Futures Rise Ahead Of Key Powell Speech
US equity futures rose, led by Nasdaq 100 contracts, setting up the tech-heavy index for a rebound as investors brace for Powell 2nd press conference in less than a week, in which he is widely expected to be more hawkish than he was during last week’s FOMC. S&P 500 futures climbed 0.1% as of 7:45 a.m. ET while Nasdaq 100 contracts added 0.3%. The Bloomberg Dollar Spot Index retreated from the day’s highs, boosting most Group-of-1o currencies. Treasury yields pulled back after two days of outsized gains. Oil climbed with gold, while Bitcoin advanced for a second day.
Among notable moves in premarket trading, Activision gained after the video game publisher’s results beat expectations thanks to the performance of its big game titles. Bed Bath & Beyond sank 33% and was set for its biggest one-day drop in nearly six months (which in turn followed a record surge the day prior) after the troubled home-furnishings retailer said it’s planning to issue convertible preferred securities and warrants that would raise more than $1 billion. Bank stocks were lower in premarket trading Tuesday, putting them on track to fall for a third straight session. Nu Holdings Ltd/Cayman Islands and Block Inc. are among the most active financials stocks in early premarket trading, gaining 1% and 0.3% respectively. Here are some of the biggest US movers today:
- Activision Blizzard shares rise 2.6% to $73.47, still well below Microsoft’s offer to buy the company at $95 per share, after the video game publisher’s results beat expectations thanks to the performance of its big game titles.
- Oak Street Health shares surge 36% after a Wall Street Journal report that the company is close to an agreement to be acquired by CVS Health for about $10.5 billion, including debt. Peer Cano Health (CANO US) gains 11%.
- Baidu ADRs soared 15% in US premarket trading on growing hopes over the Chinese search giant’s ChatGPT-like service, which the company said is on track to roll out in March. Artificial intelligence- related stocks gained amid Baidu’s progress: SoundHound AI +15%, BigBear.ai +3.3%, C3.ai +4%
- Pinterest shares slip 3.2% after the social network reported fourth-quarter revenue that was weaker than expected. While analysts were positive about the platform’s improving engagement trends, they noted that the ad market remains tough.
- ZoomInfo Technologies fell 10% after the sales and marketing software company gave guidance for 2023 EPS and revenue that missed estimates. Analysts noted that cost cuts and layoffs among software firms have hurt ZoomInfo’s ability to up-sell on deals, while the macroeconomic environment is also a challenge.
- Bed Bath & Beyond shares slump 31% after the troubled home-furnishings retailer said that it’s planning to issue convertible preferred securities and warrants that would raise more than $1 billion.
- Chegg tumbles 24% after the US online education provider issued weaker-than-expected 2023 guidance. Expectations for a second year of shrinking sales prompted a downgrade at KeyBanc, while other brokers slash their price targets, adding the company could face future challenges from emerging AI technologies.
- Adecoagro the US-listed agricultural firm with operations in South America, drops 5.9% after Morgan Stanley downgrades it to underweight from equal- weight, saying soy and corn yields will be impacted by severe drought in Argentina.
The sharp rally in US stocks had cooled in the past two days amid mounting fears that resilient economic growth would keep the Fed hawkish for longer. Fallout from the flight over the US of an alleged Chinese spy balloon has also kept risk demand subdued. Fed Chair Jerome Powell is set to speak later today and investors are keen for clues on whether the central bank could further slow the pace of rate hikes over the next few months.
“There is little to cheer as the Fed hawks are returning to the playground, mixed with escalating geopolitical tensions with China,” said Ipek Ozkardeskaya, senior analyst at Swissquote Bank. Investor confidence about the outlook for technology stocks also appears to be fizzling out. Just as the Nasdaq 100 is getting close to entering a bull market, bearish bets on the index are piling up, signaling that the outperformance isn’t expected to last, according to Citi’s Chris Montagu.
