North American News
Market Momentum: Nasdaq Up for Third Consecutive Day, Major Indices Poised for Weekly Gains
- Nasdaq leads the way. S&P index index within 13 points of its all-time high closing level.
The major US stock indices are closing higher. The SEC announced that they approved Bitcoin ETFs. William’s was a bit more hawkish, but who cares if the Fed cuts 3 or 6 times. One can argue if they cut 6 it means there is trouble in the economy.
The final numbers are showing:
- Dow up 170.55 points or 0.45% at 37695.72
- S&P up 26.95 points or 0.57% at 4783.46
- Nasdaq up 111.93 points or 0.75% at 14969.64
The Russell 2000 rose a modest 2.22 points or 0.11% at 1970.26.
For the trading week:
- Dow, +0.61%
- S&P, +1.84%
- Nasdaq, +3.07%.
Some big winners today include:
- Intuitive Surgical, +10.25%
- Palo Alto networks +5.22%
- Meta-+3.65%
- Uber technologies +3.50%
- Home Depot +3.07%
- Crowdstrike +3.02%
- Celsius +2.94%
Leading the Dow 30 is:
- Home Depot +3.07%
- Microsoft +1.86%
- Walmart +1.23%
- McDonald +1.11%
- Salesforce +1.06%
US CPI Preview: Forecasts from 10 major banks
As we get closer to the release time, here are the forecasts by the economists and researchers of 10 major banks regarding the upcoming United States inflation print for December.
Headline CPI is expected to pick up a tick to 3.2% year-on-year while core is expected to fall two ticks to 3.8% YoY.On a monthly basis, headline inflation is seen at 0.2% while core CPI is expected at 0.3% for the second consecutive month.
TDS
We look for core inflation to slow down to 0.1% MoM from 0.3% in Nov, with the headline likely strengthening a tenth to 0.2%.Our unrounded core CPI forecast at 0.14% MoM suggests it will be a close call between a 0.1% and a 0.2% gain. The report is likely to show that used vehicle prices were a large drag on inflation, while OER/rents are expected to head modestly lower.
Deutsche Bank
We expect headline CPI (0.26%) to come in roughly in line with core (0.28%). This would equate to 3.9% and 3.3% YoY, a tenth ahead of consensus. We were at 4.0% and 3.1% last month. So core is not yet breaking through 3% on the downside and the 3 and 6m annualised rates are also likely to stay slightly above this mark.
ANZ
We expect core CPI inflation to have risen 0.2% MoM in December.A similar increase is expected for headline, although energy price volatility pose downside risks.
NBF
Food and shelter prices are expected to rise again, while a drop in gasoline prices should translate into a decline in the energy component. All of this could result in a 0.2% increase in prices on a monthly basis. If we’re right, the YoY rate could rise from 3.1% to 3.2%. Core prices, for their part, could show a 0.3% monthly progression.On a 12-month basis, core inflation should still decline a tick from 4.0% to 3.9%.
SocGen
We expect a 0.2% headline increase and a 0.3% core CPI increase for December. Our more precise forecasts are for a 0.23% increase for the headline rounding down and a 0.28% increase on core rounding up. Energy prices help to suppress the headline increase but are not the drag they have been in the previous two months. We expect energy to be up 0.2%, while food-at-home prices are likely to climb 0.15%.
RBC Economics
We look for US CPI growth to show further signs of moderation in December, notwithstanding a likely tick higher in the YoY rate of headline price growth to 3.2% from 3.1% a month earlier. That small increase should be entirely explained by a smaller YoY decline in energy prices. We expect YoY price growth in core (excluding food and energy) products to slow to 3.8% from 4.0% on a more ‘normal’ looking 0.2% monthly (seasonally adjusted) increase from November.With price growth trending in the right direction and signs that economic growth is slowing, the Fed is widely expected to pivot to interest rate cuts in the first half of this year.Our own forecast assuming the first decrease comes in Q2.
