It’s been another lively start to the week following a busy weekend in which Swiss authorities have been working tirelessly to complete the sale of Credit Suisse and avoid further fallout on the open. So far it looks as though those efforts have not been in vain, along with those of a selection of major central banks to ensure access to dollar funding continues. This is now the second weekend that central banks, governments, and regulators have spent putting out fires, and, while markets are recovering today, I’m not sure anyone is confident that all flames have been extinguished. That said, the speed and decisiveness with which authorities have acted over the last couple of weeks will be providing some reassurance amid all of the … [Read More...]

Some calm appears to have returned to financial markets in early trade in Europe this morning but how long will it last? While everyone will be hoping that the turmoil that swept through markets since Friday is dealt with and behind us, I’m not sure anyone can say with any confidence that this is the case and investors will remain very sensitive to ongoing developments. What’s more, we’ve seen a dramatic repricing of interest rate expectations, to the extent that markets now price peak rates to be here or near and rate cuts this year to be highly likely. In much the same way that I wasn’t convinced by pricing in the aftermath of Powell’s appearances, barring much greater fallout in the … [Read More...]

The Japanese yen is showing strength on Thursday. In the European session, USD/JPY is trading at 136.27, down 0.79%. Kuroda’s last hurrah After 10 years at the helm of the Bank of Japan, Governor Kuroda chairs his final policy meeting on Friday. Traditionally, BoJ governors have not made policy changes at their last meeting, and in all likelihood, Kuroda will not go out into the night with guns blazing. Still, Kuroda likes to keep the markets guessing and his tweak of the 10-year yield target range in December completely blindsided traders and jolted the financial markets. This has kept the markets on alert for Kuroda tweaking or even abandoning the BoJ’s yield curve control (YCC) policy. The bond market remains dysfunctional due to the YCC, even … [Read More...]

It would appear investors are taking a cautious stance ahead of tomorrow’s jobs report, a little spooked by Powell’s comments in Congress and fearful of being caught on the wrong side of another hot jobs report. That’s clearly the danger at this point, that we get another hot report that confirms January was no blip and instead indicative of a labour market that not only isn’t cooling but perhaps getting hotter. The trend pre-January across many indicators pointed to a cooling in the economy and that was expected to catch up to the jobs market eventually but a variety of data points at the start of the year threw that narrative into doubt. I expect the February data and that of the … [Read More...]

Choppy trading remains in oil Oil has pared earlier losses but remains lower on the day as we near the end of the trading week. We’ve basically just experienced last week but in reverse, in keeping with how oil markets have traded since early December. Choppy but ultimately range-bound action has been evident throughout that period and while traders will have an eye on the range lows – which have been gradually rising – there’s currently little to suggest we’re about to see a major breakout in either direction. We’ll need to see more concrete evidence that either the global economy is facing dire straits or China’s rebound is going to far exceed expectations. Jobs report key for gold Gold is … [Read More...]

The British pound has extended its gains and is trading at 1.1996 in Europe, up 0.62%. Earlier, GBP/USD pushed above the symbolic 1.20 level. UK GDP rises 0.3% The UK ended a light calendar week on a bright note, as January GDP posted a modest gain of 0.3%, above the estimate of 0.1% and following a -0.5% reading in December. The UK managed to avoid a recession in 2022 but there is uncertainty as to whether the economy can stay above water this year as well. Today’s GDP has provided a bit of optimism and the pound has responded with gains of 0.50%. The Bank of England will be pleased with the improvement in GDP, as policy makers continue to grapple with stubbornly high inflation of 10.1%. The … [Read More...]

Equity markets in Asia are enjoying some decent gains overnight, with China and Hong Kong the obvious outperformers, while Europe is also enjoying a positive start on Wednesday. Choppy trading conditions are still evident this week although the latest Chinese PMIs have provided some cause for more optimism. It was already believed that the transition from zero-Covid to living with it was going smoothly but this survey data suggests businesses are now extremely optimistic about the future. That bodes well not just for China but regionally as well, as strong demand boosts trade and a resurgence in tourism restores the battered industry. There’s still a long way to go and there could be setbacks along the way but investors will no doubt be encouraged by … [Read More...]

Stock markets are poised to end the week on a positive note although broadly speaking, it doesn’t seem we’ve progressed in either direction over recent weeks. Trading has become very choppy as the economic data has turned more problematic and interest rate expectations have flipped. Investors are now waiting for evidence that the January figures were the blip many expect they were, driven by unseasonably warm weather, and next Friday’s jobs report will be the first such tier-one release. Until then, we may see more fluctuations in the markets, although there are some interesting releases in the interim, not to mention the two appearances by Fed Chair Jerome Powell in Congress during the week. I can’t imagine he will pivot too dramatically … [Read More...]