In today’s briefing:
- Mint Macro Roundup: BoE and ECB Policy Meetings
- Portfolio Changes – Fed Exuberance = Equities Neutral, Long Bitcoin
- Myanmar Faces Prolonged Conflict as Civil War Intensifies
- The Weekly Market Monitor – China Caves, Liquidity Flows, and There’s Jay Powell!
- Regional Politics: Turning Points in Global and Asian Politics Loom in 2024
- CX Daily: What China’s New Capital Rules Mean for Banks
- Portfolio Watch: Liquidity the Name of the Game
- Economists See China Focusing More on Growth Next Year After Key Meeting
Mint Macro Roundup: BoE and ECB Policy Meetings
- European banks opted to hold rates steady and their statements were more dovish than the Fed. ECB and BoE statements suggested rates would need to stay elevated for some time.
- EU and UK economies are slowing sharply which draws concerns over how long rates can stay elevated without their economies tilting into recession.
- UK and EU equities reacted negatively to the announcements while commodities rallied. Bond markets were largely unchanged. EUR and GBP outperformed JPY after the announcements while DXY fell further.
Portfolio Changes – Fed Exuberance = Equities Neutral, Long Bitcoin
- We have lifted the weight of Developed and Emerging Market Equities to Neutral and raise Bitcoin to Overweight.
- The catalyst for these portfolio decisions is the Federal Reserve, which strengthened the dominant market driver being the combination of Federal Reserve rate cuts, a soft landing, and ample liquidity.
- Bitcoin is also one of the beneficiaries of growing worries about the speed of debt accumulation. In addition, the impact of US spot Bitcoin ETFs may drive Bitcoin’s price higher.
Myanmar Faces Prolonged Conflict as Civil War Intensifies
- The junta in Naypyidaw faces its most serious challenge from the ongoing Operation 1027, where a coalition of ethnic militias has inflicted major setbacks on the army.
- Poor morale and defections are hampering the military’s response against the insurgents. Beijing also shows signs of hedging its bets, providing limited tacit support to the rebels.
- Given the balance of power, our baseline case is that the fighting is prolonged throughout most of 2024. A collapse of the junta is plausible but should not be assumed.
The Weekly Market Monitor – China Caves, Liquidity Flows, and There’s Jay Powell!
- China is providing massive amounts of liquidity to finally solve its ongoing real estate recession. At a time when liquidity in other parts of the world is also rising.
- The UK economy has not grown in the past nine months, and France is saying ‘au revoir’ to its manufacturing sector.
- Our Fear & Frenzy Sentiment Index has never been so deep in Frenzy territory. Yet, the other key sentiment indicator – 200-day moving averages – looks prettier every day.
Regional Politics: Turning Points in Global and Asian Politics Loom in 2024
- Elections in Taiwan and the US will shape the dynamics of US-China competition. Anti-incumbent sentiment is currently strong in both contests.
- In India and Indonesia, incumbent governments (or their proxies) will seek a further term. The results will determine whether status quo economic and foreign policy is maintained.
- Other countries in the region such as Thailand, Singapore, and Japan may also see changes in leadership depending on local political dynamics.
CX Daily: What China’s New Capital Rules Mean for Banks
- Capital / In Depth: What China’s new capital rules mean for banks
China-France /: ‘We are willing to build a balanced relationship’ with China, France’s top diplomat says
- Bonds/: Local governments tap $29 billion special bonds to fund smaller banks
Portfolio Watch: Liquidity the Name of the Game
- As we wrap up the last Central Bank week of the year, it’s safe to say that the market hasn’t provided much incentive to conclude the celebratory spirit that started in November before the New Year.
- Powell’s press conference and the FOMC dot plot have continued to push interest rates lower and inject more USD liquidity into global markets.
- Risk assets have enthusiastically embraced this liquidity boost, even though John Williams’s recent attempts to temper the euphoria by clarifying that the Fed is not currently discussing rate cuts.
Economists See China Focusing More on Growth Next Year After Key Meeting
- China’s top policymakers emphasized economic growth and signaled stronger fiscal support when they met Monday and Tuesday to chalk out plans for the world’s second-largest economy in the coming year.
- Policymakers at the annual Central Economic Work Conference (CEWC) called for “efforts to pursue progress while ensuring stability” in 2024, according to a readout published by the state-run Xinhua News Agency.
- The conference took place in Beijing and was attended by top leaders, including President Xi Jinping and Premier Li Qiang.
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