Wells Fargo
We look for Thursday’s CPI report to show that inflation continues to slow on trend in a way that positions the FOMC to start cutting rates in June.We expect a 0.2% increase in headline CPI and a 0.3% increase in the core. Energy prices were more stable last month and are unlikely to repeat the major declines that occurred in October and November. We expect the disinflation in core goods to continue amid demand normalization, healthier supply chains and the fall in commodity prices from their peak. Core services inflation should also slow modestly relative to November, led by softer price increases for primary shelter.
Commerzbank
The information available to us on individual goods and services points to a change in consumer prices of around 0.25% compared to the previous month, both for the headline rate and for the core rate, which excludes energy and food. Whether the figure published by the statisticians, rounded to one digit, will be 0.2% or 0.3% cannot be clearly assessed on this basis.In terms of YoY rates, headline inflation could even increase slightly from 3.1% to 3.2%.In any case, we expect the core rate to fall, this time from 4.0% to 3.8%.
ING
We think the CPI report will show a soft print this month, given falling gasoline prices and more benign housing rent data. Core CPI is set to break below 4% YoY for the first time since May 2021, and this will give the Federal Reserve added confidence that inflation is on the path to sustainability reaching the 2% target by mid-2024.
CIBC
We expect headline and core prices both to rise by 0.3% MoM in the month.Core goods prices should show a somewhat weaker disinflationary impulse but services inflation will edge down to keep core inflation very close to the Fed’s target on a monthly basis.Our views on core inflation are slightly above consensus but it’s getting harder to get excited about CPI surprises given the progress observed on inflation over the past six months. We are now out of the territory where one report could change the FOMC’s thinking about near-term policy choices and markets understand this.
U.S. Treasury auctions off $37 billion of 10 year notes at a high yield of 4.024%
- WI level at the time of the auction was at 4.019%
- High-yield 4.024%
- WI 4.019%
- Tail of 0.5 basis points versus 6-month average of 0.8%
- Bid to cover 2.56X versus 6-month average of 2.51X
- Dealers 15.15% vs 6-month average of 14.5%
- Directs 18.74% versus six month average of 18.8%
- Indirects 66.11% versus six with average of 66.7
US MBA mortgage applications w.e. 5 January +9.9% vs -10.7% prior
- Latest data from the Mortgage Bankers Association for the week ending 5 January 2024
- Prior -10.7%
- Market index 190.6 vs 173.5 prior
- Purchase index 148.6 vs 140.7 prior
- Refinance index 425.4 vs 358.2 prior
- 30-year mortgage rate 6.81% vs 6.76% prior
US November wholesale sales 0.0% vs -0.3% expected
- US November wholesale sales
- Prior was -1.3% (revised to -1.5%)
- Inventories -0.2% vs -0.2% expected
Fed’s Williams: Our work to bring inflation back to 2% is not done
- Comments from Williams
- Fed’s can cut rates when confident inflation moving to 2%
- Fed will need restrictive policy stance for some time
- Outlook still uncertain, rate decision to be made meeting-by-meeting
- Rare decisions will be driven by totality of data
- Risks to economy are two sided
- In 2024 sees GDP at around 1.25%, unemployment at 4%
- Sees inflation ebbing to 2.25% in 2024, and 2% in 2025
- Things are looking very good on jobs front
- Inflation situation has improved quite a bit
- Fed sees ‘meaningful’ progress in restoring economic balance
- Balance sheet wind down working as planned
- Fed not near point where banking sector liquidity is scarce
JP Morgan on warning signs for stocks as disinflation process stalls, and risks rise
- JPM see higher risks for geopolitics and inflation
In a note, JP Morgan equity strategist Marko Kolanovic has once again weighed in on the negatives for stocks:
- the disinflation thesis is likely to be challenged during 1H24 as the disinflation process stalls
- equities appear overbought given low implied cash allocations and low short interest
- risks are rising for geopolitics to drive both a risk-off shift and a boost to inflation via increased shipping costs
Amazon’s Twitch to cut 500 staff (thats around 35% of employees)
Twitch is service that focuses on video game live streaming, including broadcasts of esports competitions. It also offers music broadcasts, creative content, and “in real life” streams.
