Weekly Market Recap (27-01 December)

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BoJ Governor Ueda
continues to be uncertain about them hitting the 2% target sustainably:

  • Cannot say with
    conviction that inflation will hit 2% sustainably
  • Japan economy is
    recovering moderately.
  • The output gap has
    narrowed to near zero.
  • Some positive signs
    seen in wages and inflation
  • But there is still
    high uncertainty on whether this cycle can strengthen further

BoJ Governor Ueda

BoE Governor
Bailey (neutral – voter) pushed back on rate cuts expectations:

  • It is too soon to
    discuss about cutting interest rates.
  • Getting inflation
    down to 2% will be hard work.
  • A lot of the recent
    fall in inflation is due to unwinding of energy cost surge

BoE’s Governor Bailey

ECB President Lagarde
(neutral – voter) acknowledged the stagnation in the Eurozone economy but
remains wary of prematurely declaring victory against inflation:

  • Euro area activity
    has stagnated in recent quarters and is likely to remain weak for the rest
    of the year
  • Advises that it is
    premature to start declaring victory in the current economic scenario.
  • There are
    indications of potential job growth slowdown towards the end of the year,
  • Emphasizes the need
    to stay focused on the mandate of price stability, considering various
    forces affecting inflation.
  • Notes that wage
    pressures remain strong
  • Looking beyond 2024,
    the ECB’s Governing Council is committed to exploring ways to further
    decarbonize corporate portfolios.
  • Expects the
    weakening of inflationary pressures to continue.
  • States that the
    medium-term outlook for inflation is still surrounded by considerable
  • Says the PEPP will
    be discussed in the not-so-distant future
  • We will re-examine a
    proposal to keep reinvesting until the end of 2024.

ECB’s President Lagarde

The Australian Retail
Sales for October missed expectations:

  • Retail Sales M/M
    -0.2% vs. 0.1% expected and 0.9% prior.
  • Retail Sales Y/Y
    1.2% vs. 2.0% prior.

Australia Retail Sales YoY

RBA Governor Bullock
highlighted that the strength in the labour market is keeping inflation high
for longer than expected:

  • High employment is
    helping people to pay expensive mortgages
  • Says Australia
    inflation path is similar to overseas.
  • Says again she
    expects inflation to decline to just under 3% in 2025.
  • Notes uncertainty on
    inflation’s path.
  • Monetary policy is restrictive.
  • Rate hikes are
    dampening demand but demand being propped up by immigration, this has
    contributed to second round effects of cost rises.
  • Sticky services inflation.

RBA’s Bullock

BoE’s Ramsden (neutral –
voter) reiterated that the central bank will keep interest rates high for an
extended period of time to ensure that inflation goes back to the 2% target:

  • Monetary policy is
    likely to need to be restrictive for an extended period of time to get
    inflation back to 2% target
  • UK inflation is more
  • The path of rates
    will be data dependent.
  • We are not making
    any commitments on where rates will be

BoE’s Ramsden

ECB’s Nagel (hawk –
voter) pushed back against rate cuts expectations:

  • Rate hikes are not
    necessarily over.
  • Would have to hike
    again if inflation outlook worsened.
  • Premature to discuss
    about rate cuts, would prefer to err on the side of caution.
  • Inflation outlook is
    encouraging but core inflation dynamics continue to be strong

ECB’s Nagel

BoE’s Haskel (hawk –
voter) pushed back against rate cuts expectations citing labour market
tightness as a reason for persistently high inflation:

  • Labour market
    tightness continues to impart inflation pressures.
  • This will need higher
    rates for longer to get inflation sustainably to target
  • Current outlook does
    not suggest scope for moderation in rates any time soon.
  • This is why I have
    been voting for higher rates at recent meetings.
  • At current rate of
    change, it would take at least a year to fall back to average pre-pandemic
  • Rates will have to
    be held higher and longer than many seem to be expecting.

BoE’s Haskel

The US Consumer
Confidence beat expectations, although the labour market details continue to
show weakness:

  • Consumer Confidence
    102.0 vs. 101.0 expected and 99.1 prior (revised from 102.6).
  • Present situation
    index 138.2 vs. 138.6 prior (revised from 143.1).
  • Expectations index 77.8 vs. 75.6 prior.
  • 1 year inflation
    expectations 5.7% vs. 5.9% prior.
  • Jobs hard-to-get
    15.4 vs. 13.1 prior.

