Daily Market Outlook, January 10, 2024

Munnelly’s Market Minute…“Nikkei Hits 34 Year Highs”

Most stocks in the Asian region saw a decline following the weak performance of Wall St and cautiousness ahead of important inflation data and earnings reports.The Nikkei 225 has reached a level above 34k handle for the first time in more than thirty years, as low wages further support the argument for a postponed BoJ exit. Hang Seng and Shanghai Comp remained quiet due to the absence of significant positive catalysts and a lukewarm PBoC liquidity operation. Additionally, HSBC and Citigroup revised their Hang Seng Index projections downwards citing concerns about earnings and Chinese policies.

Today, there are no significant economic data releases on the docket. France has reported a 0.5% increase in industrial production for November, following a 0.3% decrease in October. The overall industrial activity in the Eurozone remains weak. Market attention today will be on central bank speakers as they adjust their expectations for interest rates in the coming year. In the Eurozone, ECB Vice President Guindos and fellow Executive Board member Schnabel are scheduled to speak at separate events. Guindos will deliver a speech in Madrid, while Schnabel will participate in a live Q&A on Twitter at 14:00 GMT. Currently, markets estimate a 1-in-3 probability of an ECB rate cut in March.

At 14:15 GMT, Bank of England Governor Bailey and other FPC members will testify to Parliament regarding the Financial Stability Report published last month. They are expected to discuss the impact of higher interest rates on households and businesses, as well as the overall resilience of the economy.

Stateside, there are only a few items on the data slate: we will see the release of the Weekly MBA mortgage applications and November's wholesale sales data. On the speaker's front, Fed's Williams (voter) will be speaking from NY on the 2024 Economic Outlook. Additionally, the Treasury will be conducting a sale of USD 37 billion worth of 10-year notes. Markets are eagerly awaiting Thursday’s US CPI inflation report which is likely to prove the major macro driver of the week.

Overnight Newswire Updates of Note

Japan’s Slower Wage Growth Adds To Reasons For BoJ To Hold
Australian Inflation Cools, Boosts Case For February Rate Pause
US, China Resume In-Person Defense Policy Coordination Talks
Fed’s Barr Signals Emergency Loan Program Won’t Be Extended
ECB’s Villeroy Reiterates That Rates Will Be Cut This Year
Dollar Steady As Traders Brace For US Inflation Data, Bitcoin Volatile
Bitcoin Swings Sharply After False Claim That SEC Approved ETFs
Bond Traders Pile Into Short-Term Wagers Targeting Higher Yields
Emerging Market Debt Issuance Hits Record As Borrowing Costs Fall
Oil Prices Extend Gains Wednesday After US Crude Stocks Draw
Japan Shares Beat Asia Peers With Indexes Hitting 34 Year Highs
Chinese Companies Resort To Repurposing Nvidia Gaming Chips For AI
Boeing CEO Says Company Needs To Acknowledge ‘Our Mistake’

(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)

EUR/USD: 1.0800 (1.4BLN), 1.0850 (479M), 1.0900 (637M), 1.0910-20 (1.1BLN)
1.0925-30 (1.2BLN), 1.0970 (1.1BLN), 1.0985 (3.6BLN)
USD/CHF: 0.8500 (740M), 0.8530 (219M), 0.8550 (200M)
GBP/USD: 1.2650 (225M)
AUD/USD: 0.6660-75 (550M), 0.6855-60 (886M)
AUD/NZD: 1.0735-50 (379M)
USD/CAD: 1.3350 (250M), 1.3400 (696M), 1.3435 (556M)
USD/JPY: 144.05 (1.7BLN), 144.50 (795M), 145.00 (2BLN)
EUR/JPY: 156.00 (1BLN)

CFTC Data As Of 05/01/24

USD bearish increasing-1,674
CAD bearish decreasing +1,045
EUR bullish neutral +138
GBP bullish neutral +78
AUD bearish decreasing +601
NZD neutral neutral +198
CHF bearish increasing -262
JPY bearish neutral -157
Bitcoin experienced a 2.5% decrease following a statement from a spokesperson indicating that the SEC's account may have been compromised. A false post on X claimed that the SEC had given the green light for bitcoin ETFs, but the SEC has clarified that they have not yet approved a spot bitcoin exchange traded fund. The price of Bitcoin sharply dropped from a high of 47,897 to 44,903 before stabilising. If the SEC approves BTC ETFs, there could be up to $100 billion in inflows, according to Standard Chartered, who also suggests that Bitcoin could reach $200k by the end of 2025 with ETF approvals. Traders are cautious of a potential "buy rumour, sell news" reaction even if the SEC does approve ETFs.