Head of Macroeconomic Research
Summary: Weak Chinese data and Saudi Arabia oil attack have put an abrupt end to the equity rally. More risks are popping up this week that could have a negative impact on the market and increase volatility.
9/16/2019 – British PM Johnson meets Juncker for Brexit talks.
We don’t expect much from this meeting. Our central scenario is that snap elections will be announced very soon, which would postpone Brexit deadline once again. We don’t think a second Brexit referendum would bring more clarity, as the British population is still very divided over the issue (chart below).
We acknowledge the risk of Brexit accident remains elevated, but it could lead to positive unexpected outcome in other European countries. Indeed, based on the latest debates in Germany’s Bundestag, it seems that a technical recession is not enough to trigger a fiscal stimulus package in Germany, but a hard Brexit could certainly change the mind of the German government. The only pending question is to know whether it will be too late to implement a counter-cyclical policy.
9/18/2019 – FOMC meeting
The latest US macro data are quite good, but the motivation to lower rates (25bps already priced in) will be linked to external factors e.g. trade war but more importantly tightened financial conditions at the global level due to US shortage. The growing risk is that the Fed pauses after this rate cut, which could be clearly negative for the market. We will focus on the FOMC meeting a bit longer tomorrow in another short note.
9/19/2019 – Washington can move ahead with F-16 sale to Taiwan
The Trump administration could technically move forward with the sale of F-16 fighters to Taiwan, worth an estimated $8 billion. This move is widely embraced by the US Congress with support from both main parties. If the administration goes ahead with the sale, it will certainly infuriate China. In our view, it is unlikely that the sale will go on in the coming weeks, as it could seriously jeopardize US-China trade negotiations that will take place in October. However, it is quite certain that the F-16 sale will be part of the negotiations and could be used as powerful lever for action by the US administration to obtain concessions from the Chinese counterpart.
9/20/2019 – Germany’s government unveils climate change policy package.
This is mostly a crucial test of credibility for Merkel. Over the past months, her government has proclaimed it will unveil a significant climate change policy package to cut greenhouse gas emissions by 55% by 2030 compared with 1990. There have been many questions about how to do so. If Merkel underdelivers, it could constitute another setback for the Chancellor, and it could further weaken her position within the coalition.
A new fragmented world order can render some of today's infrastructure obselete, but it also calls for massive new investments across the globe, which requires a new set of strategic and tactical investment strategies.
Steen Jakobsen,
Chief Investment Officer
As globalisation turns to fragmentation, China seems set on playing a role in the global economy, while simultaneously working towards proofing its own economic situation from external shocks and crises.
Redmond Wong,
Market Strategist
The recent bank runs and ensuing challenges are reminicent of something we've seen before. Will it end like the S&L crises of 1986 and 1995?
Chris Dembik,
Head of Macroeconomic Research
Equity markets need to recalibrate to another - fragmented - global world. What's your view on equities in this market - are they going up or down?
Peter Garnry,
Head of Equity Strategy
With every development comes new opportunites, some of which could be in India. Have you considered the country as a part of your diversification strategy?
Charu Chanana,
Market Strategist
A collar is an option strategy that allows some protection while maintaining some upside potential. What investment would you like to use a collar strategy for?
Hans Oudshoorn,
Trainer Academy
There are arguments to be made for many commodities to have upside. Which are you paying the most attention to this quarter?
Ole S. Hansen,
Head of Commodity Strategy
In a very challenging macro environment, which currencies do you think will come out on top?
John J. Hardy,
Head of FX Strategy
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