Macro

In today’s briefing:

Out of the Box #14: 4 Reasons Why Curve Steepening Is Now on the Cards
Fed Lending Survey: ‘Stay Away from High Yield Bonds!’
BoE: Obfuscated Hiking Path
CX Daily: China Pushes Electric Future for Inland Shipping
Central Bank Vows Further Mortgage Easing to Support Housing
Out of the Box #15: What if Its the Labour Market that Drags Housing Down This Time?
Injective Protocol: Unlocking the Potential of Decentralised Trading

Out of the Box #14: 4 Reasons Why Curve Steepening Is Now on the Cards

In our “out of the box” series, we aim at being ahead of the current consensus narrative and think of the next theme that could drive price action before anyone else has given it any noteworthy attention.
This week we look at four reasons why the curve steepener is now the trend to watch! There are four reasons for the USD curve steepening now
The issuance profile will move towards longer durations, the BoJ decision has decreased Japanese incentives to buy USTs, the Manufacturing rebound will add to steepening pressures, positioning is already loaded with duration

Fed Lending Survey: ‘Stay Away from High Yield Bonds!’

A further tightening of US lending standards point to negative loan growth and GDP growth.
In addition, the latest Federal Reserve Loan Survey suggests the high yield default rate will rise fivefold(!) compared to last year.
Yet, high yield bond spreads remain in la-la land, reflecting zero odds of a US recession or tighter lending standards.

BoE: Obfuscated Hiking Path

By Phil Rush

The BoE hiked by 25bps in Aug-23, thereby siding with the dovish side of the divided consensus. It belatedly justified June’s forceful hike as a reassessed central outlook.
Unfortunately, the Governor hasn’t learned to communicate effectively. Multiple paths can achieve the target for any information set, and he won’t reveal a preference.
We still expect 25bp rate hikes in September and November, with policy staying tight for a long time. The BoE’s obfuscation of the outlook does not mean it’s done hiking.

CX Daily: China Pushes Electric Future for Inland Shipping

Ships / In Depth: China pushes electric future for inland shipping
Torrential rains /: North China city pleads for emergency aid after flood
Mortgage /: Central bank vows further mortgage easing to support housing

Central Bank Vows Further Mortgage Easing to Support Housing

China’s central bank pledged to step up mortgage easing to support homebuyers, signaling further efforts to bolster the ailing property market.
Officials of the People’s Bank of China (PBOC) and the State Administration of Foreign Exchange vowed Tuesday to implement precise and differentiated housing credit policies based on the specific conditions of each city and continue guiding commercial banks to relax residential mortgage rules.
Lenders should adjust mortgage rates for existing loans in an orderly manner to support people’s housing needs, the officials said at a meeting to outline their agenda for the second half of the year.

Out of the Box #15: What if Its the Labour Market that Drags Housing Down This Time?

By Emil Moller

Main Points: 1) The US economy is looking strong for now.
Crude drawings and solid job numbers keep coming in etc, 2) My view is we will see a recession around Q1 and that layoffs will be manifested in small buis/service sector 3) The FED and the Treasury will have a harder time responding this time around given less fiscal and monetary room making a bailout of relevant creditors costlyIn my inaugural piece (available here), I highlighted an economic climate of distortion, with winners and losers due to the monetary policy regime and yield curve inversion.
I argued that strong businesses with robust balance sheets would emerge victorious over smaller local businesses, startups, private equity, and the like.

Injective Protocol: Unlocking the Potential of Decentralised Trading

By ByteTree Asset Management

Injective is the first decentralised exchange-focused layer-1 blockchain platform.
Integrated with the Cosmos ecosystem, it was custom-built to host Decentralised Exchanges (DEXs) that aim to shape the future of crypto trading.
The platform offers developers a user-friendly environment equipped with plug-and-play financial infrastructure components, facilitating the seamless creation of highly efficient, fast, and cost-effective dApps.

