As the North American session begins, the JPY is the strongest and the AUD is the weakest. The USD is stronger with only a modest decline vs the JPY in the morning snapshot. To start the US session, the price action dynamics are following the equation for 2024 so far. Yields in the US are higher, stocks are lower and that has the US dollar moving to the upside as well. Yesterday the dynamics were the exact opposite helped by a lower inflation survey expectations released from the New York Fed. The survey showed the one-year inflation expectations at 3% versus 3.4% in the prior month. That was the lowest level since January 2021. The 3-year inflation expectations fell to 2.6% from 3.0%
Yesterday the NASDAQ index had its best day since November 14. The move took the price above its 200-hour moving hour at 14624.69, but remained below its 100-hour moving average at 14877.97. That 100-hour moving average remains a key hurdle to get above if the buyers are to take more control. Yesterday, Boeing shares fell -8.1% due to the cabin panel falling off the plane in mid flight over the weekend. Its shares are currently down -0.71%.
From the Fed yesterday, late yesterday Fed's Michelle Bowman, typically known for her hawkish stance in the Federal Open Market Committee (FOMC), took a more balanced, perhaps slightly dovish perspective on monetary policy in her comments. Bowman suggested that maintaining the current policy rate for a period might further reduce inflation, signaling that the existing policy stance is adequately restrictive. She acknowledged the possibility of lowering the Fed’s policy rate should inflation approach the 2% target. Bowman also noted an improved balance in the labor market between supply and demand. While recognizing ongoing risks to inflation, including geopolitical factors and potential easing of financial conditions, she maintained a cautious approach to modifying the Fed policy rate. Open to the idea of increasing the rate in future meetings if inflationary progress stalls or reverses, she also expressed concerns about banking regulators’ climate guidance potentially distracting from core financial risks. This shift in her tone indicates a readiness to adapt to evolving economic conditions, balancing between caution and responsiveness (see comments from Eamonn's post here).
Earlier in the day, Atlanta Atlanta Fed Pres. Bostic's comments presented a cautiously optimistic view of the current economic situation. He believes that any rise in unemployment due to inflation reduction will be less severe than typical. Bostic asserted that the Federal Reserve is in a strong position, with its restrictive policies effectively slowing down inflation in an orderly manner. He observed that families are gradually adjusting to past price hikes, and the impact of higher prices is lessening, which should improve public sentiment. He acknowledged that while goods inflation has returned to pre-pandemic levels, services inflation is decreasing more slowly, without significant drops expected. Bostic noted that many economic indicators are now similar to those before the pandemic, emphasizing the importance of short-term inflation measures, which currently show positive trends.
Despite these optimistic signs, Bostic maintains a stance of vigilance, not yet ready to declare victory over inflation. He acknowledged the strong job numbers, pointing out that the growth is concentrated in a small sector of the economy, which suggests broader economic slowing. He anticipates two quarter-percent rate cuts by year's end (the Fed sees 80 basis points of cut in their dot plot), but emphasized the need for continued restrictive policy even then. Bostic stresses the importance of being absolutely certain of inflation control before making significant policy changes and remains alert to the possibility of inflation rebounding, underlining the necessity for the Fed to stay attentive.
Today, Germany announced much weaker than expected production. That level came in at -0.7% versus expectations of 0.4%. That was the 7th consecutive monthly decline and has helped to weaken the EUR vs the greenback. The not-so-bad news from the EU is that the Unemployment rate across the EU did fall to 6.4% from 6.5% last month, and from expectations of 6.5%.
Today, the NFIB business optimism index for December came in higher 91.9 versus 90.6 last month. Today US trade data will be released at 8:30 AM. Canada building permit century data will also be released at 8:30 AM ET. US CPI released on Thursday which represents the biggest economic release this week. The expectations are for 0.2% month on month gain for both the headline and the core measure.
A snapshot of the markets as the North American session begins currently shows:
- Crude oil is trading up $1.77 or 2.5% at $72.53. At this time yesterday, the price was at $71.68
- Gold is trading up $8.23 or 0.40% at $2036.09. At this time yesterday, it was trading at $2020.50
- Silver is trading up seven cents or 0.31% at $23.14. At this time yesterday, it was trading at $22.86
- Bitcoin traded at $46,241 at this time yesterday, the price was trading at $44,679. The high price today extended to $47,179. Yesterday the high price reached a new cycle high of $47,281 (highest since April 2022)
In the premarket for US stocks, the major indices are trading higher after starting the week with solid gains on Monday:
- Dow Industrial Average futures are implying a decline -132 points. Yesterday, the index rose 216.90 points or 0.58%
- S&P futures are implying a decline of -17.2919 points. Yesterday, the index rose 66.32.2 or 1.41%
- Nasdaq futures are implying a client of -78 points. Yesterday,, the index rose 319.69 points or 2.20%
In the European equity markets, the major indices are all trading lower:
- German DAX, -0.36%. Yesterday, the index rose 0.74%
- France CAC Melissa 0.37%, . Yesterday, the index rose 0.40%
- UK FTSE 100 -0.02%. Yesterday, the index rose 0.06%
- Spain's Ibex -1.91%. Yesterday, the index rose 0.44%
- Italy's FTSE MIB -0.64% (delayed by 10 minutes). Yesterday the index rose 0.42%
Shares in the Asian Pacific markets were mostly lower:
- Japan's Nikkei 225, was 1.16%
- China's Shanghai composite index , was 0.20%
- Hong Kong's Hang Seng index, -0.21%
- Australia S&P/ASX, +0.93%
Looking at the US debt market, yields are trading higher:
- 2-year yield 4.376% +3.2 basis points. Yesterday at this time, the yield was at 4.401%
- 5-year yield 3.95% +3.0 basis points. Yesterday at this time, the yield was at 4.029%
- 10-year yield 4.034% +3.2 basis points. Yesterday at this time, the yield was at 4.062%
- 30-year yield 4.200% +2.6 basis points. Yesterday at this time, the yield was at 4.218%
- The 2-10 year spread is at -33.3 basis points. At this time yesterday, the spread was at -34.1 basis points
- The 2-30 year spread is at -17.2 basis points. At this time yesterday, the spread was at -18.4 basis points
In the European debt market, the benchmark 10-year yields are higher:
