Macro

• Widespread caution around Chinese buying sentiment 
• Weakness in Yuan can pose significant challenge
• Trade data not very optimistic

• Depression / In Depth: Why depression goes undertreated among China’s seniors
• China-Malaysia /: Strengthening China ties would bolster Malaysia’s chip, renewables supply chains, minister says
• Funds /: China expands cross-border funding pilot program for multinationals

• Hello everyone, and welcome back to our weekly positioning update – this week with a strong focus on the moves we are seeing in Fixed Income and forward-pricing at the moment and the subsequent positioning as we head into 2025.
• Markets continue to lean bearish on the Eurozone while upbeat on the US in equity terms, and likely for good reasons as macro data hasn’t given any good arguments as to why one should be upbeat on the Eurozone, and the signs we are getting on European growth in our nowcasts have yet to show up in actual releases – for now, it’s mainly the less China sensitive countries like Spain, Portugal and Greece that are performing macro-wise while Germany, France and Italy suffer.
• GDP growth is surprisingly strong in the first 3 whilst very weak in the latter 3, and given the latter’s weighting in European equity indices, it makes sense why we are seeing hedge funds being long consumer staples, health care and other defensives while scaling down bets on cyclical equities.

• According to Webster the word of the year is Polarization.
• Oxford have Brain Rot and Cambridge have Manifest. Collins have Brat, which was apparently ‘made famous by a Chari XCX album’ (me neither).
• Personally, just as Cozzy Livs (cost of living) was my favourite in 2023, this year really deserves to be ‘Word Salad’, although without Kamala it is unlikely to reappear anywhere near as much.

• For the week ending 13/Dec, US crude inventories fell by 0.9m barrels, missing forecasts. Gasoline stocks rose more than anticipated, while distillate inventories declined more than expected.
• US natural gas inventories fell by 125 Bcf for the week ending 13/Dec, beating analyst expectations of a 123 Bcf drawdown. Inventories are 3.8% above the 5-year seasonal average.
• Major analysts lowered their 12-month PTs on Exxon, SLB, Halliburton, and Occidental. Also, Barclays downgraded its rating on Halliburton to Equalweight from Overweight.

• FY 2024-25 H1 witnesses 12% YoY growth in tire exports value 
• Motorcycle tire exports volume up by 37%; Columbia largest importer 
• Bridgestone to invest US$85 million for India expansion 

• US and China treasury yields highlight inflation control challenges, with the Fed’s rate cut fueling market uncertainty.
• Asia’s mixed monetary decisions saw Japan hold rates, while the Philippines’ cuts worsened currency pressures.
• China’s retail sales remain resilient despite lower growth expectations, contrasting with declining real sales in the US.

• The BoE matched widespread expectations again by holding the Bank rate at 4.75%, although the three dissenters exceeded the two we expected (consensus was for one).
• Surprisingly high wage growth is reinforcing the gradualist urge of most members. Softer labour market conditions will likely be used to justify a February rate cut.
• We maintain our call for BoE cuts in February and May before an extended pause that may end with rate hikes to remove accidental stimulus amid high neutral rates.

• The Norges Bank held the policy rate at 4.5%, aligning with the consensus, and signalled potential easing from March 2025, contingent on continued economic moderation.
• Inflation has slowed significantly but remains above target, constrained by high wage growth and business costs; domestic activity has exceeded expectations, while unemployment remains stable.
• The outlook is marked by uncertainty, with risks from global trade policy and domestic inflationary pressures influencing the trajectory of future rate adjustments.

• EVs / In Depth: How shift to EVs risks sidelining auto parts giants
• Toy /In Depth: China’s trendy toy makers march into Southeast Asia
• Delivery /China’s food delivery giants to introduce mandatory rest breaks for riders

• We expect inflation for the first fortnight of December to stand at 0.38% bw, given the rebound in prices following “El Buen Fin” discount season.
• This fortnight inflation would be in line with the increase of 0.38% bw that is typical observed in this period.
• Our forecast is explained by the 0.45% bw increase in core inflation (typically 0.44% bw in the period).

