BoJ, Beijing, & Brussels Leave Banks, Bonds, Big-Tech, Bitcoin, & Bullion ‘Mixed’ After Long-Weekend

“Surprisingly” good economic growth data from China (sure, we believe you) coupled with more chaos in Japanese bond markets as it becomes clear that Kuroda as his cronies have lost control of their bond market (the largest in the world) provided some fun and games over the weekend. But this morning saw terrible US data combine with dovish ECB speak (and mixed US bank earnings data) to offer yet more chaos across asset classes as levels swung violently intraday.

The Empire Fed survey puked unexpectedly hard this morning, dragging ‘soft’ survey data to six-month lows as ‘hard’ data hovers back near 7 month highs…

Source: Bloomberg

The bad economic news and dovish ECB sent US rate-hike expectations shifted dovishly intraday…

Source: Bloomberg

Comments from ‘sources’ about The ECB shifting less hawkishly sparked Euro selling…

Source: Bloomberg

…and kneejerk higher in US stocks (and bond prices) but that did not last long. Goldman weighed down The Dow on the day which was the ugliest horse in the equity market glue factory today.Late-day comments from Fed’s Barkin reaffirming the ‘higher for longer’ narrative (“as long as inflation is elevated, we need to keep hiking”) sparked some selling, erasing gains for all the majors. The Nasdaq managed to cling to small gains as the cash market closed…

Bank stocks – since earnings started on Friday pre-market – are mixed with Morgan Stanley the biggest winner and Goldman Sachs clubbed like a baby seal…

Source: Bloomberg

TSLA shares soared over 7% today, back near 1 month highs…

“Most Shorted” stocks continued their huge squeeze higher, now up 20% from the post-payrolls dip…

Source: Bloomberg

Treasuries were mixed today with the long-end sold (30Y +4bps) and short-end bid (2Y -5bps)…

Source: Bloomberg

The 10Y JGB yield broke back above its 50bps YCC band…

Source: Bloomberg

The dollar drifted modestly lower (despite euro and yuan weakness as cable and yuan strengthened)

Source: Bloomberg

Bitcoin extended its gains from Friday, rallying and holding above $21,000…

Source: Bloomberg

Ethereum topped $1600 intraday today…

Source: Bloomberg

Oil was up for the 8th straight day – the longest winning streak since Feb 2021 – with WTI back above $81 since the first day of the year…

Gold inched lower today but futures remain above $1900…

Finally, this is why Jay Powell won’t cut rates anytime soon, despite the market’s expectations… As Bloomberg details, the consumer price index fell in December for the first time in 2 1/2 years after coming in below forecast the prior two months. The cooler inflation readings have led investors to price in almost a half percentage-point cut in the Federal Reserve’s benchmark interest rate by the end of this year. Fed officials, however, continue to maintain they will not be changing policy, pointing to lessons learned in 1980.

Source: Bloomberg

The central bank, then led by Chairman Paul Volcker, cut rates after CPI growth slowed markedly in mid-1980. Inflation then re-accelerated, forcing the Fed to reverse course and again raise rates, sparking the second of two recessions in the decade.

Additionally, the market’s decoupling between “goldilocks” financial conditions easing and “recession” yield curve inversion continues to widen…

Source: Bloomberg

The last time the market got this ‘optimistic’, financial conditions tightened back down to reality of the yield curve.