In today’s briefing:
- Positioning Watch – Commodities Are Finally Moving
- CX Daily: Chinese Pharma Turns to Global Deals to Cure Capital Crunch
- Macro Nugget: Diverging US and Europe Inflation Outlook
- Money Watch: Trillions of USDs Are Waiting to Be Unleashed
- Turbulent Stillness: US & UK Rates Amidst Volatility
Positioning Watch – Commodities Are Finally Moving
- Hello everyone, and welcome back to our weekly positioning watch! We have been all about the possibility of a cyclical rebound with the US economy showing great signs at the moment, and China is also potentially looking to beat the fairly bearish expectations (and why barely anyone has been net long cyclicals in all asset spaces).
- This leaves markets with a great divergence, as Europe is yet to show the same signs of momentum, and inflation expectations (between USD and EUR) are also starting to diverge, but positioning has not followed accordingly.
- Let’s rerun our current trades to kick things off: Equities: Long Materials and Long Korea (as a China proxy).
CX Daily: Chinese Pharma Turns to Global Deals to Cure Capital Crunch
- Biotech / Cover story: Chinese pharma turns to global deals to cure capital crunch
- Obituary /Chinese beverage tycoon Zong Qinghou dies at 79
- Fire /Nanjing e-bike parking lot fire kills 15 after spreading to apartment building
Macro Nugget: Diverging US and Europe Inflation Outlook
- Yesterday we got the full release of the February Ifo report from Germany.
- We note that price expectations in services ex. real estate fell almost 10 percentage points.
- One of our high conviction macro bets for this year is the major divergence between US and Euro inflation and looking at the below chart using employment data from Ifo and compensation plans from the NFIB Survey in the US certainly points in this direction.
Money Watch: Trillions of USDs Are Waiting to Be Unleashed
- Money trends were abysmal for most parts of 2022 and the early parts of 2023, but we are starting to see interesting trends arising in the global money growth with clear geographical divergences.
- Japan, China and the Euro zone have reported January M1, M2 and M3 developments and while trends remain benign in JPY and CNY, the money trends in EUR are re-worsening.
- A gap seems to be opening between USD and EUR money trends, which rhymes well with our strong thesis of a growing inflation gap between the US and the Euro zone.
Turbulent Stillness: US & UK Rates Amidst Volatility
- The past four weeks have been a whirlwind for fixed-income markets, with seemingly contradictory signals emerging across US and UK rates.
- While volatility reigns supreme, the question remains: are we witnessing a fundamental shift or temporary turbulence?
- Recent weeks have seen wide weekly ranges (28bps) despite minimal net change (-2bps), suggesting unease amongst investors.
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