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Macro Monday WK 37: The not so Super Mario Draghi?

Kay Van-Petersen

Global Macro Strategist

Summary:  WK 37 starts out with the Asia Monday Morning have a continued risk-on skew, this is all likely due to markets trying to front run the easing decisions that are to come out of the ECB on Sep 12 & the Fed on Sep 18.
Disappointments here could potentially lead to profit taking & even a reversal in the current bullish sentiment

Macro Monday WK 37: The not so Super Mario Draghi?


Mon 9 Sep 2019

A  replay of the call is available

Folks really all about ECB this wk & Fed next wk, equities seem to be front running the potential easing that is coming through. Real test will be Fed Sep 18, yet also a chance that Draghi cannot do enough this Thu Sep 12 to keep the bulls running.

Wishing everyone a healthy, phenomenal, smooth, profitable & lucky wk up ahead.



Summary of Prior Week:

  • Geo Politics: China took out the doubts of a potential Sep meeting, by saying they are good to meet in Oct with the US. Likely looking to keep things quiet as they head into their Oct 1st, 70yr National Day Anniversary

    HK withdraw the extradition bill, sparking a c. +4% rally on the day. Still not sure if this is structurally a game changer – as underlying current is longer term social imbalances

    Econ data: Despite US ISM mfg. recording a sub 50 print 49.1a 51.2e, ISM non-mfg came in at 56.4a 54.0e
  • BoC: Remains an outlier vs. what we are seeing in the rest of the world. Point that their borrowing costs remain lower than US, yet inflation is higher, they are operating at close to capacity & data has continued to surprise positively
  • FI: Much wider for the wk driven by USTs, Bunds & JGBs…
  • FX: DXY lower by c. 50bp, likely due to bullish equity sentiment & bond yields moving higher
  • CMD: Lower on softs, gold & silver, yet Energy, Iron Ore & copper got lifted
  • EQ: Risk-on cont. for 2nd wk strongly across the board, Nas-100 is close to +25% YTD, CSI-300 +31%, CAC +19%, ASX +18%
  • Vol: Lowered by Equity rally to 15.00 on the VIX c. -16% for the wk. Also lower across bond vol metrics


COT Report: [@Ole_S_Hansen]

  • Big spike up by over a fourth in USD net longs to $13.1bn from $10.6bn
  • Once again same trend getting into month 2, of consistently smaller net long exposure in the commodity complex


Week Ahead

Key Focus:

  • ECB | CBT | US & CH Inflation  | GeoPolitics

Central Banks (SGT):

  • #WK 37 – MA 3.00% p (12) TU 19.75%p (12) ECB -040p (12)
  • #WK 38 – BZ 6.00% p (19) FED 2.00%p 2.25%p (19) SNB –0.75%p (19) NO 1.25%p (19) BoE 0.75%p (19) BoJ 0.75%p (19) SA 6.50%p (19) ID 6.50%p (19

Fed Speakers (SGT):

  • Blackout

Other (SGT):

  • China Fri Hols (13) Potential US / CH Ripples – Yes China has indicated ready to meet in Oct, yet does Trump stay quiet for 3wks?


Econ Data:

  • US: JOTLS, PPI, CPI 1.8%e/p CORE 2.3%e 2.2%p, RS
  • CH: New Loans, TB, CPI 2.6%e 2.8%p, PPI -0.9%e -0.3%p
  • EZ: Regional IP & CPI data, EZ IP, TB
  • JP: GDP, CA, Machinery Orders -9.0%e +13.9%p, PPI, Tertiary Indus. Activity
  • UK: GDP MoM +0.10%e 0.00%p, mfg. prod, AHE, CB leading index
  • NZ: Mfg. Sales, Visitor Arrivals, Biz Mfg. Index 48.2p
  • AU: Home Loans, NAB Biz Conf. MI Inflation Expectations
  • CA: Housing Starts, Building Permits, Cap. Util 82.0%e 80.9%p, House Prices


Greater China Focus (GST: slides 10 to 11) – Focus on PBOC actions; RRR cuts & more liquidity

  • Interestingly now cutting RRR is net positive for USDCNH (yuan strength), we saw a move from c. 7.14 on Fri to 7.10
  • RRR cut by 50bp effect Sep 16 for all banks, as well as up to 100bp for certain commercial banks
  • Latest move will release 900bn of RMB (c. USD 130bn) of liquidity into the market, versus say previous cuts in Jan & May of RMB 800bn & RMB 280 bn

Chartography & Price Action

  • Comments in the charts, we go from looking at where Jan 2020 Fed Fund Futures are pricing (c. 3x 25bp cut by year end), to the big move last wk in US 10yr yields (from c. 1.42/43% to 1.56%), pullback in gold & silver, bounces in AUD & NZD plus equities


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