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Aug 03

Daily Brief Macro: Japan Watch: Flows in JPY and JGBs after the YCC decision and more

In today’s briefing:

Japan Watch: Flows in JPY and JGBs after the YCC decision
5 things we watch: Downgrades, Cyclicals, Oil, JGBs and GDP/GDI
Business Cycle Watch – Recession or rebound?
US Downgrade! Now What?
AFC Iraq Fund July 2023 Update: “Market Rallies as It Begins to Discount the Budget’s Passage”
AFC Uzbekistan Fund July 2023 Update

Japan Watch: Flows in JPY and JGBs after the YCC decision

The change to the YCC-policy in Japan caught a majority of investors off guard, but so did the subsequent flows and moves in Japanese markets.
We kept reiterating that JGB yield risks were to the upside, while the JPY could see downside, which is exactly what has happened.
In this piece, we will try to elaborate on why that is and why we see a slow grind to 1% in 10yr JGB yields alongside a move in USDJPY to +150 territory.

5 things we watch: Downgrades, Cyclicals, Oil, JGBs and GDP/GDI

A credit downgrade of the US sovereign debt amidst a steepening of global curves triggered by the Bank of Japan finally making mini-steps towards normalization of monetary policy.
Macro never fails to surprise and here is how we view the five most present topics in global macro.
This week we are watching the following 5 topics within global macro: you can find in depth research pieces on all topics on the links below or just read our brief summary in this article.

Business Cycle Watch – Recession or rebound?

Welcome back to another business cycle-themed article post the business cycle week where we covered a potential rebound in manufacturing and what that might mean for assets in the time to come.
Today we shed some light on the kings of business cycle data – GDP and GDI – which are both widely known for being THE metrics to watch (together with the labor market) when assessing if the economy is actually slowing down or not.
Normally the two follow each other quite closely, as they are conceptually identical, but currently, we are faced with an interesting gap with GDI screaming recession while GDP is hinting at a rebound amidst a skyrocketing fiscal deficit, higher public interest expenses and a much stronger labor market.

US Downgrade! Now What?

By Alfonso Peccatiello (Alf)

Are we back in 2011 or what? After the US debt ceiling drama earlier this year we just witnessed a rating agency downgrading the US exactly like in 2011 – back then S&P, this time Fitch.
Today you are likely to read plenty of scary and fear-mongering headlines.
In this piece instead we’ll take a step back and rationally assess what the US downgrade means for investors and markets out there.

AFC Iraq Fund July 2023 Update: “Market Rallies as It Begins to Discount the Budget’s Passage”

By Asia Frontier Capital

The AFC Iraq Fund was up an estimated 8.2%, underperforming its benchmark, the Rabee Securities RSISX USD Index, which was up 9.2%.
For the year, the AFC Iraq Fund is up an estimated 49.9%, outperforming its benchmark’s 42.3% increase.
The market’s technical picture continues to be positive, with the macroeconomic fundamentals discussed last year supporting our view that the market’s uptrend will likely remain in force.

AFC Uzbekistan Fund July 2023 Update

By Asia Frontier Capital

July saw most of the fund’s portfolio companies complete their filing of annual 2022 results, as well as results for the second quarter of 2023.
In short, earnings continue to impress! While we are seeing multiple compression as share prices remain relatively flat, this gives us the opportunity to continue deploying capital into Uzbekistan’s blue-chip companies at attractive prices, in anticipation of the next phase of the re-rating.
The July 2023 fund NAV fell to an estimated USD 1,831.2 (-0.8%) or +83.1% since inception on 29th March 2019.

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Aug 02

Daily Brief Macro: China’s Stimulus Rollout Shows Signs of Gaining Steam and more

In today’s briefing:

China’s Stimulus Rollout Shows Signs of Gaining Steam
Expect the ISM Manufacturing to Rise to 48, Signaling 14% Downside for Equities
CX Daily: China’s Property Crisis Contagion Spreads to State-Backed Developers
Growth in East Asia Holds Up and a Path to Recovery Is Open
Great Game: Book burnings and Ukrainian peace talks
The Energy Cable #31 – Crack Spreads and Positioning Support the Bull-Case!
CX Daily: Race Is On to Become China’s SpaceX

China’s Stimulus Rollout Shows Signs of Gaining Steam

Worried by a worsening economy, Beijing is expanding stimulus measures with incentives to consumers to buy big-ticket items and assuaging private entrepreneurs’ fears of policy biases against them.
Tentative moves to loosen hukou restrictions in Zhejiang suggest a newfound willingness to tackle politically-sensitive reforms to bolster long-run growth.
Policymakers’ hopes seem to be for a better-managed but slower pace of growth that is in line with China’s demographic and other fundamentals.

