Macro

In today’s briefing:

The Liquidity ‘Air Pocket’: A Short Update After US Tax Filing-Week
Global Funds Q1 Review: Benefiting from Underweights in Apple & Tesla
Walker’s Weekly: Dr. Jim’s Summary of Key Global Macro Developments – 19 Apr 2024
HEW: Reflating Tighter for Longer
The Weekly Market Monitor – Rockets Roar While Hawks Take Off

The Liquidity ‘Air Pocket’: A Short Update After US Tax Filing-Week

By Michael J. Howell

Global Liquidity has been the key factor driving risk assets higher. It faces a short-term air pocket that investors need to understand
Three factors are dragging Global Liquidity — the US Fed, the PBoC and the rising MOVE Index
Most important near-term, the US money market liquidity has suffered a major hit this week following the April 15th Tax-filing deadline. Next up the QFA at month-end

Global Funds Q1 Review: Benefiting from Underweights in Apple & Tesla

By Steven Holden

Strong start to 2024, but majority underperform: Average returns of 7.6% lags the SPDRs MSCI ACWI ETF by -0.33%, with 44% of funds outperforming.
USA Technology Drives Returns: US Tech sector accounts for 1/4 of total returns in Q1. China & India Financials a drag on performance.
Apple and Tesla Positions Outperform: Underweights in both stocks help claw back losses made due to NVIDIA underweights.

Walker’s Weekly: Dr. Jim’s Summary of Key Global Macro Developments – 19 Apr 2024

By Dr. Jim Walker

China’s GDP Performance: China’s first quarter GDP growth exceeded expectations at 5.3%, sparking debates about data accuracy and manipulation.
Singapore’s Economic Revisions: Singapore’s initial growth estimate of 0.5% was later revised down to 0.1%, underscoring challenges in producing accurate forecasts.
Regional Trade Dynamics: While China reported a contraction in exports, a closer look revealed modest export growth. Japan and Korea struggled with declining exports and imports, highlighting challenges in domestic demand.

HEW: Reflating Tighter for Longer

Despite no policy decisions this week, hawkish moves continued as UK price and wage inflation exceeded expectations and FOMC comments suggested another rate hike. The belief remains that the BoE should cut later than the Fed.
The upcoming week is expected to be quiet for monetary policy announcements, with the BOJ and Bank Indonesia being the main ones.
The flash PMIs are the data highlight of the week, along with the Q1 GDP, March PCE and durable goods data from the US.

The Weekly Market Monitor – Rockets Roar While Hawks Take Off

Geopolitical tensions and worries about inflation are overshadowing intrinsically bullish market sentiment and decent earnings reports.
Contrary to what has become the latest market muse, higher interest rates do not explain the resilience of the US consumer and economy.
China’s data dump raises serious questions about its true underlying growth momentum, suggesting that its consumers will continue to buy gold.

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Apr 19

Daily Brief Macro: EM Gold Rush: The pressure valve amid Asian FX debasement risks? and more

In today’s briefing:

EM Gold Rush: The pressure valve amid Asian FX debasement risks?
5 Things We Watch – Rates Pricing, Bond Positioning, Equities Setback, USD Wrecking Ball…
Asia Ex-Japan Q1 Performance & Attribution: Strong Start for Active Managers
BoE Should Move Behind the Fed and ECB
Australia Unemployment Rate 3.84% (consensus 3.9%) in Mar-24
GEM Funds Outperform in Q1. Long-Term Active Vs Passive Performance Compelling.
Scandi Watch: Assessing the path for SEK and NOK rates

EM Gold Rush: The pressure valve amid Asian FX debasement risks?

By Elias Lisberg Glistrup

Welcome to this week’s edition of our EM-focused weekly editorial.
This week, we’ve decided to look into the reemerging weakness in Asian FX, and how this corresponds with the still strong momentum in gold prices.
Gold rallies have historically coincided with a weaker USD.

5 Things We Watch – Rates Pricing, Bond Positioning, Equities Setback, USD Wrecking Ball…

Macro is truly back with central banks and pricing of policy rates back on the top priority list amongst traders and investors.
Powell’s remarks from yesterday confirmed fears of the Fed deviating from their promised rate cuts back in December, and the question will now be, whether they will cut rates at all.
A pivot from a pivot is tough, but it might be exactly what’s going to happen.

Asia Ex-Japan Q1 Performance & Attribution: Strong Start for Active Managers

By Steven Holden

Strong start to 2024 as majority outperform: Average returns of 3.3% beat the iShares Asia Ex-Japan benchmark, with 66% of funds outperforming.
Technology Sector Drives Returns: Taiwan and South Korean Tech contribute the most to returns, whilst China Financials and Healthcare drag on performance.
HDFC Bank and AIA Group costly: Both stocks are among the top overweights among Asia Ex-Japan investors. Poor performance this quarter cost managers ~ 50bps in losses versus the benchmark.