• The Riksbank cut its policy rate by 25bp to 2.5%, meeting consensus expectations and reflecting a total reduction of 1.5 percentage points since May 2024 to support weak economic activity and stabilise inflation near the target.
• Forward guidance indicates the potential for another rate cut in H1 2025, contingent on stable inflation and growth projections, emphasising evaluating the lagged effects of earlier policy adjustments.
• External uncertainties, including geopolitical tensions and trade policy ambiguities, alongside domestic risks, such as the krona’s exchange rate and fragile recovery momentum, will influence future monetary policy decisions.

• Happy Tuesday, and welcome back to our weekly commodity editorial, where we keep you updated each and every week on what’s going on in the world of commodities, energy, and the like!
• It’s hard to talk about commodities without talking about China these days, as we have seen a complete reversal in the Chinese macro scene after we scouted last week for the best commodity plays should the Chinese stimulus come through.
• After all, they used the same wording as they did back in 2008, and it was wise of markets to “cry wolf,” as China would need to publish actual stimulus plans and their size before markets chased the story.

• What happens when an ominously sounding Hindenburg Omen occurs when the market is oversold? The notoriously unreliable Omen is said to have called “ten of the last three market corrections”.
• The market’s reaction to the FOMC decision added to the risk-off market tone. The Fed marked down the number of 2025 quarter-point rate cuts from four to two.
• Four of the five components of our Bottom Spotting Model have flashed buy signals. Two or more simultaneous buy signals have been good long entry points for traders.

• Airlines / In Depth: Even more European airlines drop China routes
• Fraud /In Depth: China fleshes out telecom fraud rules to ensure punishments fit the crime
• Temu /: Temu suffers first big setback as Vietnam suspends its operations

• The final Euro area inflation print for November trimmed its rise by 4bps, rounding it down to 2.2% y-o-y. Revisions were broadly spread over the special aggregates.
• Median inflation remains close to annualising at 2%, although Germany is excessive like the UK. Our projections for underlying pressures softened slightly over the past month.
• In our view, EA inflation will still slow to the 2% target in a few months and stay near there through 2025. Forceful ECB easing could break that benign outlook.

• The Bank of Thailand unanimously maintained the policy rate at 2.25%, aligning with consensus expectations, citing alignment with economic potential and inflation within target expectations.
• Economic growth projections for 2024–2025 remain steady, but uneven sectoral recovery, particularly in manufacturing and SMEs, presents ongoing risks to sustainable recovery.
• Global economic uncertainties, credit growth trends, and the efficacy of government debt-relief programmes in supporting domestic demand and financial stability will influence future policy decisions.

• Bank Indonesia held the BI-Rate at 6.00%, consistent with expectations, focusing on exchange rate stability and inflation control within the 2.5% ±1% target range amid heightened global uncertainty.
• Strengthened pro-market monetary operations and macroprudential measures aim to attract foreign capital inflows and support credit growth in priority sectors, sustaining financial stability and growth momentum.
• Future policy adjustments will depend on inflation dynamics, external shocks, and capital flow trends, as global risks, such as slower Fed rate cuts and rising US yields, constrain monetary policy flexibility.

• UK inflation matched expectations by increasing to its highest headline pace since March, although this doubled the BoE’s forecast error to 0.2pp (0.1pp in services).
• Only one division contributed much less to the monthly impulse than last year, with the median rate remaining excessive at 3% amid broadly high unit labour cost rises.
• An early December index date will likely be used, weighing on airfares in the short term. Our forecast still gaps higher than others in 2025 despite the consensus rising.