Expect the ISM Manufacturing to Rise to 48, Signaling 14% Downside for Equities

Based on the six regional Manufacturing PMIs published for the ISM Manufacturing Index, the ISM should come in at 48.1 for July.
Based on several leading macro indicators, including the latest Fed Lending Survey and Money Supply Growth, the scope for an increase in the ISM Manufacturing Index is limited.
An ISM Manufacturing Index points to 14% downside for the S&P 500 Index and significantly lower bond yields.

CX Daily: China’s Property Crisis Contagion Spreads to State-Backed Developers

Property /Cover Story: China’s property crisis contagion spreads to state-backed developers
Mortgages /: Chart of the Day: China’s personal mortgages post first decline in a decade
Private /: China seeks feedback from private sector on what it can do better

Growth in East Asia Holds Up and a Path to Recovery Is Open

Growth in South Korea and Taiwan has held up better than expected thanks to resilient domestic demand.
While headline indicators suggest continued difficulties ahead, developments in major markets such as the US and China may provide upside surprises for the world economy.
Resilient labour markets and slack in the tourism industry allow Asian economies to take advantage of any global upswing. The path towards recovery has widened.

Great Game: Book burnings and Ukrainian peace talks

By Mikkel Rosenvold

We begin close to our home in Denmark, where the phenomenon of Quran burnings is once again the topic of the hour.
The right wing provocateur and nutjob Rasmus Paludan started the trend before he stood for the Danish Election in 2019 and since took his activites across the Sound to Sweden.
The burning of the Quran is obviously a huge affront to the global muslim population and was a major roadblock for Sweden’s entry into NATO.

The Energy Cable #31 – Crack Spreads and Positioning Support the Bull-Case!

Welcome to your weekly maverick energy newsletter with views from both sides of the pond! Steno Research and 3Fourteen models align – see how we view the risk/reward in various proxy trades below!
Apparently with the spikes in volatility over the last couple of weeks we need to talk about natural gas in Europe again.
Various people have been harping about the Natural Gas markets in Europe, so let’s once and for all lay it out. Nooo, we are not going to run out of gas this winter.

CX Daily: Race Is On to Become China’s SpaceX

Space /In Depth: Race is on to become China’s SpaceX
Torrential rains /: Floods in North China claim 20 lives as torrential rain cuts power, communications
China-France /: China and France make progress on financial cooperation

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Aug 01

Daily Brief Macro: Emerging Market Funds: Top-Down Positioning and Fund Flows Update and more

In today’s briefing:

Emerging Market Funds: Top-Down Positioning and Fund Flows Update
Steno Signals #58 – The One on Banana Republics, Yield Curve Controls and the Yuge EUR Consensus
Money Watch – Is money growth BACK?
EA: HICP Slowing Slightly in Summer-23
The Week That Was in ASEAN@Smartkarma – Astra’s Omnipresence, Grab’s Taxi Win, and AKRA
AFC Vietnam Fund July 2023 Report
Hong Kong’s Economic Bind
Stocks Vs. Commodities Ratio // China Wants to Boost Its Property Sector (But How)
Credit Watch: If you SLOOS you lose – the 5 best charts from the SLOOS survey
Macro Regime Indicator: PMIs to drive price action together with headline inflation

Emerging Market Funds: Top-Down Positioning and Fund Flows Update

By Steven Holden

Asia underweight funds LATAM overweight. Asia’s ‘big 4’, account for 64.4% of the average fund. MENA region suffers from a lack of ownership, with Saudi Arabia held underweight by -2.92%.
Tech moves to the top sector holding after capturing strong inflows, displacing Financials which saw heavy outflows and negative rotation.
TSMC, Samsung, Tencent and Alibaba are the consensus holding. All 4 are owned by at least 70% of funds and form the backbone of most active GEM equity funds.