BoE Should Move Behind the Fed and ECB

Hawkish surprises in the UK and US data pushed back rate cut pricing. Dovish comments from Bailey still weigh on BoE rates, inappropriately keeping pricing below the Fed.
Underlying inflationary pressures are worse in the UK, where wage growth is persistently high and not backed by productivity, causing the UK’s services inflation to be higher.
Prevailing policy settings don’t seem set to drive down UK inflationary pressures before the US. Unemployment is trending similarly, suggesting similar monetary tightness.

Australia Unemployment Rate 3.84% (consensus 3.9%) in Mar-24

Australia’s unemployment rate in March 2024 increased slightly less than predicted, showing relative stability in the labour market.
The 3.84% unemployment rate is still higher than both the one-year and long-term averages.
Employment decreased, indicating a weaker demand in the labour market.

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

GEM Funds Outperform in Q1. Long-Term Active Vs Passive Performance Compelling.

By Steven Holden

Strong start to 2024 as majority of GEM funds outperform: Average returns of 2.8% beat the iShares MSCI EM ETF by 0.66%, with 63% of funds outperforming.
Technology Sector Drives Returns: Technology sector the key contributor to returns, with TSMC accounting for just over half of total fund returns on the quarter.
Active vs Passive: Q1 performance adds to GEM active fund’s impressive record of outperformance. 5-year average GEM fund returns are +7.4% ahead of the benchmark iShares MSCI EM ETF.

Scandi Watch: Assessing the path for SEK and NOK rates

Welcome to a short and sweet Scandi special.
After years of working at the biggest bank in the Nordics, I have developed a strong understanding of the rate path model of Norges Bank and we have developed a “cheat sheet” that can live track the path, if it was to be hypothetically updated daily.
The overwhelming conclusion is that the path has shifted in a dovish direction since the MPR-1 meeting in March in contrast to global developments.

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Apr 18

Daily Brief Macro: The Rally in Gold: Clear as Day and more

In today’s briefing:

The Rally in Gold: Clear as Day
EA Inflation Subdued Enough for the ECB
UK Stuck With High Services Inflation

The Rally in Gold: Clear as Day

The massive rally in the price of gold coincided with Fed Governor Waller’s speech, in which he stated that he believes the Federal Reserve should buy more T-bills.
Many market pundits argue that changing narratives explain historical gold rallies.
But digging a bit deeper reveals that, especially since the Great Financial Crisis, the narrative behind gold’s strong performance has been the same and getting stronger.

EA Inflation Subdued Enough for the ECB

The final EA HICP inflation print confirmed the downside surprise to 2.4% from the flash release. Progress gets more challenging as energy and food base effects wear out.
Although services inflation is stuck at 4%, that is far better than the UK’s 6%, and the median inflationary impulse is broadly settling below the ECB’s target.
Labour costs might remain inflationary, but the ECB seems to have sufficient confidence to cut in June unless the data surprise significantly to the contrary.

UK Stuck With High Services Inflation

UK CPI inflation exceeded the consensus by 0.1pp as it only slowed to 3.2% in March, as we forecasted. Services inflation stuck at 6%, and high-frequency impulses increased.
Persistently high pay settlements sustain wage and underlying price inflation above target-consistent levels. We only see services slowing below 4.5% in September.
We expect the BoE to cut in November after the ECB and Fed. Further resilience in UK and global data could still cause all three to roll back even further.

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Apr 17

Daily Brief Macro: Iran’s attack – Large in Size and more

By VRS (Valuation & Research Specialists)

In today’s briefing:

Iran’s attack – Large in Size, Harmless in Effect. What’s next?
Inflation Preoccupation
Comment on Exchange Rate – USD/JPY – March 29, 2024
UK Paying More for Fewer Workers
Positioning Watch – Volatility Is Back, but Markets Still Lean into USD Duration.. God Knows Why..
Regional Economics: Bumpy Disinflation Makes Rate Cuts in 2024 a Big If
South Korea Politics: Policy Constraints Loom After Legislative Polls
Canada CPI Inflation 2.9% y-o-y (consensus 2.9%) in Mar-24

Iran’s attack – Large in Size, Harmless in Effect. What’s next?

By Mikkel Rosenvold

Welcome to the weekly Great Game, which is obviously dedicated to the situation in the Middle East.
We covered Saturday’s attack on Israel in our Debrief, so in this post, I’ll try and look a bit ahead and give our take on what may lie ahead – both in the Israel/Iran conflict, but perhaps even more importantly in the Red Sea deadlock.
Understanding Iran’s strikeSituation:On Saturday evening, Iran attacked Israel in response to the April 1st bombing of the Iranian embassy in Damascus.

