Global Macro Strategist
Summary: Morning APAC Global Macro & Cross-Asset Snapshot
Happy Macro Wed 2 Oct 2019
APAC Global Macro Morning Brief
So we kick off early hours Asia Wed morning with reports from the Japanese Coast Guard that North Korea seems to have fired a missile toward the East Sea & confirmations of that have been given by South Korea
What is also interesting with the timing of the NK is it coincides with Golden Week & the 70th anniversary of China that was yesterday – i.e. the expectations were that things would be quiet in North Asia during this period
So you have to wonder if the North Koreans are sending their own message to China, alongside the protestors in Hong Kong – which has now recorded it first death
Interestingly enough, at least prior to the launch, the US & NK were due to resume talks this Fri & Sat
All this on the back of a pretty big pullback in the S&P overnight -1.2% to 2940 & a spike in the VIX to 18.56 +14.3%. No doubt triggered by the big miss in US ISM mfg PMI that came in at 47.8a 50.4e 49.1 (this marked back to back month where we have been sub 50)
Generally the Mfg. PMI data for Sep has seen misses & disappointments across the board, one exception was the UK’s 48.3a 47.0e 47.4p – yet at sub 50, its still in contraction territory. EZ as a block now has 8 consecutive months of sub 50 mfg. PMI prints
O/N sessions saw a big reversal in yields… UST after initially spiking to 1.75% reversed to a session low 1.61% before closing at 1.635%. Bunds & JGBs are at -56bp & -15bp respectively
This pullback in yields was a boon to the precious space which has been struggling of late. Silver jumped +1.41% to 17.24, gold which has not pulled back as much as silver finished up +0.45% to 1479
The flight to safety was also echoed in USDJPY & USDCHF which saw pullbacks of 0.31% & -0.42% to 107.73 & 0.9932 respectively. With EM FX also feeling unloved as the likes of USDTRY 5.7216 & USDZAR 15.3332 climbed by 1.29% & 1.31% respectively
We also got the RBA decision yesterday, which whilst in-line with expectations of their 25bp cut to 0.75% - seemed to have a much bigger effect on the market, despite a balanced statement. AUDUSD at 0.67 is a big support level
We also got some key equity sector specific news from Charles Schwab (online broker) which seems set to eliminate commission for US stock, ETF & options trades .
This caused a sell-off in a lot of the US brokers from the lies of TD Ameritrade, Interactive Brokers, E*Trade as well as Schwab itself. Names were down from -10% to -25%
In addition to points & econ data below, focus today will be on Hong Kong protests, seeing whether US equities can bounce back from yesterday’s -1.2% pullback, as well as the latest fiascos around the Trump Impeachment Investigations.
Today:
Other:
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.
