Macro

In today’s briefing:

Hong Kong: How Much GDP Is Deduced from the Northern Spending of Hong Kong Residents
Iron Ore Prices on Fire on Hopes of China’s Third Plenum
The Heat Is On: News Flow and Sentiment in CHINA/HONG KONG (July 5th)
Paladin-Fission Merger Primed to Benefit from Rising Uranium Demand
Eurozone: Will the Tight Labor Market Persevere?
US Nonfarm Payroll Change 206k (consensus 190k) in Jun-24
HEW: Passing Political Parties

Hong Kong: How Much GDP Is Deduced from the Northern Spending of Hong Kong Residents

It is estimated that 0.8 million Hong Kong residents spend weekends at other Bay Areas
These residents spend an average of HKD730 on a weekend in Shenzhen
The value-added factor for food, alcoholic drinks, and tobacco as well as retail trade are both 0.12, which gives 3.64 billion HKD, or 3.5% in annual GDP

Iron Ore Prices on Fire on Hopes of China’s Third Plenum

By Pranay Yadav

Anticipation of an extensive stimulus package at China’s Third Plenum, aimed at revitalizing the decelerating economy, is driving a rebound in iron ore prices.
China’s iron ore imports have increased by 7% year-over-year despite a 3% decline in steel output, leading to a buildup in inventories on-shore.
The convergence of technical signals and seasonal trends in the SGX TSI Iron Ore Index suggests a bullish market stance, highlighting potential profit opportunities.

The Heat Is On: News Flow and Sentiment in CHINA/HONG KONG (July 5th)

China and Hong Kong saw positive ETF flows for the week.
Dividend Yield, Low Volatility and Value strategies have outperformed during the market correction in Hong Kong.
Lufax Holdings jumps after announcement that Ping An will increase stake. Fufeng slumps after announcing a decline in 1st half profit.

Paladin-Fission Merger Primed to Benefit from Rising Uranium Demand

Combined entity of Paladin Energy and Fission Uranium expected to command a market capitalisation of USD 3.5 billion.
Following the Russia-Ukraine war, uranium miners started looking for alternative sources in low-risk regions, putting focus on US and Canada.
Post-Merger, Paladin will have the second-largest resource base of any listed uranium miner in the Western Hemisphere, second only to Cameco.

Eurozone: Will the Tight Labor Market Persevere?

With markets and policy makers very much focused on inflation, the EZ labor market continues to shine –apparently. Indeed, the EZ jobless rate has remains at a record-low of 6.4%.
That will perturb ECB hawks wary of higher ensuing wage pressures.
But this apparent record-low may exaggerate the tightness in the labor market.

US Nonfarm Payroll Change 206k (consensus 190k) in Jun-24

By Heteronomics AI

US Nonfarm Payroll additions for June 2024 surpassed expectations, however, showed a slowdown compared to prior months, particularly in private sector hiring.
There is an increase in unemployment and only modest wage growth, indicating a weakening labour market.
This economic situation is likely to prompt a Federal Reserve rate cut in the near future.

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

HEW: Passing Political Parties

UK, France, and US voters are showing support for opposition parties in recent elections, with a notable shift away from Biden in the US. Central banks in these countries are expected to make cuts in August and September.
Upcoming events include monetary policy decisions from the Reserve Bank of New Zealand, Bank of Korea, Bank Negara Malaysia, and Central Reserve Bank of Peru.
The second round of French elections and US inflation data are anticipated to be the focal points for global markets, with a potential September cut from the Federal Reserve if outcomes are benign.

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Jul 05

Daily Brief Macro: Three Risk-Off Signals Offset by One Risk-On Signal? and more

In today’s briefing:

Three Risk-Off Signals Offset by One Risk-On Signal?
Is Underlying Inflation Edging Higher, Lower or Flatlining?
Iron Ore Tracker July 4th, 2024: Prices Rangebound, Iron Condors Anyone?
EM Watch: A Chinese tale of two very different realities
Japan Watch – Why BoJ Will NOT Intervene Anytime Soon
[ETP 27/2024] Oil Prices Surge While Natural Gas Slides; Energy Majors’ Gains Slowdown
CX Daily: China’s Push to Expand Its Carbon Market

Three Risk-Off Signals Offset by One Risk-On Signal?

