Daily Brief Macro: The Week Ahead – US Core PCE and more

• Global equities finished the week on a high note, with Nvidia’s strong earnings boosting markets, especially in Japan.
• European yields rose due to strong PMIs, while the dollar weakened and the euro and pound strengthened.
• In the US, core PCE inflation is expected to be strong, with potential temporary factors contributing to the high readings.

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• It seems like no one is willing to add bets on rate cuts in H1 after even the doves from the ECB and the Fed have been hard to convince of spring action lately.
• G3 central bankers have been on parade with messages around the risks of easing prematurely after watching the cocktail of 1) higher freight rates, 2) sticky wages and 3) easing financial conditions, especially in the US.
• We have seen front-end back paddling in rates space ever since New Years accordingly and the almost bizarre uniformity in views and positioning has been blown into pieces in a matter of weeks.

• On 26 February, South Korea announced its long awaited Corporate Value Up reform plan details to improve shareholder returns of listed Korean companies. 
• Due to the lofty expectations about these corporate reforms, there was some disappointment when the details actually came out. KOSPI declined by 0.8% today following these corporate reform details. 
• Many investors are likely to take a “wait and see” attitude to see if real, material, positive changes will be announced in 2Q/3Q, before committing additional capital into Korean equities.

• China’s mutual funds produced a mixed bag of performance last year. Publicly offered equity funds endured a second straight year of losses, grappling with a prolonged stock market rout. Bond funds, on the other hand, had a comparatively stellar year.

• The uptick in bond fund flows fueled a shift in China’s asset management landscape, with mutual funds emerging as the most preferred asset management avenue, outstripping banking wealth management for the first time.

• This shift reflects investors’ concerted efforts to navigate prevailing financial market volatility and mitigate risk in the country’s stock market, which has seen a protracted rout continue into this year.

• The past week saw insights on Indonesia’s election, Grab Holdings (GRAB US), Bangkok Dusit Medical Services (BDMS TB), Delta Electronics Thailand, Singapore Airlines (SIA SP), and Sea Ltd (SE US).
• There were also insights on Indonesia and Singapore, a sector view on the EV ecosystem in Southeast Asia, a sector view on Indonesian banks, and ASEAN’s EV Ecosystem.
• The Week That Was in ASEAN@Smartkarma is filled with an eclectic mix of differentiated, substantive, and actionable insights, macro and equity bottom-up, from across Southeast Asia.

• Price benchmarks of Nat Gas among major producers have fallen off a cliff relative to price benchmarks of major net consumers/importers as the halt to global shipping has led to regional bottlenecks and abundances.
• We remain long US Nat Gas as a minor improvement in shipping paired with bottlenecks in 1-2 months from now makes for a potential extremely bullish cocktail if it squeezes out the current aggressive short-selling by CTAs. 
• We expect a spill-over from shipping to the pricing of goods

• Updates on the Macro scoreboard, including the S&P 500 futures and the US dollar index
• Key news to watch next week, such as consumer confidence numbers and GDP
• Interview with Mike Green from Simplify Asset Management discussing inflation and monetary policy, potential risks and market expectations

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• Recent market volatility with large moves in individual stocks
• Multistrategy hedge funds may be impacting these market movements
• Goose Hollow Capital founder Krishna Kumar discusses the workings of pod shops and their impact on stock trading

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• As per the International Cocoa Organization, there was a deficit of 216kt in the global market during 2021/22 and 99kt in 2022/23.

• With a significant decline in West African output in the ongoing 2023/24 season, it is anticipated that the market will experience a substantial third deficit, nearing 400kt.

• This would result in stocks reaching their lowest levels in at least a decade.

• We have been banging the drum on a potential sharp gap opening between inflation trends in the US and in Germany (or the Euro zone).
• The market has slowly but surely started to acknowledge the trend, but we continue to see traded inflation spreads as vastly mispriced given the forward looking indicators on inflation.
• The IFO survey details from Germany made for very benign inflation reading as price expectations decline in manufacturing, autos and metal and not least SERVICES.