Daily Brief Macro: Positioning Watch – No recession betting in markets yet and more

• Hello everyone, and welcome back to our weekly positioning watch.
• Economic data from the US has been received by markets with a bit more skepticism after the recessionary ISM services report, and while the NFP report—judging by the markets’ reaction—made everyone from equities to fixed income happy, the overall picture of the US economy is still admittedly gloomier than we anticipated a few weeks back However, with increased access to real-time gauges of the economy, there is currently no reason to worry about a recession—or at least no reason to trade it.
• Recessions are always triggered by something; the economy almost never slow-drifts into one, which makes it impossible to time.

• WA gold explorers and developers are struggling in the market compared to producers
• Value gap between explorers/developers and producers has widened, with little progress in projects
• Cash balances are dwindling for many companies, raising questions for investors about the incentive to fund them

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• China disinflation process is clear in the June CPI data, with excess production and soft consumer spending producing a lower than expected outcome. 
• Combined with weak M2 money growth, parts of China economy remain weak and point to a softening of GDP growth in H2.
• So policy action will likely remain targeted, in face of the weak economy

• With the IDR stabilizing and inflation abating to 2.5%YoY in Jun’24, we expect a 25bp cut in the policy rate in the Jul-Sep’24 quarter. This should bolster hitherto-weak private consumption. 
• The fiscal deficit was a modest 2.2% of GDP in Apr’23-Mar’24; ‘Prabowo risk’ won’t be manifest until 2025. Until then, liquid banks (L-D ratio 86.5%) are well-positioned to drive growth. 
• At 11.75x, the equity market’s trailing P/E ratio is far below its 20-year mean of 16.16x. Given the stable macro backdrop, we recommend going Overweight Indonesian equities. 

• Welcome to another election-heavy Great Game as we continue the 2024 ballot bonanza.
• This week saw the pivotal elections in both the UK and France as well as a very different, but also very interesting presidential election in Iran.
• We’ll cover all three and what they might mean for investors.

• NOAA predicts an 85% chance of an above-normal hurricane season (Jun to Nov), with 17-25 named storms (winds of 39 mph or higher).
• Oil prices plunge 1.6% before and then rises 2.4% in the ten days after weather shock. Crude oil IV rises 8.7% in 10-days before and 10-days after the weather shock.
• Hurricanes impact offshore oil production & refinery operations in the Gulf of Mexico (GOM), which accounts for 14% of total US crude production and 48% of US refinery capacity.

• We already addressed the US CPI report in our “Week at a Glance”.
• Tomorrow’s US CPI report is the make-or-break moment we’ve been waiting for.
• To keep the risk asset party alive, we need a soft outcome, and it looks like we might just get it.

• Smoore International, China Communication Services and GDS have Bullish technical signals in a challenging market.
• After a 3 year run from the COVID lows, Samsonite has confirmed a Bearish technical signal.
• Hautai Securities hits an all time low and becomes a “Catch a Falling Knife” chart.

• Recent acreage report shows benign planting figures and solid ending stocks for Corn sending its prices lower. Wheat also declined on higher stocks, while Soybeans rebounded.
• Wheat faces headwinds & tailwinds. Fundamentals are dragged down by favorable weather in exporting countries & imminent US harvest; Strong US demand & weak EU forecast has supported prices.
• Soybeans appear well supported from an unlikely ally in Trump. Import Duty tit-for-tat could see China slapping duty on Soy imports.

• Within the last years, where change has been the only constant, one thing remains unchanged: grocery shopping.
• Supermarkets have thus thrived, supported in recent years by pantry loading, eat-at-home trends, omnichannel capabilities, and increasing salaries.
• We are positive on the outlook for the space, with our covered companies expected to further benefit from increasing salaries and differentiation in value propositions, although the latter is a reflection of increased competition that we expect to continue.