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
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