In today’s briefing:
- Positioning Watch – Markets Are Moving Away from the US (in FI)
- Liquidity Nugget: The worst turn liquidity in years
- China’s Serial Rate Cuts: What are Them and are They Effective in Reviving the Falling Economy
- Walker’s Weekly: Dr. Jim’s Summary of Key Global Macro Developments – 27 Sep 2024
- EM FX Outlook: Fed Easing Helps but Divergent Trends
- HEW: Shrinking Fed Exceptionalism
- Heard From Fortress Hill: Weekly Market Observations (27 Sep 2024)
- Outlook Overview: How Far Are the Rate Cuts?
- EU Conveys To WTO That It Is Firm On EUDR Deadline
- CX Daily: Can China Create Its Own Goldman Sachs With Brokerage Mega-Merger?
Positioning Watch – Markets Are Moving Away from the US (in FI)
- Hello everyone, and welcome back to our weekly positioning update!
- Everything is about China these days, with both the PBoC and the Politburo preparing stimulus packages to save the Chinese economy from its nasty downturn.
- While the stimulus initiatives are not very large, relatively speaking (roughly a percentage of GDP on average across stimulus packages), markets clearly see the heavy amounts of proposed stimulus as a “whatever it takes” signal, sparking a strong momentum trend in the Hang Seng and China proxies.
Liquidity Nugget: The worst turn liquidity in years
- September’s month-end is always a significant period for xCcy markets, primarily due to window-dressing by financial institutions and the upcoming 3-month rolling into year-end.
- This leads to heightened volatility and liquidity adjustments, particularly noticeable around the xCcy basis.
- How bad will it be this year?
China’s Serial Rate Cuts: What are Them and are They Effective in Reviving the Falling Economy
- What exactly are medium term lending facility, short term lending facility, Loan Prime Rates, Required Reserve Ratio, 7-day reverse repo rate, and 14-day reverse repo rate?
- The PBOC measures this week are wider and more all-rounded, compressing what is usually a month or two of actions into one single week.
- The intensity of measures will give hope and expectation to even more measures to come and turn the long-term down trend of Chinese stocks to an upward momentum in short-term.
Walker’s Weekly: Dr. Jim’s Summary of Key Global Macro Developments – 27 Sep 2024
- European manufacturing PMIs signal recession, with Germany’s reading at 40.3, indicating deep trouble in the sector.
- China’s moderate stimulus measures aim to stabilize the property sector without excessive debt or household stimulus.
- Vietnam’s economic outlook is optimistic, driven by political shifts and expected pro-growth policies under General Secretary To Lam.
EM FX Outlook: Fed Easing Helps but Divergent Trends
- USD strength is ebbing across the board, which provides a positive force for most EM currencies on a spot basis.
- However, where inflation differentials are large, the downward pressure will remain in 2025 e.g. Turkish Lira (TRY)
- Where inflation differentials are modest against the U.S., but interest rate differentials are wider then this can mean modest appreciation – especially if the starting point is an undervalued currency.
HEW: Shrinking Fed Exceptionalism
- China’s stimulus has positively impacted sentiment, although this is not the case in the Euro area due to falling PMIs and unexpectedly weak flash inflation releases. The Fed’s dovish pricing extremes have become less exceptional.
- The upcoming week’s data may further this trend, with the Euro area HICP tracking low and US pricing potentially susceptible to another drop in unemployment. Policy decisions will only be coming from Colombia and Poland.
- The most significant event of the week will be Powell’s speech.
Heard From Fortress Hill: Weekly Market Observations (27 Sep 2024)
- The biggest fuss of the market this week is the intensity of a number of PBOC’s measures, which, unconventionally, were jam-packed.
- In particular the 800 billion RMB fund directly loaned to security broker and corporate repurchases is a new and effective measure to revive the falling stock market.
- Whether the serial of different types of rate cuts and the stock market funds can revive the economy will take a few month longer to see.
Outlook Overview: How Far Are the Rate Cuts?
- The U.S. economy is slowing, with the critical question being whether this is a soft or harder landing.
- Our broad analysis leaves us inclined to the soft landing view into 2025, though we shall watch real sector data closely over the next 3-6 months to check the trajectory.
- Elsewhere, European growth should recover into 2025. Finally, China growth is set to slow to 4% in 2025, as slowdown in consumption adds to the drag from the residential property.
EU Conveys To WTO That It Is Firm On EUDR Deadline
- WTO chief Ngozi Okonjo-Iweala’s request goes unheeded
- EPP agriculture chief quotes EC chief offering temporary solution
- EUDR system to be opened for user registration in November
CX Daily: Can China Create Its Own Goldman Sachs With Brokerage Mega-Merger?
- M&A / In Depth: Can China create its own Goldman Sachs with brokerage mega-merger?
China-U.S. /: Asia New Vision Forum: China-U.S. ties should be ‘managed strategic competition,’ Rudd says
- Investment /: Asia New Vision Forum: Fresh stimulus package ‘great news’ for startups, VC investor says
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