Macro Dragon: Who wants to be a millionaire?
Summary: Macro Dragon = Daily Cross-Asset + Global Views
Macro Dragon: Who wants to be a millionaire?
Before we get into it, for those that are back – or on the way back in – from what was hopefully a restful year-end holiday break, Happy New Years!
Let me sincerely (hand on liver) wish you, your families & teams the best of 2020. May your health, vigor & experiences be excellent & full of fun + laughter. May you continue to grow & develop yourself. May you be awash in gratitude & contribution plus fall [tail] backward into more money than Bezos.
We’ll be shaking things up from KVP’s side, so expect a lot more trade views going forward, as well as 20 long-term trades views for 2020 – which KVP will do a special piece & mini-series on.
Ok let’s get after it…
So we did a great piece & detailed thought piece yest on KVP’s take on the US / Iran escalation following the drone strike assassination of probably the de facto #2 most powerful person in Iran, the revered (& reviled) General Qassem. It been quite well received & as in all things, tried to take all parties into account for a balanced view.
One can look at the framework, points & risks associated with the view that KVP has that this is likely a tactical buy the dip situation in equities & fade the risk-off moves i.e. gold higher, yields lower, yen stronger, oil higher, vol higher.
Early days, but as we slowly get more people back on their desks this & next week – the ‘true’ price action & participation will dictate the lay of the land. This also has to be measured by whatever steps Iran takes & based on those steps, potential counter measures by the US. And as we flagged in the risks to the view – nothing else landing on the menu, a la Rocket Man or Putin.
We have already seen the Iranians say that in regards to Nucler development, all systems are a go – this should come as no real surprise, Trump sunk that boat when he broke the original US/EU/Iranian Nuclear Deal that his predecessor Obama had put together.
A state backed Iranian TV has run with one dollar being raised for the 80m Iranians to facilitate a contract for the assassination of Trump – so basically a $80m bounty.
Whilst this is not (yet?) an official Iranian government statement (yet obviously given the green light), it does show how this one unwritten rule of international diplomacy - no targeting of leaders by sovereign countries – could potentially be written off on the global political sphere.
Anyhow, S&P closed up +0.35% to 3246, oil is off its recent highs with Brent closing at 68.91 +0.45%, after getting as high as 70.74. Gold was +0.87% to 1565 after touching 1588! And this Tue Asia morning we got DollarYen heading towards 108.50, from 108.40, after being as low as 107.77 early yest morning.
Pretty much a sea of green on the Dec Final Service PMIs…
EZ beat 52.8a 52.4e, German retail sales also came in at +2.1%a +1.1%e & upward rev. to -1.3%r
UK beat 50.0a 49.1e
US beat 52.8a 52.2e
Key part will obviously be US ISM Non-Mfg. due out today, especially as last wk’s Mfg. was a big miss with 47.2a 49.0e 48.1p (A miss & not trending the right direction, sub 50 is contracting & we are into winter season)
Have a great, profitable start to the year everyone. Best of luck in 2020, may it be your best yet.
On The Radar Today:
It’s really all about US ISM Non-Mfg today…
- EZ: Flash CPI 1.3%e 1.0%p, CORE 1.3%e/p, Retail Sales
- NZ: Milk Auction
- CA: Ivey PMI 60.2e 60.0p, Trade Balance
- US: ISM Non-Mfg. 54.5e 53.9p, Trade Balance, Factory Orders
What We Are Reading From SaxoStrats:
- Jakobsen & SaxoStrats team with our 2020: Outrageous Predictions
- Ole on initial cut on the conflict: Middle East tensions drive oil & gold higher
- Peter-G on equities in the new year: What to expect in 2020?
- Eleanor’s latest on China: Patchy Activity Keeps Policy Makers in Easing Mode
- Hardy latest FX Breakout Monitor: Geopolitical concerns washing over currencies
Latest Market Insights
Outrageous Predictions 2023: The War Economy
- The constantly growing global need for energy drives the world's richest to huddle up and launch a R&D project in a size the world hasn't seen since the Manhattan Project gave the US the first atomic bomb.
French President Macron resignsThe political stalemate in France and the rise of Marie Le Pen following the 2022 elections corners President Macron, forcing him to give up on politics and resign from his position. At least for now.
Gold rockets to USD 3,000 as central banks fail on inflation mandateAs markets and central banks realise that the idea that inflation is transitory is wrong, and that prices will remain higher for longer, gold is sent through the roof, hitting a price tag of USD 3,000
EU Army forces EU down path to full unionWith continued challenges in the region and a US military that isn't aggressively enacting its former role as global policeman, the European Union agrees to create its own armed forces, bringing the whole region closer.
A country agrees to ban all meat production by 2030In an effort to become one of the global leaders on the path to net-zero emissions, one country decides to not only put a heavy tax on meat, but to ban domestic production entirely.
UK holds UnBrexit referendumFollowing a recession and domestic pressure, the United Kingdom is thrown into political turmoil that will end with a vote to wind back Brexit.
Widespread price controls are introduced to cap official inflationHistory tells us that with the war economy comes rationing and price controls. And this time is no different, as policymakers introduce strict price controls that lead to a range of unintended consequences.
OPEC+ & Chindia walk out of the IMF, agree to trade with new reserve assetSanctions against Russia have caused widespread turmoil due to US Dollar moves in countries across the globe that don't consider the US an ally. To relieve themselves from this, they leave the IMF and create a new reserve asset.
USDJPY fixed to the USD at 200 as Japan overhauls financial systemFollowing the challenges that faced the Japanese Yen in 2022, the Bank of Japan attempts to keep the currency from sliding. Unsuccessful on the long-term, Japan will launch a reset of its entire financial system.
Tax haven ban kills private equityWith the war economy comes an increased focus on national interests and sovereign nations' ability to assert themselves. In that regard, the OECD countries turn their attention on tax havens and pull the big guns out, banning them altogether.