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
- 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
- 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
- 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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