Heading into today’s 12pm speech by Powell, Investors are assessing whether the Fed Chair will dampen market optimism for interest-rate cuts later in 2023, following January’s strong payrolls report and comments from other Fed officials about the possibility of a higher peak than policy makers had previously expected. Treasuries steadied after a two-day rout sparked by traders ramping up bets on future Fed tightening.
“I expect that Powell will drive home that point that they’ve done a lot and there’ll be a tightening that is going to impact the economy later on this year,” Jack McIntyre, a portfolio manager at Brandywine Global Investment Management LLC, said on Bloomberg Television. As discussed last night, market positioning is vulnerable for another delta squeeze should Powell prove to be more dovish than expected.
Meanwhile, Bloomberg notes that the fourth-quarter reporting season has done little to support optimism about corporate fundamentals. Earnings in sectors from energy to consumer discretionary have been coming in below pre-season estimates and companies are dialing back outlooks based on expectations growth will slow. Still, in a seemingly contrarian move, analysts have boosted stock-price targets, signaling how equity prices are being driven more by the Fed’s outlook than profits.
Geopolitical concerns are also back on the radar. As the US attempts to recover the sunken remains of a huge Chinese balloon it blasted out of the sky with a missile, Beijing acknowledged ownership of a second balloon spotted drifting over several Latin American countries.
In Europe, the Stoxx 600 advances 0.3% as investors focus on positive corporate earnings rather than the prospect of additional monetary tightening. Energy and banks are among the best performing sectors, boosted by BP Plc and BNP Paribas SA after their respective updates exceeded expectations. Turkish assets extended declines as the country continued to grapple with earthquakes that killed at least 4,000 people in Turkey and Syria. Here are some of the biggest European movers:
- BP shares gain as much as 4.3% after the oil major raised its dividend and extended share buybacks after reporting record full-year profits
- BNP Paribas rises as much as 2.1% after the euro zone’s largest bank announced a 5-billion-euro buyback and upgraded its 2025 financial targets
- Demant climbs as much as 12%, the most since February 2021, after the Danish hearing-aid maker presented a stronger-than-expected outlook for 2023
- Paradox Interactive jumps as much as 13% with analysts saying the Swedish video-game developer’s results look strong on the bottom line
- Lotus Bakeries advances as much as 7.3%, the most since August 2021, as analysts said the biscuit maker’s results topped expectations on all metrics
- TeamViewer jumps as much as 18% after the German software maker projected 2023 revenue ahead of analyst expectations and announced a buyback program of as much as €150m
- Carlsberg falls as much as 3.7%, the most since October, as analysts said guidance from the Danish brewer was disappointing
- Siemens Energy drops as much as 4.8% after its results confirmed pre-released figures that had disappointed investors
- Synlab slides as much as 25%, the most since the German laboratory and diagnostics firm’s May 2021 IPO, after it cut its 2022 margin guidance
- AMS-Osram tumbles as much as 20% after the company issued a first-quarter outlook that missed estimates, suspended cash dividends and guided 2024 targets to the lower end of prior ranges
- Morgan Advanced falls as much as 8.2% after providing a trading update in which the specialty chemicals company said a recent cyber attack will reduce FY23 Ebita by 10%-15%
- Nordic Semiconductor drops as much as 19%, the biggest intraday slide since 2018, after the chipmaker said it no longer expects to meet its 2023 revenue target
In FX, the Bloomberg Dollar Spot Index eased as the greenback was little changed or weaker against its Group-of-10 peers. The Australian dollar led gains after the RBA raised the Cash Rate by 25bps to 3.35%, as expected, while it stated that the Board expects further increases in interest rates and is resolute in its determination to return inflation to the target. RBA said inflation is expected to decline this year due to both global factors and slower growth in domestic demand, as well as noted that the path to achieving a soft landing remains a narrow one. Furthermore, it stated there is uncertainty around the timing and extent of the expected slowdown in household spending and that another source of uncertainty is how the global economy responds to the large and rapid increase in interest rates around the world, while these uncertainties mean that there are a range of potential scenarios for the Australian economy. Elsewhere, the Norwegian krone was the worst performer.
