco Phillips, Pinterest, Expedia
- Friday: Pepsico
A snapshot of the markets as the North American session begins currently shows:
- Crude oil is trading up $0.51 or 0.70% at $73.30. At this time yesterday, the price was trading at $72.15
- Gold is trading up $1.96 or 0.09% at $2027. At this time yesterday, the price was trading at $2022.17
- Silver is trading down 2.8 cents or -0.14% at $22.29. At this time yesterday, the price was trading at $22.39
- Bitcoin traded at $42,630. At this time yesterday, the price was trading at $43,256
In the premarket for US stocks, the major indices are mixed:
- Dow Industrial Average futures are implying a decline of -38 points.Yesterday, the index fell -274.30 points or -0.71%
- S&P futures are implying a decline of -4.3 points. Yesterday, the index fell -15.80 points or -0.32%.
- Nasdaq futures are implying a modest gain of 5 point. Yesterday, the index fell -31.28 points or -0.20%
In the European equity markets, the major indices are trading mixed.
- German DAX, +0.11%
- France CAC +0.3%
- UK FTSE 100, + 0.54%
- Spain's Ibex, + 0.33%
- Italy's FTSE MIB, was 0.26% (delayed by 10 minutes).
Shares in the Asian Pacific markets were mixed. China and Hong Kong shares sword
- Japan's Nikkei 225, -0.53%
- China's Shanghai composite index , +3.23%
- Hong Kong's Hang Seng index, +4.04%
- Australia S&P/ASX, -0.58%
Looking at the US debt market, yields little change after rising sharply yesterday. The 10 year yield fell short of its high for the year near 4.196% of the remains above its 200-day moving average of 4.122%. Today the U.S. Treasury will auction off $54 billion of three-year notes at 1 PM ET. Tomorrow treasury auction off 10 year and on Thursday 30-year coupon issues. A snapshot of the market currently shows:
- 2-year yield 4.455% -1.6 basis points. At this time yesterday, the yield was at 4.449%
- 5-year yield 4.110% -1.0 basis points. At this time yesterday, the yield 4.083%
- 10-year yield 4.161% -0.2 basis points. At this time yesterday, the yield was at 4.119%
- 30-year yield 4.349% +0.5 basis points. At this time yesterday, the yield was at 4.303%
- The 2-10 year spread is at -29.4 basis points. At this time yesterday, the spread was at - -32.6 basis points
- The 2-30 year spread is at -10.7 basis points. At this time yesterday, the spread was at was 14.1 basis points.
In the European debt market, the benchmark 10-year yields are little changed:
