Macro Monday Week 45: Global Growth Is Still In Free Fall
Summary: The weeks focus will be post Fed and BoC digestion, as well as RBA and BoE on the horizon. ISM Services from the US will be key, as will final PMIs out of EZ. Also look out for Lagarde speaking with the ECB governor's crown - will she set the bell curve for monetary policy in the EZ block. Cuts meanwhile are to be expected out of Thailand and Malaysia.
(Note that these are solely the views & opinions of KVP & do not constitute any trade or investment recommendations)
Macro Monday WK 45: Global Economic Growth Is Still In Free Fall
A replay of the call is available HERE
TGIM & Happy Macro Monday everyone, hope everyone had a great wkd & for the Global Rugby watchers out there Congrats to the new Champions South Africa, as well as great effort by England & New Zealand.
We really have only 6 wks left to mid Dec, before folks start switching off their computer screens, putting down their phones & letting their twitter handles cool off (most folks at least, pretty sure Trump will tweet through Dec!)
This wk is still post digestion of the Fed’s one & done from last wk, we are now sitting with 13.5% prob of a cut for the Dec 11 meeting. And even going to 16 Dec 2020, that is c. 77%. At the same time, the global growth continues to fall, which would suggest to KVP that at some point Fed will need a few more ‘insurance cuts’ Also remember 2020 for the Fed is a half-life year, given US 2020 Nov elections. We covered the Fed & BoC decision last wk on our cross-asset brief, this also included links to statement & press conference replays
Speaking of 2020, note how no one is really talking about Biden anymore? Seems to be Warren, Sander or
Buddah Buttigieg… - at least in Iowa. Still early days, would expect the likes of Harris, Yang & Booker to drop out… still early days to Jul 2020 nomination
Wishing everyone a great wk ahead.
Summary of Prior Week:
- FED: Pretty much delivered a one & done session. Yet the market not fully buying that
- BoC: Keeps rates unchanged, yet does potentially open up the door for flexibility to a cut – again more about non domestic pressures
- CH Econ: Again misses across both Mfg. & Serv. PMIs from China: 49.3a 49.9e & 52.8a 53.7e. So that’s half a year of consecutive contraction in its mfg. PMI
- US Econ: Despite a very strong set of NFPs 128k a 90k e & big revisions to 180k (136k), we saw misses on the MoM AHE 0.2%a 0.3%e & more importantly on the ISM mfg. 48.3a 48.9e 47.8p, marking three back to back months of contraction in manufacturing
- EQ: SPX 3022 +1.2% is just 4 points shy of making new ATHs. Bulls controlled equities across the globe
- FI: Back towards 1.70% lvls on USTs
- FX: -0.61% for DXY, Euro & Yen strengthen on the wk
- CMD: Predominantly up across the complex, with +10.4% NatGas & Coffee +4.6% leading
- Vol: Lower to 12.30 -2.8
COT Report: [@Ole_S_Hansen]
- Post 4 wks of USD additions, we are now into wk two of lower net USD positioning with a -17% (-28%) drawdown to $12.6bn ($15.2bn)
- We continue to AGAIN see big increases in CAD longs from 33K to 44K – its amazing, to KVP at least… that we have just not seen massive CAD strength, now even with CA rates highest in DM
- Once again worth noting the market is still short sterling (despite a -38% reduction, up from last wk’s -28%) & this does not account for the world’s AM being massively UW other UK assets
- i.e. post a firm Brexit & clarity on elections, KVP would likely expect a tsunami of capital into the UK assets. Caveats: situation fluid, a Corbyn gov. & negative UK credit impulse (recession)
- Worth noting this set of CoT profile (from Tues close last wk) was pre Fed & BoC…
- Now into 3 wks of commodity expansion
- RBA | US ISM Services | EZ PMIs| US Earnings
Central Banks (SGT):
- RBA 0.75% e/p (5) BNM 3.00% e/p (5) BoT 1.25% e 1.50% p (6) BoE 0.75% e/p (31)
FOMC Speakers (SGT):
- Evans, Williams, Brainard
- US & CA Daylights Saving Time Shift, Japan Mon Bank holiday, ECB’s Lagarde Speaking (believe its first public speech as ECB governor)
- US: Factory Orders, Final Serv. PMI 51.0e/p, ISM Non-Mfg. 53.5e 52.6p, JOLTS, Crude Oil Inventories, UoM Sentiment
- CH: Caixin Serv. PMI 51.5e 51.3p, TB, CPI 3.2%e 3.0%p, PPI -1.5%e -1.2%p
- EZ: PMIs Mfg. 45.7e/p Serv. 51.8e/p, GER Mfg. 41.9e/p GER Serv. 51.2e/p, EU Economic Forecasts
- JP: Monetary Base, BoJ minutes, Avg. Cash Earnings
- UK: Serv, OMI 49.6e 49.5p, BoE Inflation Report, House Prices, BoE Rate Decision
- NZ: Milk Auction, ANZ cmd prices, Jobs Data
- AU: RBA Rate decision, MI Inflation Gauge, RS, RBA Monetary Policy Statement, TB, Home Loans
- CA: TB, Ivey PMI 49.3e 48.7p, Housing Starts, CA Jobs Data, Building Permits
Chartography & Price Action
- Snapshot of US earnings so far, all a revenue growth story +3% & mild earnings recession -1.0% story. Basic Materials plus Oil & Gas sectors continue to under-perform on a sector basis, both on top & bottom line (-8.4%, -34.5% and -28.4%, -31.5%). So far Utilities & Health Care have the best earnings growth at +9.3% & +8.5%
- Number of weekly charts from DXY to Gold, Silver, to SPX, Nifty-50, VIX & Hog Futures showing the very clear consistent seasonal effects that Raymond fantastically flagged
- Peter’s latest monthly piece on equities: Macro & Equities Divergence Increased in October
- Hardy’s latest FX Breakout Monitor: USD Outlook still chef focus after strong payrolls
Jakobsen on all things brexit: The UK General Election Finally Agreed, Brexit Not So Much
Hansen's latest commodity focus: Crude Oil
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