Twitch is operated by a subsidiary of Amazon.com.
Boeing CEO Calhoun: What happened should never happen, and can never happen
- The jinxed Boeing 737 Max continues.
- A “quality escape” allowed the unsafe 737 Max -9 plane to fly
- This issue is specific to the 737 max 9. We don’t do this on any other plane.
- Was devastated and emotional when I first saw the images of the Alaska Air incident
- Company is now in a moment where our job is to understand what happened
- The certification of the Max 10 is unrelated and should not slow down that process
- We will all be certain, that airplanes that fly will never have a safety issue like this again
- We will not rush the process to get planes back in the air.
- We will engineer answers and make certain it doew not happen again.
Boeing shares are trading higher by about $3.00 or 1.31% at $228.70.The high-price did reach $231.50 today. The low price extended to $226.26. The low price yesterday reached $223.14.
Commodities
Silver dips on rising US bond yields as technicals shift bearish
- Silver’s decline influenced by high US bond yields, impacting the metal’s trading direction.
- Technical analysis indicates a sideways yet slightly bearish trend, with key support levels in focus.
- For a potential upward shift, Silver needs to reclaim $23.00 and surpass the 100-DMA at $23.28.
Silver slumps late in the North American session as high US Treasury bond yields hit precious metals prices across the board. At the time of writing, the white metal trades at $22.70 a troy ounce, down 0.24%.
Silver’s daily chart shows the non-yielding metal is trading sideways though slightly tilted to the downside. This is because Silver dropped below the 100-day moving average (DMA) on January 3. Since then, the 100-DMA remains a key resistance level respected by buyers, exacerbating Silver’s fall below $23.00.
Gold retreats ahead of US CPI release
- Gold’s drop influenced by heightened anticipation of US inflation report and rising Treasury yields.
- Expectations of higher headline CPI and a decline in core CPI shape market sentiment, impacting Gold’s value.
- Upcoming US CPI data crucial for market expectations around Fed’s rate decisions and its impact on Gold prices.
Gold price dropped 0.33% late in the North American session as traders awaited Thursday’s release of the latest inflation report in the United States.
Crude oil futures settles at $71.37
- The price felt $-0.87 or -1.20%
The price of crude oil futures is settling at $71.37. That is day $0.87 or -1.20%. The low price for the day reached $71.01. The high price was at $73.59.
US weekly EIA crude oil inventories +1338K vs -675K expected
- Weekly oil inventory data from the US EIA
- Prior was 5503K
- Gasoline +8029K vs 2489K exp
- Distillates +6528K vs +2382K exp
- Refinery utilization -0.6% vs -0.8% exp
- Production 13.2 mbpd to 13.2 mbpd
- Impld mogas demand: 8.33mbpd vs 7.95mbpd prior
Russian crude oil exports in the first week of 2024 down by 500,000 bpd
- Russia pledged to its OPEC+ cartel partners to cut by 0.5mn bpd, and they have done so
- At the latest OPEC+ meeting at the end of November, Russia said it would deepen the export cut to 500,000 bpd in the first quarter of 2024 – with May and June 2023 being the reference export levels for the cut.
- The first week of 2024 showed Russia … average exports of 3.28 million bpd were down by 300,000 bpd from May-June 2023, and down by 500,000 bpd compared to the previous week to December 31.
Looking ahead it’s a little more uncertain says the report:
- It’s not clear whether Russia will keep its exports as low as planned going forward as Moscow has always been evasive about its compliance with the OPEC+ agreement, even before the Russian invasion of Ukraine.
