Daily Brief Macro: Portfolio Watch: The outlook is brightening into October and more

• Everything is about the ongoing rally in Chinese equities at the moment, with China now being the best yielding country in the world in equity space after both the PBoC and the Politburo coming through with stimulus proposals, which has caught all China bears on the wrong side of the trade.
• We learned today that the PBoC is cutting the standing lending facility rates by 20 bps, a move not seen since the pandemic broke out.
• They have normally cut the interest rates in the lending facility by 10 bps at a time, so this is likely a sign that they’re truly willing to do something about the slump in growth / real estate.

• Commodity markets are down despite stimulatory measures from China, with oil prices falling due to increased supply from Libya and OPEC plus alliance
• China’s demand outlook for oil remains steady, with forecasts for oil demand growth unchanged despite stimulus measures
• Base metals, particularly copper, have seen a price increase due to stronger demand impulses from China, with bullish outlook and potential upside risks for the first half of 2025

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• Happy Weekend from Copenhagen! China made a 5-6 standard deviation move, happening just ahead of a significant influx of liquidity in both USD and CNY markets.
• Despite global softness in labor market data trends, this influx is noteworthy, and the Fed is considering rolling out 1-2 liquidity tricks to bolster the outlook.
• Before we head into Q4, the looming risk of a strike at East Coast ports in the U.S. adds a layer of concern.

• Did China Just Trigger Commodity Markets?
• China’s central bank last week announced a new stimulus package to the economy to curb the growth decline that is still going on.
• Chinese stocks jumped and also “Chinese-linked commodity prices” like soy, copper and steel gained momentum as Governor Pan Gongsheng announced plans to lower borrowing costs and inject more funds into the economy, as well as to ease households’ mortgage repayment burden.

• In the first quarter of 2024, Japan’s economy grew by 0.18% (QoQ).
• This growth is mainly attributed to real fixed capital formation, but also to real private final consumption expenditure to a lesser extent.
• These figures increased by about 2.53% and 0.43% (QoQ) respectively. 

• US rig count declined by one to 587 for the week ending 27/Sep, marking the sixth drop in seven weeks. Despite this, the rig count increased by six in Q3.
• The US oil rig count fell by four to 484 after staying flat last week. Gas rigs rose by three to 99, marking its second increase in six weeks.
• For the week ending 27/Sep, US energy producers added one rig in Texas and cut two in New Mexico and one in Louisiana.  

• Benchmark revisions in the UK’s quarterly national accounts data for Q3 cut business investment to bumble around pre-pandemic levels, offset by higher consumption.
• Households are still managing to raise their saving ratio to double their 2019 levels. Income has risen on their assets by a similar amount to gross savings.
• All shifts appear consistent with the intertemporal demand substitution channel of monetary policy. Deferred demand should support the hysteresis of high neutral rates.

• US natural gas prices jumped 19.2% for the week ending 27/Sept, marking the largest weekly increase since November 2023, driven by strong demand and concerns over supply cuts.
• Henry Hub Put/Call volume ratio fell to 1.03 (27/Sep) from 1.69 the previous week as put volumes fell by 45.5% WoW, while call volumes declined by 10.1%.
• Put OI increased for contracts expiring in October and November, while call OI rose for expiries in December, January, February, and March.

• China has implemented monetary and fiscal support measures to boost growth, including rate cuts and policies to stimulate real estate market.
• Market interprets these measures as more potent and impactful than previous rounds of stimulus, potentially driving asset prices and economic activity in emerging markets.
• Impact of Chinese measures on EM assets may also depend on sentiment, real economic activity, and commodity price channels, in the context of US rates and upcoming election.

This content is sourced through publicly available sources and has been machine generated. Information displayed is for general informational purposes only.

• SGX Iron Ore futures surged by $10.24/ton to $102.09/ton last week, hitting the highest level since July, driven by China’s stimulus announcement.
• A bullish technical signal emerged as the 9-day moving average crossed over the 21-day, yet RSI overbought levels (72.35) suggest a potential correction.
• Trading volume spiked mid-week but thinned near $105/ton, indicating waning volume above $100/ton and setting up volatility for a short-term price drop.