Asia Morning Bites - 17.02.2023

Macro outlook

• Global Markets: Strong January US PPI data probably didn’t help market sentiment to recover yesterday, and US stocks had another down day. The S&P 500 dropped 1.38% while the NASDAQ was down 1.78%. Chinese stocks were mixed. The CSI 300 dropped 0.73% but the Hang Seng Index rose 0.84%. US Treasury yields have slowed their rise. 2Y yields were up less than a basis point, though there was another 5.6bp rise in the 10Y yield taking it to 3.86%, within spitting distance of 3.90%, which a number of market commentators have said is a target for re-entering long bond positions. This hasn’t yet become a consensus view, but it was interesting yesterday to see the St Louis Fed’s James Bullard raising the prospect of returning to 50bp hikes at the next Fed meeting. This was also supported by Loretta Mester. Barkin and Bowman speak later today. The USD remains pretty strong not surprisingly. EURUSD has dropped to 1.0664. There was a more moderate view expressed by the ECB’s Lane, who noted that much of the effect of earlier tightening was still in the pipeline. While Stournaras said that the updated economic projections due in March should decide the magnitude of the next rate increase. The AUD was also weak, not helped by yesterday’s poor labour data. Cable also slid back below 1.20 but the JPY was fairly steady at just over 1.34. Yesterday was quite mixed for other Asian FX. There were small gains from the PHP, IDR, and INR, but currencies were flat or registered small losses elsewhere.
• G-7 Macro:  US PPI data came in stronger than expected in January. Final demand PPI rose 0.7% MoM, against expectations for a 0.4% MoM rise. There were above-consensus rises for core measures too. Somewhat curiously, the number of housing starts declined in January, which does put some strain on the weather explanation for some of the other data flow recently, and so we have to be alert to the possibility that there is more to the recent strong data than we have been thinking up until now. This is quite a worry. There isn’t a lot on the G-7 calendar today.
• Singapore: Singapore reported January non-oil domestic exports (NODX) today.  NODX slid for a 4th straight month, declining 25%YoY as demand faded sharply.  Shipments of electronics fell 26.8%YoY while petrochemical exports dropped 26.6%.  Exports to major trading partners like China (-41.1%YoY) and the US (-31.5%YoY) contracted although exports to the European Union managed to jump 21.4%.   The reopening of China from strict lockdown measures could help revive demand in the coming months but for now, we see a couple more months of contraction for NODX.     

Read next: USD/JPY Is Trading Close To 134.00, EUR/USD Is Remaining Above $1.07| FXMAG.COM

What to look out for: Fed speakers on deck

• Singapore NODX (17 February)

• Thailand GDP (17 February)

• US import prices (17 February)

• Fed’s Barkin and Bowman speak (17 February)