• US natural gas prices rose 6.6% for the week ending 13/Dec, driven by rising LNG exports, despite downward pressure from milder winter forecasts.
• Henry Hub Put/Call volume ratio rose to 1.10 from 1.06 (06/Dec) the previous week as put volumes rose by 21.5% WoW, while call volumes increased by 16.5%. 
• Henry Hub OI PCR fell to 0.83 from 0.84 compared to last week. Call OI rose by 5.4% WoW, while put OI increased by 4.8%.

• UK unemployment stopped rising in October, with the 4.3% rate close to the average of the past 18 months. The underlying trend is only for a slight weakening after strength.
• Employment and hours worked are booming, partly owing to recent revisions. The poor productivity performance raises the hawkish pressure from these activity data.
• Resurgent wages compound the hawkish news as private pay jumps on not-yet-captured public sector settlements. These data torch the dovish case for cutting rates this week.

• PPP / Cover Story: How regulation shake-up cast public-private partnerships into limbo

• Hong Kong /In Depth: Mainlanders flood Hong Kong talent program

• Ji Yue /Baidu, Geely offer limited help to stalled EV brand

• Historic Coffee Price Rally During the week Coffee Futures hit a new all-time high.
• Supply concerns continue to fuel the rally in a strongly backwardated futures market.
• The drought that El Niño weather brought over to Brazil over the last summer continue to be persistent.

• WPI inflation eased to 1.9%YoY in Nov’24, implying that the real policy rate was +4.6%, reining in industrial growth. Using CPI, the real policy rate in Nov’24 was +1.04%. 
• That seeming divergence is mainly caused by vegetable inflation, which moderated to a still-high 29.2%YoY in Nov’24 (from Oct’24’s 42.2%YoY!). Core CPI inflation has remained below 4%YoY since Dec’23. 
• The bountiful winter harvest is likely to prompt a steady moderation in food/headline CPI inflation to below 4%YoY by Apr’25. We expect the repo rate to decline 75bp by Jun’25. 

• Global credit ecosystem remains stable, similar to 2024 outlook
• Tight spreads and low all-in yields support demand in credit markets
• Concerns about non-cash accrual companies in private credit portfolios and potential impact on risk distribution from public to private markets, but overall sentiment remains positive for credit markets.

This content is sourced through publicly available sources and has been machine generated. Information displayed is for general informational purposes only.

• Welcome to my weekly editorial, where I assess the big-picture macro landscape, explore potential risks, and identify the next narrative for traders.
• Last week, I kept getting pings, rings, and dings from traders eager to discuss whether inflation is poised to make a comeback following the fourth consecutive hot inflation report in the U.S. Admittedly, we’re trending around 3.5% inflation on an annualized basis, which doesn’t look great amidst a cutting cycle.
• Consequently, the market has started repricing the inflation outlook, with the near-term (2-year) outlook once again outpacing the 10-year inflation outlook in inflation swaps.

• The US oil and gas rig count remained unchanged at 589 for the week ending on 13/Dec, after rising by seven the previous week.
• For the week ending 06/Dec, US oil production rose to a new high of 13.63m bpd from 13.50m bpd the week prior.
• The number of active US oil rigs was steady at 482, while the US gas rig count rose by one to 103.

• Over the last week, the FTSE ALL World equities index stalled slightly, losing 0.8% in value, with the FTSE ALL Share index losing a tad more, down a smidgeon under 1%.
• Tech stocks again outperformed, sending the Nasdaq 1.5% higher and taking the index to over 20,000 for the first time ever.
• The S&P 500 edged 0.5% lower, and the Russell 2000 ended the week 2% down. The Magnificent 7 hit new highs as the market-broadening trend evaporated.

• The past week saw insight on Indosat (ISAT IJ), Mitra Adiperkasa (MAPI IJ), Global Digital Niaga Tbk PT (BELI IJ), Singapore Post (SPOST SP), and IHH Healthcare (IHH MK). 
• There was also a macro insight on Vietnam as well as an index rebalancing piece from Brian Freitas on the Vietnamese market. 
• The Week That Was in ASEAN@Smartkarma is filled with an eclectic mix of differentiated substantive, and actionable insights, macro and equity bottom, from across Southeast Asia.

