In today’s briefing:
- South Korea Plans To Lower Inheritance Taxes
- EM Watch: Knock-outing the EM darlings, while inflation is returning in EM space
- [ETP 30/2024] Oil Reels Under Macroeconomic Headwinds; Nat-Gas Sheds Gains to Oversupply Concerns
- Positioning Watch – There was no “rotation” from large to small caps
- Actinver – Macro Daily: Inflation: 1h-Jul
- Scandi Watch: Norges Bank -> A hawk flying among doves?
- Equity Watch: Analyzing Rotation, Momentum, and Sentiment in the Equity Markets
South Korea Plans To Lower Inheritance Taxes
- On 25 July, the South Korean government announced that it plans to lower highest bracket inheritance taxes from 50% to 40%.
- This is a significant move since excessively high inheritance taxes has been one of the key reasons for poor corporate governance in Korea.
- A reduction in the highest bracket inheritance taxes from 50% to 40-45% is likely sometime in 4Q24 to 2025 which should help to improve corporate governance in Korea.
EM Watch: Knock-outing the EM darlings, while inflation is returning in EM space
- Welcome to our weekly EM editorial, where we touch upon the most tradeable topics in liquid EM markets and how they interact with main themes in G10 markets.
- The overwhelming story centers around the position squaring party that has been triggered by the reversal of the carry trade in USDJPY.
- The real rate spread is no longer trending upwards, leaving the fair value lower than 150 now that the spec long positioning in USD versus JPY is getting squeezed.
[ETP 30/2024] Oil Reels Under Macroeconomic Headwinds; Nat-Gas Sheds Gains to Oversupply Concerns
- US crude inventories fell for the fourth straight week, with a 3.7 mb drawdown. Gasoline stocks dropped by 5.6 mb, the largest decline since March.
- As of 19/Jul, US natural gas inventories were up 8.4% YoY and 16.4% above the 5-year seasonal average.
- TotalEnergies’ Q2 revenue fell 5.2% YoY, missing estimates by 7.3%. EPS dropped 7.5% YoY and missed estimates by 7.2%.
Positioning Watch – There was no “rotation” from large to small caps
- Welcome back to our weekly positioning update.
- It’s hard not to touch upon the recent moves in equities once again, with markets trying to digest whether it was the beginning of a broader outflow from large cap / tech into small cap stocks and indices like Russell 2000, or if it was simply a hiccup due to extended positioning and a profound fear that the cutting cycle was already fully priced in, leaving tiny room for extensive gains in large cap stocks, which were up >20% YTD before the CPI report.
- We provide 3 reasons as to why it was not a rotation below.
Actinver – Macro Daily: Inflation: 1h-Jul
- The inflation rate for the first half of July stood at 0.71%, driven by increases in the prices of agricultural and energy products.
- However, core inflation continued its downward trend in annual terms, approaching 4.0%.
- This reinforces the expectation that the Board of Governors of Banxico will opt for a 25 basis points cut in the reference rate, in a decision that we anticipate will be divided.
Scandi Watch: Norges Bank -> A hawk flying among doves?
- The Norwegian rates case is always interesting when we see significant moves in NOK, foreign rates, and energy prices.
- Norges Bank is in contrast to other central banks extremely structured/mechanical around their rate decisions and the upcoming policy bias can hence be tracked with a decent precision in real time.
- Here is a brief summary of the current status of the (semi)-mechanical adjustments to the rate path from June, given recent development.
Equity Watch: Analyzing Rotation, Momentum, and Sentiment in the Equity Markets
- Take aways: As liquidity and growth improve so will equity markets.
- The RTY rotation story is not all rosy. Momentum suggests that we are not as concentrated in equity markets as we think
- Three weeks ago, when the dovish CPI print landed, the immediate reaction was a sell-off in large caps followed by an influx into small caps, with RTY rising >10% over the week following the release.
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