APAC Global Macro Morning Brief – Happy Macro Fri 25 Oct 2019: Getting ready for an action packed week
Summary: Morning APAC Global Macro & Cross-Asset Snapshot
(Note that these are solely the views & opinions of KVP, they do not constitute any trade or investment recommendations, nor advice of any kind.)
Happy Macro Fri 25 Oct 2019
APAC Global Macro Morning Brief – Getting ready for an action packed week
So Dec 12 is the day that Bojo wants a snap election to be held in the UK (i.e. will not be able to make the Oct 31 deadline). He will need 2/3 of parliament to pass the motion & it looks like there could be an EU extension until the end of Jan 2020.
The saga continues, sterling 1.2851 -0.47% also continues to hold up very well.
So it was Flash PMIs Thu o/n & its really a mixed picture across the world. The key takeaway, is there is still not floor in sight to global economic downtown
Australia is hanging by the skin of their teeth on the 50 lvl, south of which would signal contraction. Flash mfg. & Serv. Came in at 50.1 & 50.8, compared to previous figures of 50.3 & 52.5
Japan has now seen ten consecutive months of sub 50 prints in their mfg. PMIs, with the latest missing at 48.5a 49.2e 48.9p.
The Euro-Zone as a block missed: Flash Mfg. PMI 45.7a 46.1e 45.7p, Flash Serv. PMI 51.8e 51.9a 51.6p.
Germany similar to Japan has also had 10 consecutive months of contraction in its mfg. PMI 41.9a 42.0e 41.7p
Its worth noting France bucked the trend in the EZ, with a mfg. PMI that beat, and serv. PMI that was quite strong 52.9a 51.6e 51.1p
The US which is a service focused economy saw its serv. PMIs come in at 51.0 a/e 50.9, yet experienced a decent beat on the mfg. side 51.5a 50.7e 51.1p. ISMs that are due next wk, always garner a lot more focus that the Markit PMIs
Cross-Asset View: Grind up continues on the S&P, we are not far from all-time new highs. If that inverse head & shoulder technical formation plays out, that could be +500 points in the making over 6-9m.
Treasuries 1.77% hovering around the same lvls they have been of late 1.70 – 1.80, with that said decent +0.79% pop up in gold to get back above $1500 at $1504… for the bulls a weekly close above here would be key.
Dollar as a whole overnight, was neither here nor there.
Econ Data Today:
- EZ: German Ifo Business Climate
- US: UoM Consumer Sentiment
Next week will see:
- Will be all about the Fed, not so much in will they cut – that’s currently sitting at a 90.4% probability of a 25bp cut to 1.75% - yet what indication will they give (if any), on future pace of cuts. Still astounded that folks keep talking about a midcycle adjustment
- Pivotal as well next wk will be final PMI readings, ISMs out of the US will be critical (last month saw the first month of misses in both ISM readings in a long time) as well Non-Farm Payrolls & Average Hourly earnings. Its worth nothing the key US readings come out on Friday Nov 1, so it will be post the Fed Oct 30 meeting. Only exception here will be the first reading of US 3Q GDP where 1.6% is expected vs. a 2.0% final reading from the 2Q.
- In addition to the Fed we will have rate decisions out of Canada and Brazil, former is expected to stay put at 1.75% whilst the latter to cut by 50bp to 5.00%. We also have the BoJ on the Thu post the Fed.
- It will also be a Singapore holiday on Monday – Happy Deepavali Everyone – yet have no fear Macro Monday will still be on!
- Also watch for daylights savings changes in Europe, as well as another public Monday holiday in New Zealand.
Have a brilliant Friday & exceptional wkd up ahead. For those partying it up with the Rugby cup in Japan, enjoy & good luck.
- To catch this wk’s Macro Monday Click here… & replay of the call here
- Don’t forget to bookmark & check our Daily SaxoStrats calls from the European morning session c. 09:00 CET
Latest Market Insights
Outrageous Predictions 2023: The War Economy
- The constantly growing global need for energy drives the world's richest to huddle up and launch a R&D project in a size the world hasn't seen since the Manhattan Project gave the US the first atomic bomb.
French President Macron resignsThe political stalemate in France and the rise of Marie Le Pen following the 2022 elections corners President Macron, forcing him to give up on politics and resign from his position. At least for now.
Gold rockets to USD 3,000 as central banks fail on inflation mandateAs markets and central banks realise that the idea that inflation is transitory is wrong, and that prices will remain higher for longer, gold is sent through the roof, hitting a price tag of USD 3,000
EU Army forces EU down path to full unionWith continued challenges in the region and a US military that isn't aggressively enacting its former role as global policeman, the European Union agrees to create its own armed forces, bringing the whole region closer.
A country agrees to ban all meat production by 2030In an effort to become one of the global leaders on the path to net-zero emissions, one country decides to not only put a heavy tax on meat, but to ban domestic production entirely.
UK holds UnBrexit referendumFollowing a recession and domestic pressure, the United Kingdom is thrown into political turmoil that will end with a vote to wind back Brexit.
Widespread price controls are introduced to cap official inflationHistory tells us that with the war economy comes rationing and price controls. And this time is no different, as policymakers introduce strict price controls that lead to a range of unintended consequences.
OPEC+ & Chindia walk out of the IMF, agree to trade with new reserve assetSanctions against Russia have caused widespread turmoil due to US Dollar moves in countries across the globe that don't consider the US an ally. To relieve themselves from this, they leave the IMF and create a new reserve asset.
USDJPY fixed to the USD at 200 as Japan overhauls financial systemFollowing the challenges that faced the Japanese Yen in 2022, the Bank of Japan attempts to keep the currency from sliding. Unsuccessful on the long-term, Japan will launch a reset of its entire financial system.
Tax haven ban kills private equityWith the war economy comes an increased focus on national interests and sovereign nations' ability to assert themselves. In that regard, the OECD countries turn their attention on tax havens and pull the big guns out, banning them altogether.