• WTI futures rose 6.1% for the week ending 13/Dec, driven by China’s policy easing plans and supply concerns from sanctions on Russia and Iran.
• WTI options Put/Call volume ratio fell 1.15 from 1.24 (06/Dec) last week, as call volume rose by 21.7% WoW while put volume increased by 12.6%.  
• WTI OI PCR fell to 0.85 from 0.88 last week. Call OI rose by 7.0% WoW, while put OI increased by 3.3%.

• January-October 2024 exports yield US$2.54 billion, up 17% YoY
• 405% rise in value YoY in exports to Malaysia during Jan-Oct 2024
• Michelin plans to source rice husks from Vietnam for tire-making

• Flash PMIs for December broadly exceeded expectations in the services sector, with the UK and EA rebounding and the US surging to highs more consistent with hikes than cuts.
• A slight trend rise in the US unemployment rate suggests strength is partly structural but could be noise around cyclical strength. Global rates still don’t look tight.
• We still expect persistent underlying price and wage inflation to truncate easing cycles earlier than most expect, following the norm for cuts without recessions, like in 1998.

• The Syrian civil war has consequences that extend far beyond its immediate vicinity.
• The potential collapse of the Assad regime could significantly impact global issues, including the Russia/Ukraine conflict.
• This collapse could also affect Germany’s debt ceiling reform prospects and the oil industry.

• The UK economy has recently shown signs of stabilizing after a period of stagnation, with a modest uptick in household spending and business investment.
• Government spending and public investment have also provided a temporary boost, contributing to a more positive short-term outlook.
• Nevertheless, multiple risks persist as geopolitical tensions, volatile energy markets, and uncertain global trade conditions continue to threaten stability, while changes in foreign economic policies could weigh on business and consumer sentiment.

• Risk reward favours this shift in allocation between these markets.  
• Short to mid-term concerns on the Indian market warrant this strategic change
• Slowing revenue growth and less government spending leading to decelerating profits which is not yet reflected in market multiples

• In the wake of Trump’s electoral win, market participants have given him the benefit of the doubt and embraced a honeymoon.
• Expectations for equity returns are high and sentiment is becoming frothy.
• Risks are rising, but we would tactically monitor if market technical and sentiment conditions progress in January.

• The continued lack of disinflationary progress in the November CPI and PPI reports is setting up conditions for a hawkish rate cut at the December meeting.
• The big question is how this affects overall risk appetite. Elections of new presidents often set up a honeymoon period characterized by small-cap outperformance, which has been lacking this year.
• Our base case is a rally into year-end, but we would like to see confirmation from better relative performance of high-beta small-cap stocks

• Narrow leadership in the S&P500 has evoked memories of the conditions that prevailed in the late-1990s. US history is littered with periods of even greater concentration of equity market leadership.
• Narrow leadership of the S&P500 reflects the shift in the distribution of corporate profits in favour of larger companies as important sectors within the US economy have become more concentrated. 
• Current valuations of the top 10 S&P500 stocks are lower than the 2000 peak. Exuberant profit expectations present the biggest threat to US equities as opposed to narrow leadership.

• China TSF disappointed expectations, coming in at 2.34 trillion RMB (down 5% YoY), compared to the median forecast of 2.7 trillion RMB by the street.
• Comex premiums significantly strengthened, with alot of market participants turning bullish with the imminent return of Donald Trump to power on the 20th of January 2025.
• We initiated on First Quantum Minerals (FM CN). For more details, read our insight: First Quantum Minerals (FM CN): Call Option on Cobre Panama? 

