Consumers Aren't Fooled!
Financial assets are clearly operating on a set of rules devoid of economic fundamentals
Highlights
• Consumers see fewer jobs on the horizon
• Japan’s equity rally has room to run
• Household delinquencies drive Canadian bank loan loss provisions higher
• Where to go in the choose-your-own-adventure economy?
While We Were Sleeping
The action in global equities is all over the map so far today. Dow futures are off triple digits as they were at this same time yesterday. While both Salesforce and Snowflake beat Q4 views, guidance by both firms was decidedly light. Asia was mixed: gains in China’s Shanghai Composite (+1.9%) and Taiwan (+0.6%) but losses across Thailand (-0.8%), Korea (-0.4%), Hong Kong (-0.2%), and Japan’s Nikkei 225 (-0.1%) while India and Singapore were both little changed.
The China bounce was led by the bond market, where 30-year yields fell an additional -2 basis points to 2.47% (down more than -10 basis points in the past week in the sharpest decline since August 2022), the lowest it has been in decades as the view builds that a PBOC easing move is coming our way soon. Bond markets are steady but with a mild upward yield bias (+2 basis points for the 10-year T-note yield to 4.29% — holding near the 2024 highs) as John Williams from the New York Fed weighed in with his view that rates are going to stay higher for longer (the dovish FOMC tone last December is now a distant memory).
The DXY dollar index is giving up some ground as it met stiff resistance at the 100- and 200-day trendlines — off nearly -20 pips to 103.8. Dollar-yen moved down -0.6% to ¥149.8 on the back of some verbal intervention by Japan’s Vice Finance Minister for International Affairs (Masato Kanda) to the effect that excessive currency moves are not desirable (a strong hint that ¥150 is a line being drawn in the sand).
Bitcoin continues to surge and touched $64,000 (now just below $63,000 and is up a further +3% overnight) on the boom in ETF flows — rapidly approaching the 2021 peak of around $69,000. FOMO has certainly hit the crypto space of late — nothing fundamental has changed… only sentiment, psychology, and the herd mentality from maddening crowds. This is also part and parcel of the speculative frenzy in the most dangerous segments of the EM universe — runaway inflation of +65% and a surge in interest rates to 45% in Turkey, for example, has not stopped the broad Borsa Istanbul index from leading the world this year with a +22% surge (in U.S. dollar terms)! It is a mad, mad, mad world. Meanwhile, Brent crude is down -0.5% to just over $83.0 per barrel (and to $78.4 per barrel for WTI), and spot gold is little changed. All market quotes are time-stamped to 4:30 a.m. (EST).
The overseas data were also on the mixed side. Not helping on the bond market front were the various state CPI numbers out of Germany — generally up between +0.5% to +0.6% MoM in February. Germany’s unemployment rate in February stayed at 5.9% — the consensus was looking for a dip to 5.8%. The really big shocker was the unexpected -0.4% MoM pullback in German retail sales in January — the consensus was at +0.5%, so a really big downside miss; and this followed a -0.5% December dive. But guess what? The German DAX hit a record high today!
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