North American News
US equities wrap up a tough week as inflation bites
- How high is high enough for the Fed?
On the day:
- S&P 500 -1.0%
- DJIA -1.1%
- Nasdaq Comp -1.7%
- Russell 2000 -1.2%
On the week:
- S&P 500 -2.7% — worst since Dec
- Nasdaq Comp -3.3% — worst since Dec
- Russell 2000 -3.1%
The bigger story is the bond market with US 2s closing at 4.81%, which is the highest since 2007.
US January PCE core inflation 4.7% vs 4.3% expected
- US Core PCE, personal income and personal consumption
- YoY core inflation 4.4% prior revised up to 4.6%
- MoM core inflation 0.3% prior revised to 0.4%
- Core PCE MoM 0.6% versus 0.4% expected. Last month 0.4% revised up from 0.3%
- Core PCE YoY 4.7% versus 4.3%.
- Personal income 0.6% versus 1.0% expected. Last month 0.3% revised up from 0.2%
- personal consumption real 1.1% versus -0.3% last month
- personal consumption adjusted 1.8% versus 1.3% expected. Last month -0.1% versus -0.2% previously reported
US January new home sales 670K vs 620K expected
- US January new home sales data
- Prior was 616K
- Home sales change +7.2% vs +2.3% m/m prior (prior revised to +7.2%)
UMichigan consumer sentiment for February 67.0 versus 64.9 last month (66.4 preliminary)
- UMich consumer sentiment for February 2023
- Prior month 64.9
- preliminary 66.4
- University of Michigan consumer sentiment 67.0 versus 66.4 expectations
- Current conditions 70.7 versus 68.4 last month and 72.6 preliminary
- Expectations 64.7 versus 62.7 last month and 62.3 preliminary
- one year inflation expectations 4.1% versus 4.2% preliminary and 3.9% last month
- five year inflation expectations at 2.9% versus 2.9% last month (and preliminary)
Dallas Fed January trimmed mean PCE price idnex +6.3% vs +4.0% prior
- Another sign of accelerating inflation
The Dallas measure of core inflation accelerated to a one-month annualized pace of 6.3% compared to 4.0% in December.
There are many fans of this report on the FOMC and it highlights the stubborn path of inflation going forward.
Fed’s Collins: Recent US data confirm case for more rate hikes
- Comments from the Fed’s Collins
- More rate hikes needed to deal with ‘too high’ inflation
- US central bank will need to get rates up and potentially hold them there for a long period
- She is optimistic that the Fed can get inflation down and achieve a soft landing
- She is aware there are many risks, including negative economic outcomes
Feds Jefferson: Wage growth is running too high to be consistent with 2% inflation
- Fed Gov. Jefferson speaking
- US central bank is addressing inflation promptly, forcefully to maintain its credibility, preserve inflation anchor
- Outlook for non-housing core services inflation depends on whether labor demand moves into better balance with labor supply
- Wage growth is still running too high to be consistent with timely, sustainable return to 2% inflation
- Ongoing imbalance between supply and demand for labor suggests high inflation may come down only slowly
- Feds credibility is higher now than in 1960s and 1970s
- Rrgument that policymakers should accept that this inflation will be costly is well reasoned
- Current situation is different from past inflation fights
- Policymakers must complement findings from economic models with careful scrutiny of real-time data
Commodities
Gold under pressure as rates go up – Commerzbank
Gold is facing headwinds from several sides at once. Prospects of higher rates are set to weigh on the yellow metal, economists at Commerzbank report.
Further Fed rate hikes
“Gold ETFs have been seeing increased outflows again of late, for one thing. Outflows in the last five days of trading have totalled 14.7 tons, which equates to just shy of three tons per day.”
“The world’s largest and most liquid Gold ETF has also registered outflows again recently. Previously, it had seen slight net inflows for several weeks, fuelling hopes that ETF investors were returning. It appears that the noticeable increase in rate hike expectations has quashed any such hopes for now.”
WTI crude oil gains $1 to finish flat on the week
- WTI crude up $99cents to $76.35
When you zoom out and look at the weekly oil chart, all the volatility seems to spill away. There have been plenty of whippy moves in the past few months but it’s all taken place in a range of $70-85.
This week, oil bounced around again but closed almost perfectly flat on the week after a 99-cent gain today.
EU News
European equity close: Worst day of the year so far
- Closing changes for the main European bourses on the day and week
On the day:
- Stoxx 600 -0.9%
- German DAX -1.4%
- Francis CAC -1.4%
- UK’s FTSE 100 -0.3%
- Spain’s Ibex -0.15%
- Italy’s FTSE MIB -0.9%
On the week:
- Stoxx 600 -1.3%
- German DAX -1.5%
- Francis CAC -1.5%
- UK’s FTSE 100 -1.6%
- Spain’s Ibex -1.3%
- Italy’s FTSE MIB -1.8%
Other News
US, China to hold deputy-level bilateral talks at G20 finance ministers’ meeting
- But the meeting will be on debt issues and sustainable finance
This is arguably for show as the bigger picture souring in relations between the two is still very much the story that is encompassing the nature of their correspondence at the moment. The talk will take place some time today as finance ministers from the G20 are at the meeting in Bangalore, India.
Today marks one year to the day of Russia’s invasion of Ukraine
- The markets may be less sensitive to the headlines now
It is now a historic day for the entire world and things have never really been the same when it comes to geopolitical relations across the globe. Russia has since been heavily sanctioned and China, while mostly trying to stay on the fence, has also seen recent relations with the US take a turn for the worse – though that has been coming for a while.
Cryptocurrency News
Lido Dao price to tank 25% as Fed’s preferred inflation measure ticks higher
- Lido Dao price drops 4% on the back of rising PCE deflator.
- LDO set to be revalued lower as Fed will look to hike interest rates.
- With tighter financial conditions, risk assets are bound to sell off.
Lido Dao (LDO) price is tanking as traders are getting a gut punch from the US Personal Consumption Expenditures (PCE) index that arrived on Friday. The PCE is the preferred tool for the Fed to assess how inflation is doing. With an upward beat in every metric in January and an upward revision for the prior numbers, inflation appears quite sticky.
Lido Dao price drops under the weight of sticky inflation
Lido Dao price is sliding lower with equities and other cryptocurrencies as the US Dollar gains strength. The move comes after PCE numbers on Friday that point to rising prices and wages across the board in the United States.
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