Weekly Market Recap (29-02 February)


ECB’s Knot (hawk –
voter) over the weekend reaffirmed the central bank’s focus on wage growth to
decide when and by how much tweak their monetary policy:

  • We now have a
    credible prospect that inflation will return to 2% in 2025.
  • The only piece
    that’s missing is the conviction that wage growth will adapt to lower
  • As soon as that
    piece of the puzzle falls in place, we will be able to lower interest rates
    a bit.

ECB’s Knot

Over the weekend
three US troops got killed in Jordan in a drone attack. The US blamed
Iran-backed militias and later in the week Kataib Hezbollah, the group that
attacked the US base, said that it will suspend military and security
operations against US forces. Crude Oil opened higher on Monday, but the gains
were quickly erased.

Drone Attack

ECB’s de Guindos
(neutral – voter) expressed his confidence in reaching their 2% target as he
sees inflation risks tilted to the downside:

  • We will cut interest
    rates when we are sure of meeting 2% inflation goal.
  • There is good news
    on inflation recently.
  • Sooner or later,
    that will be reflected in monetary policy.
  • Optimistic about
    inflation dynamics, even on core inflation.
  • Inflation risks are
    to the downside.
  • Latest bank lending
    survey shows certain stabilization.
  • I think the
    disinflation process can continue.
  • China doesn’t worry
    US due to financial contagion but through indirect impact on growth.
  • I think that
    inflation will be slightly lower than we have predicted.
  • Inflation
    figures have mostly brought positive surprises recently.
  • Does
    not want to put a figure on what “slightly lower” means.
  • Monetary
    policy has played its part in bringing inflation down.
  • Euro
    area growth prospects have deteriorated in the meantime.
  • Growth
    could even be slightly below 0.8%, as projected in December.

ECB’s de Guindos

ECB’s Centeno
(dove – voter) is one of the most dovish members and he’s calling for sooner
than expected rate cuts:

  • Inflation is
    decreasing in a sustained manner.
  • Almost all factors
    that drove prices up have dissipated.
  • Should start cutting
    rates sooner rather than later but avoid abrupt moves.
  • No need to wait for
    wages data in May to make rate decisions.
  • There are no visible
    second-round effects of wage hikes.

ECB’s Centeno

ECB’s Kazimir
(hawk – non voter in March) pushed back against the market’s pricing as he sees
the first rate cut coming in June rather than April:

  • The next move will
    be a rate cut and it is within our reach.
  • A rate cut in June
    is more probable than April, but exact timing is secondary to the
    decision’s impact.
  • Patience is
    essential before making pivotal decisions.
  • ECB is not behind
    the curve; it is markets getting ahead of the event.
  • Disinflation signs
    are positive but not yet enough to make a confident conclusion.

ECB’s Kazimir

SNB’s Jordan
expects inflation to rise a bit in the short term but still end the year below
their 2% target:

  • Our expectation is
    that inflation will again rise a little.
  • Regarding inflation,
    the situation has improved, it looks relatively good.
  • Inflation should be
    below 2% in 2024.
  • Inflation probably accelerated January.

SNB’s Chairman Jordan

The US Treasury
released its Q1 quarterly refunding estimates, and it was below the prior

  • Last year, the
    Treasury estimated Q1 borrowing needs at $816 billion, now expects to
    borrow $760 billion.
  • Expects to borrow
    $202 billion in the April-June quarter, assuming end-June cash balance of
    $750 billion.
  • Says it borrowed
    $776 billion in Q4 — in line with estimates — and
  • Ended with cash
    balance of $769 billion, which was $19 billion higher than estimated due
    to discount on borrowing.

The Treasury said that it
sees increased net fiscal flows and a higher cash balance.

US Treasury

The Japanese December
Unemployment Rate fell to 2.4% vs. 2.5% expected and 2.5% prior.

Japan Unemployment Rate

The Australian December
Retail Sales missed expectations by a big margin:

  • Retail Sales M/M -2.7%
    vs. -0.9% expected and 2.0% prior.
  • Retail Sales Y/Y
    0.8% vs. 2.20% prior.

Australia Retail Sales YoY

The Eurozone Q4 Preliminary GDP slightly beat

  • Q4 GDP 0.0% vs.
    -0.1% expected and -0.1% prior.

Eurozone Q4 GDP

ECB’s Vujcic (hawk – voter) is open for a rate cut
either on April or June but he cautions against expecting rate cuts at every

  • April or June timing
    for a rate cut is not a big difference.
  • Rate cuts by 25 bps
    amount is preferable.
  • But it is not a
    given that rate cuts would happen at every meeting, pauses are possible.
  • GDP data supports
    view that Eurozone economy is facing soft landing scenario.