Steno Signals #58 – The One on Banana Republics, Yield Curve Controls and the Yuge EUR Consensus

The outlook for the economy, rates, fx and other assets apparently never fails to surprise!
We have thankfully made very decent returns through a tough trading week as some of our cyclical rotations had a tremendous start to the week before taking a minor hit when the change of the yield curve regime in Japan was announced.
First things first. The decision to move the cap in the 10yr point of the Japanese Government Bond (JGB) curve from 0.5% to 1.0% was a big surprise to many timing-wise.

Money Watch – Is money growth BACK?

With the central bank tightening and continuing globally with Fed and ECB hiking rates 25bps and BoJ moving the YCC cap, we have a look at global money trends again today to see if correlations hold and what to expect next in global markets.
Main take-aways: M1 growth looks outright horrible in the West, while Asian money trends looks very bullishM2 sub-components are still pointing towards more money flowing into more illiquid time-depositsReal M2 is starting to turn positive.
Could reignite inflation and fuel further economic growth.

EA: HICP Slowing Slightly in Summer-23

By Phil Rush

EA inflation slowed as expected by 21bp to 5.31% in the Jul-23 flash. Downside news in some member states did not extend to the EA, unlike the trend since Nov-22.
Energy prices offset upside news in core inflation again, which is a hawkish mix. It probably isn’t enough to trigger another rate hike in September.
A similar slight slowing remains likely in August before September steps down more broadly. HICP inflation should reach a welcome 2-handle in the Autumn.

The Week That Was in ASEAN@Smartkarma – Astra’s Omnipresence, Grab’s Taxi Win, and AKRA

By Angus Mackintosh

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 South East Asia.
The past week saw insights on Astra International (ASII IJ), BFI Finance Indonesia (BFIN IJ),AKR Corporindo (AKRA IJ), Grab Holdings (GRAB US), and The Keepers Holdings (KEEPR PM)
There were also insights on Multi Bintang Indonesia (MLBI IJ), Sido Muncul, and Pertamina Geothermal Energy PT (PGEO IJ) plus an insight on Thai Banks and LQ45 rebalance.

AFC Vietnam Fund July 2023 Report

By Asia Frontier Capital

In July, the Vietnamese stock market received robust backing from local retail investors who were enthused by the positive macro-economic indicators, leading to an upswing in investment sentiment.
As a result, the VN-Index surged by an impressive 9.11%, reaching 1,222.9 points and surpassing the critical 1,200 level.
This marked a significant milestone for the market.

Hong Kong’s Economic Bind

By Untying The Gordian Knot

We can observe a similar situation of temporarily tight liquidity when we compare Overnight or 1-week HIBOR to 1-month HIBOR, which tends to be more volatile.
However, it is worth noting that the curve remains flat from 1 week to three months.
In December, yields peaked, and the curve remained steep, possibly due to year-end demand.

Stocks Vs. Commodities Ratio // China Wants to Boost Its Property Sector (But How)

By The Commodity Report

The Chinese Communist Party’s Politburo, one of the country’s top decision-making bodies, on Monday, released a statement outlining plans to boost the country’s ailing property sector.
But it didn’t give much detail or signal any major measures as some commodity traders had hoped.
This uncertainty was also perfectly displayed in the price action of copper.

Credit Watch: If you SLOOS you lose – the 5 best charts from the SLOOS survey

The ECB survey on credit conditions in the Euro area was out last week, and it revealed a small rebound in both the ease of getting credit and the demand for getting credit.
The trends are interestingly slightly weaker in the US SLOOS survey, which is the first hint of a US Economy, which may surprise negatively 2-3 quarters ahead relatively to Europe.
Yes, I see a rate of change move from a very negative number to a slightly less negative number as a positive, as markets care about the rate of change and not nominal levels, even if it means that demand is still subdued.

Macro Regime Indicator: PMIs to drive price action together with headline inflation

Every month, we assess the risk/reward in asset allocation via our Macro Regime Indicator framework, where we use our asset allocation model to provide input for our thought process and positioning ahead of the new month’s trading.
In early July we wrote that: “We remain a bit split on whether we will see a pronounced change of the Macro Regime from “down, down, down” (in liquidity, inflation and growth) to Goldilocks without QE with inflation down, liquidity down and growth slightly up.
Our portfolio will hence combine the best of the two regimes for the month of July.