Inflation Preoccupation

By Thomas Lam

The gap between the CPI and PCE price index adds another layer of complexity to the continuing data scrutiny
The extent and duration of the CPI-PCE convergence tend to vary across time periods and different economic environments
Also, the details from the latest CPI print, while tentatively less favorable, bear watching

Comment on Exchange Rate – USD/JPY – March 29, 2024

During the period under consideration, i.e. February 28th 2024 to March 29th, 2024, the USD/JPY pair fluctuated between 146 and 152 Yen per 1 Dollar.
The MA-10 line at the beginning of the period considered was moving above the MA-20 line.
From March 7th until March 22nd the MA-10 line trend changed and was moving below the MA-20.

UK Paying More for Fewer Workers

UK unemployment jumped surprisingly far in February 2024 to hit 4.2% as employment fell. More long-term jobless suggests this is neither a new shock nor too disinflationary.
Average earnings growth surged by 0.7% m-o-m, meaning the wage bill still rose despite fewer jobs. Regular pay growth is in rude health at 6% y-o-y or 2.1% in real terms.
Wage settlements are stuck at 5%, with a skew higher into April. Embedded inflation expectations are too high and demand tight policy despite some cyclical softening.

Positioning Watch – Volatility Is Back, but Markets Still Lean into USD Duration.. God Knows Why..

Hi everyone, and welcome back to our weekly positioning / sentiment overview, which will be delivered to you right as firefighters have hopefully put out the fire at the old exchange building in Copenhagen..
Markets have started the week off where they left last week, with the USD wrecking ball continuing to prevail, posing headwinds for equity and fixed income markets as Fed pricing has more or less turned upside down lately.
We generally positioned for this repricing of USD fixed income, but were caught wrongfooted in a few trades along the way admittedly.

Regional Economics: Bumpy Disinflation Makes Rate Cuts in 2024 a Big If

The latest US inflation print is emblematic that economies worldwide will face difficulties in achieving the “last mile” of disinflation.
Volatile food and energy prices, as well as geopolitical disturbances to supply chains, will continue to cause problems for Asian central banks.
Despite continued tightness in monetary policy, we still expect Asian economies to grow respectably in 2024.

South Korea Politics: Policy Constraints Loom After Legislative Polls

President Yoon Suk Yeol suffered a major political setback in the recent parliamentary polls, with the main opposition party winning a clear majority in the National Assembly.
Simmering public discontent from rising costs of living and doctors’ strikes to protest against Yoon’s plan to increase medical school intake drove voters to the opposition.
Yoon’s parliamentary defeat and the contrasting domestic policy agenda of the Democratic Party means greater political paralysis ahead.

Canada CPI Inflation 2.9% y-o-y (consensus 2.9%) in Mar-24

Canada’s annual CPI inflation rate in March 2024 increased to 2.9%, matching market expectations and marking the highest growth since December 2023.
Despite this, disinflation has resulted in the current rate being 0.42 percentage points below the one-year average.
The core measures continued to slow down, more than what was anticipated.

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

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Apr 16

Daily Brief Macro: Chinese Data Continues to Improve Incrementally and more

In today’s briefing:

Chinese Data Continues to Improve Incrementally
The week at a glance: Soft CPI in UK and a BIG positive surprise from China?
CrossASEAN Ground Zero – Hospitals in Play, ROTI in Play, and Philippine Towers
Corn Prices To Fire Up on Rising Energy Costs
Europe, The Elections And The Economy
Energy Cable: Good Luck Reaching Your 2% Target, Powell
Comment on Exchange Rate USD/JPY – March 29, 2024
The Week That Was in ASEAN@ Smartkarma – MAPI & Boycotts, Ace Hardware Reborn, and VinFast’s Trouble
Inflation Surprises as Commodities Rip Higher

Chinese Data Continues to Improve Incrementally

By Rikki Malik

Qingming holiday sending surpasses 2019 levels on an absolute and per capita basis
A further relaxation of housing measures spurs increased mortgage demand
Two steps forward, one step back -typical signs of a bottoming-out economy.

The week at a glance: Soft CPI in UK and a BIG positive surprise from China?

By Ulrik Simmelholt

Happy Monday and welcome to our short and sweet coverage of the data calendar for the week ahead.
We try to map the events with market moving potential and exploit weaknesses or skews in the economic consensus around them.
This week we see strong upside to US retail sales, Chinese GDP, while soft downside to the UK CPI figures.

