APAC Global Macro Morning Brief – Happy Macro Wed 23 Oct 2019: 50% chance of a UK general election & Brexit by end of Jan 2020

APAC Global Macro Morning Brief – Happy Macro Wed 23 Oct 2019: 50% chance of a UK general election & Brexit by end of Jan 2020

Macro 1 minute to read
Kay Van-Petersen

Global Macro Strategist

Summary:  Morning APAC Global Macro & Cross-Asset Snapshot


(Note that these are solely the views and opinions of KVP, and do not constitute any trade or investment recommendations.)


Happy Macro Wed 23 Oct 2019

 

APAC Global Macro Morning Brief: 50% UK general election & Brexit by end of January 2020




KVP was on Bloomberg TV Tuesday Asia morning - talking all things Global Macro, here is a link to part of the segment, always a lot of fun with such phenomenal people – definitely amongst the very best in the financials news space.

Brexit – as highlighted beautifully o/n by our Chief Economist & CIO Steen Jakobsen, it was always about vote number two - which was about accelerating the process, rather than the usual 21days for parliament to pass the law which would not have worked with the Oct 31 deadline

Vote one (The WAB) was passed & well flagged to do so. Vote two (The Program Motion, PM) was the 50-delta skew & was rejected

The updated Saxo House view – which is always subject to change, given how liquid things are – is that now there is a 50% chance of a UK General Election & Brexit by end of January 2020

This could also explain why sterling is still staying bid, with GBPUSD at these 1.2872 -0.68% & EURGBP at these 0.8643 +0.46%. I.e. the price action is suggesting that the market still views all the developments in cumulating to a higher GBP, i.e. election should still be positive as it should be Boris over Corbyn & now we finally look like there is political lack of capital to keep blocking an exit. In situations like this, where asymmetry in one direction is suggested by the market, its worth going through the factors of what would be needed to change that & how high of a bar (low to high probability) is that in taking place

Meanwhile across the Atlantic from the UK, it looks like Trudeau’s Liberals have just managed to hang on by the skin of their teeth and its looks like it will be a minority government gig.

DollarCad was sharply unchanged at 1.3095 with Canada having a history of minority governments, so apparently nothing to see here.

-

Cross-Asset wise we hand a pullback in the S&P 2996 -0.36%, as well as down session in Europe. Yet nothing to dramatic in regards to moves across other asset classes, USTs are still round 1.75% levels, dollar had a slight +20% tick up to the DXY 97.53 lvls (EUR & GBP pullback) & Gold 1487 popped by +0.21%.   

Facebook 182.34 -3.91% was on the backfoot of a combination of weaker markets, as well as coalition of states conducting a Facebook antitrust investigation into everybody’s favourite ‘your privacy & data for sale’ & ‘election fixer franchise’.

Post watching Billions, KVP shut eye would be a ‘touch’ affected, if he had 47 US Attorney Generals gunning for him. Best way to “really” start to pivot out of this is for Zuc to step down, senior execs to move on & that board to be reshuffled – they still don’t get it. That’s the thing about money, profitable & influence enterprises, at +$22bn in earnings for 2018 & at close to 3bn monthly users (Facebook, WhatsApp, Instagram, Messenger) – you can afford to not get it for a while, perhaps even forever.

Just to give you context, here are some countries’ who’s GDP are less than FB’s earning last year: Botswana, Senegal, Cambodia, Malo, Jamica, Mozambique, Namibia, Congo     

-

On US equites & earnings in general: Boeing will be very interesting today, as the 737 Max saga continues. KVP remembers having a lunch a few months back with a full-fledged career pilot who used to be in the air force, & now flies some of the biggest commercial planes, let’s call him Top Gun.

Long & short of it, I asked Top Gun how does someone who is in the business of flying aircraft see the whole 737 Max software stumble? It was basically pretty clear from day one, that corners had been cut & that there were a lot of red flags, there are normally 3 fail-safe systems in place with everything in the cockpit [flying is basically a series of checks & checks on checks] & post the max software upgrade that got down to 1 fail-safe. Meaning you don’t know you are in trouble until its too late.

i.e. KVP’s read, this was systematic error in how everything was conducted & not some rogue operator mistake – and this no doubt extends into other companies & industries.

The only thing that Boeing has going for them, is a big deal at the end of the day… with all due respect to the Brazilians & Chinese… its still predominantly a global Duopoly market between the Europeans (Airbus) & the Americans (Boeing)…

That a tough current to swim against & being a global macro padawan, KVP likes to swim with the current. Now if he was an event driven, stock specific kind of investor maybe it’s a different call. And yes we need more competition not just in aircraft, but tech & retail – the likes of FB, Google, Amazon, Apple have an unprecedented structural influence on how societies are functioning.

Later on today we’ll also hear from Tech favs. Tesla, Microsoft, as well as some big global industrial players such as Caterpillar that may give a better feel of how global growth is faring.