EU News
A mixed day for the major European indices
- German DAX /France CAC unchanged. Spain’s Ibex modestly higher
The major European indices are closing the day with mixed results
- German DAX rose 1.43 points or 0.01%
- France CAC fell -0.54% or -0.1%
- UK FTSE 100.fell -32.18 points or -0.42%
- Spain’s Ibex rose 6.8 points or 0.07%
- Italy’s FTSE MIB rose 54.99 points or 0.18%
Slump in German engineering orders sees no signs of a turnaround – VDMA
- The VDMA is the association of Germany’s engineering industry
Their latest finding shows that German engineering companies’ order books took yet another sharp tumble in November, falling by 13% year-on-year. That sees a return to a double-digit fall after October’s 5% decline. In the period from September to November, orders were down by 12% year-on-year with the split showing domestic orders falling by 17% and foreign orders declining by 11%.
Swiss National Bank expects an annual loss of around 3 billion CHF
- Due to the strong Swissy
News from Monday on the SNB, which will not be paying profits to the government for the second year in a row.
The very strong CHF has outweighed capital gains from equity and bond portfolios in foreign currencies the Bank has.
The Swiss National Bank has announced (in its preliminary results) that it expects an annual loss of around 3 billion Swiss francs for last year.
Info via Bloomberg
ECB’s de Guindos: Rapid pace of disinflation likely to slow down this year
- Remarks by ECB vice president, Luis de Guindos
- Disinflation process to pause temporarily at the beginning of the year
- Growth developments are more disappointing
- Incoming data indicate that future remains uncertain, prospects tilted to the downside
European Central Bank’s Centeno signals earlier-than-expected rate cuts
- Due to recent developments in inflation and the economy
ECB member and Bank of Portugal governor Mario Centeno spoke on Tuesday in an interview with Econostream Media. ICYMI:
Centeno said rate cuts from the European Central Bank could come sooner than the market expects
- should not wait until May to make a decision
- there are no signs of additional pressure on inflation
- rates have peaked
- expects inflation to have fallen to target in Q2
- “The decision to keep nominal rates steady for the moment is appropriate and we will decide when to cut them sooner than we thought until recently,”
- “I can’t say when, but I can … say the most recent developments on inflation and the economy have obviously brought the moment of easing (of monetary policy) closer”
BNP Paribas AM says the ECB is likely to cut before the Fed – March or April possible
- Federal Reserve can afford to wait for further signs of a slowdown
The Wall Street Journal reported, ICYMI, on a BNP Paribas Asset Management assessment saying the European Central Bank is likely to cut interest rates in the spring, before the Federal Reserve does.
Citing:
- Eurozone economy is weaker than that of the U.S.
- “It would make more sense that the ECB cuts first”
- initial ECB rate cut in March or April is “conceivable.”
- U.S. growth is still strong, the Fed can afford to wait for more signs of a slowdown
- “Inflation rates are pretty similar in the eurozone and the U.S., but there was probably a recession in the eurozone in the fourth quarter of 2023, notably in Germany,”
Asia-Pacific-World News
Senior People’s Bank of China official hints at further easing to come
- OMOs, MLFs, RRR all on the table
ICYMI, comments from Zou Lan, head of the People’s Bank of China’s (PBOC) monetary policy department in an interview with state media outlet Xinhua News Agency on Tuesday:
- said that the PBOC may use open market operations, medium-term lending facilities and reserve requirements among other monetary policy tools to provide “strong” support for reasonable growth in credit
- PBOC will also strengthen its counter-cyclical and cross-cycle policy adjustments to create favorable financial conditions for the country’s economic growth
- PBOC will also take measures to prevent funds from clogging and idling while guiding financial institutions to strengthen their liquidity risk management for stable money market operations
Australian November CPI 4.3% y/y (expected 4.4%)
Australian inflation data. This is the monthly data, not the official quarterly data.
- expected 4.4%, prior 4.9%
- m/m is +0.4%
Trimmed mean comes in at 4.6%
- prior 5.3%
other data published:
Q3 Job Vacancies -0.7% q/q to 388K
- prior -8.9%
New Zealand export prices rise, global shipping costs jump
- The index tracks the prices of 17 of New Zealand’s major commodity exports
The ANZ World Commodity Price Index gained 2.4% m/m in December
- prior was -1.2%
For the y/y, came in at -1.8% y/y.
