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?
- 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
- 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!
- We look at the historical relationship between the Eurozone Manufacturing and Services PMI and Eurozone Equity Returns.
- Despite what many investors believe, the Manufacturing PMI remains the dominant PMI index due to its cyclical nature.
- In addition, while the Services PMI reveals a less downbeat picture than the Manufacturing PMI concerning the current EURO STOXX 600 Index level, upside is absent!
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