The Market Call

Macro & Overnight Oil prices dropped sharply yesterday as OPEC+ struggles to maintain production discipline, evidenced by Angola splitting away from the producer cartel last month. This week’s main macro focus remains on Thursday’s US inflation data. Expectations are for the year-on-year headline rate to be unchanged from last month’s 3.2%. Equity markets were strong overnight, led by US techn...

Macro & Overnight Last week saw a New Year market hangover following the pre-Christmas party mood. Bond yields are higher (up 30 bps in the case of US and UK 10-yr benchmarks), energy prices and the dollar are higher, and equities have sold off. Rising tensions in the Middle East and extended supply lines from Asia to Europe are the proximate causes. But sticky inflation data from Europe and c...

Jeremy McKeown and Gareth Evans discuss the main market trends from last year and the outlook for 2024. They discuss the October pivot on rate expectations, the rise of the Magnificent Seven AI wonder stocks, the outlook for Chinese and UK equities, and will a recovery in China be inflationary or deflationary. Will Trump win the US election, and what are the market implications? What about the UK?...

December 18, 2023 Powell’s promised punch bowl is good enough for now Macro & Overnight Following the party mood induced by Jay Powell last week, talking about lower rates in 2024, there has, over recent days, been a rearguard action from central bankers to try to remove the punch bowl. Ironically, ECB President Lagarde, who should think about lowering rates more than the Fed, claimed she hadn...

December 14, 2023 Fed to pivot, Santa rally back on & Music Magpie is reinvented Macro & Overnight The Federal Reserve kept Fed funds steady at their 22-year high for a third consecutive meeting but indicated 75 bps reductions in 2024 in its so-called “dot plot” projections. In essence, Jay Powell is saying the quiet part out loud. They have been at least thinking about, thinking about low...

December 13, 2023 UK GDP weaker, UK rates to fall & another UK small-cap bid Macro & Overnight The UK economy contracted in October, although year-on-year measures remain in positive territory. Following weakening employment data, rate hikes must now be firmly off the table, and it is a matter of when, not if, rates head down next year, which is good news for UK risk assets, such as equiti...

Macro & Overnight UK’s unemployment rate for October was unchanged from the previous month. Annual average earnings growth over the three months to October fell, and job vacancies rose, indicating a softening labour market. Investor focus today will be on the US CPI inflation data a day ahead of the Fed’s FOMC rate-setting meeting. Although rates are expected to be put on hold again, the focus...

December 11, 2023 Central banks look to reassert control in a busy week for macro data Macro & Overnight It is a big week for macroeconomic data. While the US soft landing narrative remains intact, the world economy is walking a fine line between deflationary recession and re-emergent inflation. How the world’s governments finance their growing debt burdens in this sensitive environment adds f...

December 8, 2023 Yen rises, 10 yr Gilt yield below 4% & luxury spirits lower Macro & Overnight The Japanese yen has strengthened on suggestions that the Bank of Japan is nearing the end of its negative interest rate policy. The advance has reversed the recent strength in Japanese stocks and bonds. Japanese rate normalisation has been talked about many times, but there is growing conviction...

December 7, 2023 Financial conditions ease, UK bids continue & Energean enters Morrocco Macro & Overnight Oil prices continued lower overnight, with Brent now 22% lower than its September high. This decline indicates slowing demand from a weak global economy, a lack of OPEC+ unity, and a boost to consumers in oil-consuming countries. The $ was up and the £ weaker while US and UK 10yr yield...

December 6, 2023 PE strikes Ten Entertainment Macro & Overnight The US Jolt job openings data estimates there were about 600,000 fewer job vacancies in October than in the prior month and about 20% fewer than a year ago. The more widely followed non-farm payroll data is on Friday, where investors will look for an affirmative indicator of lower employment or higher unemployment. In an example o...

Motion capture powers Oxford Metrics Macro & Overnight There is little new today in macro; attention remains on US employment data culminating in the non-farm payrolls on Friday for clues on the inflation and recession trade-off in the world’s biggest economy. UK Company News There is a flurry of news from some interesting smaller technology companies in the UK.  AdvancedADVT has announced the...

Inflation train has left the station Macro & Overnight Investors ignored Powell’s Friday speech, indicating that the Fed remains prepared to raise rates. With falling bond yields and a weaker dollar, markets believe the inflation train has left the station, and the next train due is a recession. Regardless of their hawkish tones, investors no longer believe the central banks’ higher-for-longer...

