Global Macro APAC Morning Brief

Happy Impeachment Wed 25 Sep 2019

APAC Global Macro Morning Brief

O/N, Levels & Thoughts:

So apart from Trump’s UN speech which was about patriotic interests over global relations, Trump also took aim at the likes of China, Iran & Venezuela

The key focus today will stem from the announcement just hours ago that the Democrat’s Nancy Pelosi has formally announced an Impeachment Inquiry of Trump – all tied to the latest sequence of events surrounding the president, in this case in regards to phone calls with the New Ukrainian President Zelensky  - and whether Trump was leaning in, to instigate an investigation into the Biden Family, in particular Hunter Biden who sits on the board of a Ukrainian energy company.

Its worth noting that Zelensky won a landslide election in May of this year – as an actor, comedian & definitely not a politician – predominantly due to corruption being so rampant in the Ukraine, which led voters to being so fed up with the establishment.  

Trump has flagged that he will release the recordings of the tapes. At the same time the whistle-blower behind all this (an intelligence employee) is looking to testify before intelligence committees from the House & Senate.

So key thing here is what are the initial implications?

Hard to gauge so early on & with Nov 2020 elections being so far away.

Plus we also have to see what else comes out of the transcript, is there something else we did not know?

And what if there is evidence of Hunter Biden & corruption?


KVP’s current initial thoughts to consider with the formal impeachment announcement:

• No clear near-term market impact (to me at least), yes it creates more noise & uncertainty… yet just don’t see anyone being surprised here… its been one thing after another with the Donald… this almost feels natural.

• Increased probability that Trump will get more erratic (more pressure on him) & volatile – this likely increases the probability of…

• Trump running his 2020 re-election strategy on a Tariffs Campaign (i.e. he will not seek a lasting deal with China, with tariffs & a ‘strong patriotic USA image’ he will control more of the political airwaves & headlines).

• There will be an increased likelihood of military conflict abroad… again it depends how under pressure he gets & how much focus he needs to divert from the domestic & election agenda, as well as how the underlying US economy is doing in 1H 2020.

• The impeachment investigation, whilst potentially catapulting Joe Biden back to the top of the democratic candidates, it will suck the air out of the room overall on their 2020 campaign (i.e. one more big distraction & Trump gets way more clicks than “sleepy joe”).
  • This could be a plus for equity markets as the probability of a Bernie or even what was more likely prior to this announcement, a Warren win have done down.
  • This likely averts what would have been a potential -20% to -30% pullback in US Equities if there was a chance of Warren or Sanders sitting in the White House.
  • Biden is considered way more pro-business than MMT advocates Sander & Warren.

• This new “witch hunt” as Trump calls it, is only going to motivate & empower his base more. At the end of the day, it’s the most motivated electoral base that gets out there to vote. And this likely ups the ante on the motivation behind Trumps voters.

• An impeachment investigation & proceedings will take months if not quarters, also even if Trump is found guilty of impeachment, the republicans control the senate – so they could sweep it under the rug & choose to do nothing. This is a big part of the reason why a lot of the democrats have been so reluctant to go down this path.
  • You need 2/3 majority in the Senate to be convicted on the grounds of impeachment. Just to give you context of how rare this is, I believe have only been three previous instances of US presidents coming under impeachment proceedings: Andrew Johnson who was impeached in 1868, Richard Nixon who resigned during the process & Bill Clinton (the original Teflon Don) in 1998 who was acquitted by the Senate.

• News flows from this will be Trump, Trump, Trump, Biden… Trump, Trump, Trump, Biden…

• Still a long way to the Mid Jul 2020, democratic nomination for their presidential candidate. 

Today:

• NZ: RBNZ due out today, estimates are for them to leave rates unchanged at 1.0%

• JP: BoJ Mins, BoJ Core CPI

• EZ: Bund auction, GER Gfk Consumer Climate survey

• US: New Home Sales, Crude Inventory Figures, FOMC members Evans 20:00 & George 22:00 speaking

Other:

• To catch this wk’s Macro Monday Click here… or maybe just scroll down… limitless possibilities!

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