Global Macro Strategist
Summary: Morning APAC Global Macro & Cross-Asset Snapshot
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 8th Oct.
Today: Service PMI Day…
Other:
2024: The wasted year
Markets are driven by election optimism, overshadowing growing debt and liquidity concerns. The 2024 elections loom large, but economic fundamentals and debt issues warrant cautious investment.
As US economic slowdown hints at a shift away from exceptionalism, USD faces downside with looming Fed cuts. AUD and NZD set to outperform as their rate cuts lag. JPY gains on carry unwind bets and BOJ pivot.
Amid AI and obesity drug excitement, equities see varied prospects: neutral on overvalued US stocks, negative on Japan due to JPY risks, positive on Europe. European defence stocks gain appeal.
With the economic slowdown, quality assets will gain favour, especially sovereign bonds up to 5 years. Central banks' potential rate cuts in Q2 suggest extending duration, despite policy and inflation concerns.
Commodities poised for rebound. The "Year of the Metal" boosts gold and silver, copper awaits rate cuts. Grains may recover, natural gas stabilises. Gold targets $2,300-$2,500/oz, copper's breakout could signal growth.
Markets are driven by election optimism, overshadowing growing debt and liquidity concerns. The 2024 elections loom large, but economic fundamentals and debt issues warrant cautious investment.
As US economic slowdown hints at a shift away from exceptionalism, USD faces downside with looming Fed cuts. AUD and NZD set to outperform as their rate cuts lag. JPY gains on carry unwind bets and BOJ pivot.
Amid AI and obesity drug excitement, equities see varied prospects: neutral on overvalued US stocks, negative on Japan due to JPY risks, positive on Europe. European defence stocks gain appeal.
With the economic slowdown, quality assets will gain favour, especially sovereign bonds up to 5 years. Central banks' potential rate cuts in Q2 suggest extending duration, despite policy and inflation concerns.
Commodities poised for rebound. The "Year of the Metal" boosts gold and silver, copper awaits rate cuts. Grains may recover, natural gas stabilises. Gold targets $2,300-$2,500/oz, copper's breakout could signal growth.
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