Category

Macro

Jul 24
0

Daily Brief Macro: Global Monetary Tightening Gathers Pace as US Inflation Raises the Ante on the Fed and more

By | Daily Briefs, Macro

In today’s briefing:

  • Global Monetary Tightening Gathers Pace as US Inflation Raises the Ante on the Fed

Global Monetary Tightening Gathers Pace as US Inflation Raises the Ante on the Fed

By Said Desaque

  • Disappointing inflation data for June raised pressure on the Fed for more hawkish measures. Markets discount 75 basis point increases in the federal funds rate this month and in September. 
  • Measures undertaken by the Fed have forced other central banks to follow suit, notably the European Central Bank.  Meanwhile, other central banks are anchoring future rate hikes to the Fed.
  • The Biden Administration seeks to mitigate the inflationary impact of high oil prices via greater supply, particularly from Saudi Arabia. Doubts prevail over Saudi Arabia’s ability to sustain higher production. 

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Jul 23
0

Daily Brief Macro: Cross Markets: Is the Ship Turning? and more

By | Daily Briefs, Macro

In today’s briefing:

  • Cross Markets: Is the Ship Turning?
  • Surveys Screeching Toward Recession
  • CX Daily: How Saving Poyang Lake Will Alter A Complex Ecosystem
  • UK: Sales Down, Down, Deeper and Down

Cross Markets: Is the Ship Turning?

By Shyam Devani

  • Is the inflation ship turning? Price action in markets warrants this question
  • The clearest breaks have been in US stocks which should still rally
  • Bonds may be the next to move – it is the central market to watch

Surveys Screeching Toward Recession

By Phil Rush

  • Global manufacturing is trending towards contractions, with the Euro area now leading the way for the worse. At least price pressures are easing in the process.
  • Services are also being increasingly smashed, proportional to accelerated policy tightening, with the US indicated as contracting, and the EA on the cusp of joining it.
  • Survey-Based measures of activity don’t always move with the hard data. However, broad trend shifts tend to be shared signals rather than noise, so they need respect.

CX Daily: How Saving Poyang Lake Will Alter A Complex Ecosystem

By Caixin Global

  • In Depth: How saving Poyang Lake will alter a complex ecosystem

  • Huawei steps up debt financing with $593 million onshore bond sale

  • Shanghai appoints acting top prosecutor after graft probe topples previous chief

UK: Sales Down, Down, Deeper and Down

By Phil Rush

  • The British consumer continued suffering from painfully high inflation in June, with no significant real growth since Oct-21 creating an annual decline near 6%.
  • Food sales were relatively high in June but should probably be read relative to the deep drop in May amid bank holiday changes. April’s similar rise was revised away.
  • Non-Retail consumption is also being squeezed. New car sales are trending down at near a 20% annual pace. Consumers are being forced to drop discretionary purchases.

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Jul 22
0

Daily Brief Macro: Bear Market Rally or Turning Point? and more

By | Daily Briefs, Macro

In today’s briefing:

  • Bear Market Rally or Turning Point?
  • CX Daily: China’s Primary Health Care On The Front Line Against Covid
  • ECB: Hiking With No Clothes
  • Temasek Focuses on China’s Micro-Level Growth Trends, Head of China Says

Bear Market Rally or Turning Point?

By The Macro Compass

  • In an interview released last month, legendary investor Stanley Druckenmiller reminded everybody how bear market rallies can be a challenging experience for people comfortably sitting on the short side.
  • Due to their fast and furious nature, they seem to be somehow designed to mine the confidence of the short side.
  • ‘‘What if I am wrong on the big picture macro thesis?’’ ’’What if I find myself big times under-allocated in equities and we keep rallying?’’

CX Daily: China’s Primary Health Care On The Front Line Against Covid

By Caixin Global

  • In Depth: China’s primary health care on the front line against Covid

  • Exclusive: U.K. bank seeks investors for stalled Chinese-backed London development

  • Chinese vice premier urges regions not to let up in fight with Covid

ECB: Hiking With No Clothes

By Phil Rush

  • The ECB followed through on recent source reports and frontloaded its 50bps rate hike into July. More steps are ahead but are likely to be data-dependent 25bps ones.
  • Abrupt tightening requires a credible policy to manage fragmentation pressures, which a new transmission protection instrument (TPI) is intended to provide.
  • Purchases under TPI are a conditional insurance policy that requires future agreement to trigger, so it is unlikely to prevent excess recessionary pressures from building.

