2020-Feb-18

US is Back, RBA mins, ZEW, Empire...

Top of Mind…

• To get the full menu of wk 8, check out our Friday piece, Global Markets: Lucky 8, As We Look Into Next WK

• Even though the US was out o/n on a Public Holiday, you would not have known it, as US equity futures did not miss a beat closing up +0.21% & +0.36% on S&P 500 & Nasdaq 100. Their European cousins also had a great session across the board, with the EuroStoxx banks in particular clocking a +0.81% to 102. Which on a longer time-frame is a bit questionable if we do get a more dovish ECB, ie. Negative rates have not exactly being helpful to the banking sector as our Equity strategist Peter Garnry has pointed out several times before.

• And in Asia Monday’s session, we had outperformance on China & Hong Kong equities, up +2.25% & +0.52%. We are pretty much back to pre-virus fears on both indices.

• One security that is not playing ball there is USDCNH which at 6.9855, is well north of the 6.8457 lows that were made on Jan 20^th (i.e. post the signing of the phase one deal).

• Japan was the clear laggard at -0.69% on the Nikkei to 52523. The 4^th quarter GDP was  massive miss -6.3%a -3.8%e +1.8%p. This was attributed to the questionable sales tax increase that was put in place last year. Whilst some folks may have viewed that move as prudent towards deleveraging, with a debt to GDP ratio well over 200% this is not even a dent. What will be interesting in Japan is whether or not the Olympic is still on given the virus concerns. And if it is still on, whether the attendance may be materially affected. The one thing they have going for them is summer in the Northern Hemisphere.

• Today’s key points in Asia with be the RBA mins, with likely a focus on any mention of Corvid-19 & potential implications towards more easing. In addition to the deflationary lag that China (& thereby Australia) is experiencing, its worth noting that a lot of Chinese tourists & students go to Australia. It may take time to recover.

• Just to give context on one big extreme, HK has seen its visitors go from 200K a day to 3K a day – now granted HK has cascaded from one structural issue to the next, but it does show the power of the "visitors tap" to be almost completely switched off.

• Our Australia Analyst Eleanor Creagh points out the RBA is quite reluctant to cut again & it really all about jobs for them. What is going to be worth noting is whether they think the slows down linked to the bush fires and/or virus are transitory or more structural.
  
  
• Europe will see ZEW surveys for Germany & the EZ as a whole. Whilst the UK will get key jobs data. The US will contend with house prices & the Empire Mfg. Index.

On The Radar Today…

(All times are SGT)

• AU: RBA mins out at 08:30

• UK: Jobs Data; Avg. Erns +3.1%e +3.2%p, U/R 3.8%e/p

• EZ: GER ZEW Survey, EZ ZEW Survey

• CA: Mfg. Sales

• US: Empire State Mfg. Readings, NAHB Housing Market Index, TIC Long-Term Purchases, Kashkari @ 03:00

For Wed key readings are likely to be machinery data out of Japan, wage price index out of Aus, CPI & PPI out of the UK. Remember, econ data wise this wk is all about Flash PMIS on Friday

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It is going to be a phenomenal week, wishing everyone the very best possible day. Let’s all keep our minds & hearts open to the opportunities available & remember, it is not about resources, but resourcefulness & most of all, timing.

All that we desire lies within.  

Namaste,

KVP

Ps. Note the Macro Dragon will be on break from back-end of Feb to early Mar – given a long overdue & upcoming spectacular legacy family trip

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Anchor Pieces # SaxoStrats:

• Jakobsen & SaxoStrats team with our 2020: Outrageous Predictions

• Our latest 1Q2020 Quarterly Outlook: The Great Climate Shift

• Eleanor on a Meta trend: Climate Deeply Embedded in Risk & Opportunity

• Garnry on The Godzilla theme: Green stocks are the next mega trend in equities

• Jakobsen latest global macro presentation Everything is Perfect

• KVP on the Fed: The Half-Life Fed & Min. One Cut By 1H20