In today’s briefing:
- Walker’s Weekly: Dr. Jim’s Summary of Key Global Macro Developments – 6 Sep 2024
- US: A Harder Landing and Fed’s Response
- Heard From Fortress Hill: Weekly Market Observations (6 Sep 2024)
- HEW: Landing 25bp Across the Pond
- US August Nonfarm Payroll Suggests Only 25 Bps Rate Cut
Walker’s Weekly: Dr. Jim’s Summary of Key Global Macro Developments – 6 Sep 2024
- U.S. PMI dropped to 47, sparking concerns about slowing economic activity ahead of the expected interest rate cut.
- India’s economy continues to outperform Asia, with a PMI of 57 and strong Q2 GDP growth.
- Hong Kong’s property sector faces challenges, with weak earnings reports from New World and Sun Hung Kai.
US: A Harder Landing and Fed’s Response
- Though our baseline view is for a soft landing for the U.S. economy and only one 25bps cut by end 2024, uncertainty exists over the scale of the slowdown.
- If the U.S. economy has a harder landing (stagnation/technical recession with 20-25% probability), then the Fed could likely cut the Fed Funds rate to 2.50% or below in 2025.
- A skew exist to lower Fed Funds depending on the outcome of the economy.
Heard From Fortress Hill: Weekly Market Observations (6 Sep 2024)
- US S&P 500 declined by 1.85% in the past week and Hong Kong Hang Seng was down 2.34%, and Hong Kong typhoon leads to trade halt on Friday.
- Our strategy did not change in the past week, still holding on long PLTR call, long Link Reit (HKG:0823) call, and shorting Tracker Fund (HKG: 2800) call.
- Except we have taken some profit by selling Link Reit call, which increase quite handsomely as underlying rose by over 3% in the middle of the week.
HEW: Landing 25bp Across the Pond
- The US unemployment rate has dropped and wage growth has increased, which should lead the Federal Reserve to a 25bp cut in September. Other central banks have also ceased leaning towards dovish surprises.
- The upcoming ECB decision is anticipated to result in a 25bp deposit rate cut and further adjustments to the refi and lending rates as the corridor narrows.
- UK GDP and labour market data, as well as US inflation, are other significant highlights to look out for.
US August Nonfarm Payroll Suggests Only 25 Bps Rate Cut
- August’s non-farm payroll is a little weaker than expected with a 142k rise overall, with significant negative back month revisions in the preceding two months totaling 86k.
- However the data is stronger than July’s, not only in the payroll, but also a correction lower in unemployment to 4.2% from 4.3%, a reversal of July’s dip.
- This suggests a 25bps FOMC easing in September rather than 50bps.
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