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G10 Macro Rates Market Analysis – Weekly Review – 1st February 2021

Monday, February 01, 2021

With the Pacific G10 Macro Rates Team 
Last week equity markets stole the show. The world’s leading capitalist nation demonstrated a lack of irony as a platform called Robinhood redistributed profits away from the (rich) hedge funds to the (poor) retail investor. Short positions were squeezed mercilessly, and equity funds deleveraged as a result. At the peak of the mayhem, the platform halted trading access to retail clients whilst still allowing institutions to trade. This raises a whole new line of enquiry about the ethics and legality behind such an action. With the volatility increase, exchange margins have been raised and positions decreased, along with rumours that it was other hedge funds acting behind the cloak of the “hooders” who were squeezing the shorts. Potential ripples outside of Long-Short equity funds have not surfaced yet, and it seems that the event might be contained.

Chair Powell spoke post the FOMC decision, emphasising the road to a normal economy remains a long way off. ECB speakers emphasised that rate cuts were still possible, focusing the markets eye on the strength of the Euro. With many G10 central banks close to their reversal rate (lower bound), jawboning their currencies lower might become the next and only game in town.

North America
US: The FOMC left interest rates unchanged. January activity data was weaker, Dallas Fed +7 (12 exp., 9.7 rev.) and the Conference Board Confidence measures were mixed. Inflation, as measured by the December Core PCE Deflator, showed unexpected strength, rising to +0.3% MoM (0.1% exp., 0.0% rev.) and +1.5% YoY (1.3% exp., 1.4% rev.)

Canada: Monthly GDP bounced to +0.7% MoM (0.4% exp., 0.4% rev.), -2.8% YoY (-3.2% exp., -3.5% rev.)

Europe
Eurozone: January Economic Confidence defied expectations and ticked higher to 91.5 (89.6 exp., 90.4 rev.)

French December Consumer Spending bounced back to +23.0% MoM (23.7% exp., -18.9% rev.) and +3.7% YoY (3.4% exp., -17.1% rev.) with Q4 GDP printing at -1.3% QoQ (-4.0% exp., 18.7% rev.), -5.0% YoY (-7.6% exp., -3.9% rev.) German January IFO ticked a little lower across all measures and the Jan CPI (Harmonized) exploded, by European standards, to +1.4% MoM (0.3% exp., 0.6% rev.) bringing the YoY measure to +1.6% (0.5% exp., -0.7% rev.) Unemployment was stable, at +6.0% (6.1% exp., 6.1% rev.) and Q4 GDP was a little stronger +0.1% QoQ (0.0% exp., 8.5% rev.) and -3.9% YoY (-4.0% exp., -4.0% rev.) Italian consumer and manufacturing confidence was very slightly lower.

Sweden: Swedish December Unemployment Rate rose to +8.7% (8.6% exp., 8.3% rev.) and Retail Sales dropped -4.9% MoM (-1.0% exp., 0.8% rev.) however January data showed some resilience with Consumer Confidence stable and Manufacturing Confidence moving higher.

Norway: Norwegian November unemployment numbers continued to improve with the Unemployment Rate (AKU) 5.0% (5.2% exp., 5.2% rev.) However, economic restrictions still pushed December Retail Sales to -5.7% MoM (-0.6% exp., 2.9% rev.)

Japan
December Industrial Production weakened to -1.6% MoM (-1.5% exp., -0.5% rev.) and -3.2% YoY (-3.1% exp., -3.9% rev.). December Retail Sales were negative, but slightly better than expected, the Jobless Rate was better at +2.9% (3.0% exp., 2.9% rev.) and January Consumer Confidence ticked higher. January Tokyo CPI Ex-Fresh Food, Energy was better than anticipated at +0.2% YoY (0.0% exp., -0.4% rev.)

UK

November Unemployment Rate +5.0% (5.1% exp., 4.9% rev.)

Australasia

Australia: Inflation in Australia was stable with the 4Q Trimmed Mean at +0.4% QoQ (0.4% exp., 0.4% rev.) and +1.2% YoY (1.1% exp., 1.2% rev.)

New Zealand: No tier 1 data.

 For further information on the Pacific G10 Macro Rates team, their experience and strategy please see below  

Read the Strategy Information Sheet

IMPORTANT INFORMATION: Issued and approved by Pacific Capital Partners Limited, a limited company registered in England and Wales, authorised and regulated by the Financial Conduct Authority . The information contained herein is not approved for use by the public and is only intended for recipients who would be generally classified as investment professionals. Information or opinions contained in this article do not constitute an offer to sell or a solicitation, or offer to buy, any securities or financial instruments or investment advice or any advice or recommendation.

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