Global Macro Strategist
Summary: Global Macro & Cross-Asset snapshot from APAC to kick-off your day
Happy Tue!
Tue 3 Sep 2019
O/N & Levels:
Not too much on, given US (& CA) was out given the labor day wkd – still US EQ futures are down c. -70bp since Fri levels in early Asia Tue open. DXY is breaking out higher given its multi-year high close on Fri & the US trade weighted dollar index is at all time highs
A strong US is chocking global growth & causing particular issues for EM, the Fed, Trump & Commodities in general - the whispers on Saxo 4Q Outlook say that it will focus predominantly on the USD, so please stay tuned for that
EZ mfg. PMIs were in-line to better as a whole & more importantly China Caixin mfg. index has a massive beat 50.4a 49.8e - too early to call the turning of the ship, yet 2-3 months of this could signal a bounce in the making… Worth noting that we have had a number of head fakes in China this year
Sterling at two wk lows given Bojo moves & Parliament counter moves… he’s potentially threatening calling a general election… ignore the noise for now… from KVP’s view… worst thing that can happen is another useless extension… best thing is some form of clarity on the future... be that in hard Brexit or no hard Brexit… it’s the uncertainty that kills economic growth, animal spirits & investor appetite
Today:
US back in & on that front final mfg. PMIsis & ISM mfg will be key with 50.0 & 51.2 expected respectfully across the two
AU retail sales, current account & of course RBA – mkt expecting no move from former given previous back to back cuts to 1%. Worth bearing in mind RBNZ surprise -50bp, as well as this will be first RBA meeting post USDCNH shooting through the 7.00 handle. A weaker yuan basically acts as a tax on Australia's exports into China
Have an amazing Tue & epic wk ahead, profitable trading everyone
For those that missed the Macro Monday Call from earlier this wk covering the action packed wk ahead, you can access it here & catch the replay link here....
Bond. Long Bond(s)
With real rates being too positive, we see three scenarios: Opportunity to lock in rates at cycle high, government overreach to keep the economy afloat or a complete reset of the economy.
Steen Jakobsen,
Chief Investment Officer
Is a bond bull market ahead? Inflation still poses a risk for investors, but the moment for increasing duration to your portfolio may be approaching towards the end of the year, when central banks might be forced to cut interest rates.
Althea Spinozzi,
Senior Fixed Income Strategist
The furious rate hike cycle has brought gains in the US dollar, but with stagflation risks in Europe and the UK and weakness in the Chinese economy, USD may have more room to run. But a strong dollar could also have repercussions for US growth, emerging markets and commodity prices.
Charu Chanana,
Market Strategist
With the cost of capital rising painfully, stagflation fears are back, illuminating the fragile state of the green transformation, while giving a tailwind to nuclear power, and threatening the growth of AI-related stocks.
Peter Garnry,
Head of Equity Strategy
With supply tightness not only in energy but all commodities, the momentum in commodity prices may continue, pressuring central banks to lower real rates. That could be a good setup for precious metals, including gold, silver and potentially platinum as well.
Ole S. Hansen,
Head of Commodity Strategy
As the pandemic showed, even the US Treasury can experience seismic shifts. With the government increasing the pace of issuing bonds to support fiscal spending, the complex Treasury market and regulatory constraints could spark a liquidity event.
Redmond Wong,
Market Strategist
The tide has turned for bonds. Given the current yields, bonds have become an attractive investment, with added benefits including lower risk than stocks, increased diversification and a steady stream of income unaffected by economic changes.
Peter Siks,
Investment Coach