US Consumer Confidence

Fed’s Waller (hawk –
voter) delivered mostly neutral remarks, but the market reacted on him saying
that they could start lowering rates if inflation continues to fall for several
more months, which is consistent with the current market pricing:

  • Need some
    improvement in services inflation ex-housing for overall inflation to
    reach 2%.
  • Increasingly
    confident policy is well-positioned to slow economy, get inflation back to
  • Cannot say for sure
    if Fed has done enough.
  • Data over the next
    couple months will hopefully tell if the Fed has done enough.
  • Recent loosening of
    financial conditions a reminder to be careful about relying on market
    tightening to do Fed’s job
  • Encouraged by signs
    of moderating economic growth.
  • Inflation still too
    high, too early to say if slowing will be sustained.
  • Supply-side problems
    mostly behind us. Monetary policy will need to do the work from here
  • Premature to rely on
    productivity growth gains to guide stance of Fed policy.
  • Consumer spending is
    slowing, manufacturing and nonmanufacturing activity has slowed.
  • Labor market is
    cooling off, but still fairly tight and will watch closely
  • Will closely monitor
    goods, services prices in coming weeks to see if inflation still on
    downward path.
  • If the decline in
    inflation continues for several more months, three months, four months,
    five months, we could start lowering the policy rate just because
    inflation is lower

Fed’s Waller

Fed’s Bowman (hawk –
voter) remains one of the most hawkish members as she still sees a rate hike as
her baseline scenario:

  • Says she Favors
    hiking if inflation progress stalls.
  • Inflation remains
    high, recent progress is uneven.
  • Baseline outlook is
    that the Fed will need to increase rates further to keep policy
    sufficiently restrictive
  • Fed should keep in
    mind risks with prematurely declaring victory on inflation

Fed’s Bowman

Fed’s Williams (neutral –
voter) welcomed the decline in inflation:

  • Encouraging to see
    decline in inflation pressure.
  • Fed has signalled
    strong commitment to get inflation back to 2%.
  • Longer run inflation
    expectations have been very stable.

Fed’s Williams

Fed’s Goolsbee (dove –
voter) is focused on housing inflation:

  • Of all pieces of
    data, housing inflation is most paramount.
  • Market-based
    inflation expectations have been anchored.
  • Have some concern
    about keeping rates too high for too long
  • Once you believe you
    are on path to 2% inflation, amount of restrictiveness needs to be less
  • Data will determine
    how fast we go.

Fed’s Goolsbee

The Australian Monthly
CPI for October missed expectations:

  • CPI Y/Y 4.9% vs.
    5.2% expected and 5.6% prior.
  • CPI M/M -0.4% vs. 0.3% prior.
  • CPI Trimmed Mean Y/Y
    5.3% vs. 5.4% prior.
  • Goods inflation Y/Y
    4.6% vs. 5.7% prior.
  • Services inflation
    5.0% vs. 5.3% prior.

Australia Monthly CPI YoY

BoJ’s Adachi, as other
BoJ members, continue to highlight the importance of wage inflation as a key
decision maker for any BoJ policy normalisation:

  • Japan yet to see
    positive wage-inflation cycle become embedded enough.
  • Appropriate to
    patiently maintain easy policy.
  • If needed BoJ will
    take additional easing steps.
  • Steps BoJ took in
    October to make YCC flexible not aimed at laying the groundwork for policy
  • Japan’s inflation
    expectations heightening moderately.
  • See risk to Japan’s
    inflation outlook skewed to upside
  • Companies starting
    to shed deflationary price-setting practices.
  • Hard to predict now
    whether wage hikes will continue next fiscal year.
  • Given high
    uncertainty over global economic outlook, there is risk Japan’s inflation,
    wages face downward pressure
  • If positive
    wage-inflation cycle strengthens, that could further push up prices.
  • Positive
    wage-inflation cycle has not happened yet.
  • But if chances of it
    happening increases, then we can start discussing exit strategy
  • Don’t need to
    necessarily wait for it to turn positive to debate exit from negative
  • Will probably need to wait until the start of the next fiscal year in determining
    wage talks outcome.
  • The
    outcome will be crucial in making any big policy decisions.
  • Does
    not think BoJ are at the stage to discuss an end to negative rates.