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Jul 31

Daily Brief Macro: US Banking System Survives Treasury’s First Borrowing Binge and more

In today’s briefing:

US Banking System Survives Treasury’s First Borrowing Binge, but Liquidity Concerns for 2024 Linger
Positioning Watch – The market’s response to another Fed hike
On the Verge of a Long-Term Buy Signal

US Banking System Survives Treasury’s First Borrowing Binge, but Liquidity Concerns for 2024 Linger

By Said Desaque

US banks’ financial results for Q2 indicate limited effects from the regional banking crisis in March on credit quality and the real economy.
Money market funds have reduced their participation in the Fed’s reverse repo programme since early-June and have bought US Treasuries without a detrimental impact on bank deposits.
Benign quantitative tightening could continue into 2024 even if the Fed decides to lower its policy rate, thereby squeezing banking system liquidity during a period of high US Treasury borrowing.

Positioning Watch – The market’s response to another Fed hike

Welcome back to our weekly positioning article, where we as always take you through the positioning data that we have found relevant throughout the week.
The central bank week is over, and what a week it has been with the quite shocking decision from BoJ yesterday, moving the YCC upper band from 0.5% to 1%, increasing the flexibility of their monetary policy since they effectively now have more room to play with, and they don’t have to buy as many bonds as they do now to keep yields under control – unless yields rise to >1%.
In the West, the Fed and ECB delivered right as expected with a 25 bps hike each, despite inflation coming down FAST both in the US and EZ – it sure looks like they want to be sure that inflation gets down to target.

On the Verge of a Long-Term Buy Signal

By Cam Hui

A monthly MACD crossover model is on the verge of a major long-term buy signal for U.S. stocks.
In addition, our Trend Asset Allocation Model has turned bullish, which is a signal for long-term investors to raise their equity allocations.
However, the short-term outlook is less certain and the market can correct at any time.

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Jul 30

Daily Brief Macro: The Weekly Market Monitor (30) – Behold the Dovish Shift! and more

In today’s briefing:

The Weekly Market Monitor (30) – Behold the Dovish Shift!

The Weekly Market Monitor (30) – Behold the Dovish Shift!

The surprisingly dovish tone of Federal Reserve Chairman Powell and ECB President Lagarde suggests the end of the tightening cycle is in, boding well for Equities and Treasuries.
After quarters of declining or negative earnings and revenue growth, Big Tech companies are finally showing improvement.
After being in Frenzy for three weeks, our Fear & Frenzy Sentiment Index has slipped back to Neutral.

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Jul 29

Daily Brief Macro: Japan Watch: 1% with Added Flexibility – More or Less Printing from Here? and more

In today’s briefing:

Japan Watch: 1% with Added Flexibility – More or Less Printing from Here?
CX Daily: Interview With Indonesian President Joko Widodo: A Unifying ‘Outsider’
Portfolio Watch: Surfing the boomer wave
Gold, Yen and Finding the Recession
TPW Advisory Friday Musings: What’s Next?

Japan Watch: 1% with Added Flexibility – More or Less Printing from Here?

The Bank of Japan moved the needle on the 10yr YCC from an effective cap 0.5% to a new effective cap at 1% but with a larger flexibility being introduced to the setup.
This also means that JGBs are now effectively tradeable again and that two-way-traffic is introduced as the BoJ can decide to guide the 10yr point both higher and lower within the accepted range given incoming data on prices ahead.
This is very different from just communicating a new clear cap and the 10yr yield is trading around +56 bps on the screens by the time of writing.

CX Daily: Interview With Indonesian President Joko Widodo: A Unifying ‘Outsider’

Joko Widodo /: Interview with Indonesian President Joko Widodo: A unifying ‘outsider’
IPO /: China’s first U.S. IPO under new listing rules moves a step closer
Economy /: Half of China’s provinces fall behind the national economy

Portfolio Watch: Surfing the boomer wave

By Emil Moller

Hello everyone and welcome back for our weekly Portfolio Watch!We have had a great week here with our book as we have switched exposure from US Tech & AI to old-school stuff.
Energy, Materials and Commodities are our favorites on a risk/reward basis.
Our models here keep getting backed by hard data and with commodities- our thesis here is a temporary rebound in Manufacturing:Chart 1: ISM Manufacturing, Order/InventoryWith Goldilocks data ramping up, we have enjoyed some nice green tailwinds to the book.

