Daily Brief Macro: Making a Drama Out of a Steel Crisis and more

• China’s steel industry is facing significant challenges, including price drops, overcapacity, and government intervention
• Steel producers are preparing for potential consolidation and supply side reforms to address the industry crisis
• Iron ore prices have also been impacted by the challenges in the steel market, with expectations for lower Chinese imports and domestic output

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• Guest is Saurabh Mukherjeeya, founder of Marcellus Investment Managers and advocate for investing in India
• Contrasts India and China, highlighting India’s better performance over the years
• Discusses the reasons behind India not receiving as much attention in terms of foreign investment compared to China, with recent shift towards investing in India

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• Inflation rates are gradually slowing, with both headline and core inflation in line with expectations and at multi-year lows
• Housing prices showed more firming than expected, particularly in rental markets
• Markets are pricing in very soft core CPI inflation over the coming months, with expectations for gradual disinflation and a focus on wage growth by the Fed

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• Japan peaked in 1989, but then experienced decades of underperformance and false dawns in terms of economic growth and stock market valuations
• Recent changes in Japan, including increased inflation, wage growth, and more shareholder-friendly behavior from corporations, are leading to renewed optimism for investors
• Japan’s history of stagnation and deflation created risk-averse investors, but recent policies and efforts are turning the economy around, making it an exciting investment opportunity

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• During last week, the International Energy Association (IEA) as well as OPEC both announced that demand for oil is slowing, revising down previous demand forecasts for the year and beyond.
• The world is seeing a major deceleration in oil demand growth led by China, with inventories set to rise next year even if OPEC+ were to postpone its plans to ease output cuts, the IEA stated.
• Meanwhile, the growth from the US won’t be able to offset the slowdown from China, according to the agency.

• Welcome to our weekly “The Week At A Glance” publication, where we explore the most important key figure releases and tradeable themes for the upcoming week.
• We remain almost exclusively long on USD fixed income, and therefore, our attention is particularly focused on two key developments this week:
• The Jackson Hole Conference and Ueda’s Appearance in the Japanese Parliament. Revisions to U.S. Employment Data: The Bureau of Labor Statistics (BLS) will release first-quarter 2024 data from the QCEW on August 21, 2024, at 10:00 a.m. (ET).

• Volatility continues to ease with US recession fears and Bank of Japan induced volatility fading
• Several central banks, including New Zealand and the Philippines, have joined the rate cut party, while Norway’s central bank kept rates unchanged
• US CPI report showed higher than expected inflation, particularly in rental and OER inflation, with expectations of continued growth at close to trend level in the US economy

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• As most of you know, we remained upbeat on the cycle until around mid-July, as growth parameters continued to perform solidly in real-time, while inflation also posed a risk of re-acceleration.
• Our real-time tracking of the three main macro parameters is the cornerstone of our macro thinking, and through July and August, we have begun to observe a significant shift.
• The risk of rising inflation has collapsed, while growth momentum has also weakened substantially.

• There are notable differences in short-term prospects for oil demand.
• These differences become more pronounced when considering the timing of ‘peak oil’.
• ‘Peak oil’ refers to the hypothetical point at which global oil production will hit its maximum rate before declining.

• The past week saw insights on Sea Ltd (SE US), GoTo Gojek Tokopedia (GOTO IJ), Grab Holdings (GRAB US), and Comfortdelgro Corp (CD SP).
• There were also macro insights on Indonesia from Manu Bhaskaran and on the Philippines, as well as the CrossASEAN Ground Zero and an SET Index Rebalance Insight from Brian Freitas.
• The Week That Was in ASEAN@Smartkarma is filled with an eclectic mix of differentiated substantive, and actionable insights, macro and equity bottom-up, from across Southeast Asia.