2023.02.13 Weekly Note

No where to hide but the Dollar

11 min readFeb 13, 2023

Nothing of particular to note this week, other that retaining the general risk-off bias held over previous weeks. I would add that I think this will be the kind of risk-off where ‘there is no where to hide but in USD’ as it is likely to be induced from the rates volatility coming back. CPI could change that view, but should it break the recent disinflation trend as expected, that would further confirm the turn in trends and bearish view for the near-term.



  • Wall Street Sees Worst Week of 2023 on Fed Jitters, Stock Buyers Fatigue sets in as Bond Yields Jump (BBG). The Stock Market Is Suddenly Dropping. It’s Time to Stop Looking to the Future — stock market is losing steam all of a sudden, probably because investors had just gotten too aggressive in their assumptions about a recovery in the economy and profits in 2024 (Barrons). FOMO Options Bets Sweep Market During Stock Rally — Activity tied to Apple, Meta Platforms and Tesla shares has touched some of the highest levels in history recently (WSJ). The New Wall Street Playbook: Cut Staff, Raise Dividends (Barrons). Investors Brace for Risk Inflation Dooms Bonds to Bear Market — Surprise hot CPI print may extend rout triggered by jobs data, Rates traders place option bets that target 6% Fed policy peak (BBG). Credit Markets Are Poised for a Gut Check After 10% Rally — Barclays strategists warn investors to not get complacent, Also the dismantling of Libor is forestalled in loan market (BBG). BlackRock, Pimco Push Back Against Bets Inflation Cooling Fast — Investors pulled $10.8b from inflation ETFs in past 6 months, World’s biggest money managers warn market may be too sanguine (BBG). Investors Are Exiting U.S. Stock Funds During 2023 Rally — Bond and international equity funds, individual stocks get renewed interest (WSJ).
  • Gas ETF Gains $518 Million in Flows Despite Price at Record Low (BBG). Natural Gas: Fasten Your Seat Belts — The buffers that keep America’s natural-gas price fluctuations at bay are eroding, ability for the electricity sector to switch to coal if shortages arise is diminishing, natural-gas supply growth in the US is expected to be somewhat constrained, lack of new pipeline capacity, extreme weather events could worsen fluctuations further (WSJ). Oil Declines as Slowdown Concerns Vie With Russia Supply Cutback — Traders assessing impact of Moscow’s plan to reduce production, WTI drops below $79 a barrel after soaring over 8% last week (BBG). Metals Rally Fueled by China’s Reopening, Tight Supplies — Copper, aluminum and other metals post large gains amid worries about low stockpiles (WSJ). Gold Slides as Hotter US Inflation Keeps Hawkish Fed on Track (BBG). The Devaluation Run in Emerging Markets Is Just Getting Started — Indebted frontier nations need devaluations for IMF funding, Argentina, Bangladesh, Nigeria seen likely to devalue next (BBG).
  • PayPal Pauses Stablecoin Work Amid Regulatory Scrutiny of Crypto — Partner Paxos under investigation by NY financial regulators, PayPal has been exploring a stablecoin amid crypto push (BBG). Biggest Crypto Staker Warns on DeFi Challenges After SEC’s Kraken Crack Down — DeFi project Lido has the largest staking service for Ether, Andreessen Horowitz and Coinbase Ventures among Lido investors (BBG). Crypto Firms’ In-House Tokens Are Coming Under More Scrutiny (WSJ). Wall Street Firm Oversees Billions Backing Tether — Cantor Fitzgerald helps manage a $39 billion Treasury portfolio that makes up the lion’s share of the stablecoin’s reserves (WSJ).