- The euro fell as much as 0.3% to touch $1.0697, before paring losses. The currency is set for its fourth day of declines, the longest losing streak since November. Bunds and Italian bonds were little changed ahead of scheduled policymaker speeches. Germany’s industrial production fell 3.1% m/m (estimate -0.8%) in December versus revised +0.4% in November
- The pound slid to a day-low of $1.1987 before paring. Gilts were steady after Monday’s sharp drop
- The Australian dollar rebounded from a one-month low to rally by as much as 1% while sovereign yields jumped after the Reserve Bank raised its key rate by 25bps to 3.35% and signaled that more tightening is needed to crush stubbornly-high inflation
- The yen also bounced from a one-month low after Japanese workers’ nominal wages in December rose at the fastest pace since 1997, an acceleration in gains that may fuel speculation the central bank will consider shifting policy after Governor Haruhiko Kuroda steps down in April
In rates, treasuries clawed back some of Monday’s heavy declines with two-year yields eased as much as 5bps ahead of comments from Powell. At 730am ET, Treasuries were mixed with the curve steeper as front-end unwinds portion of Monday’s selloff. Long-end is steady, leaving 2s10s, 5s30s spreads both steeper by 3bp-4bp on the day. Bunds lag over early London session amid debt sales. Focal points of US session include 3-year note auction at 1pm New York time, an hour after Fed Chair Powell is slated to make unscripted comments at an event. US yields little changed across long-end of the curve while front-end trades richer by ~3bp on the day; US 10-year yields around 3.64%, richer by ~1bp vs Monday’s close with bunds and gilts lagging by 4bp and 6bp in the sector. Treasury auction cycle begins with $40b 3-year note sale; $35b 10-year and $21b 30-year new issue auctions are ahead Wednesday and Thursday. WI 3-year yield at 4.09% is around 11bp cheaper than January’s, which stopped 2.3bp through the WI level.
In commodities, crude benchmarks rose for a second session, after Saudi Arabia signaled it was optimistic about oil demand by unexpectedly raising prices for customers in its main market of Asia, while also lifting those for Europe and the US. WTI added 2.4% to trade near $75.90. Pumping has begun on the Kirkuk-Ceyhan oil pipeline from Iraq; exports from Ceyhan expected to being on Tuesday, according to an energy official. TotalEnergies SE is being forced to cut production of fuels like gasoline and diesel at its French oil refineries for 48 hours, according to the CGT union. US official later confirmed the US is considering raising the tariff on Russian aluminium to 200% but stated no decision was made and no announcement is expected this week, according to Reuters. Spot gold is modestly firmer and at the top-end of the session’s ranges, rising roughly 0.4% to trade near $1,874 while base metals are mixed overall with LME Copper moving back towards the USD 9k/t mark.
Looking at today’s events, at 8:30 a.m. ET we’ll get US trade balance data. Fed Chair Jerome Powell will speak at 12 p.m., followed by comments from Fed Vice Chair for Supervision Michael Barr due at 2 p.m. At 1 p.m., the US will sell $40 billion in three-year notes. Earnings today include KKR, DuPont, Prudential, Chipotle and Carlyle.
To the day ahead now, and we’ll hear from an array of central bank speakers, including Fed Chair Powell at 12pm, followed by comments from Fed Vice Chair for Supervision Michael Barr due at 2 p.m. Other central bank speakers include the ECB’s Schnabel and Villeroy, BoE Deputy Governor Ramsden, Deputy Governor Cunliffe and Chief Economist Pill, and Bank of Canada Governor Macklem. Data releases include the US trade balance at 8:30am ET. At 1 p.m., the US will sell $40 billion in three-year notes. Earnings today include KKR, DuPont, Prudential, Chipotle and Carlyle. Finally, tonight will see US President Biden deliver the State of the Union address.
