Daily Market Outlook, February 16, 2024

Munnelly’s Market Minute…

“Nikkei Heading For All Time Highs WIth Japan In Recession”

The Nikkei reached a 34-year high, just shy of its all-time high of 38,957.44 points set on Dec. 29, 1989. The stock market in Asia has surged by 15% this year, following a 28% rally in 2023. Despite Japan slipping into recession and losing its position as the world's third-largest economy to Germany, the market has seen significant growth. The weakening yen has both positive and negative impacts, benefiting large Japanese companies with global operations but raising prices for food and energy imports, affecting consumers. The Bank of Japan is facing the challenge of balancing negative interest rates with accommodative monetary policy. BOJ Governor Kazuo Ueda mentioned the central bank will consider maintaining its monetary easing measures once the inflation target is consistently achieved.

The UK's retail sales figures for January, showing a much larger-than-expected monthly rise of 3.4%, indeed signal a strong rebound from the previous month's decline. This positive momentum aligns with Bank of England Governor Bailey's recent assertion regarding signs of economic recovery. The improvement in consumer fundamentals such as rising wages and increasing confidence further supports the notion of a strengthening economy and may influence the Bank of England's stance on interest rate cuts.

In the US, upcoming data releases, including producer price data and the University of Michigan consumer sentiment reading, are anticipated to provide insights into inflation trends and consumer outlook. The recent rise in consumer sentiment, driven by factors like falling inflation and expectations of lower interest rates, underscores the potential impact on economic decisions and policy considerations.

The speeches by US Fed Regional Presidents Barkin and Daly, both influential voters on interest rates, will be closely watched for their perspectives on recent economic developments. Additionally, Bank of England Chief Economist Pill's address in Washington is expected to offer insights into the broader international economic landscape.

Overnight Newswire Updates of Note

Bostic Says May Take ‘Some Time’ To Know Inflation Heading To 2%
House Won’t Pass Stopgap To Avoid Shutdown, Key Republican Says
ECB’s Villeroy: Risk Of Cutting Too Late At Least As Big As Too Early
China Set To Bide Time On Rate Cut Until Yuan, Data Stabilize
Unfazed By Recession, Reports Suggest BoJ Keeps April Shift On Table
BoJ Ueda: To Mull Policy Move When Infl. Target Conditions Met
Japan FinMin Watching FX Moves With A High Sense Of Urgency
Orr Says RBNZ Still Needs To Anchor Inflation Expectations
Japan 10-Year Yield Seen Breaking Above 1% Even Before BoJ Hike
Wall Street Await Potential Spring Approval Of Spot Ether ETF
US House Votes To Overturn Biden’s NatGas Export Approval Freeze
Japan Stocks Near 1989 Historic High After S&P 500 Hits Another Record
Applied Materials Jumps After Forecast Shows Rebound For Chips

(Sourced from Bloomberg, Reuters and other reliable financial news outlets)

FX Options Expiries For 10am New York Cut

(1BLN+ represent larger expiries, more magnetic when trading within daily ATR)

EUR/USD: 1.0615 (1.6 billion), 1.0670-75 (2 billion), 1.0700 (1.8 billion), 1.0750-55 (1.4 billion), 1.0800 (3.1 billion), 1.0820 (1 billion)
GBP/USD: 1.2650-60 (1.7 billion), 1.2720 (500 million)
USD/CHF: 0.8780 (800 million)
AUD/USD: 0.6400 (500 million), 0.6535 (700 million)
USD/JPY: 149.00 (1.1 billion), 150.00 (1.1 billion), 152.00 (800 million)
USD/CAD: 1.3500-05 (1.8 billion)

CFTC Data As Of 8/02/24

The British Pound had a net long position of 34,475 contracts.
The Euro had a net long position of 62,153 contracts.
The Japanese Yen had a net short position of -84,230 contracts.
Bitcoin had a net short position of -1,523 contracts.
The Swiss Franc had a net short position of -5,567 contracts.
Equity fund managers reduced their net long position in S&P 500 CME by 53,941 contracts to 912,862.
Equity fund speculators decreased their net short position in S&P 500 CME by 8,669 contracts to 423,955.