Macro: Sandcastle economics
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Global Macro Strategist
Summary: Morning APAC Global Macro & Cross-Asset Snapshot
(Note that these are solely the views & opinions of KVP & do not constitute any trade or investment recommendations nor advice.)
Happy Macro Wed 9 Oct 2019
So the theme of headwinds into China coming from the white house continues to build up, from bans on certain Chinese companies to visa restrictions on officials – these are not the moves for setting the environment for a conciliatory meetings.
The overnight sentiment only reinforces what we’ve talked about before on one of the biggest implications from the impeachment investigations being that Trump will run in 2020 on a Tariffs Campaign against China & other parts of the world.
Added to that, took about a misplaced tweet… one executive from the Houston Rockets team tweeted out something on Hong Kong… an apology & erased tweet later… has done little to curb the backlash from Mainland China, not to mention pre-NBA season games not being broadcasted this wk in China (which has +500m fans).
I can just see the team owners & commissioner, “someone take that phone away from that guy”… it does highlight though, how interconnected the world has become – which I think over-time is going to work out for the greater good, i.e. its introduces an accountability that was never there. Again does not mean, that accountability is justified - we just have never before had anything on this scale as a species, to rally around issues on a country-to-global scale.
This again is an exceptional media / consulting opportunity, the vast majority of companies & corporate executives are still at a loss at just how potent their social media views can be for their company (or in some cases industry) both negatively & positively.
Overnight econ data actually saw healthy beat in German industrial production +0.3%a vs. -0.20%e & upward revisions – bears watching. Canada saw big beats in housing numbers as we saw housing starts beat 221ka 217ke, yet more impressively building permits tick up by +6.1%a vs. 2.3%e… you have to keep in mind Poloz has still not started to cut rates… & that’s a question of when, not if… so KVP would keep CA rates & bonds very much on the macro radar.
US PPI missed, as did the small business index.
Do take a look at the latest Macro Digest from Steen Jakobsen, resonates with what we touched on a few Macro Mondays back (especially if Joe Biden has to step down if there is evidence of corruption linked to his son). Bear in mind Steen got Trump & Brexit right, and whilst early days, here are some of his current views on the US's 2020 elections.
Macro Digest: The Next President of the USA, Elizabeth Warren
Cross-Assets Snapshot:
European equities were read across the board, with the likes of the DAX 11970, down -1.05%. This continued into the US where we saw the S&P deep below the 3,000 lvl at 2893 -1.6%. We have now ticked to over 20 on the VIX, with a +13.6% uplift to 20.28, +35.2% in the last one month
Still the pullback we have been getting in US equities feels very orderly, and its been a steady grind up on the VIX… this is where it gets interesting for vol players. The VIX’s ability to stay above 20, let alone poke through 25 or even 30 for extended periods of time has been muted in the past
Gold continues to struggle to sustainably break through this $1500 lvl after getting as low as $1487 at one point overnight, before finishing up +0.80%. Silver beat that with a +1.69% to 17.7330 lvl. Brent crude 58.02 saw a small pullback of -0.19%
US 2/10 is at c. +11bp, grinding higher. UST at 1.54% & we have bunds & JGBs at c. -59bp & -21bp
The Dollar index is back above 99.00 lvl for the DXY with a +0.17% uplift overnight. DollarYen was -0.16% yet still staying above the 107 lvls.
Reflections of an investment strategist:
Econ Data Today: Fairly light…
4th Quarter Outlook is out: Taking Down The Killer Dollar
Other: