In today’s briefing:
- Walker’s Weekly: Dr. Jim’s Summary of Key Global Macro Developments – 26 Jul 2024
- Central Bank Watch – We are approaching the point where the market is losing its composure
- Nowhere to Run to Baby, Nowhere to Hide! Part 1
- Heard From Fortress Hill: Weekly Market Observations (26 July 2024)
- China: Struggling Middle Class and Bottom 50%
- CX Daily: China’s Macro Leverage Ratio Edges Up to Fresh Record
- HEW: Consolidating Risk-off
- Sustainability and ESG Investment
Walker’s Weekly: Dr. Jim’s Summary of Key Global Macro Developments – 26 Jul 2024
- Japanese Market: Yen strengthens, impacting stocks like Nissan with poor earnings due to weak overseas profit translation.
US Market: Weakening labor signals suggest possible September interest rate cuts; current economic policies may be behind the curve.
Global Economy: China boosts demand, India maintains fiscal policy, Korea’s GDP growth and investment stagnate.
Central Bank Watch – We are approaching the point where the market is losing its composure
- Markets at one point began to anticipate a risk of more than a 25 bps increase in September, and we have already seen early chatter about a rate cut from the Fed next week.
- This is the kind of “loss of composure” we see when position squaring takes precedence over common sense.
- We are likely approaching the point where the squaring party triggered by USDJPY is starting to impact market pricing and sentiment in nonsensical ways, as deleveraging is ongoing, even if the dust has settled a little this afternoon.
Nowhere to Run to Baby, Nowhere to Hide! Part 1
- Are we witnessing a short-term carry-trade unwind or trend change?
- JPY’s strength and overall market weakness continue to go hand in hand.
- Any near-term bounce be used to reduce exposure in certain sectors
Heard From Fortress Hill: Weekly Market Observations (26 July 2024)
- US tech stocks correct quite heavily, with S&P500 down for 2.6% and Nasdaq down for 3.7% up to Thursday this week.
- Hang Seng follows suit, declining for 2.6% for the week. However, we believe Hong Kong stocks are doomed a short-term recovery in coming weeks.
- After treading new high last Tuesday, gold has retreated from USD2467.8 to USD2409.4. Gold is still a long-term good investment as central banks are mounting gold position.
China: Struggling Middle Class and Bottom 50%
- Uncertainty over income and employment, adverse wealth effects from lower house prices, plus growing risk aversion, will likely mean that consumption continues to struggle.
- We forecast slower H2 GDP growth and look for 4% in 2025.
- Sluggish China retail sales/negative auto sales and price cuts for luxury goods suggest that China consumption is struggling.
CX Daily: China’s Macro Leverage Ratio Edges Up to Fresh Record
- Debt /: China’s macro leverage ratio edges up to fresh record
- China-Ukraine /: China supports Russia-Ukraine peace talks, but conditions aren’t yet ‘ripe,’ Beijing says
- Borrowing /: China encourages ‘high quality’ companies to seek borrowing overseas
HEW: Consolidating Risk-off
- Equity longs and FX carry trades are being unwound, indicating a general reduction of risk in consensus positions, unrelated to significant macro news or Trump’s trading.
- The US services PMI remains strong, suggesting a healthy service sector economy.
- Market repricing is expected to respond to policy changes next week, including a potential BOJ hike, a soft signal from the Fed regarding September, and a possible BoE rate cut, which could affect Yen strength and sterling long positions respectively.
Sustainability and ESG Investment
- Sustainability and ESG investment has increasingly gained importance and has become not just a talking point
- Surprisingly, China is one of the most serious countries that care about ESG, even beating America and Europe in certain sustainability aspects.
- It is worthwhile to review UN’s 17 sustainability goals to see what each economy can do to to raise the hope of achieving them by 2030.
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