- S&P 500 futures up 0.2% to 4,131.00
- MXAP up 0.4% to 166.13
- MXAPJ up 0.2% to 542.05
- Nikkei little changed at 27,685.47
- Topix up 0.2% to 1,983.40
- Hang Seng Index up 0.4% to 21,298.70
- Shanghai Composite up 0.3% to 3,248.09
- Sensex down 0.3% to 60,335.03
- Australia S&P/ASX 200 down 0.5% to 7,504.14
- Kospi up 0.6% to 2,451.71
- STOXX Europe 600 up 0.3% to 458.44
- German 10Y yield little changed at 2.30%
- Euro little changed at $1.0718
- Brent Futures up 1.6% to $82.26/bbl
- Gold spot up 0.4% to $1,875.19
- U.S. Dollar Index little changed at 103.55
Top Overnight News from Bloomberg
- Japan’s Finance Ministry hasn’t approached BOJ Deputy Governor Masayoshi Amamiya about becoming the next governor, says Finance Minister Shunichi Suzuki
- French labor unions are holding a third day of mass strikes and protests against raising the retirement age, keeping up pressure on the government as parliament debates the proposed reform
- London house prices flatlined in December, recording their worst performance in more than three years, one of the UK’s biggest mortgage lenders said
- Rescue teams from overseas began deploying in Turkey on Tuesday after a pair of powerful earthquakes a day earlier killed at least 4,000 people in the country and neighboring Syria, leaving millions to suffer without power or heat throughout a snowy night
- A $5 trillion investor coalition wants to change how markets assess government bonds to help unlock climate finance to emerging markets by proposing a framework it says focuses on fairness between richer and poorer countries
A More detailed look at global markets courtesy of Newsquawk
APAC stocks eventually traded mixed after the weak lead from global counterparts as markets continued to ramp up hawkish Fed pricing, while the region also digested the RBA rate decision. ASX 200 was initially kept afloat amid strength in the energy sector after a rebound in oil prices although the index was later pressured after the RBA lifted the Cash Rate by 25bps to a fresh decade-high and signalled further rate increases ahead. Nikkei 225 was indecisive after mixed data in which household spending disappointed but wages topped forecasts, while the earnings deluge also continued. Hang Seng and Shanghai Comp. were varied with Hong Kong led by a rebound in the tech, healthcare and property sectors following yesterday’s underperformance although the mood in the mainland was less decisive owing to the recent spy balloon frictions and with a lack of fresh drivers aside from Wuhan relaxing property buying restrictions.
Top Asian News
- US President Biden said the US made it clear to China what it would do regarding the balloon and it was always his view that the balloon should be shot down, while he added the balloon incident doesn’t weaken US-China relations, according to Reuters.
- RBA raised the Cash Rate by 25bps to 3.35%, as expected, while it stated that the Board expects further increases in interest rates and is resolute in its determination to return inflation to the target. RBA said inflation is expected to decline this year due to both global factors and slower growth in domestic demand, as well as noted that the path to achieving a soft landing remains a narrow one. Furthermore, it stated there is uncertainty around the timing and extent of the expected slowdown in household spending and that another source of uncertainty is how the global economy responds to the large and rapid increase in interest rates around the world, while these uncertainties mean that there are a range of potential scenarios for the Australian economy.
- Chinese President Xi says will strive to achieve overall improvement in economic operations, via state media; Premier Li says China’s economy still faces many challenges.