  • U.S. Jobless Claims Climbed Last Week but Remain Historically Low — Hiring has outpaced layoffs, with industries in the services sector driving job growth (WSJ). Mass Layoffs or Hiring Boom? What’s Actually Happening in the Jobs Market — Restaurants, hospitals, nursing homes and child-care centers are finally staffing up as they enter the last stage of the pandemic recovery. Those new jobs are more than offsetting cuts announced by huge employers such as Amazon.com Inc. and Microsoft Corp (WSJ). Fed’s Jerome Powell Braces for Longer Inflation Fight Amid Hiring Surge — Process of lowering inflation to goal of 2% is likely to take ‘quite a bit of time’ (WSJ).
  • Hard or Soft Landing? Some Economists See Neither if Growth Accelerates — Upturn would require higher interest rates to tame inflation (WSJ). Remote Work Is Costing Manhattan More Than $12 Billion a Year (BBG).
  • Fed’s Inflation Fight Pushes Up Cost of U.S. Debt — Republicans and Democrats disagree on whether debt load is manageable (WSJ). U.S. Begins Allowing Medicaid Money to Be Spent on Food — Biden administration allows states to tap funds for nutrition to battle chronic diseases, improve health (WSJ). Biden Appears Set to Run in 2024, but Many Democratic Voters Have Doubts — Some cite the 80-year-old president’s age as cause for concern (WSJ). Bill to Ban TikTok in US Reflects Growing Concerns in Congress — Legislation likely to draw opposition from tech lobby, users, TikTok CEO Shou Zi Chew slated to testify in House next month (BBG).
  • US shoots down fourth aerial object over North America (FT). Chinese balloon had multiple antennas for intelligence gathering, US says — State department official said aircraft was part of a broader surveillance fleet (FT). US Sanctions Six Chinese Firms Connected to Balloon Uproar — Biden ordered an F-22 to shoot down the balloon last week, Biden said incident didn’t further strain US-China relations (BBG). Taiwan reveals Chinese military balloons fly ‘very frequently’ into its airspace — Country has observed dozens of surveillance aircraft collecting data in preparation for possible invasion (FT).


  • U.K. Ekes Out Economic Growth, Boosted by World Cup — Central bank expects a recession this year and chronically weak growth as investment declines and workers are hard to find (WSJ). London Is Losing Its Crown as a Luxury Shopping Destination — Changes to tax-free rules mean visitors from America, and soon China, are now more likely to bypass the U.K. capital for Paris or Milan (WSJ). UK pub closures in 2022 near to highest level in a decade — More than 500 businesses fold as sector struggles with rising costs and falling demand (FT). UK’s Exorbitant Child-Care Costs Emerge as a Top Political Issue — With the country’s nursery bills the most expensive in the OECD, calls for reform are growing louder (BBG).
  • Euro-Zone Inflation Seen Lingering Above ECB’s Target Into 2025 — Bloomberg survey sees core gauge over 5% in first half of 2023,Key policy rate to be raised to 3.25%, economists in poll say (BBG). European Office Demand Rebounds From Covid to Drive Up Rents — Leased space jumped 15% last year to well above 15-year trend, Climate targets, post-pandemic shift propelling office demand (BBG).
  • EU Leaders Back Looser Subsidy Rules in Response to U.S. Green Spending — France, Germany favor looser subsidy rules, worrying some of the bloc’s less wealthy members (WSJ).
  • Lawmakers’ Support for Macron’s Pension Overhaul in France Falters — Proposal to raise retirement age has sparked protest, leading some lawmakers from the president’s party to threaten to vote against the measure (WSJ). French Protests Against Macron Pension Plan Draw Hundreds of Thousands (WSJ).
  • Zelensky Calls for More Help for Ukraine in EU Meeting — Ukrainian president joins summit in Brussels amid tour of European capitals (WSJ). Tanks Aren’t Arriving in Ukraine Despite Promises From European Allies — A reluctant Berlin is Kyiv’s biggest tank provider (WSJ). Ukraine Says Russia Delaying New Mobilization Amid Stepped-Up Offensive (WSJ). Russia’s Wagner Group Claims Gains Near Bakhmut in Eastern Ukraine — U.K. says Moscow’s forces are suffering highest casualty rates since start of invasion (WSJ). Russia’s Central Bank Warns of Rate Rises if War Fuels Inflation — The Bank of Russia is worried that higher spending on the war, and the diversion of workers to fight it, will receive inflation (WSJ).