By Douglas Kim

The three risk-off signals include the decline in the Bitcoin price, decline in the copper price, and the first day share price performances of recent Korean IPOs.
These three risk-off signals are offset by one major risk-on signal which includes the U.S. Junk Bond-Treasury Yield spread.
An important risk-off signal is the first day share price performances of major Korean IPOs after listing. We have started to see some weakness on this signal in July.

Is Underlying Inflation Edging Higher, Lower or Flatlining?

By Thomas Lam

Central bankers in advanced economies, while pausing, cutting and hiking, continue to debate underlying or trend inflation developments
My estimate of underlying inflation for the G3 overall, which zeroes-in on the Most and More Persistent categories, trended lower recently
The estimated level of underlying G3 inflation in May was approximately 1%-point above the pre-pandemic average

Iron Ore Tracker July 4th, 2024: Prices Rangebound, Iron Condors Anyone?

Iron ore has remained rangebound between 95 and 130 USD/ton for three years, with cost-curve support kicking in on the higher end of the cost curve at around 100 USD/ton.
Coking coal prices are expected to bounce due to the Anglo incident, and we believe the 65-62 spread will benefit, moving out of its mid-teens band.
We like iron condors (set up details in the insight) and high-grade ore producers Rio Tinto Ltd (RIO AU), Vale (VALE US).

EM Watch: A Chinese tale of two very different realities

Welcome to our weekly EM Watch series, where we focus on the diverging economic trends in China, where local consumption seems to be on the floor, while the export sector is still gaining momentum.
Additionally, an interesting niche case in Panama requires some attention.
The USDCNY pressures are more fierce than they have been at any time since the pandemic, and we are once again approaching the intervention zone around 7.30 in USDCNY.

Japan Watch – Why BoJ Will NOT Intervene Anytime Soon

Recently, numerous JPY pairs have breached the levels where the BoJ / MoF intervened in April/May, prompting markets to wonder if (and when) authorities might step in again to support the Yen.
The reaction in USDJPY post key events/meetings has been consistently uniform for the past 12-18 months.
Markets build up a hawkish narrative prior to the event, only to unwind positions when the news turns out to be less hawkish than anticipated.

[ETP 27/2024] Oil Prices Surge While Natural Gas Slides; Energy Majors’ Gains Slowdown

US crude oil inventory declined by 12.2 million barrels as of the week ending on 28/Jun, the biggest drawdown since July 2023.
Henry Hub prices continued to decline from last week due to increased production and cooler weather forecasts.
Saudi Aramco awarded over USD 25 billion in contracts for gas expansion. Goldman Sachs lowered its target price on Saudi Aramco but maintained its “Neutral” rating.

CX Daily: China’s Push to Expand Its Carbon Market

Carbon / In Depth: China’s push to expand its carbon market Big changes are afoot for China’s three-year-old national carbon market.
Kidnap /China calls for severe punishments after kidnapped victims murdered in Philippines
Crypto /CSRC official likely used cryptocurrency to hide bribes, sources say

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Jul 04

Daily Brief Macro: Korean Government Announces Corporate and Dividend Tax Incentives Under Corporate Value Up Program and more

In today’s briefing:

Korean Government Announces Corporate and Dividend Tax Incentives Under Corporate Value Up Program
Preview to the 3rd Plenum of Chinese Communist Party
UK Politics: The Morning After
India: Growth Ensures that the Market Is Not Too Expensive Despite Big 4yr Runup
CX Daily: China’s Ultra-Long Bonds May Test PBOC’s Monetary Toolkit
CrossASEAN Ground Zero – Campina Ice Cream, Mayapada Hospital’s Fundraise, and Xurya’s Solar Allure
Actinver – Macro Daily: Domestic Demand: Investment and Consumption
Navigating Frothy US Equities with S&P Spreads
Gen AI Unleashes Hyper Demand for Data Centers
Business Cycle Watch: Is the US in a recession already? Here are the pros and cons

Korean Government Announces Corporate and Dividend Tax Incentives Under Corporate Value Up Program

By Douglas Kim

The Korean government announced corporate tax incentives for companies that actively increase capital returns to shareholders and also dividend tax incentives and as part of the Corporate Value Up program.
For companies that provide shareholder returns, a 5% corporate tax amount on the increase will be deducted and the tax burden on increased dividends of the company will be reduced.
For dividends under 20mn won, the tax rate will be reduced from 14% to 9%. Investor can choose lower rate (25% or comprehensive tax rate) for dividends exceeding 20mn won.

