Investors are a bit on edge, waiting for Thursday’s CPI print. That will be sign for potential Fed moves this year. It should show some disinflation, but investors want to see the data. Per TS Lombard, geopolitics is the likeliest source of an inflation surprise, and inflation volatility is back.
The CPI data matters because most people are positioned for a soft-landing scenario. Of course, there are still folks positioned for a no- or hard-landing, so there could be additional funds to squeeze the market higher. As 42Macro notes, their positioning model indicates investor positioning is somewhat stretched, but not to levels that would be consistent with major bull market peaks.
Bitcoin was up before getting the final SEC decision about ETF applications. The token briefly popped to a 21-mo high yesterday on a false post on the SEC’s X account claiming that the agency had approved the plans. Supposedly, the compromised account didn’t have 2-factor authentication. So, the SEC’s tech team is probably hunting this person down.
Per Bloomberg, global governments are going to flood the market with bonds at a near unprecedented clip in the coming weeks. A bunch of countries (e.g., US, UK, from the EZ, Japan) will sell a net $2.1 tn of new bonds to finance 2024 spending plans, a +7% increase from 2023.
Boeing’s CEO admits “our mistake” after the 737 MAX door blowout and nonstop media coverage of the guy whose shirt blew off, per the FT.
Building on our prior note, Reuters is out with a story about how US banks are expected to report lower profits for 4Q23 given loan defaults. So, maybe EZ banks are a better bet. We’ve been hiding in some Japanese banks, but see the next note.
Japan’s TOPIX closed at its highest level since March 1990. Japanese equities were up higher yet again (Nikkei up +2%, and Topix +1.3%). There’s been a sharp slowdown in wage growth that now risks delaying BOJ monetary policy normalization. We think any tightening could be a 2H24 event, but if the momentum in key inflation and wage growth aren’t so hot, that time frame could get extended. Perhaps time to rotate.
Global chip sales rose for the 1st time in more than a year, given strong AI demand. TSMC finally printed a decent top line figure because of it (flat 4Q rev, but above internal and external expectations). In other chip news, Intel is coming out with AI PC chips for autos, to go against Nvidia and Qualcomm, per Reuters. Plus, the FT says that Chinese companies are repurposing Nvidia gaming chips to get around US export controls.
Last week’s Dec ISM print is usually experienced during recessions.
US crude inventories fell by -5.2 million barrels last week, per the API data, down to the lowest in 10 weeks if confirmed by the EIA. Also, the costs to haul oil from the US to Asia is forcing buyers to get spot barrels from the Persian Gulf, which is driving up cargo premiums. Both could be inflationary dynamics. Just this morning, BBG reports on massive missile launches and drone attacks in the Red Sea. Pretty brazen from the Iran-backed militant group.