BoJ’s Adachi

The RBNZ left the OCR
unchanged at 5.5% as expected:

  • Interest rates are restricting
    spending in the economy and consumer price inflation is declining, as is
    necessary to meet the committee’s remit.
  • Interest rates will
    need to remain at a restricted level for a sustained period of time.
  • However, inflation
    remains too high, and the committee remains wary of ongoing inflationary
  • Demand growth has
    eased, but by less than anticipated
    over the first half of 2023 in part due to
    strong population growth.
  • The committee is confident
    that the current level of the OCR is restricting demand.
  • The OCR will need to
    stay restrictive, so demand growth remains subdued, and inflation returns
    to the 1 to 3 percent target range.
  • If inflationary
    pressures were to be stronger than anticipated, the OCR would likely need
    to increase further.


  • Sees official cash
    rate at 5.63% in March 2024 (prior 5.58%).
  • Sees official cash
    rate at 5.66% in December 2024 (prior 5.5%).
  • Sees official cash
    rate at 5.56% in March 2025 (prior 5.36%).
  • Sees official cash
    rate at 3.55% in December 2026.
  • Sees NZD TWI at
    around 70.7% in December 2024 (prior 71.0%).
  • Sees annual CPI 2.5%
    by December 2024 (prior 2.4%).

the minutes of the meeting:

  • Committee agreed
    that interest rates will need to remain at a restrictive level for longer.
  • Members agreed they remain
    confident that monetary policy is restricting demand.
  • Ongoing excess
    demand and inflationary pressures were of concern, given high core
  • Members discussed
    the possibility of the need for increases to the OCR.
  • Members agreed that
    with interest rates already restrictive, it was appropriate to wait for
    further data and information.
  • Members agreed that
    monetary policy was supportive of sustainable house prices.
  • Pressure in the
    labour market is easing, although employment remains above its maximum
    sustainable level.
  • Members also noted
    that most major central banks have indicated that they intend to retain
    current restrictive policy rates for longer, and are willing to tighten
    further, if required.
  • While growth in
    parts of the economy is slowing, there has been less of a decline in
    aggregate demand growth than expected earlier in the year.
  • Committee noted that
    the estimate of the long-run nominal neutral OCR has increased by 25 basis
    points to 2.50%.


Moving on to the Governor
Orr Press Conference:

  • Meeting with new PM
    was highly constructive.
  • We’ve been adamant
    on holding rates through next year
  • Projection shows
    upward bias to rates, but it is not a done deal.
  • Risk to inflation is
    still more to upside.
  • We did discuss
    raising rates at this meeting.
  • Had a robust
    discussion about rates.
  • Nervous that
    inflation has been outside the band for so long
  • Concerned that
    longer-term inflation expectations are creeping up.
  • Global rates do
    matter to us, very tuned into that outlook.
  • Will make decision
    on debt-to-income restrictions early next year.
  • Seeing credit growth
    slowing rapidly, our message on rates is being heeded.
  • We are saying rates
    need to be this high for some time to come, banks should listen.
  • We are not bound by
    policy meeting dates, can act on shocks if needed.
  • Comfortable on
    waiting until the February meeting right now.
  • Domestic inflation
    is causing the challenge, big part of that is dwelling costs.

RBNZ Governor Orr

ECB’s de Guindos (neutral
– voter) just explained why they raised interest rates:

  • Our objective is to
    bring inflation back to 2% target
  • Rate hikes are both
    for borrowers and savers.
  • That is part of our
    monetary policy transmission.
  • If savings become
    more attractive, consumers will spend less, reducing demand.
  • This is what we aim
    for to push down inflation.