CrossASEAN Ground Zero – Hospitals in Play, ROTI in Play, and Philippine Towers

By Angus Mackintosh

CrossASEAN Ground Zero is a thematic weekly product that focuses on key Southeast Asian themes and technology trends with a core focus on Indonesia.
We look at Indonesian Hospitals, as Saratoga buys into Brawijaya Hospital focusing attention on the space. We also look at leading mass-market bread maker ROTI as KKR seeks an exit.
We also look at the telecom tower space as transactions on the Philippines heat up and examine the current state of play in Indonesian towers.

Corn Prices To Fire Up on Rising Energy Costs

By VRS (Valuation & Research Specialists)

Corn prices are presently being pressured by ample supplies owing to the record US harvest.
Corn prices face an upside risk owing to elevated demand for ethanol and supply uncertainty from the South American harvest.
Premium for long-dated corn futures over near-term futures is on the rise. A calendar spread can be used to express this view.

Europe, The Elections And The Economy

By Alastair Newton

The centre appears likely to maintain control in the forthcoming European Parliament elections.
However, a strong showing by nationalist parties, particularly in France and Germany, may impede Europe’s economic recovery efforts.
This could be particularly problematic given the presence of new external threats.

Energy Cable: Good Luck Reaching Your 2% Target, Powell

By Ulrik Simmelholt

Greetings from a sunny but windy Copenhagen where we bring you a short but chart heavy edition of the Energy Cable.
What a week in macro and markets, huh?
The CPI print out of the US confirmed our tilt towards a reacceleration of inflation and the difficulties Powell faces in getting to the 2% target.

Comment on Exchange Rate USD/JPY – March 29, 2024

During the period under consideration, i.e. February 28 th , 2024 to March 29th, 2024, the USD/JPY pair fluctuated between 146 and 152 Yen per 1 Dollar.
The MA-10 line at the beginning of the period considered was moving above the MA-20 line. From March 7 th until March 22 nd , the MA-10 line trend changed and was moving below the MA-20.
By the end of the examined period, the MA-10 line ended up above the MA-20 line.

The Week That Was in ASEAN@ Smartkarma – MAPI & Boycotts, Ace Hardware Reborn, and VinFast’s Trouble

By Angus Mackintosh

The past week saw insights on Mitra Adiperkasa (MAPI IJ), Ace Hardware Indonesia (ACES IJ), Vinfast (VFS US), The Keepers Holdings (KEEPR PM), and Ocean Gold Philippines IPO.
There were also macro insights on Indonesia, Singapore, Thailand, and the Philippines, and CrossASEAN Ground Zero on Indonesian Hospitals, ROTI, and Towers in the Philippines, and Indonesia.
The Week That Was in ASEAN@Smartkarma is filled with an eclectic mix of differentiated, substantive, and actionable insights, macro and equity bottom-up, from across Southeast Asia.

Inflation Surprises as Commodities Rip Higher

By The Commodity Report

Last week’s inflation data surprised market participants on the upside. CPI YoY: 3,2% vs. 3,1% estimate. Core CPI m/m: 0,4% vs 0,3% estimated
Even larger was the upside surprise in the PPI data. Friends of the 70s double-dip inflation scenario will probably love this chart.
Take a closer look at the 70s and how inflation recovered before it take of in the late 70s for another rip higher.

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Apr 15

Daily Brief Macro: Iron Ore Primer: Understanding The Drivers Of the Market and more

In today’s briefing:

Iron Ore Primer: Understanding The Drivers Of the Market, Ways To Play The Sector
Iran/Israel Debrief: A Very Soft Response from Iran – No Risk of Wider War
Hedging Risk Amidst the Escalating Israel-Iran Conflict
Implications of Immigration on Future Fed Policy Conduct and US Equity Returns
Steno Signals #95 – Is the Next Move a Hike?
Portfolio Watch: The USD Wrecking Ball Is Back
Here Comes the Sentiment Flush
How Expensive Are U.S. Equities?
Inflation Takes Centre Stage – QE Coming?

Iron Ore Primer: Understanding The Drivers Of the Market, Ways To Play The Sector

By Sameer Taneja

We provide a comprehensive introduction to the iron ore sector, covering the drivers and a view of the commodity in the short run.
We look at eleven listed names in the space ( from large-cap miners to the juniors deriving a vast majority of their revenues from ore) and list our favorite miners.
We like Vale (VALE US) for its capital return in large caps, Kumba Iron Ore (KIO SJ) in midcaps, and Mount Gibson Iron (MGX AU) in junior miners.

Iran/Israel Debrief: A Very Soft Response from Iran – No Risk of Wider War

By Mikkel Rosenvold

Good morning everyone – what a dramatic night in the Middle East and what a couple of days we have in front of us.
Just a quick update on our take on things.
Note that this is written Sunday morning CET and that events are still unfolding.