Preview to the 3rd Plenum of Chinese Communist Party

The 3 plenum July 15-18 will likely see some additional measures that will support or stimulate China economy. However, they are unlikely to be game changers.
Major points to observe include unemployment and healthcare benefit boost, Hukou fine tuning, discussion about inheritance tax, and the 2-4 trillion Yuan of buying most unsold homes.
Deepening of reform especially in boosting innovation and upgrading consumption will also be touched on, but there will seem no short-term effective measures.

UK Politics: The Morning After

By Alastair Newton

The incoming Labour government is prioritizing securing a second term from the start.
The promised “change” in their manifesto will be gradual, aiming for a modest boost in economic growth.
More radical measures are anticipated to be implemented in the potential second term.

India: Growth Ensures that the Market Is Not Too Expensive Despite Big 4yr Runup

By Prasenjit K. Basu

Despite more than doubling in the past 4 years, the BSE-Sensex is fairly valued (trailing P/E of 24.04x) relative to its 10-year mean (23.93x)– helped by sustained EPS growth.
The trailing P/E is above the 20-year (21.34x) and 30-year mean (20.4x), but those reflect weaker growth prospects in earlier decades. 10yr mean better reflects new normal 8% RGDP growth.
Net FPI inflows reached a record USD10.14bn in Dec’23, when the market was similarly valued. FPI flows into equity were minimal in H1CY24, but likely to rebound. Stay moderately Overweight.

CX Daily: China’s Ultra-Long Bonds May Test PBOC’s Monetary Toolkit

Bonds / In Depth: China’s ultra-long bonds may test PBOC’s monetary toolkit
Badminton /: Teenage Chinese badminton star’s death draws criticism of first responders
Central bank /: PBOC bond-borrowing plan fuels expectation of action to raise yields

CrossASEAN Ground Zero – Campina Ice Cream, Mayapada Hospital’s Fundraise, and Xurya’s Solar Allure

By Angus Mackintosh

This week we look at the potential sale of Campina Ice Cream and the dairy space and the fundraising plans of Mayapada Hospital with M&A picking up in healthcare.
We also take a look at the latest fundraising by Indonesia’s solar operator Xurya as investors are drawn towards sustainable power investments but see potential headwinds.
CrossASEAN Ground Zero is a thematic weekly product that focuses on key Southeast Asian themes and technology trends with a core focus on Indonesia.

Actinver – Macro Daily: Domestic Demand: Investment and Consumption

By Actinver

Fixed investment grew 0.9% MoM, driven by investment in both residential and infrastructure construction.
Investment in imported machinery continued to outperform investment in domestic assets due to the strength of the Mexican peso.
In April, gross fixed investment in the country reached its fourth consecutive month of expansion, supported in the first two months by investment in machinery and equipment, and in the following two by investment in construction.

Navigating Frothy US Equities with S&P Spreads

By Pranay Yadav

Amid all-time highs, the S&P 500 faces recession risks with economic indicators like unemployment and housing starts signaling downturns, impacting broader market stability.
The S&P 500’s growth, heavily reliant on mega-cap tech stocks, contrasts sharply with broader indices, driven by AI advancements and global revenue streams, suggesting market top-heaviness.
Given recession precursors and market frothiness, a spread trade using CME’s Micro E-Mini futures (Long S&P 500 and Short Russell 2000) is proposed to balance potential gains with reduced risks.