European bourses are modestly firmer, Euro Stoxx 50 +0.2%, after yesterday’s pronounced pressure and ahead of key Central Bank speak. Within Europe, sectors are mixed with Energy the clear outperformer post-BP, with the FTSE 100 bid, while Banking names are bolstered on yields/BNP Paribas. Stateside, the picture is very similar to the above though the NQ +0.3% is the incremental outperformer with US yields ever so slightly softer. BP (BP/ LN) Q4 2022 (USD): Adj. Net 4.81bln (exp. 5.11bln), Revenue 69.3bln (exp. 59.5bln). Adj. EPS 0.2644 (exp. 0.2713); Co. plans a further USD 2.75bln share buyback; Co. increases dividend by 10% Nintendo (7974 JT) 9-month (JPY): Net Profit 346mln, -5.8%; Operating Profit 410mln, -13%; Recurring Profit 482mln, -6%; Switch unit sales 14.91mln (prev. 18.95mln). FY22/23: Switch unit sales 18mln (prev. guided 19mln), Op. Income 480bln (exp. 500bln)
Top European News
- ECB’s Villeroy says we are not very far from the peak in inflation, does not think the ECB needs to choose between fighting inflation and avoiding a recession; better economic environment does make the monetary task easier.
- HS2 faces more delays and cuts as the UK looks to rein in the costs of the project, according to FT.
- Ion Markets began bringing clients back onto the clearer derivatives platform overnight following the ransomware attack, according to a Reuters source.
- UK Cabinet Reshuffle: Grant Shapps expected to be new energy security secretary, Kemi Badenoch expected to be new business and trade secretary, according to Times’ Swinford; Greg Hands will be the new Conservative Party Chairman.
- DXY solid around 103.500 in advance of Fed chair Powell, Aussie boosted by hawkish RBA hike and guidance overnight, as AUD/USD rebounds firmly from sub-0.6900 lows to probe 0.6950 and AUD/NZD from 1.0908 to 1.0985.
- Yen rebounds circa 100 pips vs Dollar between 131.70-132.71 bounds as strong Japanese wages more than offset weak household consumption.
- Franc, Kiwi and Loonie claw back some heavy post-NFP losses vs Buck, but Euro and Sterling lag on 1.0700 and 1.2000 handles.
- PBoC set USD/CNY mid-point at 6.7967 vs exp. 6.7962 (prev. 6.7737)
- Russian Government is said to be pushing the CBR to hint at looser policy; Bank of Russia is unwilling to signal that easing is imminent; CBR is under pressure from the government to improve forecasts, according to Bloomberg.
- Core EGBs are softer, though off worst levels, with pressure emanating from hawkish remarks from ECB’s Villeroy; Bunds down to 136.49 at worst.
- Gilts are similarly lower by just under 20 ticks ahead of BoE’s Pill and despite a well received 2027 sale.
- Stateside, USTs are little changed overall with yields slightly lower though very much at the top-end of Monday’s parameters ahead of Chair Powell and a 3yr sale.
- Crude benchmarks continue to climb as the momentum from APAC trade remains in play, with fresh developments somewhat limited after Monday’s OSP updates; WTI and Brent are firmer by over 2.0%.
- BP alongside earnings remarked that it expects oil prices to remain supported in Q1 by recovering Chinese demand, ongoing uncertainty around the level of Russian exports and low inventory levels.
- Pumping has begun on the Kirkuk-Ceyhan oil pipeline from Iraq; exports from Ceyhan expected to being on Tuesday, according to an energy official.
- Fire at the Norsi Nizhny Novgorod (340k BPD) oil refinery in Russia has been extinguished, site is operating normally, via Lukoil.
- US official later confirmed the US is considering raising the tariff on Russian aluminium to 200% but stated no decision was made and no announcement is expected this week, according to Reuters.
- Spot gold is modestly firmer and at the top-end of the session’s ranges, while base metals are mixed overall with LME Copper moving back towards the USD 9k/t mark.
- North Korean leader Kim presided over a military meeting and vowed to expand drills and bolster war readiness posture, according to Yonhap.
