The consistency of the hawkish message, that rates are going higher and will remain in restrictive territory, is finally hitting home and yields rose in sync and weighed heavily on stocks and bonds this year.
- Nikkei loses 1%, US500 futures 0.4%, US Dollar extends gains before US CPI & retail data. Asian shares fell ahead of the data but also due to the weak earnings that weighed on the sentiment.
- Lyft, Tokyo Electron (-4.39%), SoftBank (-1.12%), Advantest (-1.57%), Shiseido (-3.97%), Olympus (-2.25%).
In case you missed it, the Morgan Stanley Market Sentiment Indicator (MSI) has turned risk negative & the GS program trading desk writes: “Inflecting CTA flow could translate to an approx. 20% sell off in US equities over a month in a down tape scenario”.
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- FX – USDIndex UP – saw a high of 103.70 before correcting to currently 103.44. Reuters: “Risks could be to the upside given a re-analysis of seasonal factors released last week saw upward revisions to CPI in December and November. That lifted core inflation on a 3-month annualised basis to 4.3%, from 3.1%.”
- EUR & GBP – extend losses against USD – 1.0680 & 1.2057 respectively.
- JPY – held above 132 area on reports that Japan’s government is likely to appoint academic Kazuo Ueda as the- next BOJ governor, a surprise choice that could see the country finally align with other major economies in raising interest rates.
- USDJPY – if 132.80 is broken, next R: 134.80.
- Commodities – USOil – steady at 79 after +2% spike. If higher inflation then concerns could increase that the move would slow economic activity and demand for oil. Russia to cut oil output by 500,000 bpd in March.
- Reuters – “Oil may resume its rally in 2023 as Chinese demand recovers after COVID curbs were scrapped and lack of investment limits growth in supply, OPEC country officials told Reuters, with a growing number seeing a possible return to $100 a barrel.”
- Gold – sideways at $1856-1867.
- Cryptocurrencies – BTC – Tested $21.3k lows, currently at $21.8k.
Today – We have heavy release schedule through mid-February. We expect Fed policy, US January retail sales, inflation indexes, housing starts, permits and Philly Fed indexes.
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