ECB’s de Guindos

Fed’s Barkin (neutral –
non voter) pushed back on rate cuts expectations as he sees inflation being
more stubborn than expected:

  • Revised consumer
    spending data is more consistent with what I am hearing on the ground.
  • I’m hearing
    consumers slowing down, but not falling off the table.
  • Sceptical that price
    setters at this point have gone back to where they were pre-Covid.
  • 5.2% GDP tells
    companies that they can still try to raise prices.
  • The goods inflation
    has clearly come down. It’s basically back to pre-Covid levels.
  • While I think that
    entry rates have clearly come down, but housing inflation is still going
  • A lot of services
    prices are still going up driven by wages
  • I am still in the
    “looking to be convinced category” that inflation is coming down
  • Not willing to take
    another rate hike off the table.
  • Want the option of
    doing more on rates if inflation flairs again.
  • Markets have a
    different forecast than me on inflation.
  • I believe inflation
    will be stubborn then we’d like
  • Talking about rate
    cuts is premature
  • We do hope the
    messages we send go into the financial conditions in the markets.
  • Try not to get
    overly focused on the financial conditions in the markets.
  • Market bets on 4
    rate cuts next year might be based on expectations for soft landing. I hope they are right.
  • My forecast is that
    inflation will come down but stubbornly.
  • We will in the end
    have some kind of slowdown.
  • To lower rates you’d
    need to be confident inflation is headed back to 2%.

Fed’s Barkin

Fed’s Mester (hawk – non
voter) toned down her hawkish stance as she’s comfortable with the current
policy setting:

  • Monetary policy is
    in a good place.
  • Sees “clear progress”
    in getting inflation to 2%.
  • It will take time to
    get to 2% but Fed will do it.
  • Fed has time to vet
    incoming data.
  • Monetary policy must
    be nimble in current circumstances.
  • Monetary policy well
    positioned to be flexible.

Fed’s Mester

The Fed’s Beige Book showed
slowing economic activity with the index now at levels consistent with a recession:

  • On balance, economic
    activity slowed since the previous report.
  • Retail sales,
    including autos, remained mixed; sales of discretionary items and durable
    goods, like furniture and appliances, declined, on average, as consumers
    showed more price sensitivity.
  • Four Districts
    reported modest growth, two indicated conditions were flat to slightly
    down, and six noted slight declines in activity.
  • Demand for
    transportation services was sluggish.
  • Manufacturing
    activity was mixed, and manufacturers’ outlooks weakened.
  • Consumer credit
    remained fairly healthy, but some banks noted a slight uptick in
    consumer delinquencies.
  • The economic outlook
    for the next six to twelve months diminished over the reporting period.
  • Price increases
    largely moderated across Districts, though prices remained elevated.
  • Most Districts
    expect moderate price increases to continue into next year.
  • Demand for labour
    continued to ease, as most Districts reported flat to modest increases in
    overall employment.
  • Several Districts
    continued to describe labour markets as tight with skilled workers in
    short supply.

Beige Book

The 2nd
estimate for the US Q3 GDP was revised upwards, but personal consumption and
Core PCE were revised downwards:

  • US Q3 GDP 2nd Estimate
    5.2% vs. 5.0% expected and 4.9% for the advance reading.
  • Q2 final reading was 2.1%.
  • Personal consumption
    3.6% vs. 4.0% advance reading.
  • Core PCE prices 2.3%
    vs. 2.4% expected.
  • PCE prices 2.8% vs. 2.9% advance.
  • GDP deflator 3.5% vs. 3.5% expected.
  • GDP final sales 3.7%
    vs. 3.5% advance.
  • Corporate profits
    after tax 4.1% vs. 0.5% in Q2.

US Q3 GDP 2nd Estimate

The Japanese Industrial
Production for October beat expectations:

  • Industrial
    Production M/M 1.0% vs. 0.8% expected and 0.5% prior.
  • Industrial
    Production Y/Y 0.9% vs. -4.4% prior.

Japan Industrial Production YoY

The Chinese PMIs for
November missed expectations:

  • Manufacturing PMI 49.4
    vs. 49.7 expected and 49.5 prior.
  • Services PMI 50.2 vs 51.1
    expected and 50.6 prior.

China Manufacturing PMI

BoJ’s Nakamura reiterated
the central bank’s dovish stance as they remain uncertain on inflation hitting
the 2% target sustainably:

  • Will need some more
    time before we can modify easy monetary policy.
  • Now is a time to be
    cautious in our policy response
  • Current inflation is
    mostly driven by cost-push factors.
  • We haven’t reached a
    stage where we can say with conviction that sustained, stable achievement
    of 2% inflation accompanied by wage growth is in sight
  • We are seeing signs
    Japan will see wage growth exceeding rate of inflation.
  • Must patiently
    maintain current monetary easing for time being

BoJ Nakamura

The Eurozone CPI for
November missed expectations across the board:

  • CPI Y/Y 2.4% vs.
    2.7% expected and 2.9% prior.
  • CPI M/M -0.5% vs. 0.1% prior.
  • Core CPI Y/Y 3.6%
    vs. 3.9% expected and 4.2% prior.
  • Core CPI M/M -0.6% vs. 0.2% prior.