US Event Calendar
- 8:30 am: Dec. Trade Balance, est. -$68.5b, prior -$61.5b
- 12:00 pm: Fed Chair Powell Speaks in Washington
- 2:00 pm: Fed’s Barr Discusses Financial Inclusion
- 2:00 pm.: US Secretary of State Antony Blinken will meet German Vice Chancellor Robert Habeck
- 3:00 pm: Dec. Consumer Credit, est. $25b, prior $28b
DB’s Jim Reid concludes the overnight wrap
Off to Brussels this morning so for those attending the DB Outlook lunch see you later. A few people asked me yesterday how our 1990s fancy dress quiz went at our kid’s school on Saturday. What I can say is that there are few benefits of being an older parent other than when there is a 1990s music round. There were many blank faces in the room but a mispent youth (rather not being born then) meant I aced that round and our team won overall. I can’t say I added a huge amount outside of music and sport though. There unfortunately wasn’t a round on 800 years of financial market data. For those that want to see how close I looked to Keith Flint of the Prodigy and how much my wife looked like Geri from the Spice Girls please let me know and I’ll send.
Markets got the week off to a “scary spice” start yesterday, with bonds and equities both soft, especially bonds. That was driven by growing doubts among investors about whether inflation would come down as hoped over the coming months, which in turn saw them price in a much more aggressive pace of rate hikes from central banks. Indeed, expectations of the Fed’s terminal rate for this cycle hit the first new high of the cycle since early November with the July contract ending yesterday with an implied rate of 5.157%, up from 4.81% at the recent lows last Wednesday. Indeed we’ve seen a full 25bps rate hike added to market pricing (and a bit more) since the jobs report came out on Friday. December 2023 contracts were up another 20bps yesterday and are now +48.5bps since just before the payroll report.
If investors are questioning the terminal rate once again, then this could have some big implications for markets. We wrote in our Sweet Spot note from January how a big driver of the post-October rally has been the fact that expectations of the Fed’s terminal rate stabilised around 5% and stopped rising after that point. But if we see expectations of the terminal rate take another leg higher, then clearly that would knock out a key pillar of support from the recent rally.
There was an inkling of this trend yesterday as Federal Reserve Bank of Atlanta President Bostic (non-voter this year) said that the strong Payroll report from last Friday increases the possibility that the Fed would have to increase rates further than previously forecast. President Bostic also echoed Chair Powell when referencing how inflation in core services ex-shelter has not improved as much as other sectors of the economy and sees that there is a lot of work left to do.
With investors pricing in a significantly more hawkish policy response, all eyes will be on Fed Chair Powell’s interview today at the Economic Club of Washington, DC. That’s taking place from 5pm London time, and will be the first chance he’s had to publicly respond to the bumper jobs report on Friday, which came out after his post-FOMC press conference last week. Clearly any implication that there are upside risks to the Fed’s rate outlook would validate the shift in market pricing over the last couple of days.
Ahead of that, US Treasuries lost ground across the board, with the 10yr yield up by +11.5bps on the day to 3.64% (although -2.2bps this morning in Asia). Bear in mind that on Thursday the 10yr yield hit an intraday low of 3.331%, so this is a significant bounceback. In the meantime, European sovereigns saw some sizeable shifts of their own, with yields on 10yr bunds (+10.3bps), OATs (+10.6bps) and BTPs (+13.3bps) rising significantly. The biggest underperformer were UK gilts though, where the 10yr yield rose by a massive +18.9bps on the day. That followed comments from the BoE’s Mann, who has recently been one of the most hawkish members on the MPC, but said that “in my view the next step in bank rate is still more likely to be another hike than a cut or hold.” She also struck some other hawkish tones, saying that “the consequences of under tightening far outweigh, in my opinion, the alternative.”
Equities didn’t react that well to the prospect of higher rates either, and the S&P 500 (-0.61%) lost ground for a second day running. Given the move in rates the sector skew was in favour of defensives with insurance (+1.0%), utilities (+0.9%), and food & beverage (+0.6%) outperforming while apparel (-2.0%), tech hardware (-1.7%), and media (-1.3%) all were the biggest laggards. With tech and communication stocks selling off the NASDAQ (-1.00%) and NYFANG index (-0.99%) underperformed. The one thing that made both indices look slightly better than otherwise was the fact that Tesla (+2.5%) rallied on news that Elon Musk was cleared by a federal jury and also that prices on the company’s model Y would be increasing.