ECB’s Vujcic

The US December Job Openings beat expectations with an
upward revision to the prior figure:

  • Job Openings 9.026M
    vs. 8.750M expected and 8.925M prior (revised from 8.790M).
  • Quits rate unchanged
    at 2.2%
  • Hires rate 3.6% vs.
    3.5% prior.

US Job Openings

The US January Consumer Confidence came in basically
in line with expectations but the Present Situation index jumped above the 2021
level and the labour market details improved considerably:

  • Consumer Confidence 114.8 vs. 115.0 expected and
    108.0 prior (revised from 110.7)
  • Present situation index 161.3 vs. 148.5 prior.
  • Expectations
    83.8 vs. 81.9 prior.
  • 1 year Inflation 5.2% vs. 5.6% prior – lowest
    since 2020.
  • Jobs hard-to-get 9.8 vs. 13.2 prior.

US Consumer Confidence

ECB’s Lagarde (neutral – voter) stressed the
importance of wage growth for their decisions:

  • We are not there
    yet’ on rate cuts, need more data.
  • We need to be
    further into the disinflationary process before cutting rates.
  • The next move will
    be a cut.
  • Wage data is
    critically important

ECB’s President Lagarde

The Japanese December Industrial Production missed

  • Industrial
    Production Y/Y -0.7% vs. -1.4% prior.
  • Industrial
    Production M/M 1.8% vs. 2.4% expected and -0.9% prior.

Japan Industrial Production YoY

The Australian Q4 CPI missed across the board:

  • CPY Y/Y 4.1% vs. 4.3%
    expected and 5.4% prior.
  • CPI Q/Q 0.6% vs.
    0.8% expected and 1.2% prior.
  • Trimmed Mean CPI Y/Y
    4.2% vs. 4.3% expected and 5.2% prior.
  • Trimmed Mean CPI Q/Q
    0.8% vs. 0.9% expected and 1.2% prior.

Australia Trimmed Mean CPI YoY

The Chinese January PMIs came in line with

  • Manufacturing PMI
    49.2 vs. 49.2 expected and 49.0 prior.
  • Services PMI 50.7
    vs. 50.6 expected and 50.4 prior.

China Manufacturing PMI

ECB’s Lane (dove – voter) echoed his colleagues by
reaffirming that they want to see more evidence that inflation is heading back
to their 2% target.

ECB’s Lane

The US January ADP missed expectations:

  • ADP 107K vs. 145K expected and 158K prior (revised

The median change in annual

  • Job stayers 5.2% vs. 5.4% last month.
  • Job changers 7.2% vs. 8.0% last month.


The US Treasury announced its quarterly refunding borrowing:

  • 2 year $63b vs. $63
    billion expected.
  • 3-year $54b vs.
    $53-$54 billion expected.
  • 5-year $64b vs. $64
    billion expected.
  • 7-year vs. $40 billion expected.
  • 10-year $42b vs. $42
    billion expected.
  • 20-year $16b vs. $16
    billion expected.
  • 30-year $25b vs. $25
    billion expected.
  • Supply for next week
    $121b vs. $121 billion expected.
  • Given current fiscal
    forecasts, Treasury expects to maintain bill auction sizes at current
    levels into late-March.


The Canadian November GDP beat expectations:

  • November GDP
    0.2% vs. 0.1% expected.
  • Service producing industries 0.1% vs. 0.1% prior.
  • Goods producing industries 0.6% vs. 0.0% prior.
  • December
    advance reading 0.3%.
  • Preliminary
    Q4 estimate 0.3%.
  • Preliminary
    2023 estimate 1.5%.

Canada GDP

The US Q4 Employment Cost Index missed expectations:

  • ECI Q4 0.9% vs. 1.0%
    expected and 1.1% prior.
  • Wages Q4 0.9% vs.
    1.2% last quarter.
  • Benefits Q4 0.7% vs.
    0.9% last quarter.

US Employment Cost Index

The Federal Reserve left interest rates unchanged at
5.25-5.50% as expected:

  • Recent indicators
    suggest that economic activity has been expanding at a solid pace.
  • Removes reference to
    ‘additional policy firming’.
  • The Committee does
    not expect it will be appropriate to reduce the target range until it has
    gained greater confidence that inflation is moving sustainably toward 2
  • Inflation has eased
    over the past year but remains elevated.
  • Entire paragraph
    about banking system and tighter financial conditions removed.
  • Says risks to
    employment and inflation goals are “moving into better balance”.