Metro Bank restructuring update Macro & Overnight US GDP growth in Q3 has been revised upwards to 5.2%, primarily interpreted as a further sign of a soft landing but not jeopardising the market expectation of lower rates in 2024. Bond yields and the US dollar both fell further. China’s PMI data indicates that its manufacturing sector is still contracting. Oil prices firmed as US data showed fa...

Kelso goes fishing Macro & Overnight Indications of the Fed pivot strengthened overnight as the DXY dollar index weakened, Treasury yields fell, and gold pushed to its highest level since May, only a tad below its all-time high. Global bond markets, up 4.9% in November, are on course for their best month since December 2008, as measured by the Bloomberg Global Bond Index. Pivot watchers will n...

Macro & Overnight US bond yields fell overnight as the Treasury market absorbed sizeable two and five-year bond auctions. The world’s largest capital market is proving resilient, and its price action supports the view that interest rates have peaked and the US economy is heading for a soft landing. By way of a reminder that inflationary pressures and supply chains have not gone away, the Balti...

Macro & Overnight Following the US holiday, there is a busy week of macroeconomic data to catch up on. We have the German GfK consumer confidence series tomorrow and Eurozone economic sentiment indicators on Wednesday. Also, on Wednesday, we get US Q3 GDP estimates. Thursday brings inflation data for the Eurozone and the US. Expectations are for a flattening out following recently reported dec...

UK consumer in better shape Macro & Overnight US investors are enjoying their holiday break as the ceasefire in Gaza started with hopes of hostage releases later today. UK measures of consumer sentiment and spending look better than feared. As measured by GfK, UK consumer confidence is improving, albeit bumping along the bottom at -24 for November versus -28 in October. ASDA’s survey of consum...

While today's financial news coverage focused on the Autumn Statement, probably the most significant economic news yesterday was the postponement of the OPEC+ meeting this weekend. With signs of fracturing within the cartel, this casts doubt on its ability to implement production cuts. In a demonstration of the fragility in the world's most critical and rigged energy market, benchmark oil prices f...

Macro & Overnight The Open AI Silicon Valley miniseries continued with last night’s episode, which featured the return of previously sacked CEO Sam Altman and a restructured board. The critical difference between Altman and the Board has centred on how quickly to implement new AI products. They say the world is speeding up. After Steve Jobs was sacked by the Apple Board in 1985, his reappointm...

Telecom Plus dials back to pre-2014 There is little new to report on the macro front. The rally in risk assets continued yesterday and overnight.  UK investors await tomorrow's Autumn Statement; the £ has strengthened to 1.25 against a weakening dollar.   The Open AI saga is moving into a full-scale corporate meltdown, with 95% of its staff indicating no confidence in the Board and a preference to...

Poor governance costs Microsoft dearly In macro news today: OpenAI - Sam Altman's firing wiped $50bn off Microsoft's market value Energy prices firmed up but bond yields and the US$ lower UK - Autumn Fiscal Statement is out on Wednesday US - FOMC minutes due out tomorrow and durable goods data due on Weds Argentina - elected a new president Milei who campaigned on closing the centralbank and dolla...

Market Prognosis - Small-caps starting to outperform... In today's macro and UK company news: Oil prices plummeted Emerging signs of looming deflation Walmart warned overnight DX Group confirmed its sale to US PE firm HIG Capital yesterday Read the accompanying blog: https://progressive-research.com/insights/smallcaps-starting-to-outperform/

Hotel Chocolat goes to Mars In macroeconomic news today: Xi and Biden in 4 hours of talks yesterday The equity market rally paused ...and in UK company news: LSE - two bids announced - Mars to acquire HOTC and Youngs to acquire City Pub Group Results from Close Brothers Read the accompanying blog: https://progressive-research.com/insights/hotel-chocolat-goes-to-mars/

Behold the Christmas rally The Market Prognosticator's thoughts on today's macro landscape: Yesterday's better than expected UK employment wages data The fiscal requirement for the UK under the spotlight at next week's autumn statement where Jeremy Hunt needs to finance the highest proportion of public spending to GDP since 1975 US and UK inflation is falling faster than expected - euphoria in equ...