• A Comprehensive Guide to Building AI-Powered Investment Systems: The application of Large Language Models (LLMs) in quantitative finance, focusing on the current state of LLM technology in financial applications 
• I also cover: 1. Comparative analysis of leading models                2. Implementation frameworks for production systems 3. Risk management and quality control considerations 
• Key Findings: 1. Multi-model approaches outperform single-model solutions 2. Production implementation requires robust quality controls 3. Model selection should be task-specific within the investment process 

• On 14 December, South Korean President Yoon Suk-Yeol was impeached by the National Assembly in a vote of 204 out of 300 seats.
• The Constitutional Court could take about 90-180 days in making the final decision on the impeachment of President Yoon. 
• Now that President Yoon has been impeached, Han Duk-Soo (Prime Minister) will become the temporary acting President of South Korea.   

• Hi everyone, and welcome back to our weekly positioning update.
• I’ve been puzzled over the past weeks of just how much risk assets have been denying the underlying macro trends, and it very much mimics the pattern we saw in Q4 2023.
• Markets are not really responding to macro unless there is a major surprise to either side of the economic consensus as this is the only scenario which can change the expected rate path of the Fed.

• OPEC cut its 2024 demand growth forecast for the fifth consecutive time this year. It lowered its 2024 and 2025 forecast 11.5% and 5.8%, respectively.
• The EIA and IEA lowered their 2024 demand projections by 10.1% and 8.7%, respectively. However, they raised their 2025 projections by 5.7% and 11.1%, respectively.
• The EIA reduced 2024 and 2025 price forecasts for WTI and Brent, citing higher non-OPEC+ production and subdued demand, which are expected to drive global inventory builds after Q1 2025.

• For the week ending 06/Dec, US crude inventories fell by 1.4m barrels, beating expectations of a 1m barrel decrease. However, gasoline and distillate stocks rose more than expected again.
• US natural gas inventories fell by 190 Bcf for the week ending 06/Dec, beating analyst expectations of a 175 Bcf drawdown. Inventories are 4.6% above the 5-year seasonal average.
• Wells Fargo raised its 12-month PT for Chevron but lowered targets for Shell and Occidental. Exxon targets a CAGR of 10% in earnings and 8% in cash flow through 2030.

• 79% of ELTs consumed by end-use markets, up 10.5%
• Tire-derived fuel tops ELT use, followed by ground rubber
• Sumitomo Rubber USA announces closing of Buffalo plant

• Contrary to popular belief, the upward trend in global US$ exports, which has been in place since 1948 remains intact. World trade openness too is higher today than pre-GFC.  
• US consumers are the richest. However Asian affordability is growing quickly . The region’s share of the global imports is already on par with Europe’s.   
• Globalisation is not reversing but evolving. Regional trade is driving world exports while world manufacturing production chains are transitioning from horizontal to vertical integrated.

• The seasonal festival of packed macro releases before Christmas has shown policy divergence and surprise, with the SNB and the Bank of Canada cutting by 50bp, Brazil hiking by 100bp, and the ECB’s 25bp cut as expected.
• There is a firm consensus for no change for the BoE and a 25bp cut for the Fed, with one of the other announcements expected to shock.
• The UK CPI inflation call is relatively high at 2.6% on the data front.

• Smugglers / In Depth: How China is cracking down on border trade smugglers
• Pension /: China’s personal pension pilot is ready to go nationwide, sources say
• EVs /: Baidu-Geely EV brand pledges to maintain deliveries as backers’ support wavers

• The US Net International Investment Position (NIIP) as a debtor country has ballooned since the GFC, attracting global demand for US assets, which feeds demand for the dollar.
• Historically high dollar demand has allowed the US to enjoy the benefits of low interest rates and created a historic bull market in US equities.
• As the US continues to use its currency for geopolitical purposes, countries have begun to question dollar hegemony.  The US fights against any country that tries to weaken the dollar

• On Dec. 4, Michel Barnier became only the second Prime Minister in French history to be ousted by a no-confidence vote.

• Precisely one week later, the other major EU economy, Germany, submitted a motion of no-confidence of its own to be held on Dec. 16. What the heck is going on in Europe?!