Federal Reserve

Moving on to Fed Chair
Powell’s Press Conference:

  • It will likely be
    appropriate to cut at some point this year.
  • The economy has made
    ‘good progress’ towards dual mandate.
  • Payroll growth over past
    three months is averaging 165K, which is still healthy but well below a
    year ago.
  • Inflation remains
    above longer run goal of 2%.
  • Lower inflation in
    H2 2023 were welcome but we will need to see continuing evidence to get
    confidence that inflation moving to target.
  • Longer-term
    inflation expectations appear well anchored.
  • FOMC highly
    attentive to risks inflation poses to both sides of mandate.
  • Our policy rate is
    likely at its peak.
  • Reducing policy too
    soon or too late poses risks.
  • We continue to make
    decision meeting-by-meeting.
  • We want to see a
    continuation of good inflation data to gain confidence.
  • Six month data on
    inflation is good enough but we have to have confidence it will continue.
  • We had very strong
    growth last year.
  • A lot of the
    improvement in data has been from goods, eventually that will level out
    and we’ll need to see more from services.
  • We need to see more
    evidence that confirms what we think we’re seeing.
  • “We want to see
    more good data… not looking for better data… more good data…”
  • Almost every
    participant on the committee does believe it will be appropriate to lower
  • An unexpected drop
    in employment would ‘absolutely’ argue for cutting sooner.
  • There was no
    proposal to cut rates today. There’s a wide disparity about when to cut.
  • The jobs market is
    rebalancing, it will probably take a couple years for wages to normalize.
  • We’re not looking
    for inflation to anchor below 2%.
  • We want to finish
    the job on inflation while keeping the labour market strong.
  • Overall, it’s a
    pretty good picture on the economy.
  • I don’t think it’s
    likely we will have enough confidence to cut in March, I don’t think
    that’s the base case.
  • We won’t keep it a
    secret when we have confidence on inflation.
  • I really like
    anecdotal data, and in chats with business there are signs of
  • I’m not so worried
    that growth is too strong, and inflation could come back.
  • Continued declines
    in inflation are what we’re looking at.

Fed Chair Powell

The Chinese January
Caixin Manufacturing PMI beat expectations:

  • Caixin Manufacturing
    PMI 50.8 vs. 50.6 expected and 50.8 prior.

findings highlighted in the report

  • Production continues
    to expand modestly, but total sales growth softens.
  • New export business
    rises for first time in seven months.
  • Business confidence
    improves to nine-month high.

China Caixin Manufacturing PMI

The Switzerland January
Manufacturing PMI missed expectations:

  • Manufacturing PMI 43.1
    vs. 44.5 expected and 43.0 prior.

Switzerland Manufacturing PMI

The Eurozone January CPI came in line with
expectations although the M/M measures were both deeply negative:

  • CPI Y/Y 2.8% vs. 2.8%
    expected and 2.9% prior.
  • CPI -0.4% vs. 0.2%
  • Core CPI Y/Y 3.3% vs.
    3.2% expected and 3.4% prior.
  • Core CPI M/M -0.9% vs. 0.5% prior.

Eurozone Core CPI YoY

The BoE left the Bank Rate unchanged at 5.25% as
expected dropping the tightening bias:

  • Bank
    rate vote 6-2-1 vs. 8-1-0 expected (Haskel, Mann voted for 25 bps rate hike;
    Dhingra voted for 25 bps rate cut).
  • Monetary
    policy will need to remain restrictive for sufficiently long.
  • Prepared
    to adjust monetary policy as warranted by economic data to return inflation to
    2% target sustainably.
  • Labour
    market has continued to ease but remains tight by historical standards.
  • GDP
    growth is expected to pick up gradually.
  • Risks
    to inflation are more balanced.
  • Risks
    around CPI inflation projection is skewed to the upside.
  • Although
    services price inflation and wage growth have fallen by somewhat more than
    expected, key indicators of inflation persistence remain elevated.
  • The Committee will keep under review for how long Bank Rate should be
    maintained at its current level.


Moving on to BoE Governor Bailey’s Press Conference:

  • We are not yet at a
    point where we can lower rates.
  • The level of bank
    rate remains appropriate.
  • It isn’t as simple
    as seeing inflation return to target in the spring and calling the job
  • But things are
    moving in the right direction.
  • We have to keep
    monetary policy sufficiently restrictive for sufficiently long.
  • How long that will
    be and how high rates have to stay depends on incoming data.
  • We
    need to see evidence of the most persistent elements of inflation, services
    inflation in particular,
    easing back.
  • In
    terms of policy-setting, we need to look past short-term trends.
  • Services
    inflation might be much stickier in the months ahead.
  • Hopes
    lower inflation will influence expectations in the real economy.
  • But
    we need to see more evidence of that.
  • Inflation moving back to around 2.7% is not an acceptable level as a
    resting point.
  • Needing to get inflation back to 2% mark is the best thing for
  • We
    will not maintain policy stance any longer than we need to.
  • If we follow market
    path inflation would be above target for three years.
  • Good news on economy
    has taken away need for warning that rates could rise again.
  • Don’t agree with the
    idea that we’ve done easy bit on bringing wage growth down.
  • We don’t need to see
    inflation back at target to cut rates, we need to see evidence that it’s
    heading there.