Gen AI Unleashes Hyper Demand for Data Centers

By Pranay Yadav

Singapore’s REITs, representing 12% of the equity market, face pressures from rising interest rates and economic downturns, which impact profitability and market performance.
The data center REIT sector is propelled by increasing AI applications, data sovereignty laws, and the growth of cloud services, positioning it for significant expansion.
Digital Core REIT benefits from its presence in key tech hubs and high-performance computing offerings, positioning them to outperform in a tight data center market.

Business Cycle Watch: Is the US in a recession already? Here are the pros and cons

It’s not like we haven’t had this discussion a few times already this cycle, but the recession chatter is staring at us again after the weakest ISM report in years.
The percentage of respondents reporting higher New Orders has weakened to levels only seen during the GFC.
So, is it time to buy puts and canned food and head for the cellars?

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Jul 03

Daily Brief Macro: Non-Consensus Forecast: No Fed Rate Cut This Year and more

In today’s briefing:

Non-Consensus Forecast: No Fed Rate Cut This Year
Response to Premier Li: Post COVID Chinese Economy
QE With Chinese Characteristics: What It Will Look Like.
China Economics: Expect Few Changes in Third Plenum
Regional Economics: In A Stormier World, Can Asia’s Ship Remain Steady?
US: Receding Inflation Has Put 3 Rate Cuts Back in Play for 2024
Great Game – Biden in Free-Fall and a French Ménage À Trois
Euro area Unemployment Rate 6.4% (consensus 6.4) in May-24
EA: ECB Not Yet Stuck By Service Prices

Non-Consensus Forecast: No Fed Rate Cut This Year

We are against the majority opinion that Fed will cut rate in September meeting. Also majority forecast there will be 1-2 rate cuts this year but we forecast none.
CORE PCE Price Index has been treading above 2% target, though it is on a decreasing trend two streaks on a roll and since Jan 2023.
We believe instead of targeting at the static CORE PCE Index for one data point, the Fed will consider a dynamic series of data points, known as cumulative inflation targeting.

Response to Premier Li: Post COVID Chinese Economy

In a recent forum, Chinese Premier Li Qiang is confident that Chinese economy was stagnant simply because of COVID. Now that COVID has gone, Chinese economy will eventually heal itself.
We believe rather Chinese economy will still be bumpy after COVID, with three major arrows against Chinese Economy, namely property sector slump, local government debt, and weak private sector.
Instead of the “self recovery” view of the economy proposed by Li, we believe government should more actively roll out fiscal and monetary stimulus.

QE With Chinese Characteristics: What It Will Look Like.

PBOC announced that it will borrow and trade treasury bonds from primary markets.
The central bank will use Open Market Operations to not only control and steepen the yield curve, but also improve market liquidity.
Last week the 50-year bond dropped below the 2.5% yield which was the minimal threshold the PBOC indicated before defense.

China Economics: Expect Few Changes in Third Plenum

By Manu Bhaskaran

China’s latest consumer data will do little to convince the leadership to significantly step stimulus in the upcoming Third Plenum as support for advanced sectors remains key.
Beijing’s refraining from significant stimulus is deemed a feature, rather than a bug. Policymakers do not yet view the trade-offs as unmanageable.
While some incremental step-up in policy support may be on the cards, do not expect Beijing to rock the boat beyond that.

Regional Economics: In A Stormier World, Can Asia’s Ship Remain Steady?

By Manu Bhaskaran

While global economic conditions have been “so far so good”, there are signs of trouble that, while manageable for now, could darken the outlook if they spiral out of control.
On the upside, conditions in major markets such as the US and China are stabilizing, while global capital spending and technology cycles should be favourable for Asia.
While the risks are growing, resilient domestic demand and appropriate macroeconomic management should shield Asian markets from the worst of the downsides.

US: Receding Inflation Has Put 3 Rate Cuts Back in Play for 2024

By Prasenjit K. Basu

After a 0.99%MoM annualised rise in May’24, core PCE inflation eased to 2.57%YoY — lower than the 2.6%YoY end-CY24 projection that the FOMC believed was compatible with 3 rate cuts.
While the FOMC initially signalled QT in Jun’22, base money increased each month during Jul’23-Feb’24, contributing to higher inflation. Contracting base money since Mar’24 was key to moderating MoM inflation.
Core PCE will likely rise 2%QoQ (annualised) in Q2CY24, and 2.5%YoY in Jun’24. The release of those numbers six days before FOMC decision (31/7/24) will likely trigger Jul’24 rate cut.