• The political chaos in France and Germany has the same root cause: a sluggish economy and insurmountable debt levels.

• The biggest takeaway from President Yoon’s address to the nation today was his focus on election integrity and election fraud.
• He was basically implying that the biggest reason for declaring a martial law was due to severe concerns about security breach issues at the National Election Commission.
• One of the clear beneficiaries of President Yoon’s speech today will be the cybersecurity sector.

• Relending / Share cancellation key to ensuring PBOC’s relending tool stabilizes stock market, insiders say
• Chips /In Depth: Chasing chip talent to keep the boom alive
• Preview /Commentary: CEWC will endorse stronger policy support to counter headwinds

• The ECB matched our expectations by cutting its deposit rate by 25bp to 3%. Dovish hopes for a 50bp punch were disappointed, albeit mostly faded in recent weeks.
• Removing the reference to sufficiently restrictive policy was reasonable before reaching neutral, with the appropriate determination language being similar.
• 25bp cuts in January and March would take rates to the upper end of last year’s staff estimates for neutral, which may have risen, justifying not much easing beyond that.

• First Quantum Minerals (FM CN) is a play on African mining assets for copper/zinc with an optionality of resumption of the Cobre Panama mine that could double the share price. 
• We should not assign a high probability to the asset’s resumption and view it as a long-duration, very out-of-the-money call option.
• The company trades at an EV-EBITDA of 9.8x, which is more expensive than some of its peers. However, Cobre Panama’s optionality makes it attractive.

• India’s ethanol policy is driving increasing corn demand both locally and for imports
• India’s corn production is estimated to be around 38 million for the next year
• India primarily imports non-GMO corn from Myanmar and Ukraine for their ethanol industry, facing challenges in meeting the demand due to feedstock tightness and high import duties

This content is sourced through publicly available sources and has been machine generated. Information displayed is for general informational purposes only.

• The SNB cut its policy rate by 50 basis points to 0.5%, surprising consensus expectations for a lesser reduction because of lower-than-expected inflation and subdued economic conditions.
• Inflation projections remain well within the price stability range, with medium-term forecasts reflecting subdued second-round effects, though heightened global and domestic uncertainties may influence future rate decisions.
• The SNB is flexibly prepared to keep easing if inflationary pressures weaken further while maintaining readiness to intervene in foreign exchange markets to manage franc appreciation.

• Welcome back to our weekly editorial on everything commodity and energy-related!This week is all about China as the Politburo and PBoC have announced new (undefined) stimulus measures aimed at simultaneously countering tariffs from the Trump administration in 2025 and bolstering the economy, regaining confidence as China battles structural issues.
• This naturally raises the question of how this will impact commodities.
• As the world’s largest importer of commodities by a significant margin, China’s injection of capital into its economy could provide a substantial boost.

• With the US and China distracted from stabilizing the world geopolitical order, flare-ups and stresses will occur more frequently as various actors feel emboldened to undertake risky gambits. 
• The world, including emerging Asia, will have to contend with “much higher for much longer” geopolitical risk and its aftereffects on global trade, investments, and financial markets. 
• But most economies in the region retain agency to adapt to a more hostile environment by bolstering internal resilience and forming new coalitions of the willing to pursue shared objectives. 

• Squeezed supply owing to rains lifts prices in domestic market
• Exports down 23.4% MoM at US$79.5 million in Sept
• Michelin seeks proactive policies to up rubber production 

• Inflation for the second half of November stood at -0.12%, supported by the extended effects of “El Buen Fin” sales event.
• During this period, general inflation benefited from the continuation of discounts offered during “El Buen Fin.”
• This year, the discount season began on November 15 and extended through November 18.

• Autos / In Depth: China’s auto industry reaches turning point as EV exports slow
• Funds /: Chart of the Day: Value of China’s mutual funds comes down from peak
• Nvidia /: Nvidia asserts commitment to fair competition amid China antitrust probe