Hedging Risk Amidst the Escalating Israel-Iran Conflict

By Albert Maass

Tensions between Israel and Iran have escalated, potentially leading to a broader conflict involving major global powers, which could significantly impact global financial markets.
Immediate market reactions could include a drop in global stock markets, a surge in oil prices, and increased demand for safe-haven assets like gold and the US dollar.
Multi-Asset portfolio managers need to employ strategies such as reducing risky asset exposure, increasing investments in defensive sectors, and diversifying geographically to mitigate the conflict’s impact on investments.

Implications of Immigration on Future Fed Policy Conduct and US Equity Returns

By Said Desaque

Stronger-Than-Expected data forced financial markets to pare expectations of Fed policy easing in 2024. Increased labour supply reduced wage inflation, allowing the Fed to contemplate policy rate reductions this year.
Immigration can impart short-term economic benefits and assist Fed policy by acting as a safety valve against wage inflation and keeping inflationary expectations well-anchored.
Reductions in legal immigration that curb labour supply will lower the marginal productivity of capital as well as the rate of return on equities, particularly if budget deficits remain elevated.

Steno Signals #95 – Is the Next Move a Hike?

Before getting to the financial word, I just briefly want to reiterate that we find a de-escalation most likely between Iran and Israel after the events unfolding over the weekend.
Our head of geopolitics, Mikkel Rosenvold, released his take earlier.
Quote of the week: Iran’s Chief of Staff: “Our attack is over, and we do not wish to continue it, but we will respond forcefully if Israel targets our interests.

Portfolio Watch: The USD Wrecking Ball Is Back

The USD has been on a roll since the firm US inflation report earlier in the week and we are approaching the point where European trade balances will be impacted substantially by the rally in (energy) commodities.
Even European Nat Gas seems to be on the move and pairing that move with the broader rise in Oil and Copper leads to a likely “flip” in the Eurozone trade balance.
When the Euro-zone trade balance shifts from positive to negative, we typically see an impact on the trend of the EUR, which is probably the last thing the ECB needs right now.

Here Comes the Sentiment Flush

By Cam Hui

The S&P 500 violated an uptrend that began in November. The violation resolved with the index is testing initial support nearby at the 50 dma at about 5110.
Our analysis of market internals concludes that the decline is nearly done. Sentiment is not sufficiently panicked to be contrarian bullish. Technical conditions are oversold but can become more oversold.
We interpret these conditions as a stock market that’s undergoing final flush before an intermediate-term bottom is formed. We believe any pullback should be temporary and shallow in nature.

How Expensive Are U.S. Equities?

By Cam Hui

Should investors worry about the elevated levels of equity valuation? The equity valuation question is a tricky one because it is only useful for investors with long time horizons.
Equity returns depend on the evolution of other factors such as the evolution of inflationary expectations and the bond market’s term premium.
In the short term, stock prices are elevated because of P/E expansion, but as long as earnings estimates continue to rise, downside pressure should be limited.

Inflation Takes Centre Stage – QE Coming?

By Rikki Malik

Inflationary impulses are alive and well, coming through even in “core” US data
The Bank of Japan continues to flounder around a JPY strategy
Are US banks attempting a back-door QE, aided by the Federal Reserve?

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Apr 13

Daily Brief Macro: Walker’s Weekly: Dr. Jim’s Summary of Key Global Macro Developments – 12 Apr 2024 and more

In today’s briefing:

Walker’s Weekly: Dr. Jim’s Summary of Key Global Macro Developments – 12 Apr 2024
Gold and Goldilocks
Monetary Authority of Singapore: Apr-24
The Weekly Market Monitor – Fed Doves Have Nowhere to Fly, Gold’s Fairytale Continues
UK Inflation Watch: A dovish surprise upcoming
Korea Policy Rate 3.5% (consensus 3.5%) in Apr-24
HEW: Different Evidential Hurdles

Walker’s Weekly: Dr. Jim’s Summary of Key Global Macro Developments – 12 Apr 2024

By Dr. Jim Walker

Busy week with US interest rates, Thailand’s monetary policy, and Vietnam’s economic dynamics.
Analysis reveals US inflation concerns impacting interest rate expectations, while Thailand faces challenges balancing government interference and economic growth.
Vietnam’s mixed economic indicators reflect external sector resilience but domestic sector weakness, prompting investment adjustments including removal of short on US dollar and introduction of long positions on gold and copper.

Gold and Goldilocks

By Mark Tinker

This week’s ‘CPI Print’ has caused something of a panic in the bond markets and has left the ‘Pivot’ Pundits struggling versus the ‘No Cuts’ crowd, some of whom are now doubling down and even talking about rate rises.
Traders in other markets are looking across with some degree of concern, long wary of the ability of the bond markets to trigger problems elsewhere.
So too are the politicians, keen for their particular narrative on the economy to win them votes, but concerned that they need the markets (and by extension the Fed) to support their cause.