  • Adani Cuts Growth Target, Capex in Post-Hindenburg Repair Moves — Group has slashed revenue target by half to about 15%-20%, Aim to save cash, repay debt and restore investor confidence (BBG). DBS Reveals $976 Million Adani Exposure, Assured by Cashflows — DBS’ bulk of Adani exposure from cement deal M&A financing, Adani has solid cashflows, isn’t concerned on exposure: CEO (BBG).
  • China pulls back from global subsea cable project as US tensions mount — Telecoms groups withdrew investment in Sea-Me-We 6, which will transmit data between Asia and western Europe (FT). China’s Current Account Surplus Hits 14-Year High on Exports (BBG). Germany’s China Dependency Is Dangerous, Finance Minister Says — German trade deficit with China more than doubled in 2022, Lindner wants to increase trade with ‘value partners (BBG). As Funding Costs Surge, China Set to Pump Extra Cash Into Money Market — PBOC likely to raise amount of medium-term loans, survey shows, Central bank can’t yet reduce liquidity support: Hwabao’s Wen (BBG). Chinese property brokers despair as homebuyers sit on sidelines -Tepid recovery underscores challenges in Beijing’s effort to revitalise critical economic sector (FT). China Regulators Querying Banks on Mortgage Prepayment Strain (BBG). China’s biggest chipmaker SMIC posts record 2022 revenue but warns of a tough year ahead (CNBC).
  • Japan Set to Tap Kazuo Ueda, Backer of Zero Rates, as Central Bank Head — Scholar, a surprise choice, says he wants to continue policies of Bank of Japan Gov. Haruhiko Kuroda (WSJ). Uedanomics, or Japan Turns to a Mystery Sensei — The world may not know the man set to take over the Bank of Japan, but the country’s top financial technocrats do. He’s taught many of them (BBG). Japan’s Top Refiner Is Gearing Up for the Oil Industry’s Decline — Eneos forecasts domestic fuel use to drop 50% by 2040, Company preparing to close some of its 10 refineries in Japan (BBG).
  • RBA Review to Scrutinize Communications on Rates, Chalmers Says — RBA panel will submit final report to treasurer on March 31 (BBG). Singapore Keeps 2023 Growth View Amid China Reopening Boost (BBG). Next Big Debt Wreck Seen Brewing in Indonesia Builder Binge — Construction firms may spark contagion at suppliers, vendors, Waskita Karya faces ballooning leverage, looming maturities (BBG).


Global Equities continue to struggle at their recent peaks with all non/ex-US indices all putting in lower highs and lows and beginning to buck the trend.

Looking at the heavyweights in EFA and EEM above — weekly Doji in the Nikkei last week with a lower low today to start the week, bearish hammer in Europe with a lower low of the preceeding 2-weeks; Emerging markets mixed mostly weighed down by the pullback in China while India Taiwan and South Korea have been flat in a tighter range last week.

US indices have been stubbornly resilient but the weekly bearish inside-bars and Harami’s printing, and at key technical zones (an important criterion for robust price action signals), is pointing to a turn. This week should confirm whether that is the case, or we continue sideways and consolidate before the next break higher/lower.

Cyclical sentiment is looking increasingly weak — Bearish Harami’s/Inside week prints on Dow Transports, Discretionary vs Staples, Homebuilders vs REITs, and Value (RPV also expressed relative to SPX and RPG) also buckling.

Index of the most shorted stocks made a hard turn last week which often marks a broader reversal in US equities (ES in Purple).

We saw some early signs that the sentiment behind the rally could be fading with put premiums rallying. It has dropped off slightly last week which I suspect is due to vols getting realized but should it stay elevated beyond CPI, I would stay confident of the bearish turn in equities.


From the top: Agriculturals, Energy, Precious metals, Industrial metals

Bloomberg commodities index traded higher last week as the larger weighting Energy and Food offsetting the declines in metals. The somewhat surprising fall in Industrial metals is yet another sign of weakening cyclical sentiment, while Precious metals should stay under pressure from the big rebound in yields.


Upward revisions to prior CPI prints and UoM data did little to temper inflation expectations which saw a bump higher in the front-end of the swaps curve on Friday…

and yields have made a big rise across the curve last week…

with rate vol picking up ahead of the strong CPI print expected this Tuesday.


  • USD and CHF grinding higher while JPY trades heavy at the lows
  • EUR bearish engulfing week while GBP downside stalling
  • CAD rallying while AUD and NZD attempting to hold support

Long USDJPY on dips is an obvious theme to given the rebound in rates, and I think any hawkish JPY buying can be faded as yield differentials should not narrow significantly overall.

For EUR, I would favour longs fundamentally given that the ECB still has some ways to go, but it may only help the EUR so far as it could come at a greater cost to households and growth, and I think we may be at that inflection point, particularly as the US looks increasingly likely to avoid a recession than Europe. Also considering the crowded EUR long positioning, I think EUR shorts will continue to be a strong tactical choice as a funder.

On the crosses, I like CAD longs given the strong labour market data and the resilience of Oil price. Standard Chartered comments sums it up well: “CAD There’s a lingering notion that BOC might be the first to cut rates.. perhaps.. but not anytime soon with such strong labour data. ( Strong employment report on Friday (headline, full time & UE rate all strong sending CAD to outperform ) We are seeing some technical damage being done on the CAD crosses (EURCAD, GBPCAD, NZDCAD), which advocate for a period of CAD outperformance and I couldn’t agree more.

If you have some differing views and thoughts on the market, feel free to reach out — have a great week trading!

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