Gold, Yen and Finding the Recession

By ByteTree Asset Management

Finally, we see the beginning of the long-anticipated monetary normalisation in Japan.
This is the only country in the world to still have negative interest rates, which is odd given inflation has been rising, albeit modestly to Western Economies.
This ultra-loose policy has seen bond yields remain close to zero while the yen has slumped.

TPW Advisory Friday Musings: What’s Next?

By TPW Advisory

It’s been a white-knuckle ride for much of the past 6-9 months but what a ride it’s been!
I had a similar experience last weekend up in the country. Rain had fallen for much of the prior week and road washouts had occurred in multiple spots near our camping locale.
Nonetheless, when we hit the mighty Deerfield River last Sunday I was determined to do what we do every year which is to ride the rapids bareback – i.e. no tubes.

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Jul 28

Daily Brief Macro: The Gold BRICS – A Coming Threat to US Dollar Hegemony? and more

In today’s briefing:

The Gold BRICS – A Coming Threat to US Dollar Hegemony?
5 Things We Watch – Fed, ECB, BoJ, RBA & Credit
With a Positive Real FF Rate Restored, FOMC Hiking Cycle Is Nearly Done
Indonesia: Attractively Valued Amid Good Growth with Low Inflation and CA Surplus
China Politburo Targets Boosting Domestic Demand, Private Sector
Euro area watch: 7 charts on the ECB and EUR-inflation
Head Fakes in Euro and DXY
Change in Portfolio Weighs – The Fed Rules: Increasing the Weights of Equities and Treasuries
Consumer Watch: Is the FED & ECB nudging the same herd? 5 charts we watch
CX Daily: WeChat’s Short Video E-Commerce Drive Suffers From a Lack of Customers

The Gold BRICS – A Coming Threat to US Dollar Hegemony?

By Michael J. Howell

Announcement of Gold-backed BRICS currency unit rumoured for August, 2023. Could this disrupt the US dollar?
BRICS and ‘Friends’ have already amassed over 8k tonnes or more gold bullion than is held in US official reserves
Threat to US dollar comes from undermining of US finance not denomination of trade. Integrity of dollar is a domestic question, outside of BRICS, and dependent on future fiscal solvency

5 Things We Watch – Fed, ECB, BoJ, RBA & Credit

It’s central bank week again! Always a busy week when the biggest central banks publish their monthly interest rate decisions, but as always we are on our toes to provide you with actionable and timely coverage of all the rate decisions, meeting takeaways and more from Fed, ECB, BoJ & the rest.
Our main thesis is that the overall message across the board will be slightly dovish given recent CPI numbers which suggest that the central banks’ job is done and that inflation will come down fast.
But maybe central banks keep looking in the rearview mirror, afraid to make a mistake that will ignite inflation again.

With a Positive Real FF Rate Restored, FOMC Hiking Cycle Is Nearly Done

By Prasenjit K. Basu

The hike to 22-year-high 5.375% restores a clearly positive real policy rate. Powell said there’s “still a long way to go” before reaching 2% target, so policy must remain restrictive.
We think a mild recession coupled with 6+ months of YoY declines in M2 will enable core PCE inflation to recede to 3.5%YoY by Nov’23 and 2.5% by Jun’24.
Key indicator is MoM change in core PCE. The cumulative MoM gain in core PCE has averaged over 4.5% in the past 29 months. 5.5% peak FF rate by Sep’23.

Indonesia: Attractively Valued Amid Good Growth with Low Inflation and CA Surplus

By Prasenjit K. Basu

With a positive real policy rate of +2.23% and 3.5% appreciation of IDR ytd, BI was comfortably able to keep its policy rate unchanged despite this week’s US rate hike.
Despite the commodity price correction, Indonesia will likely post a 2023 current account surplus of 0.2% of GDP; its fiscal deficit was 1.6% of GDP in the latest 12 months.
The equity market is trading at a trailing P/E of 14.7x, marginally below its 30-year mean. With RGDP of 5% in 2023 and 5.5% in 2024, we recommend being Overweight.