Great Game – Biden in Free-Fall and a French Ménage À Trois

By Mikkel Rosenvold

Hello and welcome to this week’s Great Game.
The First Round of the French Legislative Election was held on Sunday and the initial results suggested a clear win for Marine Le Pen’s far-right coalition around her National Rally party
Biden is starting to drop rapidly in polls after the US presidential debate.

Euro area Unemployment Rate 6.4% (consensus 6.4) in May-24

By Heteronomics AI

The Euro area unemployment rate stayed at 6.4% in May 2024, indicating a stable labour market as it is below long-run and one-year averages.
Economic indicators showed moderate GDP and employment growth, reflecting a cautious sentiment in the market.
Services sector is expanding while the manufacturing sector is contracting, suggesting sector-specific challenges and potential inflationary pressures.

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

EA: ECB Not Yet Stuck By Service Prices

EA inflation matched consensus expectations of 2.5% y-o-y in June despite German softness as a Benelux surge offset it, with the outcome 6bps above our forecast.
Services inflation was responsible for the upside again, as it was worryingly stuck at 4.1%, suggesting there has been no underlying progress in the past several months.
The stability of headline outcomes to past expectations reassures the ECB, keeping September alive for another cut, assuming its peers deliver on their bias to start soon.

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Jul 02

Daily Brief Macro: Steno Signals #106 – The cycle is improving. Not weakening. and more

In today’s briefing:

Steno Signals #106 – The cycle is improving. Not weakening.
Berkshire’s Bullish Bet on Occidental Fails to Sway Market Sentiments
The Week That Was in ASEAN@Smartkarma – Grab’s Lead, Bank Rakyat Indonesia, and CLEO’s Pure Water
Energy Cable: Increases in freight rates not transferring into goods inflation (for now)
HEM: Doves Stay the Course

Steno Signals #106 – The cycle is improving. Not weakening.

We spent most of last week examining cycle leads and lags as we continue to observe solid signs of re-acceleration in economies with low duration profiles and high sensitivities to interest rates and exports.
The Riksbank in Sweden, the BoC in Canada, and partially the ECB in Europe have all cut interest rates amidst an already improving cyclical environment.
We are already starting to see the positive ripple effects.

Berkshire’s Bullish Bet on Occidental Fails to Sway Market Sentiments

Occidental trades at higher PE and PB valuations than Exxon Mobil, Chevron, Shell, TotalEnergies, and BP. European oil majors are cheaper than American peers.
Occidental has been the Permian Basin’s leading oil and gas producer for the past five years.
Occidental expects to close the USD 12 billion CrownRock acquisition by August. The deal is anticipated to boost its oil output by 170k bpd.

The Week That Was in ASEAN@Smartkarma – Grab’s Lead, Bank Rakyat Indonesia, and CLEO’s Pure Water

By Angus Mackintosh

The past week saw insights on Grab Holdings (GRAB US), Bank Rakyat Indonesia (BBRI IJ), Sariguna Primatirta (CLEO IJ), PT Metrodata Electronics (MTDL IJ), and Selamat Sempurna (SMSM IJ).
There were also macro insights on inflation in the Philippines and Malaysia and further insights On Best World International (BEST SP), Ecocare Indo Pasifik (HYGN IJ) and Malaysia Airports Holdings.
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.

Energy Cable: Increases in freight rates not transferring into goods inflation (for now)

By Ulrik Simmelholt

Greetings from Copenhagen! We’ll take a look at freight rates, copper, and crude from an inflation angle.
But before we do that, let’s have a quick look at Henry Hub.
The front-month Henry Hub natural gas prices continue to face downward pressure, primarily influenced by an abundance in gas stock levels.

HEM: Doves Stay the Course

The Bank of England appears eager to implement a rate cut in August, which some view as overly dovish.
The European Central Bank’s potential rate cut in September is contingent on the Federal Reserve initiating their cut at the same time.
There is a risk of inflating economic bubbles due to premature stimulus, similar to the situation in 1998. Additionally, the excessive growth in labour costs is being underestimated.