Have a great day out there.

 

Today:

  • NZ: TB in at -1242m a vs. -1375m e, -1628m p
  • EZ: Consumer Confidence, Bund Auction
  • CA: Wholesale
  • US: Crude Oil Inventories, House Prices, Federal Budget

Other:

Quarterly Outlook

01 /

  • Equity outlook: The high cost of global fragmentation for US portfolios

    Quarterly Outlook

    Equity outlook: The high cost of global fragmentation for US portfolios

    Charu Chanana

    Chief Investment Strategist

  • Commodity Outlook: Commodities rally despite global uncertainty

    Quarterly Outlook

    Commodity Outlook: Commodities rally despite global uncertainty

    Ole Hansen

    Head of Commodity Strategy

  • Upending the global order at blinding speed

    Quarterly Outlook

    Upending the global order at blinding speed

    John J. Hardy

    Global Head of Macro Strategy

    We are witnessing a once-in-a-lifetime shredding of the global order. As the new order takes shape, ...
  • Asset allocation outlook: From Magnificent 7 to Magnificent 2,645—diversification matters, now more than ever

    Quarterly Outlook

    Asset allocation outlook: From Magnificent 7 to Magnificent 2,645—diversification matters, now more than ever

    Jacob Falkencrone

    Global Head of Investment Strategy

  • Macro outlook: Trump 2.0: Can the US have its cake and eat it, too?

    Quarterly Outlook

    Macro outlook: Trump 2.0: Can the US have its cake and eat it, too?

    John J. Hardy

    Global Head of Macro Strategy

  • Equity Outlook: The ride just got rougher

    Quarterly Outlook

    Equity Outlook: The ride just got rougher

    Charu Chanana

    Chief Investment Strategist

  • China Outlook: The choice between retaliation or de-escalation

    Quarterly Outlook

    China Outlook: The choice between retaliation or de-escalation

    Charu Chanana

    Chief Investment Strategist

  • Commodity Outlook: A bumpy road ahead calls for diversification

    Quarterly Outlook

    Commodity Outlook: A bumpy road ahead calls for diversification

    Ole Hansen

    Head of Commodity Strategy

  • FX outlook: Tariffs drive USD strength, until...?

    Quarterly Outlook

    FX outlook: Tariffs drive USD strength, until...?

    John J. Hardy

    Global Head of Macro Strategy

  • Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges

    Quarterly Outlook

    Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges

    Althea Spinozzi

    Head of Fixed Income Strategy

None of the information provided on this website constitutes an offer, solicitation, or endorsement to buy or sell any financial instrument, nor is it financial, investment, or trading advice. Saxo Capital Markets UK Ltd. (Saxo) and the Saxo Bank Group provides execution-only services, with all trades and investments based on self-directed decisions. Analysis, research, and educational content is for informational purposes only and should not be considered advice nor a recommendation. Access and use of this website is subject to: (i) the Terms of Use; (ii) the full Disclaimer; (iii) the Risk Warning; and (iv) any other notice or terms applying to Saxo’s news and research.

Saxo’s content may reflect the personal views of the author, which are subject to change without notice. Mentions of specific financial products are for illustrative purposes only and may serve to clarify financial literacy topics. Content classified as investment research is marketing material and does not meet legal requirements for independent research.

Before making any investment decisions, you should assess your own financial situation, needs, and objectives, and consider seeking independent professional advice. Saxo does not guarantee the accuracy or completeness of any information provided and assumes no liability for any errors, omissions, losses, or damages resulting from the use of this information.

Please refer to our full disclaimer for more details.

Saxo
40 Bank Street, 26th floor
E14 5DA
London
United Kingdom

Contact Saxo

Select region

United Kingdom
United Kingdom

Trade Responsibly
All trading carries risk. To help you understand the risks involved we have put together a series of Key Information Documents (KIDs) highlighting the risks and rewards related to each product. Read more
Additional Key Information Documents are available in our trading platform.

Saxo is a registered Trading Name of Saxo Capital Markets UK Ltd (‘Saxo’). Saxo is authorised and regulated by the Financial Conduct Authority, Firm Reference Number 551422. Registered address: 26th Floor, 40 Bank Street, Canary Wharf, London E14 5DA. Company number 7413871. Registered in England & Wales.

This website, including the information and materials contained in it, are not directed at, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in the United States, Belgium or any other jurisdiction where such distribution, publication, availability or use would be contrary to applicable law or regulation.

It is important that you understand that with investments, your capital is at risk. Past performance is not a guide to future performance. It is your responsibility to ensure that you make an informed decision about whether or not to invest with us. If you are still unsure if investing is right for you, please seek independent advice. Saxo assumes no liability for any loss sustained from trading in accordance with a recommendation.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the U.S. and other countries. App Store is a service mark of Apple Inc. Android is a trademark of Google Inc.

©   since 1992