Monetary Authority of Singapore: Apr-24

The Monetary Authority of Singapore (MAS) maintains the rate of appreciation of the S$NEER policy band to manage imported inflation and domestic economic pressures amid a nuanced global and local economic environment.
Future policy decisions will be influenced by global economic conditions, domestic economic dynamics, and inflation trends, focusing on the anticipated easing of inflation by the end of 2024.
MAS emphasizes its commitment to closely monitoring global and domestic developments, preparing to adjust policies as needed to ensure medium-term economic stability.

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

The Weekly Market Monitor – Fed Doves Have Nowhere to Fly, Gold’s Fairytale Continues

After three disappointing CPI reports, ‘Jay’ has only a tiny platform left to perform his dovish act.
The ongoing decline of US Small Business Sentiment confirms the odds of a US recession are not zero.
Gold is smashing record after record, and economy pundits keep telling you this is all about momentum.

UK Inflation Watch: A dovish surprise upcoming

Welcome to our monthly UK CPI watch.
March has been out of the ordinary in 2023 and 2022, which makes for extremely benign base effects in YoY terms for UK CPI inflation this year.
We typically see 0.1-0.2% MoM service inflation in March, which is seasonally soft, while also food prices typically soften during the early spring.

Korea Policy Rate 3.5% (consensus 3.5%) in Apr-24

The Bank of Korea has maintained the Policy Rate at 3.5%, aligning with the economic consensus in response to ongoing global uncertainties, notably the varied monetary policies of major economies and geopolitical risks.
Inflation dynamics influenced by volatile commodity prices alongside a slowing core inflation rate dictate a cautious monetary policy to stabilize mid-term inflation expectations.
Financial stability remains a priority, with the central bank monitoring household debt and real estate market risks alongside global financial market fluctuations to guide future interest rate decisions amidst uncertain economic conditions.

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

HEW: Different Evidential Hurdles

Market movements this week were largely influenced by a robust US inflation release, causing a shift towards September predictions. However, expectations for ECB and BoE were moved three months earlier.
Only Chile has policy announcements next week following the recent spate of news.
In the UK, focus will shift to macro data including labour market, inflation, and retail sales. The final EA HICP data will also be released, with a minor risk of an upward revision.

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Apr 12

Daily Brief Macro: EIA Lifts Price Forecast on Higher Oil Consumption Plus Tighter Supply and more

In today’s briefing:

EIA Lifts Price Forecast on Higher Oil Consumption Plus Tighter Supply
Indonesia Economics: Disinflation Setbacks Tie Central Bank’s Hands Tighter
Running Out of Runway
Indonesia Economics: More of the Same Won’t Cut It
[US CPI Review] Energy, Housing, And Services Keep Inflation Hotter Than Expected
Company Earnings: They Will Go Up, and Expectations Are Far from Excessive
ECB Loosely Tied to Cut in June
G3 Rates Watch: No one’s got a clue on R*, yet the market is convinced that it does!

EIA Lifts Price Forecast on Higher Oil Consumption Plus Tighter Supply

By Suhas Reddy

EIA raised its crude oil price forecast for 2024 and 2025, cites higher global oil consumption outlook and concerns over geopolitical tensions.
The agency also increased global liquid fuels production outlook for 2024 compared to the previous month.
Increased forecast on US retail gasoline prices relative to March STEO, expects lower gasoline inventories and higher net exports drive price rise.

Indonesia Economics: Disinflation Setbacks Tie Central Bank’s Hands Tighter

The latest figures show headline inflation inch further away from the central bank’s target, showcasing the difficulties caused by volatile food inflation worldwide.
In addition to sticky inflation, fiscal policy uncertainty also lurks in the background; the new government has many big-ticket manifesto pledges that need to be funded.
Still-Strong growth, sticky inflation, and depreciationary risks to the rupiah will cause Bank Indonesia to delay rate cuts, possibly for the whole year.

Running Out of Runway

US Services ex Shelter inflation spiked to over 8% in March!
Powell must work magic to stick to three rate cuts for this year.
Yet the odds remain high that we will see three or more rate cuts, but that doesn’t help you much now.

Indonesia Economics: More of the Same Won’t Cut It

Can Indonesia finally fulfil its potential as an economic superpower, or will it merely be able to maintain its stable but middling growth performance?
The Widodo inheritance has been mixed at best; the economy has not diversified away from its reliance on commodities, while the quality of governance has deteriorated.
Unless Prabowo pursues deep-rooted reform to liberalize and diversify the Indonesian economy, it risks merely continuing to grow at around 5%, which is simply not enough.