China Politburo Targets Boosting Domestic Demand, Private Sector

China’s top decision-making body on Monday highlighted the need to boost domestic demand and for policies to prop up the country’s private economy.
The July Politburo meeting is closely watched for signs of measures Beijing will implement to shore up growth, as the country’s post-pandemic economic recovery has lost momentum over the past few months.
“At the moment, the economy is facing new difficulties and challenges — mainly insufficient domestic demand, difficulties in the operations of some enterprises, risks and hidden dangers in key areas, and a complex and severe external environment,” stated the readout of the meeting chaired by President Xi Jinping.

Euro area watch: 7 charts on the ECB and EUR-inflation

I have finally had a few moments to digest the ECB meeting amidst stories that the Bank of Japan will tweak its YCC policy tomorrow.
The macro environment never fails to entertain.
Here is why the ECB will likely pause from here, while European inflation could reach target already by September/October.

Head Fakes in Euro and DXY

By Untying The Gordian Knot

It’s easy to identify breakouts because they are the most noticeable and generate a strong response.
It is precisely what happened when DXY broke below 100.53.
On the other hand, head fakes are often met with silence as hope for sustained trends persists.

Change in Portfolio Weighs – The Fed Rules: Increasing the Weights of Equities and Treasuries

We believe the odds that the Fed is done hiking have increased significantly after the latest FOMC meeting and Powell press conference.
The key reason to lift the weight of Equities and Treasuries is that historically both asset classes have performed well after the final Fed hike.
We looked at the average and median return on US and Developed Market Equities, US Treasuries, Commodities, and Gold following the end of the tightening cycle since 1970.

Consumer Watch: Is the FED & ECB nudging the same herd? 5 charts we watch

By Emil Moller

As we conclude this week’s Central Bank Bonanza, we believe it is pertinent to share some of the soft data charts we are closely monitoring while assessing the outlook for the upcoming quarters.
The wisdom of the crowds, often overlooked, can offer an interesting perspective for financial markets currently processing the latest rate decisions.
In the coming days, we plan to offer a more comprehensive take as to how we see things going in the coming quarters and how we would choose to ideally play it.

CX Daily: WeChat’s Short Video E-Commerce Drive Suffers From a Lack of Customers

Tencent /In Depth: WeChat’s short video e-commerce drive suffers from a lack of customers
Climate /: Former U.S. Treasury head urges Beijing and Washington to unite and tackle climate change
Leverage /Charts of the Day: China’s household, overall debt-to-GDP ratios rise to a record

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Jul 27

Daily Brief Macro: CX Daily: Wang Yi Replaces Qin Gang as Foreign Minister and more

In today’s briefing:

CX Daily: Wang Yi Replaces Qin Gang as Foreign Minister
Powell Is Done, but Whether the Fed Is Too Depends on the Data
One or Two More Fed Rate Hikes? Comparing Today to the Last FOMC Meeting
Pause Watch: 25 bps and then a pause!?
Thailand : A Judicial War Against Pita

CX Daily: Wang Yi Replaces Qin Gang as Foreign Minister

Funds: China’s new rules for private funds are just the beginning
Personnel: Wang Yi replaces Qin Gang as foreign minister
Corruption: Former Communist Party chief of Hangzhou gets suspended death sentence for bribery

Powell Is Done, but Whether the Fed Is Too Depends on the Data

Powell sounded much more dovish than during the previous FOMC meeting and had just one message: the Federal Reserve is now fully data-dependent regarding future monetary policy.
Powell believes the Fed is done and highlighted the balance between doing too much or too little. Before, the Fed had shown a clear willingness to risk doing too much.
Since the market was driven by central bank ‘hopium,’ Powell has taken a key catalyst from markets to move higher.

One or Two More Fed Rate Hikes? Comparing Today to the Last FOMC Meeting

The latest US inflation data would allow the Federal Reserve to consider ending the tightening cycle after July’s rate increase.
However, Powell’s hands are tied due to repeatedly emphasizing the need for a weaker US labor market, especially since macro data has come in better than expected.
Ironically, a surprise end to the Fed’s tightening cycle could have a negative impact on stock markets.

