YOUR QUIVER | February 10, 2023
Today's Rundown
CIO | Nadine Terman @SolsteinCapital details what she's seeing in global financial markets.
Good News Is Bad News (Today)
We’re back to “good news is bad news” this morning. US consumer sentiment is at a high, supporting the stronger growth story (and hence the higher rates for longer story). If stocks stay pressured today, we’ll see the S&P stop its 2-week bounce. The S&P was in the green this AM but red now, with the NASDAQ in the red…but we’ve got a lot more hours in the trading day…
Easy Does It
Kazuo Ueda will be nominated as the next BOJ gov on Valentine’s Day, sending the yen up as much as +1.4% against the USD. While he’s more hawkish than Dep Gov Amamiya (who said no to the job offer), per the Nikkei. Ueda doubled down on the easing. The 10-year JGB yield rose to the bank's ceiling for the first time since its Jan 18 meeting. I think they’re the only central bank rooting for inflation these days.
Kraken the Whip
The SEC crackdown on crypto staking that brought Kraken and Coinbase in its crosshairs may temporarily benefit DeFi apps like Lido, Rocket Pool and StakeWise—but these apps still let folks trade without intermediaries, anonymously using automated protocols. While they are trying to stay out of the regulatory crosshairs, they had better have a plan B if forced to register with the SEC.
Oh No You Don't
Russia is going to cut its oil output by 500k barrels/day next mo in response to sanctions. That’s ~5% of its Jan output. Brent was up over +2% on the news. OPEC+ said they won’t do anything to fill the supply hole.
It's Tankers' Time
Shipping gas and other fuels got a lot more expensive after sanctions hit. The Baltic Exchange’s data showed that daily earnings for relatively tiny tankers delivering refined fuels in the Atlantic popped about 280% this week, reaching about $42,000. They were up 58% yesterday alone, the largest one-day gain since late 2021.
Back to the Futures
Renewed weakness for 3-month USD futures is a yellow caution flag for US equities. The rates curve finally is digesting Powell’s higher for longer message. The Dec SOFR contract has fallen back to levels last seen in Nov when the S&P index was ~9% lower. So, US equity investors need to internalize the Powell message.
A Pretty Penny
GS has been bullish on metals from the start of this year, with its copper and aluminum price expectations one year out at $11,000 a ton and $3,750 a ton, respectively. GS also increased its 3 mo iron ore price outlook to $150 a ton from $115 on China's reopening. The one area of bearishness? Battery materials because supplies are up. In related news, the US gov is trying to get a trade pact going with Japan, the EZ and the UK on critical minerals, to try to get sourcing outside of China.
Money Matters
M1 is down hard across developed markets, with the US, UK, EZ, and Canada at near record rates of decline. Also, broad money is in a slowdown. Banks have been tightening lending standards in the US and EZ, especially with corporate lending, which is usually what happens before a recession. Lastly, banks are also reporting weaker demand for credit. All of this points to a slowdown in the economic cycle (and maybe a looming recession).
No Lyft
It’s headed toward its biggest drop ever after a lower profit warning. It’s going to cut px to try to get more customers (rarely a good move for an industry). Uber, on the other hand, crushed it this week with bookings up +31% in 4Q22. The one thing you can bet on today? Lyft employees are not so happy with their leadership.
On the Spot
Yes, another activist campaign, this time with $SPOT. Value Act is back in action on this one. Wonder if we’ll get 4 more, like $CRM…
Total Clickbait
OK, you got me on this one, BBG. The housing market making my toilet paper more expensive? Click. Basically, sawmills are closing because lumber demand is down because housing demand is down. They note that Canada, which is the largest softwood lumber produces, has around one-third of its capacity shut. So, costs for pulp are up.