Temasek Focuses on China’s Micro-Level Growth Trends, Head of China Says

By Caixin Global

  • A long-term investor in China assets, Temasek International Pte. Ltd. tends to look beyond GDP figures and find opportunities on the micro-level
  • The Singaporean state-owned company mainly invests in four areas in China — digitalization, sustainability, life sciences and new consumption — representing at least half of China’s GDP
  • Temasek’s investment decisions are based on trends that help industries transform and grow

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Jul 21
0

Daily Brief Macro: China: A Perfect Storm in the Making and more

By | Daily Briefs, Macro

In today’s briefing:

  • China: A Perfect Storm in the Making
  • China: Financial Crisis Looms as Tighter Global Liquidity Limits Easing Options
  • UK: Inflation Focusing on Food Again

China: A Perfect Storm in the Making

By Nicholas Chia

  • High frequency data for June showed some signs of improvement but the economy continues to struggle under multiple stresses. The present malaise goes beyond zero-Covid policies.
  • Covid-19 restrictions are hurting consumer morale and undermining SMEs; local government finances are strained; real estate is under duress; and the economic slowdown is percolating into financial and social stresses.
  • Stimulus measures will be stepped up to boost the recovery in 2H22, but strained government finances and policy constraints put the effectiveness of stimulus into question.

China: Financial Crisis Looms as Tighter Global Liquidity Limits Easing Options

By Prasenjit K. Basu

  • A RMB7.96tn (US$1.2tn) increase in TSF in May-Jun’22 (US$3.1tn in H1CY22) boosted FAI and industrial growth in Jun’22, helping avert a Q2 GDP contraction. Full-year RGDP growth won’t exceed 4%. 
  • Exports accelerated but imports were near-stagnant, contributing to a trade surplus of US$391bn in H1CY22– but FX reserves still declined US$179bn. Easing options are limited by fear of capital flight.
  • Falling home sales, weaker property values and tighter global liquidity will spread the current financial crisis to more provinces. With monetary easing constrained, China’s financial system crisis will deepen. 

UK: Inflation Focusing on Food Again

By Phil Rush

  • UK inflation was a tenth above forecast as it rose to 9.4% and 11.8% on the CPI and RPI, with the news concentrated on food prices (“core” was as expected).
  • We extend the upside trend in food prices, bolstering the forecast, but keeping it relatively flat until 2023 outside the Oct-22 energy-related increase.
  • The BoE says it focuses on evidence of increased inflation persistence rather than its spot prints. Underlying measures eased again in June, albeit staying too high.

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Jul 20
0

Daily Brief Macro: UK: Labour Market Losing Some Tightness and more

By | Daily Briefs, Macro

In today’s briefing:

  • UK: Labour Market Losing Some Tightness
  • EA: Underlying Inflation Falling Past Peak

UK: Labour Market Losing Some Tightness

By Phil Rush

  • The UK’s unemployment rate maintained the higher level it jumped to last month, with repeat respondents to the survey reporting slightly higher unemployment again.
  • Job vacancies are near their lows of the past year, and payroll numbers may already be falling. Only the highest earners are keeping their pay ahead of the inflation squeeze.
  • Pay settlements appear to have stabilised, which should ease the BoE’s concerns about potentially more persistent pressures requiring a more aggressive tightening pace.

EA: Underlying Inflation Falling Past Peak

By Phil Rush

  • EA HICP inflation was unrevised from 8.64% in the final print for Jun-22, and the HICPxT rose to 8.8% y-o-y, in line with our forecast.
  • The outlook for the next few months still looks relatively flat, albeit at painfully high inflation rates. The current consensus forecast profile is very similar to ours.
  • Underlying inflation appears to have peaked, with the monthly impulse broadly falling over the past two months. It is still running at about double target-consistent rates.

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Jul 19
0

Daily Brief Macro: Singapore: Growth Outlook Remains Bright For 2022 and more

By | Daily Briefs, Macro

In today’s briefing:

  • Singapore: Growth Outlook Remains Bright For 2022
  • Characteristics of the Best Short Candidates
  • The Week That Was in ASEAN@Smartkarma – Astra & UNTR Are Cheap, Indonesian Autos, and SCB X
  • Commodity Prices Set To Fall Back to Earth After Giddy 1H22
  • India Presidential Elections: Political Re-Alignments Ahead of the 2024 Election Cycle

Singapore: Growth Outlook Remains Bright For 2022

By Nigel Chiang

  • Intensifying inflationary pressures led the MAS to tighten policy in an unexpected off-cycle meeting last week. Upside risks to inflation persist and more tightening is likely in October.
  • Property prices are moving up too but rising mortgage rates will help cool the sector and the government can increase land supply to temper real estate prices.
  • Singapore’s multiple growth drivers lend resilience to its outlook. But as external headwinds have grown, we have downgraded our 2022 GDP growth forecast from 4.4% to 4.0%.

Characteristics of the Best Short Candidates

By Eric Fernandez, CFA

  • Factor behavior tends to persist for effective shorts as well as for effective longs.
  • Below, we describe the characteristics of the best shorts over the past 30 days.
  • We compare factors/characteristics against our Two Rivers Universe as a benchmark.

