Global Macro Strategist
Summary: Morning APAC Global Macro & Cross-Asset Snapshot
Tēnā koutou katoa, TGIF & Happy Macro Fri 20 Sep 2019 – APAC Global Macro Morning Call
O/N, Levels & Thoughts:
Econ Wise: We got a beat in 2Q NZ GDP to 2.1%a 2.0%e 2.5%p. In Australia whilst headline jobs data beat 34.7k vs. 15.0k that was expected, there was a large reduction in full-time -15.5k vs. an increase in part-time workers +50.2k, the unemployment rate also kicked up to 5.3%a vs. 5.2%e/p. OECD cuts global growth to 2.9% for 2019
We also had central bank rate decisions out Indonesia, Taiwan, Japan, Switzerland & the United Kingdom… <= respective links to their statements… latter four left rates unchanged at -0.10%, -0.75% & +0.75% respectively. Bank Indonesia cut rates by 25bp to 5.25% in-line with expectations
Bottom line from KVP’s side, its really all about the Fed (global impact wise)… ECB has even less current unity within it ranks for looser monetary policy
One key aspect about the “lack of expected response” from both the ECB & the Fed, is that it moves the ball closer to the fiscal policy side of things. The unintended consequences of Central Bankers continuing to be aggressive on the QE taps post GFC, is that they ended up doing all the heavy lifting, allowing government policy makers - fiscal stimulus and structural change perspectives – to easily step back because there was not enough pressure on them.
This is the paradox of monetary & fiscal policy – the latter only tends to really be activated during periods of shocks & recessions to the economy (despite it potentially having greater sustainable positive implications – i.e. Trump tax break bad on long-run for the economy, multi-trillion dollar infrastructure build good for long-run of the economy), whereas the latter is meant to smoothen out the volatility in the business cycle… yet all it does is build up the cancer (debt & complacency) that will eventually have to be flushed out… You can run from Global Macro for a long time, yet you can never hide forever… Its NEVER Different This Time…
The Fed continues to pump liquidity into the system with $75bn injected, this will mark the 3rd day in a row where the Fed has been active in the repo market… we can likely expect them to be present today (Fri Sep 20)
Levels: Weaker USD driven by a tiny pop in Euro & a bigger strengthening on the yen vs. the USD…. DXY at 98.27 -0.29%. Meanwhile cable 1.2523 +0.43% got to 2month highs, as prospects of a successful Oct 31 deal seemed to increase.
UST are still round the 1.78-1.80% lvls they were coming out of the FOMC decision. We have bunds 7 JGBs around -50bp & -21bp.
Brent crude reversed a two days of a big pullback to close +1.26% to 64.40, perhaps linked to Trump asking for “very significant” sanctions on Iran, as well as hinting at potential conflict – as we have flagged a few times on Macro Monday, the prospects for a conflict (any conflict) as part of a re-election strategy in 2020, is far from 0. It would be a page out of Bush’s re-election strategy on Iraq.
Gold 1498 +0.34% & Silver 17.78 +0.19% a touch higher, SPX 3007 flat for the session, with EZ EQ having a much more solid bullish session. The EuroStoxx bank index flew to 88.74 +2.42%.
Today:
Next WK – So what does week #39 bring to the table?
Other:
The end of the road
Emboldened by surging crude oil prices, Saudi Arabia makes waves on the international stage, as Crown Prince Mohammed bin Salman manages to create a World Champions League, after buying the UEFA Champion League franchise.
As the world embraces GLP-1 obesity wonder drugs, the people next in line to get a prescription stop caring about dieting and exercising, figuring that the drug will later solve all of their weight-related health problems.
With the US budget deficit spiraling above 10% of the GDP, the government is desperate to foster demand for US Treasuries. Under intense pressure from the White House, Congress makes income from government bonds tax-free.
After a criminal group deploys the most deceptive AI deepfake ever seen, generative AI becomes a national security threat. With public distrust soaring, governments crack down with harsh new laws, puncturing the AI hype.
To fix the divergence in the global trade and financial system, the largest deficit countries unite to negotiate new world trade terms. For surplus countries, the reset of the global economic model is a painful adjustment.
As discontent with Biden and Trump rises to fever pitch, Robert F. Kennedy Jr sees his support rising inexorably in the polls. On November 5, Kennedy wins the US presidential election, ushering in a new era in US politics.
Stepping up Japan's economic transformation in 2024, PM Kishida brings in a host of populist policies to boost domestic demand. As the GDP growth rate hits 7%, the BoJ is forced to abandons its yield curve control policy.
As people wake up to how little tax Europe’s billionaires are actually paying, the EU Commission implements a wealth tax of 2%. The tax sends shockwaves through Europe's luxury industry, with luxury giant LVMH plunging 40%.