Eurozone Core CPI YoY

The Eurozone Unemployment
Rate remained unchanged at 6.5% vs. 6.5% prior.

Eurozone Unemployment Rate

ECB’s Panetta (dove –
voter) reaffirmed the central bank’s “wait and see” approach:

  • Current interest rates level consistent to bring inflation down to
  • May
    be able to ease monetary conditions if persistently weak output accelerates the
    decline in inflation.
  • Monetary
    tightening has not yet had full impact and will continue to dampen demand in
    the future.
  • Risks to Eurozone economy are tilted to the downside.
  • The
    economy remains weak in Q4 2023.

ECB’s Panetta

The Canadian Q3 GDP
missed expectations coming in with a negative print:

  • Q3 GDP Q/Q -0.3% vs.
    0.2% expected.
  • Annualized Q/Q GDP
    -1.1% vs. 0.2% expected.
  • Q2 annualized Q/Q
    GDP revised to 1.4% from -0.2%.
  • September GDP 0.1% vs. 0.0% expected.
  • August GDP was 0.0%.
  • Preliminary October GDP 0.2%.
  • Q2 GDP revised to 0.3%
    from 0.0%.
  • GDP implicit price
    Q/Q 1.8% vs. 0.4% prior (revised from 0.7%).
  • Q3 final domestic
    demand 0.3% vs. 0.3% prior.

Canada Q3 GDP

The US PCE came in line
with expectations:

  • PCE Y/Y 3.0 vs. 3.0%
    expected and 3.4% prior.
  • PCE M/M 0.0% vs.
    0.1% expected and 0.4% prior.
  • Core PCE Y/Y 3.5%
    vs. 3.5% expected and 3.7% prior.
  • Core PCE M/M 0.2%
    vs. 0.2% expected and 0.3% prior.


The US Initial Claims
beat expectations once again while the Continuing Claims missed by a big

  • Initial Claims 218K
    vs. 220 expected and 211K prior (revised from 209K).
  • Continuing Claims
    1927K vs. 1872K expected and 1841 prior (revised from 1840K).

US Jobless Claims

Fed’s Daly (neutral – non
voter) pushed back against rate cuts expectations as she continues to support
the “high for longer” stance:

  • It’s still too early
    to know if Fed is done hiking rates.
  • Should take our time
    now and remain vigilant.
  • Need to better
    understand what’s happening with the economy and inflation.
  • Latest data is encouraging.
  • I’m not thinking
    about rate cuts at all right now.
  • Economy needs to
    cool down a little more.
  • Further rate hikes
    are not our base case.
  • Hearing more and
    more it is harder for companies to pass along price hikes.
  • People’s fear of
    recession has faded into the background.

Fed’s Daly

Fed’s Williams (neutral –
voter) delivered mostly neutral comments. The interesting part is this line “Key
for policy is persistence of easing in financial conditions”. It looks like the
higher the stock market (or bond market) goes, the less incentive he’s going to
have to cut:

  • If inflation
    pressures persist, we could hike again.
  • We are at or near
    the peak of interest rate target.
  • Sees inflation
    falling to 2.25% in 2024.
  • Inflation will close
    in on 2% in 2025.
  • Financial conditions have tightened.
  • Sees GDP at 1.25%
    next year.
  • Sees unemployment at
    4.25% next year.
  • Sees upside and
    downside risks for inflation.
  • Says he’s not losing
    sleep over market views of Fed funds path.
  • Key for policy is persistence of easing in
    financial conditions.
  • Notes a significant
    decline in inflation.
  • Financial conditions
    are volatile, and markets are sensitive.

Fed’s Williams

BoE’s Greene (hawk –
voter) continues to maintain her hawkish stance:

  • Policy may have to
    be restrictive for an extended period of time.
  • I believe r* may
    have risen
  • The labour market
    has shown signs of inflation persistence.
  • Data on activity
    remains mixed though, so I continue to worry more about the risk of
    inflation persistence.

