Global Macro Strategist
Summary: Morning APAC Global Macro & Cross-Asset Snapshot
Happy Thu 12 Sep 2019 – APAC Global Macro Morning Brief
O/N, Levels & Thoughts:
APAC morning starts off with a conciliatory tweet from Trump, which signals that the US will move the Tariff increase from Oct 1 to Oct 15 as a good will gesture to China, given Oct 1st will mark the nations 70yr anniversary
Trumps tweet in Asia’s morning is likely to be bullish, yet the key even for this wk is here & it will be the ECB interest decision which we touch on yest & on this wk’s Macro Monday
So interesting session o/n asset class wise, in that we’ve continued to see yields go up – yet we had a respite in the profit taking & sell-off in the precious metals space, with a pretty healthy bounce on Gold 1,493 +77bp & Silver 18.09 +65bp
And yes, trump was also busy talking about the “Boneheads” at the Federal Reserve & how interest rates need to “be brought way down”. KVP actually thinks this has the opposite effect of a probability of a 50bp cut… its reduces the delta
Energy – through the likes of Brent Crude fell -2.5% to 60.81 on the thinking that US/Iran relations potentially only have upside post John Bolton’s firing. Not bad near-term reasoning & definitely a scenario KVP missed
Any US/Iran U-turn is not going to happen overnight… so would expect a reversal in Oil back to the 62.40-62.60 lvls of earlier in the wk. Obviously watch out for the 4th nominee to National Security Advisor… will they also be an Iranian Hawk or more of a diplomat?
At the same time equities had a strong session across the EZ & US, with the SPX close at the 3000 handle +0.72% on the day. FX continues to be more of the same, despite the DXY still being bid & above 98… we continue to see DollarYen grind higher, as well as the AUD & NZD stay relatively well bid
The bond market & the equity markets are telling us two different things. Equities are acting like they are front running the potential more news of looser monetary policy, as well as greater probability of steps back into more QE (likely a question of When not IF), yet the bond market is telling us that we are likely set for disappointment (the When is
not today at the ECB or next wk with the Fed). Obviously elements of profit taking (been a pretty massive move from US 10yrs from 2.50% => 2.00% => 1.42%), maximum pessimism in markets towards end of Aug / early Sep & general mean-reversion no doubt all play a role
Lastly do not forget the rate-decision from the central bank of Turkey
Today:
Other:
There will be no APAC Morning Brief on Friday, so bear in mind that in addition to China being out on bank holiday tmr, there will be Trade Balance figures out of the Euro-Zone. With the US set to see retail sales & Consumer Sentiment data
Don’t forget Macro Monday next wk (live at 08:30 SGT/HKT/CST, 20:30 ET with the replay link sent out after) where in addition to digesting the moves & implications from the decision later on today from the ECB, we will be counting down to our expectations on Sep 18th Fed – will it be a 25bp or a 50bp cut, what are the potential reactions?
To catch this wk’s Macro Monday click here…
Don’t forget to bookmark & check our Daily SaxoStrats calls from the European morning session c. 09:00 CET
2024: The wasted year
Markets are driven by election optimism, overshadowing growing debt and liquidity concerns. The 2024 elections loom large, but economic fundamentals and debt issues warrant cautious investment.
As US economic slowdown hints at a shift away from exceptionalism, USD faces downside with looming Fed cuts. AUD and NZD set to outperform as their rate cuts lag. JPY gains on carry unwind bets and BOJ pivot.
Amid AI and obesity drug excitement, equities see varied prospects: neutral on overvalued US stocks, negative on Japan due to JPY risks, positive on Europe. European defence stocks gain appeal.
With the economic slowdown, quality assets will gain favour, especially sovereign bonds up to 5 years. Central banks' potential rate cuts in Q2 suggest extending duration, despite policy and inflation concerns.
Commodities poised for rebound. The "Year of the Metal" boosts gold and silver, copper awaits rate cuts. Grains may recover, natural gas stabilises. Gold targets $2,300-$2,500/oz, copper's breakout could signal growth.
Markets are driven by election optimism, overshadowing growing debt and liquidity concerns. The 2024 elections loom large, but economic fundamentals and debt issues warrant cautious investment.
As US economic slowdown hints at a shift away from exceptionalism, USD faces downside with looming Fed cuts. AUD and NZD set to outperform as their rate cuts lag. JPY gains on carry unwind bets and BOJ pivot.
Amid AI and obesity drug excitement, equities see varied prospects: neutral on overvalued US stocks, negative on Japan due to JPY risks, positive on Europe. European defence stocks gain appeal.
With the economic slowdown, quality assets will gain favour, especially sovereign bonds up to 5 years. Central banks' potential rate cuts in Q2 suggest extending duration, despite policy and inflation concerns.
Commodities poised for rebound. The "Year of the Metal" boosts gold and silver, copper awaits rate cuts. Grains may recover, natural gas stabilises. Gold targets $2,300-$2,500/oz, copper's breakout could signal growth.
