In today’s briefing:
- Positioning Watch: Hedge Funds Caught in the China Storm, While Retail Investors Keep Piling In
- CX Daily: How Much Fiscal Stimulus Is Needed to Jumpstart China’s Economy?
- U.S. Fiscal Policy Post-Election
- US CPI Extends Hawkish Narrative
- Better Days For Indian Farmers As Chips Fall Into Place
- [ETP 2024/41] WTI Rises Amid Supply Disruption Fears; Nat-Gas Demand Wanes Due to Hurricane Milton
- FOMC Minutes from September 18
- China’s New Economy Industries Jump on Gains Across Key Inputs, Caixin Index Shows
Positioning Watch: Hedge Funds Caught in the China Storm, While Retail Investors Keep Piling In
- Hello everyone, and welcome back to our weekly positioning watch.
- What a week it has been in global macro once again, with Chinese equities collapsing earlier this week after the Chinese stimulus frenzy fizzled out.
- However, we are now starting to hear that Chinese authorities are taking matters seriously, planning a new round of stimulus on the 12th of October.
CX Daily: How Much Fiscal Stimulus Is Needed to Jumpstart China’s Economy?
- Teachers / In Depth: Chinese teachers’ mental health crisis A recent study, which surveyed more than 550,000 teachers from preschools, primary, secondary and higher education institutions, found that between 2000 and 2022, 16.1% of Chinese teachers experienced mental health issues.
- If preschool teachers, who had a far lower rate, are excluded, the figure was 17.8%.
- “While mental health has gained widespread attention globally in recent years, the mental well-being of teachers has not received the focus it deserves,” said the lead researcher of the study Yu Guoliang, a professor at Renmin University of China and director of its Institute of Psychology.
U.S. Fiscal Policy Post-Election
- We remain concerned that fiscal stress will be evident in H1 2025, as rating agencies worry over the deficit/debt and interest rate that is unlikely to improve under either president.
- This leaves an event risk of a ratings downgrade from one of the major agencies, given that the fiscal picture warrants a lower rating for the U.S. government.
- However, current good yield levels on U.S. Treasuries, plus lack of alternative major reserve assets argues against a fiscal crisis occurring.
US CPI Extends Hawkish Narrative
- An upside CPI inflation surprise has joined upside news on the US labour market. It resisted dis-inflated expectations despite sharp falls in energy prices.
- Core strength was more pronounced and not reliant on shelter price inflation, which it exceeded by the most since Feb-22. Nor does strength reflect residual seasonality.
- Repeating 2022-23’s pattern would mean a softer Q4, helping the Fed to cut again in November and December before more robust numbers in Q1 start urging restraint.
Better Days For Indian Farmers As Chips Fall Into Place
- Rubber Board new and replanting subsidy program starts rolling
- RRII, IOCL sign MoU to boost research in process oils
- Rubber Board stalls Kerala Govt move to shut Central Nursery
[ETP 2024/41] WTI Rises Amid Supply Disruption Fears; Nat-Gas Demand Wanes Due to Hurricane Milton
- For the week ending 04/Oct, US crude inventories rose by 5.8m barrels, exceeding expectations of a 2m barrel build. However, gasoline and distillate stockpiles fell more than expected.
- US natural gas inventories rose by 82 Bcf for the week ending 04/Oct, higher than analyst expectations of a 73 Bcf buildup. Inventories are 5.1% above the 5-year seasonal average.
- Chevron and Shell experienced target price upgrades, while Schlumberger and Occidental’s target prices were cut. Notably, BNP Paribas downgraded Exxon to Underperform from Neutral.
FOMC Minutes from September 18
- FOMC minutes from September 18 generated little response from the markets.
- A substantial majority favored the 50bps easing that was delivered though some would have preferred a 25bps move and a few others indicated they could support such a decision.
- There was only one dissenting voter, Governor Michelle Bowman. Others backing 25bps appear to have been non-voting regional Fed presidents.
China’s New Economy Industries Jump on Gains Across Key Inputs, Caixin Index Shows
- The contribution of high value-added industries, such as biomedicine, to China’s total economic inputs increased in September after reaching a five-month low the previous month, driven by greater capital and technology inputs, a Caixin index showed Wednesday.
- The Caixin BBD New Economy Index (NEI) ticked up 1.1 points from August to 30.9 last month, indicating that new economy industries accounted for 30.9% of China’s overall economic input activities.
- The NEI uses big data to track the size of China’s nascent industries.
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