SNB Chairman Admits Past Expansionary Policy Mistake 

“Probably with the benefit of hindsight monetary policy was all over the place a little bit too expansionary.” The well duh prize for stating the bleeding obvious goes to Swiss National Bank chairman Thomas Jordan. Sensible folks were shouting loud and clear two years ago that it was way too expansionary and inflation would follow. So if we had deflation for 40 years and inflation is a harder habit to kick, how come you think it’s still magically going away this year? 

Stocks Choppy as FTSE Rises, Wall Street Declines 

Stocks are in a bit of a chop mode now having run up pretty well this year. The FTSE 100 is higher this morning by about 0.5% led by basic resources and oil after a decline of 1% yesterday, which shaved its YTD rally to about 4%. Shares in Frankfurt also rose having declined more than 1.7% on Thursday, still up more than 7% YTD. Paris was off 1.86%, but still +7% or so for the year. Wall Street closed lower for a third session in a row and are on track to notch weekly losses amid softening economic data. Nordstrom fell 5% after-hours after it reported weak holiday sales. Gold made a fresh high at $1,937 even as the dollar held its ground with DXY just a shade below 102. Oil is bit firmer after bouncing off the 50-day line. 

German PPI Falls, Japan's Inflation Rate Hits 4% 

More goodish news on the inflation front – German producer price inflation is falling, declining 0.4 on the month. So, it’s now only running at +21.6% on the year. PPI ran at +32.9% on an annual average in 2022 compared to 2021. It kind of highlights the whole peak and plateau thesis. The rate of inflation may have peaked but it’s still running at a hell of a clip and will continue to do so even as it trends down.  Japan’s inflation rate rose to 4% - as expected after the Tokyo number hit this 40-year high. It only underlines just how far away the Bank of Japan is right now in terms of monetary policy and how much ground it will have to make up in the coming months. As discussed in a separate note, there is a significant risk of an interest rate shock fallout in financial markets when the BoJ finally ditches yield curve control.  

Fed predicts more rate hikes, UK retail drops 

Federal Reserve Bank of New York President John Williams sees more rate hikes and said: "Bringing inflation down is likely to require a period of below-trend growth and some softening of labour market conditions". Today we hear from the Fed’s Harker and Waller, whilst ECB president Christine Lagarde speaks again. UK retail sales fell 1% as higher inflation weighed on demand, but the broadly positive risk tone has seen some of the big retail stocks a bit higher. Meanwhile the GfK consumer confidence index fell back to –45 after a brief pre-Christmas improvement.   

Netflix Shares Soar on Strong Q4 Subscriber Growth 

Netflix shares jumped 7% in after-hours trading following a big jump in subscriber numbers. The company added 7.66 million paid subscribers during the fourth quarter, more than the 4.57 million anticipated by analysts. It’s first earnings that include the new ad-supported service, though management did not break down the proportion of new subscribers that came via it. It did however note that there was not much switching from premium to free – as I noted last October: “Management don’t expect much spin down to the cheaper ad steam service and I agree.” Meanwhile co-founder Reed Hastings is stepping down as co-CEO to become executive chairman. Revenues hit expectations, rising 2% to $7.85bn, whilst earnings fell on a strong dollar hitting euro-denominated debt. Margins of 7% still impress.