US TSYS: Latest Sentiment Data Underscores Case for Soft Landing
While equities continue to drift higher after better than expected UofM sentiment, rates have gradually receded, trading near late session lows after the bell.
- UoM data climbed from 59.7 prior to 64.6 (60.7 est) underscoring the case for a soft landing for the economy as sentiment hit its highest lvl since Apr'22, while 1Y inflation exp recedes to lowest lvl since Apr 2021 at 4.0% vs. 4.3% exp (4.4% prior).
- At the margin it suggests growing headwinds to input prices but only after a string of solidly negative readings, averaging -0.4% M/M through Jun-Nov during which period core goods inflation has fallen notably.
- Earlier data showed surprising strength for import prices, rising 0.4% M/M (cons -0.9%) and with a broadly similar sized upside surprise for ex-petroleum prices at 0.8% M/M (cons -0.3%).
- Limited react to Tsy Sec Yellen comments on debt ceiling: next Thu, Jan 19, US outstanding debt "is projected to reach the statutory limit. Once the limit is reached, Treasury will need to start taking certain extraordinary measures to prevent the United States from defaulting," she said.
- Decent first half trade died down in the second half w/ US markets closed for Dr Martin Luther King Jr Day. Limited docket for Tuesday while equity earnings resume: Goldman Sachs and Morgan Stanley expected to announce before the NY open. Data picks up in earnest on Wednesday January 18 with Retail Sales, PPI, Business Inventories, Net TIC flow.
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US: President Biden's Approval Rating Continues To Trend Upwards
The approval rating of President Joe Biden's has continued a recent upwards trend following a strong performance at the midterm elections and a poor 2024 campaign launch of former President Donald Trump.
- According to RealClearPolitics, Biden's approval rating has strengthened by almost two-percentage-points since last month's midterms elections from 41% to 42.8%.
- Betting markets now see Biden's chance of winning a second term in the Oval Office a more likely prospect. Betting exchange Smarkets gives Biden a 25% implied probability of winning in 2024 compared to 31.5% of frontrunner Florida Governor Ron DeSantis (R-FL).
- Trump has slumped from the clear favourite shortly before the midterms to third most likely winner with an implied probability of 14%.
- Biden is expected to announce his intention to run for a second term either during or shortly after the holiday period.
US TSYS: Bonds Bouncing
Bonds bounce (30YY 3.5315) back above pre-FOMC levels as Fed Chairman Powell, answers question over size and pace of future hikes to bring inflation back to 2%. After raising 425bp this year, Powell said "we're into restrictive territory, it's now not so important how fast we go. It's far more important to think what is the ultimate level and then at a certain point, the question will become how long do we remain restrictive."
Yield curves flatter as short end lagging bounce so far.
- 3M10Y +2.627, -84.96 (L: -98.936 / H: -82.129)
- 2Y10Y -3.111, -75.444 (L: -77.576 / H: -65.961)
- 2Y30Y -2.857, -72.079 (L: -75.785 / H: -59.826)
- 5Y30Y -0.958, -12.807 (L: -16.004 / H: -5.285)
US STOCKS: Extending Lower As Fed Chair Powell Discusses Labor
Stocks extend session lows as Fed Chairman Powell touches upon jobs market in press Conference:
"Job gains have been robust with employment rising by an average of 272,000 jobs per month over the last three months. Although job vacancies have moved below their highs and the pace of job gains slowed from earlier in the year, the labor market continues to be out of balance with demands substantially exceeding the supply of available workers."
Current markets:
- - DJIA down 325.57 points (-0.95%) at 33780.93
- - S&P E-Mini Future down 47 points (-1.16%) at 4009
- - Nasdaq down 162.5 points (-1.4%) at 11094.84