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Jul 01

Daily Brief Macro: Union Budget 2024- What to Expect? and more

In today’s briefing:

Union Budget 2024- What to Expect?
PBoC Examines Overhaul of Monetary Policy Framework, but Quantitative Easing Appears Unlikely
How Much Is Left in the Bulls’ Gas Tank?
Q2 Earnings Season Preview

Union Budget 2024- What to Expect?

By Nitin Mangal

All eyes will be on the upcoming Union Budget 2024 in July, marking the first of Modi Government 3.0.
Job creation, tackling agriculture woes including farmers income and sustaining expenditure on infra are expected to be the core deliverables.
Moreover, fiscal deficit is expected to continue its improvement run. Capital gains tax would not be touched but GST network could broaden.

PBoC Examines Overhaul of Monetary Policy Framework, but Quantitative Easing Appears Unlikely

By Said Desaque

The People’s Bank of China (PBoC) is studying the efficacy of buying and selling government bonds in the secondary market for liquidity management as opposed to introducing quantitative easing (QE).
China’s government bond market has increased significantly in size since 2008, but the PBoC has not, unlike the Fed, bought sovereign debt in over two decades.
Monetary policy conduct could be streamlined as the number of policy benchmark lending rates is reduced. Hopes of aggressive QE by the PBoC are far-fetched given its balance sheet structure.

How Much Is Left in the Bulls’ Gas Tank?

By Cam Hui

The stock market advance in 2024 has been impressive, but prices can continue to rise.
Market internals have become frothy and overbought in the AI-related leadership, but the rest of the market is showing signs of recovery that’s indicative of a leadership rotation.
Our base-case scenario calls for some near-term choppiness, followed by further gains into year-end.

Q2 Earnings Season Preview

By Cam Hui

Investors are facing a number of challenges as they approach Q2 earnings season.
Bottom-Up EPS estimate revisions are strong, top-down economic releases have been weak. As well, forward P/E valuations are elevated
We interpret these conditions as the characteristics of a mid-cycle expansion.

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Jun 30

Daily Brief Macro: Copper Tracker June 2024: Physical/Equity Screens And Trades For July and more

In today’s briefing:

Copper Tracker June 2024: Physical/Equity Screens And Trades For July

Copper Tracker June 2024: Physical/Equity Screens And Trades For July

Copper continued its slide on concerns about inventory and the commencement of new projects and delivered a -9% return for the month.
Check out our initiation, Copper Primer: What We Like About Copper And What to Play, and equity initiation Southern Copper: In a League of Its Own
We like the long copper-short gold trade and explore iron condors in the copper Freeport Mcmoran (FCX US) .

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Jun 29

Daily Brief Macro: Southern Copper: In a League of Its Own and more

In today’s briefing:

Southern Copper: In a League of Its Own
Walker’s Weekly: Dr. Jim’s Summary of Key Global Macro Developments – 28 Jun 2024
Does Modest Increase in Debt Level of France and Japan Create Problem for Their Economies?
HEW: Holding Patterns
Biden’s Catastrophic Debate Likely to Lead to 1968-Repeat; Can It End Differently?
The Heat Is On: News Flow and Sentiment in HONG KONG
CX Daily: China’s Popular Plastic Bag Replacement Is Less Green Than It Seems

Southern Copper: In a League of Its Own

Southern Copper (SCCO US) in the equity space is the best way to play bullish copper long-term with its long-term (10-year) ROCE of >22%
With low-cost production assets in Peru and Mexico, the company has managed EBITDA margins of> 39% across the cycle (last 15 years) and averaging 50%.
A 100% payout results in a dividend yield of 3.5%. We believe there is a price for everything, and in the event of a 20% correction, it would be attractive.

Walker’s Weekly: Dr. Jim’s Summary of Key Global Macro Developments – 28 Jun 2024

By Dr. Jim Walker

Japanese Yen: The yen has significantly weakened, leading the US to label Japan as a potential currency manipulator; interest rate differentials and potential sales of US Treasuries are key factors.
Singapore Inflation: Inflation remains high at 3.1%, with historical parallels suggesting potential appreciation of the Singapore dollar by 4-5% if inflation doesn’t fall below 2%.
US Economic Indicators: Despite perceptions of a strong economy, recent US activity indicators, including manufacturing and services, show persistent weaknesses.

