Rise and shine everyone and Happy Friday.

A few macro data points to discuss:

We have the US PPI numbers to be released at 8:30 am ET. The MoM PPI has been coming in negative for the past 3 months and is expected to come in +0.1% this month, with the YoY PPI number slowing to 0.6% estimated from 1% last month. Given that we had a hotter-than-expected CPI number, even an in-line result would be a welcome sign.

Yesterday, the Fed’s Bostic sent mixed messages, underplaying January’s CPI data as being a trend but, at the same time cautioning against expecting rate cuts too soon. It’s not like the market really cared, and the view is now that traders are looking at the actual data to determine what could happen.

We also have the preliminary Michigan Sentiment data out at 10 am, showing a nice decline in inflation expectations so we’re looking for that trend to hold.

Also, keep an eye on housing as we have Housing Starts and Building Permits data out today at 8:30 am.

Keep an eye on oil, as Iraq has committed to offsetting its excess oil production over the next four months which could keep oil prices elevated over the next couple of months.

US Equity Futures are mixed this morning with the SPX and Nasdaq trading higher while the Dow and Russell 2000 are flat to lower. Yields are seeing a bit of a pickup, more on the shorter end. The US Dollar is flat at 104.27. Oil is pulling back to just under $77, while Gold and Bitcoin climb higher.

Big Stories

Retail Sales Dichotomy

We got the US Retail Sales numbers yesterday and this dropped more than expected coming in at -0.8% MoM vs. -0.1% expected. Core retail sales fell 0.4% in January and the level was revised down by 0.44% in December. Some of it was explained due to severe winter weather in January but, ecommerce spending also dropped. As far as the market goes, this is a good sign because lower consumption means lower inflation growth, i.e., a slowdown in prices.

On the other hand, we got the UK’s Retail Sales data this morning that came in hotter than expected, at +3.4% MoM vs. 1.5% est. Not only did the number turn positive but is the highest pace of YoY growth since March 2022. This adds to the BoE’s worries yet again, with the economy in recession but, inflation and wages still at a relatively high level. This may very well push back the timing of rate cuts for the central bank.

BoJ’s Ueda Speak at a Parliamentary Hearing

Bank of Japan Governor Ueda testified that the country's monetary policy is expected to remain accommodative even if negative interest rates are phased out.

"Once a positive wage-inflation cycle kicks off and sustained achievement of our price target comes into sight, we will examine whether or not to sustain our massive stimulus measures, including negative interest rates," Ueda said.

Ueda refrained from commenting on the yen and its short-term fluctuations but noted that the impact of previous import cost increases is likely to lessen.

"We'd like to scrutinise whether Japan's economy continues to recover moderately, and whether a positive wage-inflation cycle would be sustained," he told parliament on Friday, when asked by a lawmaker on how Thursday's weaker-than-expected GDP data could affect the timing of an exit.

Quote of the Day

“The recent long period of high inflation suggests that, to avoid being forced into adopting a stop-and-go policy akin to that of the 1970s, we must be cautious not to adjust our policy stance prematurely.” ECB’s Schnabel (Germany)

Chart of the Day

From BofA’s flow show: The history of bubbles shows that the recent AI bubble is in the very early stages. And this week’s flows.

Other Stories

• The Nikkei index saw an increase today, nearly reaching the historic high of 38,957.44 set in 1989, with standout performances from chip-related companies Tokyo Electron and Advantest, along with key Nikkei component Fast Retailing, right from the start.

• The New Zealand dollar didn't perform as well following comments from RBNZ Governor Orr, who kept his discussion on the central bank's objectives technical, affirming the 2% inflation target as suitable. However, he indicated that cuts to the Official Cash Rate (OCR) are not expected soon.

• The Hong Kong Mainland Properties Index rose by over 5%, buoyed by property developer Logan's legal victory, where a Hong Kong Court dismissed a petition for its winding-up, effectively granting the company a reprieve.

• Bank of England's Greene mentioned that monetary policy must stay restrictive for a longer period due to signs that UK inflation is proving to be more persistent than the US's inflation. He noted that current market rate path expectations might not fully account for this.

• Norges Bank Governor Bache stated that prematurely easing monetary policy might undermine confidence in Norway's capacity to control inflation.

Calendars

(news taken from Reuters, FT, Bloomberg; Calendar from Trading Economics)