It kind of feels like everyone is ready to get this week on the books.
We got a huge lift from Trump’s speech and after Lael Brainard flipped hawkish it was clear that the reflation narrative wasn’t dead after all. $8.2 billion in SPY inflows on Wednesday proved that the retail crowd is well aware that they’re “supposed” to be buying into the rally.
And while it was largely quiet overnight, we did see a notable risk-on push unfold around 5:30 EST when a new poll by Odoxa with Dentsu Consulting showed French presidential candidate Emmanuel Macron would get 27% of the vote in the first round of presidential elections, up 2 points from a week earlier, while Marine Le Pen’s support was seen slipping 1.5 points to 25.5%. Here was the reaction across markets:
“Core bonds opened higher, gains extended support by rally in gilts, following soft U.K. services PMI data, before sliding sharply as broad risk-on rippled through markets after latest French election polls show Le Pen risk subsiding,” Bloomberg wrote around an hour ago. “Bund futures slide after the Odoxa poll, breaking below 200- DMA to session lows; peripheral bonds tighten sharply, with Spain, Italy 10y 5-6bps tighter to Germany.”
Perhaps that will set the tone ahead of Friday’s big events which are of course speeches from Stanley Fischer and Yellen. Here’s the Fedspeak calendar for today:
- 10:15am: Fed’s Evans and Lacker Speak on Panel in New York
- 12:15pm: Fed’s Powell Speaks on Innovation and the Payments System
- 12:30pm: Fed Vice Chair Fischer Speaks in New York
- 1pm: Yellen Gives Economic Outlook Speech in Chicago
“Earlier this week, regional Fed presidents Dudley and Williams both sounded like they were very much in favour of a March hike, sharply raising market-based odds of a March hike, which now stand at around 90%,” SocGen wrote this morning, adding that for their part, “we’ll wait to hear from Vice Chair Fischer and Chair Yellen before making any formal changes to our call for a June hike.”
All of this is of course set against an increasingly fractious political environment in the US. The drama that now hangs over the Justice Department thanks to Attorney General Jeff Sessions’ apparent perjury serves to underscore the fact that no matter how well things are going, markets are still subject to Trump administration tape bombs. It will be interesting to see how much risk traders and investors are willing to carry going into the weekend.
In Asia markets are lower. The Nikkei is down despite a “better” than expected CPI ex-fresh food print. I put that in scare quotes because what counts as “good” when it comes to inflation in Japan is 0.1%:
- Japan Jan. Core Consumer Prices Rise 0.1% Y/y; Est. 0%
- Jan. CPI excluding energy, fresh food rises 0.2% y/y; est. +0.2%
- Jan. overall CPI rises 0.4% y/y; est. +0.4%
- Tokyo Feb. core CPI which excludes fresh food falls 0.3% y/y; est. -0.2%
- Tokyo Feb. overall CPI falls 0.3% y/y; est. -0.1%
Here’s your Asian market wrap:
- Nikkei down 0.5% to 19,469.17
- Topix down 0.4% to 1,558.05
- Hang Seng Index down 0.7% to 23,552.72
- Shanghai Composite down 0.4% to 3,218.31
- Sensex down 0.1% to 28,812.01
- Australia S&P/ASX 200 down 0.8% to 5,729.60
- Kospi down 1.1% to 2,078.75
In the US we’ll also get PMI data this morning:
- 9:45am: Markit US Services PMI, est. 54, prior 53.9
- 9:45am: Markit US Composite PMI, prior 54.3
- 10am: ISM Non-Manf. Composite, est. 56.5, prior 56.5
US futs are largely flat.