Global Macro APAC Morning Brief - Can Service PMIs Reverse Sentiment?

Happy Macro Thu 3 Oct 2019


APAC Global Macro Morning Brief - Will service PMIs save the day?

One of yesterday obsession continued to be the focus on the US ISM Manufacturing miss from Tuesday, which at 47.8a vs. 50.4e was a pretty big miss & also lower than the previous 49.1.

This was again highlighted given the miss in the ADP payrolls o/n 135k a vs. 140k e (see Dembik’s piece on ISM Mfg. & ADP Report) – its been a long-time since people cared about the ADP, yet that is sentiment for you.

One moment focusing on everything that is all sunshine, unicorns (WeWorks) & rainbows, the next seeing only thunder storms, fraud (WeWorks) & dark nights – the truth is generally somewhere in the space between.

The interesting thing will be whether service PMIs due today, as well as the US ISM Non-Manufacturing will change the current bearish sentiment in the market.

The US is not Germany, the ISM Non-Manufacturing is a lot more important given that over 70% of the US economy is driven by the service sector & domestic consumption – hence it ability to weather a global trade tariffs better than export dependent countries.

And all this potentially just increases the significance of US NFP on Friday… i.e. if we continue to sell-off a big beat on NFP (or even ISM Non-mfg. tonight) could see a very healthy pop upwards.

On a separate note of the trade winds flavour kind, not there is soon to be public showdown in Q4 between the US & the EZ on subsidies received by each respective airline, Boeing & Airbus – it is likely not going to be pretty…

Again someone remind me why the Dax is up +8% YTD in USD terms & +13% in EUR terms, when the USD is at multi-year highs – a fiscal stimulus is not going to help increase exports. So not sure what I am missing here, or if its just a question of time.


Cross-Assets Snapshot:

Predominantly more of what we had previously seen. The S&P continued to sell-off, accelerating to -1.8% to 2888, this time joined by the Nasdaq100 at -1.7%, 7551. The Gold & Silver bulls had another triple digit session with a +1.37% & +1.88% lift to 1501 & 17.60

Yields classically lower as one would expect given the negative sentiment, we closed at c. 1.60% in the session yest & are grinding lower in the Thu Asia morning. Bunds at -55bp will likely paly catch up lower given Germany is closed today for public hols, JGBs continue to trade lower at -18bp this morning.

Brent Crude 57.44 at -2.04% continued to falter, amazing that less than 3wks ago we opened up at close to $72!  That’s a c. -20% move, unlevered, once again underlining the fact that there are always opportunities in the markets. Catch Ole Hansen’s latest on energy: Crude Oil Update

On this Thu Asia Morning, our Equity futures are classically down post the negative US session overnight, with Nikkei down close to -2% & event the often resilient Australia market down -2.4%. Note CH equities are closed given the annual Golden Week holiday & are back in on Tues 8^th Oct.



Today: Service PMI Day…

• AU: Trade Balance

• US: ISM-non Mfg. 55.1e 56.4p, Markit Final Services 50.9e/p, Challenger Job Cuts, Factory Orders, Weekly Unemployment Claims
  • FOMC members Evans, Quarles & Clarida are respectively 14:45, 20:30 & 06:35 SGT/HKT
    
    
• EZ: Final Services 52.0e/p, GER Final Services 52.5e/p, PPI, Retail Sales

• JP: Consumer confidence & monetary base
  
  
• China Golden Week Continues, they are not back in until Tue Oct 8^th

• GER also out for Thu public hols
  

Other:

• To catch this wk’s Macro Monday Click here…  & replay of the call here

   

• Don’t forget to bookmark & check our Daily SaxoStrats calls from the European morning session c. 09:00 CET

   

• Note our 4Q outlook should be out later on this wk & will be focused on one of the biggest concerns facing investors today, the strong US dollar

   

• Some highlight video reels from the 70^th Anniversary Celebration