In today’s briefing:
- China Housing – Demand-Supply Fundamentals Part #1: The “Modern Housing” Argument
- The Great Game – What’s Going on in Ukraine?
- Macro Market Indicators (June 2023)(Update)
- China Bond Yields: An Update
- Macro Market Indicators (June 2023)
- UK: Hot Labour Stokes Hawkish Case
China Housing – Demand-Supply Fundamentals Part #1: The “Modern Housing” Argument
- The sales of new homes over the 1999-2022 period appear to be not out of sync with the increase in the number of urban households
- The fact that ‘modern housing’ in China only started at the end of 1990s, gives the sector unique long-term characteristics, harder to gauge using typical models
- Hence the practical demand-supply balance may be better than typically thought, keeping in mind the affordability and wealth distribution issues, variation by region and city
The Great Game – What’s Going on in Ukraine?
- Why did the Russians blow up the Nova Kakhovka Dam?
- Where are the Ukrainians attacking and what are the prospects?
- What will happen next? Who will win and sustain the initative?
Macro Market Indicators (June 2023)(Update)
- The ISM Manufacturing Index scenarios call for a long US Treasuries, short (US) Equities strategy in each scenario.
- Financial conditions paint a rosier picture for equities than the ISM Manufacturing, yet downside prevails.
- Despite the uptick in US Macro surprises, global economic surprises are dropping. As a result, a massive gap has opened between the MSCI World Index performance and macro surprises.
China Bond Yields: An Update
- The market was taken aback by the news that the People’s Bank of China (PBOC) cut the 7-day reverse repurchase rate by 10 basis points to 1.90% on Tuesday, 13th June 2023.
- This was the first cut in the reverse repo rate since August 2022.
- The cut was unexpected as most analysts had expected the PBOC to keep rates on hold until later this month and cut by 5 bps.
Macro Market Indicators (June 2023)
- The ISM Manufacturing Index scenarios call for a long US Treasuries, short (US) Equities strategy in each scenario.
- Financial conditions paint a rosier picture for equities than the ISM Manufacturing, yet downside prevails.
- Despite the uptick in US Macro surprises, global economic surprises are dropping. As a result, a massive gap has opened between the MSCI World Index performance and macro surprises.
UK: Hot Labour Stokes Hawkish Case
- The UK unemployment rate reversed its previous 0.1pp rise, which the ONS had spuriously upscaled into existence, by returning to 3.8% in April.
- Vacancies show labour market demand remains stable despite rapidly rising salaries. Firms still see space to pass their costs onto UK consumers as second-round effects.
- Higher pay settlements and lower unemployment indicate worrying heat that is not yet burning out the cycle. Further 25bp rate hikes are needed to break the excesses.
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