Global Macro Strategist
Summary: Morning APAC Global Macro & Cross-Asset Snapshot
Happy Macro Fri 4 Oct 2019
APAC Global Macro Morning Brief - US Super Friday, Here Come the Non-Farm Payrolls...
Our Macro morning Brief piece yesterday was titled, can Service PMIs Reverse Sentiment… & they seemed to have done so at least for the o/n sessions, yet from the perspective of bad news = good news.
US ISM Non-Manufacturing – the pillar of the US economy as it captures domestic consumption which is +70%0 of US GDP – had a pretty big miss coming in at 52.6a vs. 55.1e & down from a previous 56.4. Our Economist, Christopher Dembik takes a deeper look at the print here.
On top of that, the weekly jobless claims hit a 4wk high & once again, folks ignored the Markit PMI services print of 50.9 a/e/p. Factory orders were a touch better at -0.1%a vs. -0.2%e, 1.4%p – yet the key take away was that the ISM Non-Manufacturing is signalling weakness in the American consumer, which will be translated to the Fed need to do more, both in regards to speed & potentially magnitude.
The probability of a cut from the Federal Reserve on the upcoming Oct 30 meeting is now at 85%, at the start of the wk (prior to the ISMs & econ data) it was c. 40%.
If one looks at the Dec 11 meeting, that’s now a 96% probability with c. 60% of that being for at least 50bp cut from today - implying likely a cut in Oct & Dec.
With four key FOMC members due to speak in the next 24 hrs, the most important scripts will be from Powell and George – the latter, alongside Rosengreen was in camp no rate cuts in the previous meeting.
If George starts to signal a shift towards the dovish camp, we could see quite a significant further mover lower in bond yields (Higher in bond prices), as well as resurgence in upside for Gold & Silver.
What the different a mere week can make… once again reinstating there are always profitable opportunities out there.
Wishing everyone a strong & profitable close on this Super Friday, as well as phenomenal wkd up ahead.
Cross-Assets Snapshot:
We saw the yen 106.83 +0.24%, gold 1509 +0.38% & US 10yrs bond futures 131.70 +0.46% bid up – except the driver of lower bond yields o/n were more expectations of a more dovish Fed
Interestingly enough, we continue to see broader dollar weakness… DXY 98.8620 (sub 99.0) was down a touch at -0.16%, yet some risk-on assets such as AUD 0.6748 & NZD 0.6304 flew at +0.52% & +0.54%. On the EM FX side, LatAm led the charge again the USD with the like of the Brazilian real clocking a +1.20% rise.
For further update on Currencies, catch John Hardy’s latest thoughts: Risk Sentiment eyes US Data, EU reply to BoJo Brexit plan
Almost all the European equity indices closed in the red overnight – bear in mind that Germany was out yest on public hols, so it will be interesting to see what catch-up (if any) the Dax plays today – especially with peripheral news on US / EU trade tariffs to escalate shortly given the WTO ruling. Worth noting, there is likely to be a similar ruling on the US’ Boeing later in Q4.
We did see silver & brent crude flat overnight at 17.56 & 57.71 – both are up c. +20bp to +30bp this early Asia Fri morning. Counter to USDJPY… USDCHF actually rose by +0.22%
Today:
Next Week: China Back In from Golden Week… focus returns to potential US / China Trade Negotiations… potential kick-off of US / EZ Trade Tariffs linked to WTO reports
4th Quarter Outlook is out: Taking Down The Killer Dollar
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.
