Daily Market Outlook, March 11, 2024

Munnelly’s Macro Minute…

“Markets Cautious Ahead Of US Inflation Data”

Across Asia, most equity indices experienced declines amid speculation that the Bank of Japan might soon raise interest rates. Economic expansion in Japan picked up speed in the last quarter, raising expectations that the Bank of Japan may raise interest rates for the first time since 2007 as soon as this month. The decrease in Japanese stocks was partially attributed to the stronger yen, which typically acts as a barrier for the country's stock market. However, stocks in China defied this trend following reports that Chinese regulators had urged large banks to offer increased support to property development company China Vanke. Investors in China will be paying attention to the final remarks from the annual National People's Congress and the setting of the People's Bank of China's medium-term lending facility rate. Some analysts anticipate a reduction in the 2.5% one-year rate to bolster China's ambitious 2024 growth goal of approximately 5%.

In the UK, the latest REC/KPMG survey revealed a further loss of momentum in the labor market during February. Recruitment firms reported the sharpest decline in demand for staff since the beginning of 2021, coinciding with the UK's lockdown period.

Looking ahead, the upcoming release of U.S. CPI and PPI data could assist the market in predicting when the Federal Reserve will begin its easing cycle, following indications from Fed Chair Jerome Powell that the next rate adjustment would likely be a decrease, while leaving the timing open for consideration. With the Fed entering a blackout period leading up to its March 19-20 meeting, attention will be on the February core CPI, which is anticipated to decrease to 0.3% month-on-month from January's 0.4%. Additionally, other U.S. economic indicators such as retail sales, industrial production, weekly jobless claims, and preliminary March University of Michigan sentiment will also be in focus.

Today's data docket is light, with no major data releases scheduled. Market attention will focus on comments from Bank of England rate setter Catherine Mann, who is expected to speak at a Centre for Economic Policy Research panel. Mann, one of two MPC members who voted for a 0.25% rate hike in February, has expressed concerns about inflation persistence. With the UK Budget concluded, upcoming official data releases on the labor market and GDP will be closely watched. Recent UK labor data suggest a tight job market, with the unemployment rate dropping to 3.8% in the three months to December. Policymakers will pay close attention to weekly earnings growth, which remains above the Bank of England's 2% inflation target. Despite moderated headline pay growth, policymakers remain cautious about the timing and scale of interest rate reductions, given employment growth trends and the upcoming rise in the National Living Wage.

Overnight Newswire Updates of Note

Fed Officials To Signal Interest Rate Cuts Are Getting Closer
Traders On Alert For Hotter-Than-Expected US Inflation Print
Netanyahu Vows To Defy Biden’s ‘Red Line’ And Invade Rafah
Chinese Consumer Prices Rise For First Time Since August
BoJ Mulls Ending Yield Control To Focus On JGB Buying Size
Japan’s Economy Avoids Recession Week Before BoJ Meeting
Sunak Points To Welfare Curbs For Future Tax Cuts, Times Says
UK Labour Market Loses More Momentum In February, REC Shows
Germany Faces More Travel Chaos Amid Rail, Airline Staff Strikes
Sell US Treasuries After ‘Excessive’ Bond Rally, Barclays Says

(Sourced from Bloomberg, Reuters and other reliable financial news outlets)

FX Options Expiries For 10am New York Cut

(1BLN+ represent larger expiries, more magnetic when trading within daily ATR)

USD/JPY: 150.00 ($1.3b), 148.60 ($878.9m), 149.00 ($600.4m)
EUR/USD: 1.0800 (EU1.55b), 1.0550 (EU806.4m), 1.1000 (EU737.7m)
USD/CNY: 7.3000 ($828.7m), 6.7850 ($645m), 7.9000 ($611.8m)
AUD/USD: 0.6610 (AUD320.2m)
USD/CAD: 1.3550 ($306.6m)
NZD/USD: 0.6000 (NZD335m)
USD/MXN: 17.00 ($1.48b), 17.60 ($839.2m), 17.17 ($522.4m)
EUR/GBP: 0.8700 (EU689.7m), 0.8550 (EU383.7m)
USD/BRL: 4.9600 ($435.5m)
USD/KRW: 1330.00 ($481.1m)

CFTC Data As Of 8/03/24

Bitcoin net short position is -1,352 contracts
Euro net long position is 66,311 contracts
Japanese Yen net short position is -118,843 contracts
Swiss Franc posts net short position of -17,551 contracts
British Pound net long position is 58,385 contracts
Equity fund managers cut S&P 500 CME net long position by 24,150 contracts to 917,973
Equity fund speculators trim S&P 500 CME net short position by 31,617 contracts to 402,895