Does Modest Increase in Debt Level of France and Japan Create Problem for Their Economies?

France and Japan have seen a large increase in total non-financial sector debt/GDP since 2007, though these have been exceeded by China. What are the consequences of this build up?
Most of the surge in debt/GDP in Japan and 40% in France is due to higher government debt.
The adverse impact of higher debt and debt servicing on France’s and Japan’s economies should be small given a property crash or anti Euro government are avoided.

HEW: Holding Patterns

Central banks in Sweden, Mexico, and the Philippines have maintained their rates this week, with EA activity remaining stable according to ESI survey data, and political campaigns nearing their end.
The upcoming week is expected to be quieter with no significant central bank decisions on the horizon.
EA inflation data on Tuesday and US payrolls on Friday are the key events to watch, with the latter potentially having a larger impact on global markets.

Biden’s Catastrophic Debate Likely to Lead to 1968-Repeat; Can It End Differently?

By Prasenjit K. Basu

Pres. Biden’s disastrous debate performance (in which he looked senile and cognitively incapacitated) has led Democrats to call on him to step aside in favour of an alternate Democrat nominee.
In 1968, LBJ stepped aside before most primaries, and VP Humphrey won nomination at the convention. He lost the general mainly because third party candidate Wallace ate into Democrat votes.
Trump landslide would be inflationary (because of 10% tariffs on all imports, more on China), plus the embarrassment of having a convicted felon as president. Near-term negative for US.

The Heat Is On: News Flow and Sentiment in HONG KONG

China ETF flows in June continued to show positive momentum while other categories remained flat. Southbound Connect Flows were positive while Northbound Connect recorded a Net Sell.
Midea Real Estate Holdings jumped on plans to privatize its property development business
Shanghai Microport fell after launching a share placement at a 15% discount. The share price is hitting all time lows.

CX Daily: China’s Popular Plastic Bag Replacement Is Less Green Than It Seems

Bags / In Depth: China’s popular plastic bag replacement is less green than it seems Li Jingjing is a firm believer in making use of whatever’s around her.
Corruption /: Two of China’s former defense ministers expelled from Communist Party
Personnel /: ‘Big Six’ bank executive looks set to become Everbright Bank’s new president

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Jun 28

Daily Brief Macro: EM Watch: Western investors are tired of China and Japan “crying wolf” and more

In today’s briefing:

EM Watch: Western investors are tired of China and Japan “crying wolf”
Positioning Watch – Markets are buying into US Fixed Income, but fast money don’t agree
United Kingdom: Record Overweights in Run Up to Election
CHINA: How China’s Household Savings Are Bailing Out the Property Sector
Copper Primer: What We Like About Copper And What to Play
[ETP 26/2024] Oil Prices Drop on Surprise Inventory Build; Oil Majors Slide but Retain Gains
France: Global Funds Overweight Ahead of Snap Election
Philippines Policy Rate 6.5% (consensus 6.5%) in Jun-24
EA Stalled Without Crashing
EUR Inflation Watch: Food for pause’istas

EM Watch: Western investors are tired of China and Japan “crying wolf”

Welcome to our weekly EM Watch, with a particular focus on China and metals.
Allow me to reflect on how the Chinese and Japanese investment cases look from the outside and how Western investors perceive the current rhetoric around the suffering local currencies in the region.
The CNY once again “slow burns” versus the USD this week and we are approaching the 7.30 handle, which has typically been the line in the sand for the PBoC in China.

Positioning Watch – Markets are buying into US Fixed Income, but fast money don’t agree

Welcome back to our weekly positioning watch, brought to you today from a sunny Copenhagen.
The standings at the Euros almost perfectly mirror the current cross-regional uncertainties in equity markets.
The European election has increased the option-implied volatility premium of European equities compared to US equities, while the FTSE 100 continues to stay “less volatile” in IV terms.

