John Tierney
Summary Large caps marked time last week, but the Russell 2000 (RTY) jumped 3.1% as the 10Y Treasury yield dropped 20bp to 4.20%. And three tech companies in the data business – Salesforce (CRM), SnowFlake SNOW), and Hewlett Packard Enterprises (HPE) – soared on strong earnings and reports that their clientele are implementing data strategies […]
Richard Jones
We expect USD downside in December, mostly in the last two weeks. However, the outsized November fall may have already accounted for much of the move.
Dominique Dwor-Frecaut
Summary My February expectation that QT would end in 2023 H2 did not happen due to: Slower bank loan growth. Increased Fed lending to banks after the spring bankruptcies. Tight money market liquidity that reduced use of the Fed RRP facility by MMFs. I do not expect these events to repeat in 2024; in particular, […]
Julius Probst, PhD
Summary Worker shortages are hitting labour markets in advanced economies hard. Without a massive inflow of foreign workers, countries like Germany will soon see their workforce shrink. After several decades of declining bargaining power and stagnating wages, these trends might now finally reverse as adverse demographics are increasingly leading to labour scarcity. The Decade-Long Decline […]
Bilal Hafeez, Viresh Kanabar
We standardise WoW price changes across different markets to allow for cross-market comparisons. Last Week’s Highlights USD continued its decline as RoW data stabilises. The dollar index (DXY) kept falling last week, down 0.5% WoW. The biggest winners were NZD, AUD and GBP (Charts 1 and 2). The GBP performance owes much to a better-than-expected […]
John Tierney
Summary The boardroom drama at OpenAI managed to upstage Nvidia’s impressive earnings beat and spark new debate about the risks of headlong AI development. NVDA sold off on the week, dropping about 3%, ostensibly on valuations concerns. But make no mistake, NVDA is fairly valued based on projected earnings – and outright cheap if analysts’ […]
Henry Occleston
Summary The OBR downgraded real growth across the forecast horizon but upgraded nominal growth forecasts on the back of higher inflation ahead. Ahead of what could well be an election year in 2024, the UK Chancellor’s Autumn Statement provided a 2ppt cut to national insurance contributions. We expect next March’s budget to provide further backing […]
Richard Jones
Markets are chopping around in ranges, with the November highs/lows across the G10 FX and rates space to contain price action into year-end.
Viresh Kanabar, Bilal Hafeez
We standardise WoW price changes across different markets to allow for cross-market comparisons. Last Week’s Highlights Rates and USD fall sharply as US inflation comes in weaker than expected. October core and headline CPI were 10bp below expectations. On the headline inflation side, lower gasoline prices contributed. More importantly, on the core side, housing data […]
John Tierney
Summary We see the November rally extending into yearend. Whether it is a grind or more surges are in store depends on whether the upcoming jobs and inflation reports add fuel to the fire. Retailers seem to be finally getting their houses in order after struggling with supply chain and inventory problems over the past […]
Richard Jones
Summary Sharp moves lower in US yields and the US dollar (USD) index (DXY) this month have taken both to multi-month lows. We think these outsized market reactions are in large part due to lopsided market positioning (long USD and short the US rates market). After the big market moves, we think a clear-out has […]
Dominique Dwor-Frecaut
Summary Recession fears and hopes for deep Federal Funds Rate (FFR) cuts have been rekindled by the recent increase in unemployment. This increase is close to the threshold that has historically signaled a recession. This time around, the threshold could be providing a false positive signal due to: Data issues. A likely increase in the […]
John Tierney
Summary Following the 1H 2022 selloff, the Russell 2000 never regained the mojo that has powered the larger-cap S&P 500 (SPX) and NASDAQ 100 (NDX) to near record rallies. RTY trades as if investors expect a recession – even though those fears faded over a year ago. Rather than recession concerns, RTY has been weighed […]
Bilal Hafeez, Viresh Kanabar
Last Week’s Highlights Brent falls almost 5% on demand risks. Front-month Brent fell from $85 to $81 last week as demand worries retook centre stage. While Europe has shown the main signs of weakness, Chinese trade data sparked the sell-off last week despite being mixed. Crude imports rose from 11.2mn b/d to 11.4mn b/d last […]
John Tierney
Summary The S&P 500 (SPX) and NASDAQ (NDX) added to the gains of the previous week, but the Russell 2000 (RTY) faltered on rate concerns. We are constructive on the outlook for equities going into yearend but the weakness in small caps is a lingering concern. It shows how uneven the recovery is and how […]
Dominique Dwor-Frecaut
Summary In late September, I was concerned that the US economy could be about to hit an air pocket. In reality, there were limited headwinds to the US economy in October as a government shutdown did not happen, tax payments increased only moderately, and student debt service resumed but likely with limited compliance. High frequency […]
Richard Jones
After pulling back to a low 149-handle last week, USD/JPY is now trading back up to ~151. The wild ride in the pair is worth breaking down, especially the whiplash price action from last week and into this week.
Bilal Hafeez, Viresh Kanabar
Last Week’s Highlights 10Y yields collapsed… What drove the move? Last week’s price action was dominated by the collapse in long-end yields, which fell almost 30bps (Charts 1 and 3). Several factors drove this move. On Monday, the US treasury announced it would need to borrow $76bn less than expected at $776bn in privately held […]
John Tierney
Summary Will last week’s enormous rally hold? Our view is yes – as long as investors believe the Federal Reserve (Fed) really is on hold and finished raising rates. Whether and how long that perception lasts depends on incoming economic data. All things considered, we think it will take a significant shock – whether strong […]
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