Meanwhile Europe’s STOXX 600 was down -0.78%. Several negative geopolitical noises didn’t help either, and the NASDAQ Golden Dragon China index (-2.22%) that’s made up of US-listed Chinese companies struggled following the downing of the Chinese balloon by the US over the weekend. Later in the session, Bloomberg also reported from sources that the US was planning to place a 200% tariff on Russian aluminium.
While the speech is usually light on foreign policy, President Biden might address both of these issues in his State of the Union address to a joint session of Congress tonight. In a preview released by the White House yesterday, Biden will be calling for a quadrupling of the 1% tax on stock buyback that was part of the Inflation Reduction Act passed last year, as well as a new minimum tax on billionaires. We should note that given a Republican majority in the House of Representatives, neither is likely to become law. Other speaking points released include capping the price of insulin, using US-made products for the projects funded by the Administration’s infrastructure law, and aiming to reduce the deficit.
Elsewhere, the devastating earthquake that hit Turkey and Syria yesterday morning has had some ramifications across markets more broadly. In particular, oil prices were supported by the decision to stop oil flows to the Ceyhan export terminal, which exported around 1% of global oil supplies in January. That helped Brent crude close +0.49% higher at $80.99/bbl, although prices were knocked back later in the session amidst the global risk-off tone. Otherwise, Turkish assets saw significant losses yesterday, with the BIST 100 index down -1.35%, but only after recovering late in the session from an intraday low of -4.99%. In the meantime, yields on Turkey’s 2yr USD yield were up +43.2bps on the day.
Asian equity markets have somewhat stabilised this morning shrugging off the overnight losses on Wall Street. Across the region, the Hang Seng (+0.84%) is leading gains with the KOSPI (+0.48%), the CSI (+0.34%) and the Shanghai Composite (+0.33%) all reversing their previous session losses so far. Elsewhere, the Nikkei (-0.04%) is fractionally lower while the S&P/ASX 200 (-0.57%) is losing ground after the Reserve Bank of Australia (RBA) increased its cash rate for the ninth consecutive month (more on this below). Outside of Asia, US stock futures tied to the S&P 500 (+0.10%) and NASDAQ 100 (+0.13%) are inching higher.
In its latest monetary policy decision, the RBA raised its official cash rate by 25bps (as expected), taking it to 3.35%, its highest since September 2012, while warning of more rate hikes this year to dampen stubbornly high inflation. It was a pretty hawkish meeting. The Australian dollar has reacted positively, rallying + 0.67% to trade at 0.6929 against the US dollar at the time of writing.
Earlier data showed that real wages in Japan (+0.1% y/y) in December rose for the first time in nine months (v/s -1.5% expected) due to robust temporary bonuses to ease the impact of inflation. It followed a downwardly revised -2.5% drop recorded previously. Meanwhile, nominal cash earnings advanced more than anticipated to +4.8% y/y in December, notching the fastest growth since January 1997’s +6.6%. There are some likely distortions but this was still much higher than the +2.5% expected. See our economists’ note on it here. On the contrary, household spending (-1.3% y/y) dropped for the second consecutive month in December (v/s -0.4% expected) as people spent less on food.
There wasn’t much data of note yesterday, although German factory orders were up by a stronger-than-expected +3.2% in December (vs. +2.0% expected). Otherwise, Euro Area retail sales were down -2.7% that same month (vs -2.5% expected).
To the day ahead now, and we’ll hear from an array of central bank speakers, including Fed Chair Powell, Fed Vice Chair for Supervision Barr, the ECB’s Schnabel and Villeroy, BoE Deputy Governor Ramsden, Deputy Governor Cunliffe and Chief Economist Pill, and Bank of Canada Governor Macklem. Data releases include the US trade balance and German industrial production for December. Earnings releases include BP and Linde. Finally, tonight will see US President Biden deliver the State of the Union address.