The Week That Was in ASEAN@Smartkarma – Astra & UNTR Are Cheap, Indonesian Autos, and SCB X

By Angus Mackintosh

Commodity Prices Set To Fall Back to Earth After Giddy 1H22

By Manu Bhaskaran

  • Thermal coal benefitted from the gas shortages in Europe, while crude palm oil (CPO)’s upswing was induced by shortages of sunflower oil amid port closures in the black sea region.
  • Following a blockbuster semester, these conditions look set to normalise in the second half of the year, as the global economic growth comes under the spotlight.
  • Base metal’s decline is likely to be more pronounced in light of the economic moderation. Food and energy prices, on the other hand, will remain sticky.

India Presidential Elections: Political Re-Alignments Ahead of the 2024 Election Cycle

By Nicholas Chia

  • Vote counting for the Presidential elections will start on 21 Jul 22, and the new elected President will be sworn in on 25 Jul 22.
  • The BJP has put forth Draupadi Murmu as its candidate. She is a Santhal from the marginalised Adivasi tribal community.
  • Given the BJP’s dominance across state legislatures and the national parliament, however, Murmu is expected to coast to victory.

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Jul 18
0

Daily Brief Macro: Three Catalysts That Could Spark A “Rip Your Face Off” Rally and more

By | Daily Briefs, Macro

In today’s briefing:

  • Three Catalysts That Could Spark A “Rip Your Face Off” Rally
  • The Fed Has Become the Bull in a China Shop

Three Catalysts That Could Spark A “Rip Your Face Off” Rally

By Cam Hui

  • The U.S. stock market appears to be highly resilient in the face of bad news.
  • We outline three catalysts that have the potential to change the macro narrative from bearish to bullish and spark a “rip your face off” rally.
  • While none of these factors are specifically actionable, investors should be aware of possible asymmetry of risks and behave accordingly.

The Fed Has Become the Bull in a China Shop

By Cam Hui

  • The Fed appears intent on tightening until something breaks. In effect, the Fed is behaving like the proverbial bull in a china shop.
  • Even as Fed speakers assert their determination to bring down inflation, the market is signaling growing stress.
  • The combination of a falling 10-year Treasury yield and rising HY spreads is a possible lethal combination for financial stability.

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Jul 17
0

Daily Brief Macro: China Reverts to Infrastructure Stimulus to Boost Economy and more

By | Daily Briefs, Macro

In today’s briefing:

  • China Reverts to Infrastructure Stimulus to Boost Economy, but Legacy Issues Loom Large

China Reverts to Infrastructure Stimulus to Boost Economy, but Legacy Issues Loom Large

By Said Desaque

  • The Chinese government has resorted to stimulus via infrastructure spending to boost the economy, a route that has historically stabilised growth. Much-hyped accelerated bond sales cannot solve China’s current woes.
  • China’s slowdown is attributable to legacies from the 2009 stimulus, notably the rise of shadow banking. Attempts to curb the real estate sector and technology companies have also created headwinds.
  • The ongoing threat of new lockdowns creates a challenging outlook for consumer spending in China, thereby making achieving the +5.5% official growth target for 2022 virtually impossible.  

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Jul 14
0

Daily Brief Macro: UK: GDP Bounce With Bonus Working Day and more

By | Daily Briefs, Macro

In today’s briefing:

  • UK: GDP Bounce With Bonus Working Day

UK: GDP Bounce With Bonus Working Day

By Phil Rush

  • UK GDP bounced by 0.5% m-o-m in May amid broad-based activity growth. Postponing a bank holiday for the Jubilee may have briefly raised output as it did in 2002.
  • Activity trends still look broadly flat in 2022 with a worryingly high recession risk. The better May and supportive revisions mean the economy probably grew in Q2.
  • Given the bank holiday effect, the BoE will need to consider these data relative to the next release. Its August decision focuses more on the news about inflation persistence.

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Jul 13
0

Daily Brief Macro: Global Economic Outlook: Shifting Gears to the Downside and more

By | Daily Briefs, Macro

In today’s briefing:

  • Global Economic Outlook: Shifting Gears to the Downside
  • US-China: A Thaw Of Sorts Soon But It Will Not Go Far

Global Economic Outlook: Shifting Gears to the Downside

By Said Desaque

  • The global economic outlook has been negatively due to higher inflation, more hawkish central banks and geopolitical conflict in between Russia and Ukraine.
  • The depth and duration of slower global growth hinges on the ability of central banks to raise interest rates without materially impacting labour demand. 
  • Elevated inflation creates a high bar for the Fed to suddenly pivot to a dovish stance. Rising service sector inflation raises the risks of the Fed remaining hawkish for longer. 

US-China: A Thaw Of Sorts Soon But It Will Not Go Far

By Manu Bhaskaran

  • US-China relations are moving into a new phase.: A Biden-Xi call is likely to take place soon and could pave the way for an in-person meeting in November.
  • What the US and China seem to be aiming at is an understanding which ensures that their more intense strategic competition does not lead to unwanted crises or clashes.
  • What will not change, however, is the increased contestation between the two nations, especially in East and Southeast Asia. Te

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