Senior Relationship Manager
Summary: Will the CPI hold what markets expect?
Good Morning,
We are awaiting the US CPI at 14:30 today as the key event of the week, the expectation is reading of 6.5% annually and 5.7% Core CPI. A large US Investment Bank estimates that a reading above 6.6% would weigh on the S&P with -2.5% to -3% and below 6.4% boost the index by 3% to 3.5%.
The large move is a bit of a self-fulfilling prophecy as everybody will watch the number and I expect large moves at the time of release in all asset classes but primarily in FX and highly geared shares like tech.
So far the sentiment is cautiously bullish, indexes closed higher with the Dow up 0.8%, the S&P 500 up 1.3%, and the Nasdaq up 1.8%. The GER40 is testing the 15000 for the first time since February 2022. Amazon gained 5.8%, Apple 2.1% and Tesla 3.7%.
US 10 year yields remain at 3.5% and the Fed is expected to hike by 25 BPS to 4.65 and peak at 4.95 in June 2023.
The USD Index remains near 103, EURUSD 1.0760, GBPUSD 1.2140 and USDJPY 131.70. EURCHF was surprisingly strong yesterday, breaching parity for the first time since July and currently trading at 1.0030.
The Bank of Japan is expected to adjust it`s inflation targets next week, likely to cause volatility again.
Gold prices are near the 8-month high Silver is currently lagging at 23.60. Our Head of Commodity Strategy, Ole Hansen, sees risk of correction. Key resistance is $1900.
In the night the Chinese CPI came as expected and the Producer Price index fell by 0.7% while 0.1% was expected.
Besides the CPI, Copper and Iron rose hopes of the Chinese opening and are looking cautiously strong
Goldman Sachs announced it would cut app 3000 jobs acc to a Reuters report - app 6% of staff.
Thursday 12 January
Friday 13 January
2024: The wasted year
Markets are driven by election optimism, overshadowing growing debt and liquidity concerns. The 2024 elections loom large, but economic fundamentals and debt issues warrant cautious investment.
As US economic slowdown hints at a shift away from exceptionalism, USD faces downside with looming Fed cuts. AUD and NZD set to outperform as their rate cuts lag. JPY gains on carry unwind bets and BOJ pivot.
Amid AI and obesity drug excitement, equities see varied prospects: neutral on overvalued US stocks, negative on Japan due to JPY risks, positive on Europe. European defence stocks gain appeal.
With the economic slowdown, quality assets will gain favour, especially sovereign bonds up to 5 years. Central banks' potential rate cuts in Q2 suggest extending duration, despite policy and inflation concerns.
Commodities poised for rebound. The "Year of the Metal" boosts gold and silver, copper awaits rate cuts. Grains may recover, natural gas stabilises. Gold targets $2,300-$2,500/oz, copper's breakout could signal growth.
Markets are driven by election optimism, overshadowing growing debt and liquidity concerns. The 2024 elections loom large, but economic fundamentals and debt issues warrant cautious investment.
As US economic slowdown hints at a shift away from exceptionalism, USD faces downside with looming Fed cuts. AUD and NZD set to outperform as their rate cuts lag. JPY gains on carry unwind bets and BOJ pivot.
Amid AI and obesity drug excitement, equities see varied prospects: neutral on overvalued US stocks, negative on Japan due to JPY risks, positive on Europe. European defence stocks gain appeal.
With the economic slowdown, quality assets will gain favour, especially sovereign bonds up to 5 years. Central banks' potential rate cuts in Q2 suggest extending duration, despite policy and inflation concerns.
Commodities poised for rebound. The "Year of the Metal" boosts gold and silver, copper awaits rate cuts. Grains may recover, natural gas stabilises. Gold targets $2,300-$2,500/oz, copper's breakout could signal growth.