In today’s briefing:
- “Wham, Bam, Thank You Ma’am” – Commodities Get Slammed
- Positive Outlook for Global Liquidity Despite Lingering Fed Policy Uncertainties
- Is Good News Good News, or Bad News?
- A Time for Tactical Caution
- Steno Signals #103: A blood-bath in metals in July!?
- United Kingdom Economy – June 4, 2024
- Portfolio Watch: Good news = no cuts = bad news (for metals)
- China Mainland Economy – May 10, 2024
“Wham, Bam, Thank You Ma’am” – Commodities Get Slammed
- “Strong” non-farm payrolls number a catalyst for another hit to commodities
- Oil positioning is now very supportive for prices with non-commercial buying levels close to five-year lows.
- Copper may have more short-term downside with speculative interest still high
Positive Outlook for Global Liquidity Despite Lingering Fed Policy Uncertainties
- The outlook for global liquidity in H2 depends on the willingness of the Fed to lower its policy rate based on data dependency.
- The Bank of Canada reduced its policy rate by 25 basis points this week, offering forward guidance for further cuts, but the European Central Bank was not offering such assurances.
- US quantitative tightening was not causing a scarcity of reserves in the banking system, according to the latest Senior Financial Officer Survey, making cessation dependent on the real economy.
Is Good News Good News, or Bad News?
- We analyzed the U.S. economy and markets from the perspective of three trading desks. The bond and commodity markets are signaling weakness while equity markets are signaling growth.
- Investors should distinguish between economic growth deceleration, which would stand in direct contrast to bottom-up Street expectations of rising EPS estimates, and disinflation.
- A growth deceleration would pose headwinds to equity price gains, while disinflation would be a positive factor.
A Time for Tactical Caution
- We are intermediate-term bullish, but disturbing signs are appearing under the hood that not all is well in the short run.
- We interpret current conditions as a weak bull pushing price upward, but the market is fragile and can pull back at any time.
- Our base case calls for stock prices to grind upward, albeit in a choppy manner over the next few weeks.
Steno Signals #103: A blood-bath in metals in July!?
- Happy Sunday from a windy Copenhagen!We’ve been yammering about the copper buildup on Chinese exchanges for months.
- Was it a strategic decision to hoard copper reserves?
- Were the Chinese waiting to offload this copper until the CNY devalued, or a result of the physical demand in the Chinese economy nosedived off a cliff?
United Kingdom Economy – June 4, 2024
- The UK economy is emerging from the dual shocks of the pandemic and the subsequent energy crisis, transitioning into a period of declining inflation and stabilizing output.
- Recent data shows positive economic activity trends, with GDP growth mainly driven by the services sector, while the first quarter of 2024 registered the highest quarterly growth since mid-2022.
- A positive outlook for inflation and interest rates is expected to boost economic confidence, increase consumer spending, and ease costs for businesses.
Portfolio Watch: Good news = no cuts = bad news (for metals)
- The latest job report just dropped, and it’s music to our ears—solidifying our thesis once again.
- A few highlights:Construction Hiring: Markedly up again.
- This is a strong cycle signal, indicating robust economic activity.
China Mainland Economy – May 10, 2024
- In 2023, China’s Economy managed to grow by 5.2%.
- This growth is mainly attributed to final consumption expenditure which accounted for the 4.3% growth of the total 5.2% expansion.
- Significant contribution to growth also had the investments with 1.5% contribution and especially the public sector.
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