[US CPI Review] Energy, Housing, And Services Keep Inflation Hotter Than Expected

March CPI print came in above expectations at 3.5% YoY. CPI has come in above expectations for the past four months.
Gasoline, shelter, and transportation services were the major inflation drivers.
Dollar was the winner following the release as other currencies weakened. Euro declined the most while JPY weakened the least.

Company Earnings: They Will Go Up, and Expectations Are Far from Excessive

Three out of my four global earnings indicators point to significant earnings growth.
Chinese producer prices are the outlier, but it’s no surprise that domestic factors are at play here.
Equally important, investor expectations do not deviate all that much from the growth in earnings-per-share forecasted by the aggregate global earnings bellwether.

ECB Loosely Tied to Cut in June

The ECB maintained its policy rates and did not pre-commit to a June cut. However, a few members wanted to cut now, and the statement added explicit conditionality.
Guidance now ties the ECB to a June cut, albeit with ongoing data dependence preserving wriggle room. Sticky services inflation and Fed rates won’t stay its hand.
Resilient data are rolling back Fed views to our September call, but we now doubt the ECB will want to delay past June. The BoE would probably only then wait until Nov-24.

G3 Rates Watch: No one’s got a clue on R*, yet the market is convinced that it does!

What a week in Fixed Income space! The bloodbath after the hot US CPI report partially continued today, but equities have a tremendous ability to recover fast after inflation/rate shocks these months as the anticipated lean from central banks remains dovish.
In this short G3 rates watch, we take a practical stance on the R* concept.
If an economy can re-accelerate given current rate levels, it seems likely that R* is even higher than thought by many economists including the entire ilk of PhDs at the Federal Reserve.

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Apr 11

Daily Brief Macro: Will Copper Shine Brighter than Gold? and more

In today’s briefing:

Will Copper Shine Brighter than Gold?
Despite Record Crushing Ascent, Japanese Stocks Remain Bullish
EM Watch: China is preparing something BIG!
US CPI Review: Inflation is accelerating, no return to 2% in sight
[US CPI Preview] Rising Gasoline Prices & Shelter Costs to Result in Hot US Inflation
US CPI Inflation 3.48% y-o-y (consensus 3.4%) in Mar-24
5 Things We Watch – Rates Pricing, Liquidity turning, Labor Market, Commodities & China
New Zealand Policy Rate 5.5% (consensus 5.5%) in Apr-24
Thailand Policy Rate 2.5% (consensus 2.5%) in Apr-24
Norway CPI Inflation 3.9% y-o-y (consensus 4.2%) in Mar-24

Will Copper Shine Brighter than Gold?

Copper supply facing headwinds with a shortage of copper ore which has led to spiraling copper refining margins.
Copper futures trading sharply higher than cash prices and term structure for copper futures has steepened.
Gold to copper ratio can be used to express a bullish view on copper prices with relatively lower risk compared to a straightforward long copper position.

Despite Record Crushing Ascent, Japanese Stocks Remain Bullish

TSE market reforms are helping underperforming Japanese firms improve profitability.
Japanese equities remain undervalued relative to the US with lower P/E and PEG ratios. While Japanese firms still lag on CAPEX growth, dividend growth has been higher than the US.
Nikkei faces headwinds from the potential strengthening of the Yen as BoJ shifts towards less accommodative policy. For now, the impact is minimal.

EM Watch: China is preparing something BIG!

The below chart of ours have made the rounds in recent days and weeks as China seems to be preparing for something big given the heavy restocking efforts in Copper space.
As the price trends are diverging in copper versus steel and iron ore, the strategic initiatives of China are becoming increasingly evident in price action across the commodity complex, but we are yet to fully understand and accept the ramifications for global rates.
We have read plenty of bad takes on why China is building up copper reserves and the most obvious reason seems to be neglected by many.

US CPI Review: Inflation is accelerating, no return to 2% in sight

US inflation printed at 0.4% in both headline- and core terms, which was in line with our nowcasts and substantially above embedded market expectations.
In full transparency, we didn’t get everything right, but the broadness of the continued inflation in services and the early signs of a re-acceleration in goods prices outside of cars rhyme with our predictions.
Especially transportation services keep printing at levels that are way too hot for the Fed to take comfort in and it is likely a hint of a re-increasing momentum in wage expectations and wage growth.

[US CPI Preview] Rising Gasoline Prices & Shelter Costs to Result in Hot US Inflation

US CPI remains well above Fed’s 2% target range. Rising gasoline and shelter costs will push March CPI number upwards.
Consensus is for March CPI to print at 3.4% YoY in March from 3.2% in Feb. Core CPI is expected to clock 3.7% YoY.
Rising CPI will dent the likelihood of rate cut in the near term. Fed has reiterated its data dependence. Hot CPI data will vindicate Fed’s hawkish stance.