BoE’s Governor Bailey

The US Challenger Job Cuts showed plans to cut 82.31K
jobs in January vs. 34.82K in December:

Excluding last January, this is the highest number of
job cuts announced in January since January 2009. In most cases, companies
point to cost-cutting as the main driver for layoffs.

US Challenger Job Cuts

The US Jobless Claims missed expectations for the
second consecutive week:

  • Initial Claims 224K vs. 212K expected and 215K
    prior (revised from 214K).
  • Continuing Claims 1898K vs. 1840K expected and
    1828K prior (revised from 1833K).

US Jobless Claims

The Canadian Manufacturing PMI improved in January
although it remains in contractionary territory:

  • Manufacturing PMI 48.3 vs. 45.4 prior.
  • Production was
    sub-50 for a sixth month in a row during January.
  • Confidence in the
    future improved in January, hitting its highest level in six months.

Canada Manufacturing PMI

The US January ISM Manufacturing PMI beat expectations
by a big margin with the New Orders index jumping back into expansion:

  • ISM Manufacturing
    PMI 49.1 vs. 47.0 expected and 47.4 prior.


  • Prices paid 52.9 vs. 45.2 prior.
  • Employment 47.1 vs 48.1 prior.
  • New orders 52.5 vs. 47.1 prior.
  • Inventories 46.2 vs 44.3 prior.
  • Production 50.4 vs 50.3 prior.

US ISM Manufacturing PMI

Al Jazeera reported on a ceasefire in Gaza sending
Crude Oil price lower, but later deleted the tweet with the market erasing the
losses. Later on, Reuters reported that a Qatari official told them there is no
ceasefire deal yet for Gaza and Crude Oil started to drift lower again. The
official said that Hamas ‘received the proposal positively’ but it has not
responded yet.A Hamas official told Reuters they have received the
truce proposal but haven’t given response to any parties and it is still being
studied. They added ‘we cannot say current state of negotiations is zero and at
the same time, we cannot say that we have reached an agreement’.

WTI Crude Oil

The Australian Q4 PPI slowed although the Y/Y measure
remained elevated:

  • PPI Y/Y 4.1% vs.
    3.8% prior.
  • PPI Q/Q 0.9% vs. 1.8% prior.

Australia PPI YoY

BoE’s Pill (neutral – voter) reaffirmed his patient
approach when it comes to rate cuts:

  • The time when rate
    cuts will be possible is some way off for me.
  • Different votes on
    MPC is symptomatic of a healthy discussion.
  • Need for restrictive
    policy doesn’t mean rates need to stay at current levels indefinitely.
  • Need to look through
    any temporary achievement of inflation target in the coming months.

BoE’s Pill

The US NFP beat expectations by a big margin:

  • NFP 353K vs. 180K expected and 333K prior
    (revised from 216K).
  • November revised to 173K from 164K.
  • Two-month net revision 126K vs. -71K prior.
  • Unemployment rate 3.7% vs. 3.8% expected and 3.7%
  • Participation
    rate 62.5% vs. 62.5% prior.
  • U6 underemployment rate 7.2% vs. 7.1% prior.
  • Average hourly earnings M/M 0.6% vs. 0.3%
  • Average hourly earnings Y/Y 4.5% vs. 4.1%
  • Average weekly hours 34.1 vs. 34.3 expected.
  • Change in private payrolls 317K vs. 164K expected.
  • Change in manufacturing payrolls 23K vs. 5K
  • Household survey -31K vs. -683K prior.
  • Birth-death adjustment -121K vs. -52K prior.

US Unemployment Rate

The highlights for next week
will be

  • Monday: China Caixin Services PMI, Eurozone PPI, Canada
    Services PMI, US ISM Services PMI.
  • Tuesday: Japan Wage data, RBA Policy Decision, Eurozone
    Retail Sales, New Zealand Jobs data.
  • Wednesday: Switzerland Unemployment Rate.
  • Thursday: China Inflation data, US Jobless Claims.
  • Friday: Canada Jobs data.

That’s all folks. Have a nice weekend!


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