United Kingdom: Record Overweights in Run Up to Election

By Steven Holden

Global equity funds are heavily overweight in UK stock heading in to the election on July 4th.
Compared to the SPDRs MSCI ACWI ETF benchmark, UK allocations are at a record overweight of +2.64%, with 69% of investors positioned ahead of the benchmark.
All sectors in the UK are held net overweight, led by Industrials and Consumer Staples. Key stocks like AstraZeneca, Linde, and Unilever are among the most widely held.

CHINA: How China’s Household Savings Are Bailing Out the Property Sector

The PBOC has launched a home purchase program providing a 300 billion yuan re-lending facility which will fund local government SOE’s purchases of unsold homes.
With government bond rates at record low yields the PBOC has started to issue long term debt to finance its property support plan.
Households with total savings of Rmb 140T and seeking alternatives to low bank deposit rates are enthusiastic buyers of new government issues offering higher returns.

Copper Primer: What We Like About Copper And What to Play

Top miners like BHP Group Ltd (BHP AU) and Teck Resources (TECK US) are signaling their long-term bullish copper intent through their recent corporate actions.
Copper may experience short periods of oversupply, but its long-term outlook makes it one of the best commodities we cover in terms of return potential.
Our best plays in the copper space are Southern Copper (SCCO US), Teck Resources (TECK US) and Freeport Mcmoran (FCX US)

[ETP 26/2024] Oil Prices Drop on Surprise Inventory Build; Oil Majors Slide but Retain Gains

An unexpected increase in US crude oil and gasoline inventories pushed oil prices down but the ongoing conflicts capped the downside.
Growing natural gas output dampens Henry Hub’s uptrend. Europe will ban transshipments of Russian LNG in its ports from March 2025.
Chevron’s Wheatstone LNG facility in Australia resumed full production. Wells Fargo lowered its target price on Shell but raised it on Occidental.

France: Global Funds Overweight Ahead of Snap Election

By Steven Holden

68.2% of global equity funds are positioned ahead of the benchmark in France, with an average overweight of 2%, making it the second largest country overweight after the UK.
France is currently the second largest country overweight after the UK, effectively offsetting some of the underweights in the USA, China & Hong Kong, and Australia.
Overweights driven by by Schneider Electric, L’Oreal, and LVMH, whilst Pernod Ricard and Sanofi see investor outflows.

Philippines Policy Rate 6.5% (consensus 6.5%) in Jun-24

By Heteronomics AI

The BSP’s decision to maintain the policy rate at 6.5% aligns with consensus forecasts. It reflects confidence in managing downside inflation risks despite ongoing pressures from higher food, transport, and electricity prices.
Favourable domestic growth prospects, supported by a strong labour market and robust net exports, allow the BSP to hold steady on monetary policy while remaining cautious about potential external spillovers.
Anticipated easing of price pressures in the year’s second half could provide scope for a less restrictive policy stance. Still, the BSP remains vigilant, ready to adjust settings to maintain price stability and support sustainable economic growth.

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

EA Stalled Without Crashing

European surveys are sending mixed messages, as the PMIs crash while the ESI is stalled. We see residual seasonality polluting the PMI, making its moves more noise than signal.
Employment growth remains strong amid poor productivity, although the EEI has dipped, and its strength has narrowed, shrinking its gap to the ESI level and breadth.
Services price expectations are also resilient in the Commission’s survey. Extrapolating the noisier weak metrics risks excess stimulus and a policy reversal in 2025.

EUR Inflation Watch: Food for pause’istas

The market consensus for the European June inflation numbers is very soft, both seasonally adjusted and relative to the developments seen in June over the past 5 years.
It seems like the bet on a soft transportation category (car insurance and the likes) is the major reason behind the weak EUR-flation consensus numbers, but there is a statistically solid case to bet on the upside here, even a potentially large surprise to the upside.
We see risks clearly tilted in that direction.

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Jun 27

Daily Brief Macro: CX Daily: China Debates Pros and Cons of Open-Source AI Models and more

In today’s briefing:

CX Daily: China Debates Pros and Cons of Open-Source AI Models

CX Daily: China Debates Pros and Cons of Open-Source AI Models