Making Sense

"If you can trust yourself when all men doubt you, B ut make allowance for their doubting too;    If you can wait and not be tired by waiting..... If you can fill the unforgiving minute,  With sixty seconds’ worth of distance run,    Yours is the Earth and everything that’s in it...." ~ Rudyard Kipling  Let's Quickly review the U.S Economic Data released over the week.  The GDPNow Model estimate for real GDP growth in Q2 was revised downwards to 3% after the release of the data this week. CBO estimates show that U.S Budget Deficit will be around $ 400 bn larger this year at $ 1.90 trn.  USTs consolidated last week's gains in a 9.50 bps range and US2s10s closed relatively unchanged for the week at - 48 bps and DXY continued to climb higher after taking support at the 103.00 level at the start of the month and S&P 500 made fresh highs at 5517. On the DXY, 106.25 is a crucial resistance zone for DXY bears and an important point of reversal. S...

Liquidity conditions were very market supportive over the last week as equities rallied, Roaring Kitting was back, USD index and bonds yields declined over the week. Gold prices touched fresh all time highs, Bitcoin surged and Copper went parabolic touching all time highs. US2s10s bull flattened. Over the last week, we did not get the much hoped for USD bounce and it was a one way USD decline through the week holding the 105.75 resistance. Any retracement into the 104.80 - 105.00 levels now offers resistance.  Markets continue to price in 43 bps of rate hikes into 2024 and 65 bps of rate hikes through to March 2025.  Markets are pricing in 28 bps of rate cuts by the November policy with 19 bps of rate cuts priced into by the Sep policy. Largely, what this means is markets are pricing the chance of first rate cuts between the Sep - Nov Policy and and another 15 bps of rate cuts into the year end.  Chair Powell's leaned dovish in his comments "We did not expect this to be a...

 "We have two classes of forecasters: Those who don't know - and those who don't know they don't know" We had 3 data releases out of the US yesterday. Snapshots below: 1. Jobless Claims data – The week reflected annual revisions to the seasonal adjustment factors 2. Retail Sales data – Retail Sales Control was flat mom following an upward revision of 10bps to prior month’s figure of -0.40%. The control group is all sales, excluding receipts from auto dealers, building-materials retailers, gas stations, office supply stores, mobile homes and tobacco stores that feeds into the GDP.  The Atlanta Fed GDPnow estimates Q1 GDP at 2.30% from prior 2.5%. 3. The most important print out yesterday was the PPI report which stoked inflationary concerns after the strong CPI data. The rise in Core Goods CPI was also seen in Goods PPI which rose a 1.21% mom and surge in Energy which rose 4.35% mom. The estimates of core PCE deflator following the PPI report suggest ...

US Retail Sales surprised to the upside. Sep 2023 Retail sales came in at 0.70% mom and July 2023 to August 2023 % change was revised from up 0.6% to up 0.8%. Excluding autos, sales were up 0.6% mom, above f/c for just 0.2%. Total Industrial production rose 0.30% mom (f/c 0.00%).  Bond market sold off on the release of Retail Sales number. US2Y yields rose to a high of 5.24% , levels last seen in July 2006 and US10Y yields rose to 4.86%. We saw a reversal of the Safe haven buying in bonds (post the Israel-Hamas conflict) and DXY. DXY weakened to 106.02 levels. US equities closed flat.  Today morning, bunch of economic releases from China surprised to the upside. Retail Sales rose 5.5% yoy, Q3 GDP expanded by 4.90% yoy (f/c 4.40%)  and Industrial production rose 4.5% yoy (f/c 4.30%). Crude Oil price and Gold are on a rise. Resilience of the US economic data coupled with today's strong Economic data from China could lift commodity prices higher and support commodity cu...

In yesterday's trade, headline US retail sales grew 0.40% mom following a downwardly revised -0.70% mom for the month of March. The number was below market consensus for a 0.80% mom increase. Retail sales number after contracting in the month of Feb and Mar 23 turned positive in April. The core retails number or the control group numbers which show non discretionary spending rose 0.70% mom following a downwardly revised March figure of -0.40%. This number was sharply higher than consensus estimates of 0.30% increase. Despite the headline surprising to the downside, resilience of the core retail sales saw US treasury yields move higher as despite the negative shock and tightening credit conditions, consumer spending strength held. 2Y US Treasuries moved higher a full 16 bps to 4.12% before closing the session at 4.09% and 10Y US Treasuries moved 12 bps higher to 3.57% before closing the session at 3.54%. Remember, we are watching the formation of a H&S pattern on US Treasury yie...

  "The only limit to our realization of tomorrow will be our doubts of today." Yesterday, US released the Advance Retail Sales data. Adv Retail Sales and Food Services Data fell 0.40% mom against consensus estimates of a 0.30% contraction and following a revised 3.20% in the month of January 2023. Compared to Dec 22, Retail Sales are up 2.81%. The data offers limited insight. US also released the PPI data which fell 0.10% mom against consensus estimates of a rise of 0.30% following a downward revision to the Jan number to 0.30% rise from earlier reported 0.70% rise. This is seen as a welcome moderation in the data. Overnight we saw the market deeply concerned about the contagion risk moving to European Banks. European Banking index was down 8.40% with concerns centred around Credit Suisse. Later, during the day, FINMA and SNB issued a statement expressing comfort on the Credit Suisse capital and liquidity metrics. SNB offered a $ 54 bn covered loan facility to the bank. At th...

 US Retail Sales rebounded 3% mom following a 1.1% contraction in December. Retail Sales excluding autos and gas climbed 2.60% mom vs a 0.40% contraction.