US CPI Inflation 3.48% y-o-y (consensus 3.4%) in Mar-24

US CPI inflation in March 2024 rose to 3.48% year-on-year, surpassing consensus forecasts and indicating a more persistent inflation issue.
Core CPI inflation also unexpectedly remained at 3.8% year-on-year in March 2024.
This was due to a 0.4% month-on-month increase in March 2024.

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

5 Things We Watch – Rates Pricing, Liquidity turning, Labor Market, Commodities & China

Hello everyone, and welcome back to our weekly ‘5 Things We Watch’, where we provide 5 of the things we keep an eye out for in global macro in a short and concise format.
This week we are watching out for the following 5 topics within global macro: Rates Pricing, Liquidity Turning, Labor Market, Commodities, China.
The market went into the year expecting 7 cuts in total from the Fed, which has now been narrowed down to less than two, all while equity markets have continued their drift higher as the economy is doing better than expected paired with benign liquidity conditions.

New Zealand Policy Rate 5.5% (consensus 5.5%) in Apr-24

The Reserve Bank of New Zealand’s decision to maintain the OCR at 5.50% reflects a strategic intent to manage inflationary pressures influenced by domestic and global economic conditions.
Persistent inflationary pressures, amid weak economic growth and the nuanced impact of net migration on the labour market and consumer spending, underscore the complexities of returning consumer price inflation to the target range.
Future policy decisions will hinge on the balance between restrictive monetary policy measures and their impact on economic stability, with a keen eye on global economic trends, labour market dynamics, and inflationary trends.

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

Thailand Policy Rate 2.5% (consensus 2.5%) in Apr-24

The Bank of Thailand’s decision to keep the Policy Rate unchanged at 2.5%, despite some members advocating for a reduction, demonstrates a cautious optimism about economic growth and structural impediments, alongside a commitment to macro-financial stability.
Growth projections for 2024 and 2025 are supported by private consumption, tourism, and public expenditure, albeit tempered by structural challenges in exports and manufacturing, underscoring the need for comprehensive structural reforms.
The inflation outlook remains subdued, with expectations of a gradual increase towards the target range, necessitating vigilant monitoring of external shocks and the efficacy of monetary policy in fostering an environment conducive to sustainable economic growth amid financial stability concerns.

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

Norway CPI Inflation 3.9% y-o-y (consensus 4.2%) in Mar-24

Norway’s CPI inflation rate decreased by 0.6 percentage points to 3.9% year-on-year in March 2024, which is lower than the predicted 4.2%.
This is the lowest growth rate since September 2023.
The CPI-ATE inflation rate, which excludes volatile components, was a contributing factor to this decrease but still remained at a higher 4.5% year-on-year.

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

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Apr 10

Daily Brief Macro: Israel-Iran War Coming? and more

In today’s briefing:

Israel-Iran War Coming?
Introduction: Initiation of Coverage in the Materials Sector
Positioning Watch – Reflation bets are back in
Monday Macro: Thoughts on the Next 15 Months
HEM: Rolling Precariously
UK Politics: Plague On Both Your Houses
The Evolving and Varying Demographic Imprint

Israel-Iran War Coming?

By Mikkel Rosenvold

Welcome to this week’s Great Game, where we cover current geopolitical events relevant to your portfolio!
Situation: Israel attacked the Iranian embassy in Damascus, Syria, killing several high ranking Republican Guard officers, and the whole region is now anticipating the Iranian response.
Meanwhile, Israel and Hamas are making little progress in their truce talks in Cairo while Israel has withdrawn from smaller areas in Southern Gaza amidst heavy diplomatic pressure from the US.

Introduction: Initiation of Coverage in the Materials Sector

By Sameer Taneja

Investics Research will initiate coverage of the materials sector in April 2024, starting with iron ore and then gold, coal, and steel in subsequent months (in that order).
The areas of coverage on asset classes will encompass the underlying commodity and the associated equities.
Areas of differentiation would include in-depth coverage of all equities (small/mid and large cap) and actionable tactical ideas on the commodity.

Positioning Watch – Reflation bets are back in

Hello everyone, and welcome back to our weekly positioning/sentiment overview.
The mood in equity markets is still good, with major indices stabilizing at levels far above all time highs despite taking some time to swallow hawkish comments from Fed officials.
Markets seemingly don’t care about the repricing of Fed rates until they hear it from Powell’s mouth or until they get a feeling of true pivot (on the pivot).

Monday Macro: Thoughts on the Next 15 Months

By Adventurous Investor

I want to start this Monday’s Macro with a very top-down discussion before digging into helpful market data.
Here’s the thought – we’re entering a potentially dangerous, extended 12-to-15-month period for big macro debates.
What matters for markets globally is what happens in the US, and what matters in the US is what the US Federal Reserve is thinking.

HEM: Rolling Precariously