BoE’s Greene

The OPEC+ producers
failed to agree on a group cut and proceeded with voluntary output cuts of
about 2.2 million BPD with Saudi Arabia extending its 1 million BPD voluntary
output cut into Q1 2024 and then phasing them out. Russia increased its
voluntary cut from 300K to 500K until the end of Q1 2024. Finally, Brazil was
invited to join OPEC+ effective from January 1st.


The Japanese Unemployment
Rate ticked lower to 2.5% vs. 2.6% prior.

Japan Unemployment Rate

The Chinese Caixin
Manufacturing PMI beat expectations:

  • Manufacturing PMI 50.7
    vs. 49.8 expected and 49.5 prior.

points in the report:

  • Production returns
    to growth amid sustained rise in total new work.
  • Softer reduction in employment.
  • Business confidence
    ticks up to four-month high.

China Caixin Manufacturing PMI

The Switzerland Q3 GDP
beat expectations:

  • Q3 GDP Q/Q 0.3% vs. 0.1%
    expected and -0.1% prior (revised from 0.0%).

Switzerland Q3 GDP

The Switzerland
Manufacturing PMI slightly beat expectations:

  • Manufacturing PMI 42.1
    vs. 42.0 expected and 40.6 prior.

Switzerland Manufacturing PMI

The Canadian Labour Market
report beat expectations, but the unemployment rate keeps on increasing:

  • Employment Change
    24.9K vs. 15.0K expected and 15.0K prior.
  • Unemployment rate
    5.8% vs. 5.8% expected and 5.7% prior.
  • Full-time employment
    59.6K vs. -3.3K prior.
  • Part-time employment
    -34.7K vs. 20.8k prior.
  • Participation rate
    65.6% vs. 65.6% prior.
  • Average hourly wages
    permanent employees Y/Y 5.0% vs. 5.0% prior.

Canada Unemployment Rate

The Canadian
Manufacturing PMI fell further into contraction:

  • Manufacturing PMI 47.7 vs. 48.6 prior.

Canada Manufacturing PMI

The US ISM Manufacturing
PMI missed expectations with all the sub-indexes in contraction:

  • Manufacturing PMI 46.7
    vs. 47.6 expected and 46.7 prior.
  • Prices paid 49.9 vs. 45.1 prior.
  • Employment 45.8 vs. 46.8 prior.
  • New orders 48.3 vs. 45.5 prior.
  • Inventories 44.8 vs. 43.3 prior.
  • Production 48.5 vs. 50.4 prior.

US ISM Manufacturing PMI

Fed Chair Powell (neutral
– voter) delivered mostly neutral comments as the FOMC continues to prefer a “wait
and see” approach:

  • FOMC is moving
    forward carefully as risks around rates becoming more balanced
  • It’s premature to
    say that monetary policy is restrictive enough.
  • Fed will raise rates
    if needed to lower inflation.
  • Fed is making rate
    decisions meeting by meeting.
  • Uncertainty over
    economic outlook is unusually elevated.
  • Fed funds range well
    into restrictive territory.
  • Fed has made
    considerable progress in lowering inflation.
  • Welcomes recent
    softening in inflation data.
  • Need to see more
    progress on lowering inflation to 2%.
  • Wage growth still
    high but moderating to more sustainable levels.
  • Unemployment up but
    still historically low.
  • As the demand and
    supply related effects of the pandemic continue to unwind, uncertainty
    about the outlook for the economy is unusually elevated.

Fed Chair Powell

The highlights for next
week will be:

  • Monday: Switzerland CPI.
  • Tuesday: Tokyo CPI, China Caixin
    Services PMI, RBA Policy Decision, Eurozone PPI, Canada Services PMI, US ISM
    Services PMI, US Job Openings.
  • Wednesday: Australia GDP, Eurozone
    Retail Sales, US ADP, BoC Policy Decision.
  • Thursday: China Trade data,
    Switzerland Unemployment Rate, US Challenger Job Cuts, US Jobless Claims.
  • Friday: Japan Wage data, US
    NFP, University of Michigan Consumer Sentiment.

That’s all folks. Have a
nice weekend!

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