ANZ’s report cites:
- Dairy prices improved to drive the index higher, more than offsetting weaker aluminium prices.
- In New Zealand dollar terms, the index lifted 1.9% m/m as the NZ dollar gained 2.4% against the trade weighted index.
As part of this report on New Zealand export prices ANZ includes comments on global shipping, which are particularly relevant right now given the chaos in the Red Sea.
- Global shipping prices are once more trending higher, eroding exporters’ margins. The Baltic Dry Index, which tends to be the most volatile of the shipping indices, spiked to an 18-month high in early December, with this index doubling during 2023.Conflict in the Red Sea is adding to the cost ofmoving goods to Europe as some ships are now opting for longer routes to avoiding the Suez Canal, and insurance for shipping is now more expensive.
Japan November wages data shows another deep fall
- Real wages down 3% y/y
While nominal cash wages rose 0.2% y/y the real wage data is awful, down 3.0% y/y
Labour Cash Earnings +0.2% y/y
- expected +1.5%, prior +1.5%
Overtime Pay + 0.9% y/y
- prior -0.1%
Inflation adjusted, i.e. real, wages -3.0% y/y
Cryptocurrency News
All Bitcoin ETFs approved by US SEC
- Looks legit this time
In a landmark decision, the US Securities and Exchange Commission (SEC) has approved all Bitcoin spot ETFs in a single, unprecedented decision on Wednesday, January 10.
It ends with:
IT IS THEREFORE ORDERED, pursuant to Section 19(b)(2) of the Exchange Act,87 that the Proposals (SR-NYSEARCA-2021-90; SR-NYSEARCA-2023-44; SR-NYSEARCA2023-58; SR-NASDAQ-2023-016; SR-NASDAQ-2023-019; SR-CboeBZX-2023-028; SRCboeBZX-2023-038; SR-CboeBZX-2023-040; SR-CboeBZX-2023-042; SR-CboeBZX-2023- 044; SR-CboeBZX-2023-072) be, and hereby are, approved on an accelerated basis.
Bitcoin spot ETF is approved
The US SEC surprisingly gave the green light to the 11 spot ETF applications submitted by major players like Grayscale, Bitwise, Hashdex, Valkyrie, Ark 21Shares, Invesco, Fidelity, and others.
The decision comes after months of intense industry lobbying and a recent flurry of amended 19b-4 filings, hinting at growing pressure on the SEC to act.
The approval marks a paradigm shift, granting direct access to Bitcoin via ETFs for millions of institutional and retail investors who previously lacked options.
Nevertheless, the commission pulled the original link that mentioned ETF is approved.
Bitcoin price rises as signs mount that an ETF approval is looming
- Bitcoin price rises to $46,600, up 2.3%
All signs continue to point to an imminent approval of a bitcoin ETF.
The latest is that Fidelity’s trading app shows tickers for the prospective spot ETFs, though they’re not yet available to trade. Every credible report says an ETF will be approved today, sometime after the close and before 8 pm ET.
SEC says the content from the approval tweet was not drafted by them
- So it was a straight spoof
There was a lively debate yesterday about whether the tweet was sent in error, pulled from the drafts or created by a hacker. The early communications from the SEC left that open to interpretation but now they’re explicitly saying the tweets were NOT ‘drafted or created’ by the SEC.
They’re still investigating what happened.
Twitter confirms SECGov was compromised, did not have two-factor authentication enabled
Twitter on the BTC ETF approval/no approval debacle earlier today:
- We can confirm that the account SECGov was compromised and we have completed a preliminary investigation.
- Based on our investigation, the compromise was not due to any breach of X’s systems, but rather due to an unidentified individual obtaining control over a phone number associated with the SECGov account through a third party.
- We can also confirm that the account did not have two-factor authentication enabled at the time the account was compromised.
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