Global Macro Strategist
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 of any kind.)
To see this wk’s Macro Monday click here
APAC Global Macro Morning Brief
Despite the upcoming decisions today from Australia (RBA) & Malaysia (BNM) today, the likely biggest mover could be if we get a big miss or beat on US ISM Non-Manufacturing figures due out later today 23:00 SGT (10:00 ET)
Whilst most folks like to focus on the fact that US ISM Manufacturing are now in three consecutive months of contraction at sub 50. At the end of the day, the US is a service driven economy with 70-80% of its GDP being attributed to the service sector
This is also why the US can “Chu Chu” much longer than other countries, because its economy is driven by domestic consumption – and yes, this is also why China is rapidly evolving towards this type of economy that is less reliant (read exposed) on others
Clear opposites of this, would be Germany & Japan that are export oriented – both of which are now into 10 months of manufacturing PMI readings sub of 50. And yes last wk, we saw China PMIs miss across the board… Economic Free Fall continues…
So in the US tonight 53.5 is expected, which is a reading above the previous 52.6 – those with total recall, will remember that last month’s set of numbers missed on both readings.
So what would a big beat or miss entail?
A big positive beat, would actually likely be bearish for bonds (yields would go up), as well as precious metals – as it would add fodder to those in camp hawk or ‘hold-em-for-now’ in regards to the Fed & direction of US policy rates
Equities may actually be curbed back, even though technically we seem to be in the midst of breaking out higher in US equities, as well as indexes like the Nifty-50, the CAC, etc… Catch this wk’s Macro Monday replay
A big miss on the other hand would likely through fuel on the equity rally & be a boon to bond & precious metals bulls – the read would be the Fed are missing the direction of the economy & it would just be a question of time, before the doves take out the hawks, getting back us into cutting mode
As of this Tues Asia morning, it worth noting that the probability of a Fed cut on Dec 11 stands at c. 12%... that puppy could move significantly upwards on a big miss
-
In regards to the rate decisions today, there is only a 3.6% probability of a cut from the RBA today – so obviously a cut would be a massive surprise. More than likely they hold at 0.75% & pledge to be watching things closely. Malaysia is a little more divided in regards to potential direction today
Profitable positioning everybody & have a sensational start to November
Namaste
-KVP
Today:
Other:
Some Pieces From the Rest of the SaxoStrats Squad
AI: The good, the bad, and the bubble
While a deep recession may not be iminent thanks to central bank policy, interest rates will have to stay high for longer, and this will be accompanied by volatility risk from the unwinding of bubbles, especially within AI.
Steen Jakobsen,
Chief Investment Officer
The emergence of advanced AI systems is by far the most surprising event this year, turning everything upside down, while risks and benefits are debated. AI will also become an arms race between the US and China.
Peter Garnry,
Head of Equity Strategy
While commodities, broadly speaking, have faced some tough months, a partial reversal during June could signal that the asset class is getting back on its feet with energy holding up and precious metals with upside potential.
Ole S. Hansen,
Head of Commodity Strategy
The USD is on its back foot as markets celebrate an eventual Fed rate peak and steady long US yields. The stakes are even higher for the Japanese yen if longer major sovereign yield curves have to price in economic acceleration.
John J. Hardy,
Head of FX Strategy
As inflation remains high central banks face hard decisions about whether they should keep hiking interest rates or stop. Meanwhile, the rise of AI creates bubble-like conditions that only make the decision harder.
Althea Spinozzi,
Senior Fixed Income Strategist
The AI fever has turned the technology into a darling, pushing crypto further into no-man’s-land. There are striking similarities between AI and crypto, and if these are to come full circle, AI won't be spared for bubbles.
Mads Eberhardt,
Cryptocurrency Analyst
Stocks related to artificial intelligence (AI) have appeared on investors' radars. Expectations are high, but it may be necessary to consider how to get exposure to AI in a diversified way.
Hans Oudshoorn,
Trainer Academy
Japan’s expertise in semiconductors and robotic integration could be the foundation of AI dominance. Combining two of this year's themes, Japanese equities and artificial intelligence, brings a wave of opportunities.
Charu Chanana,
Market Strategist
As China navigates global fragmentation, its cycle of technology application, productivity enhancement, and growth is threatened by US breakthroughs in generative AI, limited computing power, and geopolitical tensions.
Redmond Wong,
Market Strategist
