In today’s briefing:
- Investment Strategy Under Upcoming US Rate Cut
- Where US Stocks Are Heading Before Rate Cut
- [ETP 29/2024] Oil Rebounds on Inventory Drop; Energy Majors’ Targets Cut
- Debt Watch: Will the US Treasury spook markets with issuance in the QRA again?
- CX Daily: Tesla’s Chinese Rival Hits Accelerator on Smart Driving
- Almost Half of Global GDP Tracking Unevenly
- ECB: September Cut Not Yet Determined
- UK: Slow Slackening Progress for Pay
- ECB Refi Rate 4.25% (consensus 4.25%) in Jul-24
Investment Strategy Under Upcoming US Rate Cut
- In face of the recent speeches by several FOMC members, we are changing or non-consensus view of no rate cut this year to one rate cut in September
- Under rate cuts, several asset classes such as real estate stocks, gold, and other safe haven currencies will rise.
- However, we still believe there will not be continuous series of rate cuts in the remainder of this year such that various asset classes listed above will only rise modestly.
Where US Stocks Are Heading Before Rate Cut
- To assess US equity direction before rate cut, we must first forecast the next rate cut. Our house forecasts that there will only be one rate cut during 2024.
- We believe S&P500, after hitting all-time high this week is due a 10% correction until the rate cut in September. Rate cuts are essential for S&P500 to tread new high.
- But we believe the rate cut is going to be one-off as the labor market remains bullish and inflation still comes off a tad higher than the Fed target.
[ETP 29/2024] Oil Rebounds on Inventory Drop; Energy Majors’ Targets Cut
- US crude oil inventories fell by 4.9 million barrels in the week ending 12/Jul, marking the third consecutive weekly decline.
- As of 12/Jul, US natural gas inventories were up 8.4% YoY and 16.9% above the 5-year seasonal average.
- UBS expects Chevron’s Q2 earnings to fall short of expectations due to LNG project downtime and lower international refining margins.
Debt Watch: Will the US Treasury spook markets with issuance in the QRA again?
- Good evening from Europe! The quarterly refunding announcement is due on July 29, and it always holds the potential to spook duration markets and liquidity betas.
- The release of the updated budget projections from the CBO in June garnered attention as they raised their budget deficit projections by around $400 billion compared to the winter projections in February.
- Not all of these outlays are newsworthy for the US Treasury.
CX Daily: Tesla’s Chinese Rival Hits Accelerator on Smart Driving
- BYD / In Depth: Tesla’s Chinese rival hits accelerator on smart driving
- Fraud /: Fugitive Chinese billionaire Guo Wengui convicted in United States
- Bonuses /: Mainland financial firms’ Hong Kong units tell staff to repay bonuses
Almost Half of Global GDP Tracking Unevenly
- My hybrid G3 nowcasting framework harnesses varied inputs from US, Euro Area (both through June) and Japan (mostly through May)
- Although 2Q 2024 headline GDP growth for the G3 overall is tracking better, 3Q might be soggier
- The individual nowcasts imply prospective upside risk for Japan in the near-term, and perhaps emerging downside risk for the US and Euro Area in the offing
ECB: September Cut Not Yet Determined
- The ECB unanimously held its policy rates in July, as widely expected after June’s cut, and refused to pre-commit to any outcome in September.
- Its policy will depend on the data in the weeks and months ahead, with some policymakers likely to firm up their positions before September’s highlighted meeting.
- We still expect another cut in September, encouraged by the Fed and BoE also easing policy. However, their premature steps could swiftly require reversals in 2025.
UK: Slow Slackening Progress for Pay
- The UK unemployment rate remained at 4.4% in May as the H1 increases are grinding to a halt in a similar pattern to 2023. Underlying changes are also becoming more neutral.
- Weekly vacancies data have rebounded to March levels while redundancies remain low and monthly pay growth is consistently annualising above 5%.
- The dovish BoE can welcome a renewed slowing in the headline wage growth rate despite current levels remaining inconsistent with the inflation target.
ECB Refi Rate 4.25% (consensus 4.25%) in Jul-24
- The ECB kept key interest rates unchanged in July, following June’s rate cuts, to manage persistent inflationary pressures while supporting economic recovery.
- Future interest rate decisions will be data-driven and flexible, avoiding pre-commitments to specific rate paths and based on ongoing assessments of inflation, economic data, and monetary policy transmission.
- Economic and financial risks, including geopolitical tensions and global trade dynamics, will influence the ECB’s policy adjustments to ensure the stability and effectiveness of monetary policy transmission.
This content is sourced through publicly available sources and has been machine generated. Information displayed is for general informational purposes only.
💡 Before it’s here, it’s on Smartkarma
Sign Up for Free
The Smartkarma Preview Pass is your entry to the Independent Investment Research Network
- ✓ Unlimited Research Summaries
- ✓ Personalised Alerts
- ✓ Custom Watchlists
- ✓ Company Data and News
- ✓ Events & Webinars