Pause Watch: 25 bps and then a pause!?

A Fed pause historically means that the recession clock starts ticking and rings in the recession when the Fed starts cutting.
The outlook for cuts?
That’s properly worth a watch series on its own but with long-end rates below 4%, equity markets making YTD highs, strong corporate profitability and a labor market that still shows strength, we venture to say that those cuts are likely not around the corner.

Thailand : A Judicial War Against Pita

By Warut Promboon

We are now in late July and Thailand still does not have a new Prime Minister (PM) yet.
We believe the future is very uncertain from now until next May when the senate power to elect the PM ends.
The uncertainty is by no means positive for Thailand’s capital market and our view toward any Thai assets remain negative in the near term.

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Jul 26

Daily Brief Macro: Asia’s Financial Stability Holds Up in Tough Times and more

In today’s briefing:

Asia’s Financial Stability Holds Up in Tough Times
Great Game: Is a Hung Parliament bad news for markets?
Pheu Thai Gets Its Shot at Forming New Thai Government
CX Daily: China Seeks Cure for Ailing Health System
Out of the Box #13: Services matter for central banks and Manufacturing for markets
The Energy Cable #30 – Progress for The Bulls
Focusing on the Services and Not Manufacturing PMI Does Provide Upside in Eurozone Equities!

Asia’s Financial Stability Holds Up in Tough Times

Asian financial stability has remained sound despite a series of global shocks, underlining the region’s improved resilience against potential aftershocks of aggressive global monetary tightening
The region has been helped by its relatively better inflation experience and improved regulation. Resilient demand and labour markets are further advantages.
Elevated borrowing costs amidst a slowdown pose a risk to households, corporations and government finances, offset by cost-cutting and fiscal consolidation in the post-pandemic years.

Great Game: Is a Hung Parliament bad news for markets?

By Mikkel Rosenvold

In the blistering heat of summer, Spanish voters went to the polls on Sunday.
It was expected to be a tough race for incumbent centre-left Prime Minister Pedro Sánchez, but the result wasn’t as clear-cut as many expected.
Many analysts have pointed to a potential lengthy government formation process and painted this as really bad news for the Spanish economy – but is that really the case?

Pheu Thai Gets Its Shot at Forming New Thai Government

The progressive Move Forward Party has failed to get its leader Pita Limjaroenrat elected as prime minister. Pheu Thai is now better positioned to form a new coalition government.
Pheu Thai will sideline Move Forward and form a coalition comprising pro-military parties. This will bring short-term stability and allow the government to proceed with a budget.
Despite popular hopes for reform being dashed, major outbursts of discontent are unlikely for now. But the discontent will persist. Any lull will be only temporary.

CX Daily: China Seeks Cure for Ailing Health System

Medical insurance /Cover Story: China seeks cure for ailing health system
Collapse /: School gym roof collapse leaves 11 dead in Northeast China
VCs /: U.S. lawmakers demand venture capital firms provide details of China tech investments

Out of the Box #13: Services matter for central banks and Manufacturing for markets

In our “out of the box” series, we aim at being ahead of the current consensus narrative and think of the next theme that could drive price action before anyone else has given it any noteworthy attention.
This week we look at the spread between Service and Manufacturing momentum and why one matters for central banks and the other for markets (for now).
Our current working thesis is that Manufacturing (especially in the US, but maybe also elsewhere during Q3/Q4) will start to rebound short-term.

The Energy Cable #30 – Progress for The Bulls

By Ulrik Simmelholt

Stars are aligning and both Steno Research and 3Fourteen research are now energy bullish.
Last week at Steno Research we looked at the potential for a bounce in Manufacturing PMI numbers and we thought it would be natural to look at both hard and soft data through the lens of one of the most important signals in the energy markets, namely the flip from contango to backwardation.
In general it can be said that the flip brings more volatility to soft data than hard data. Given PMIs general tendency to converge with hard data and its current levels (Almost GFC bearishness) we feel like there are plenty of reasons for betting on higher Manufacturing PMI numbers.

Focusing on the Services and Not Manufacturing PMI Does Provide Upside in Eurozone Equities!