Breakfast Bites - Freight Futures hit limit up

Rise and shine everyone.

It’s another quiet Monday morning. With two weeks left in the year, most people have already gotten their early New Year’s gift with Powell’s pivot and an early market rally. It’s set to be a lean 2 weeks with lower volumes of trading as people head out for the holidays. Seasonality favors small caps here and with the recent tailwind, we’re likely to continue seeing that strength.

I took a much needed break this weekend, as we plan to work into the end of the year to deliver our MacroVisor outlook for 2024. We delayed the outlook until the major Central Bank meetings were done and it looks like we were right to do so. We’ve had some interesting surprises this month and tomorrow (late tonight in the US) we receive the final major DM Central Bank decision from the Bank of Japan.

You know our forecast for the BoJ, we’re looking for no change to policy here and we expect the first real move to be made after the January meeting that comes with an economic outlook. As for the policy statement, we will be looking for some softening in the language around wages, since we expect the BoJ to start hiking before real wages turn positive, and perhaps some acknowledgment of inflation being within their expected measures.

Implied volatility on the Yen jumps to 33.2%, the highest since July 27th, ahead of the decision tomorrow.

In other news, the Containerized Freight Index Futures contracts experienced a surge, reaching their 10% limit-ups overnight. This significant increase came after COSCO Shipping and Evergreen Marine Corp decided to suspend cargo loading in the Bab-el-Mandeb Strait and opt to avoid the Suez Canal due to recent attacks in Yemen. Citi analysts have pointed out that security threats in the Red Sea region may lead to higher container shipping rates. It's worth noting that Yemen's Houthis have been targeting vessels in the southern Red Sea and the Bab al-Mandeb Strait as part of their support for the Palestinians during the Israel-Hamas conflict.

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