In today’s briefing:
- What Did Biden’s State of the Union Signal About Upcoming Debt Ceiling Negotiation
- Japan Watch: Kazuo Ueda – Who?
- China Macro: Jan CPI / PPI | Much Better Visibility Ahead
- US Inflation Watch – Charts, Charts, Charts
- Sector-Specific Issues Add to Macroeconomic Challenges Facing US Corporations
- China Macro: A Blowout Month for New Loans, but Consumers Remain Timid
- TPW Advisory Friday Musings: Two Steps Forward, One Step Back
- Asian Frontier Markets Start the Year Strong – Asia Frontier Capital (AFC) – January 2023 Update
What Did Biden’s State of the Union Signal About Upcoming Debt Ceiling Negotiation
- Tuesday’s State of the Union address gave little cause for optimism that a looming debt crisis in the U.S. can be avoided.
- Speaker Kevin McCarthy, seemed as powerless as the day he was elected and Biden certainly didn’t make his life any easier.
- No debt ceiling solution in sight, which means that USD liquidity will be ADDED in coming months. Should be USD negative and on the margin positive for risk assets.
Japan Watch: Kazuo Ueda – Who?
- Ueda seems like a centrist candidate compared to Amamiya (dove) or Yamaguchi (hawk)
- Ueda, if he gets the nod on Tuesday, is likely to slowly but surely distance himself from YCC
- We continue to like JPY on the prospects of tighter USD-JPY rates spreads
China Macro: Jan CPI / PPI | Much Better Visibility Ahead
- The slightly weaker-than-expected inflation numbers for Jan represent a delay and not a detour from the broader reopening story. Investors will likely benefit from improved visibility in the months ahead.
- The recovery in the PPI has been dragged by upward sticky factory gate prices for smaller producers downstream. This is consistent with our analysis of the Jan PMI.
- A sustained improvement in consumer activity will likely drive PPI up to 0% and CPI to 2.5% by March.
US Inflation Watch – Charts, Charts, Charts
- In this CPI ‘preview’ we’ll turn to our charts trying to align expectations to select indicators.
- We see inflation coming in lower than expected again both in headline- and core terms
- USD could weaken, while positive vibes could resurface around global equities
Sector-Specific Issues Add to Macroeconomic Challenges Facing US Corporations
- Employment growth and service sector activity are exhibiting strength in early-2023, thereby suggesting that a higher terminal Fed policy rate could be in the offing.
- Despite lower supply chain stress, higher operating costs are impacting corporations. Lack of suitably skilled workers could impact productivity growth, as well as encouraging labour hoarding and higher capital spending.
- Sector-Specific challenges are facing US corporations as economic and financial conditions normalise, notably in housing and information technology. Those sectors dependent on discretionary spending will face demand headwinds in 2023.
China Macro: A Blowout Month for New Loans, but Consumers Remain Timid
- Markets will likely look at Jan’s TSF data in a favorable light. The record loan growth was particularly encouraging, despite being boosted by a degree of bank credit reintermediation.
- Corporate lending was robust, driven concurrently by a surge in long-term loans and working capital financing. However, the outlook for mortgages remains grim. Consumers appear unmoved by falling home prices.
- We believe the PBOC’s easing bias will continue. A cut in the 5-year LPR may be the next sensible move. RRR cuts, while possible in 2023, may cause longer-term pain.
TPW Advisory Friday Musings: Two Steps Forward, One Step Back
- Trees don’t grow straight to the sky do they?
- So why would one expect stocks to just keep soaring after one of the more aggressive 3 month moves in history, especially among non US DM or EAFE (All Star Charts notes EAFE doubled SPY performance since October).
- The US has enjoyed the January trifecta as we wrote about last week which has a perfect track record of higher stocks a year out.
Asian Frontier Markets Start the Year Strong – Asia Frontier Capital (AFC) – January 2023 Update
- The year began on a strong positive note for global equity markets and most AFC funds also had a positive return at the start of the year.
- Investor sentiment continues to improve as confidence grows that we are at the peak of global inflation and interest rate hikes.
- This was also evident in the less aggressive 25 basis point increase in interest rates by the U.S. Fed on 1st February 2023, as well as less hawkish messaging from the U.S. Fed in the past few weeks.
💡 Before it’s here, it’s on Smartkarma
Sign Up for Free
The Smartkarma Preview Pass is your entry to the Independent Investment Research Network
- ✓ Unlimited Research Summaries
- ✓ Personalised Alerts
- ✓ Custom Watchlists
- ✓ Company Data and News
- ✓ Events & Webinars
