Macro Monday Week 48: Bloomberg, HK Bill, Thanksgiving...

(Note that these are solely the views & opinions of KVP & do not constitute any trade or investment recommendations)

2019-Nov-25

To catch the replay of the please click HERE

Week ahead is going to be a short-one for US traders & investors, given Thanksgiving weekend is on schedule. This likely means that liquidity in equities will start to peter away from Weds, as Americans aim to beat traffic for one of their biggest holidays. Will US families be talking about a successful phase one trade deal, broken negotiations or continued noise?

Focus this wk will be on US/CH trade, as well as the controversial HK bill that has passed congress & now heads towards the WH for the president to sign, veto or delay – possibly dilute

Alibaba will be listing a HK line tmr (9988 HK) which should take the combined cash position of the firm to over USD 43bn, just shy USD 6bn of the world’s largest listed cash stockpile of Apple

KVP also notes that Bloomberg has now formally launched himself for the 2020 race.

Whilst equal arguments can be made for this potentially aiding or harming a potential second Trump presidency, it almost surely puts ‘sleepy Joe’ down for the count. I.e. Biden sole standing flag was that of a moderate among extreme socialists Sanders & Warren, that will be overtaken by Bloomberg who in addition to having infinite capital (Biden’s campaign funding has been trailing lower & lower) has a close to flawless track record on running New York city as Mayor

Wishing everyone a great wk ahead, Happy Thanksgiving & strong close into Nov. We have two last Macro Mondays left, and also note our Galaxy Famous Outrageous Predictions will be out next wk!

Here is a link to our previous Outrageous Predictions for 2019 – interesting to note what kind of panned out & what did not

Namaste

-KVP

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Summary of Prior Week:

• Geopolitics: Phase One looking  suspect as we lost some euphoria last wk. Highest wkly USDCNH 7.0435 +0.53% close in 4wks, suggests folks are nervous. Also Rep. Senates passes HK bill, over to WH

• BoC: Signals good for now, prob of Dec cut drops to c. 7% (19.3%) - check out the transcript from Wilkens that see's them quite comfortable with their policy so far & state of the Canadian banking system
  • Financial Stability in an Uncertain World

• ECON Flash PMIs: EZ Serv. missed 51.5a 52.4e, yet mfg. beat 46.6 vs. 46.4. And GER Mfg. big beat at 43.8a 42.9e 42.1 (now 11m sub 50)

• US flash PMI beat across both mfg. & serv. 52.2a 51.5e & 51.6a 51.2e

• EQ: Key outlier this wk that saw most of global equity indexes pullback was HSI which lifted by +1.0% to 26,600. Kospi 200 was outlier with c. -2.8% for the wk

• FI: Lower across the board with some EM exceptions. USTs 1.77%, JGBs -0.07%, Bunds -0.36%, C10s

• FX: DXY grinds out higher by +0.28% for the wk to 98.27.  USD gains most MXN & KRW at +1.0%

• CMD: Iron Ore on fire with c. +23% jump on the wk. Rest of CMD complex mixed, yet decent uplift for coffee bulls at +5.5%. Once again, gold & silver bulls not playing ball with a 2^nd wk of lower USTs

• Vol: Again - volatility is low & hence option premium cont. to be low, whether you are looking for top side or downside expression

COT Report: [@Ole_S_Hansen]

• 4wk up, 3 wk dwn, now reversing to 2wk build up of USD with a +18%(+18%) increase to $17.1bn ($14.4bn)
• No delta in net positioning in Yen, interesting – especially as we are in two wks of lower yields & trade talks could be at the cusp of breaking up
• Pullback in the CAD long trend, as we continue into wk two of reductions -32% (-22%)
• A touch of an increase in GBP & AUD shorts – KVP thinks the former is the definition of insanity in the medium to long-term, given own views on sterling upside convexity
• Commodities: After 5wks of net long extension, a pause

Week Ahead

Key Focus:

• US Thanksgiving Weekend | MX Mins | US – CH Trade Talks + HK Bill Focus | 9988 HK Listing (Alibaba in HK)

Central Banks (SGT):

• NG 13.50% e/p (26) BoK 1.25% e/p (29)

FOMC Speakers (SGT):

• Powell (26 @ 08:00) 

Other (SGT):

• RBA’s Lowe (26 @ 17:05) RBNZ’s Orr (27 @ 06:00) ECB’s Lagarde (12 @ 22:00) US Thanksgiving (Thu is public holiday), 9988 HK Alibaba lists tmr in HK (will take cash to $43bn)

•  Bloomberg joining the 2020 fray likely puts a stake into the heart of Joe Biden’s chance of nomination (he no longer stands out as a moderate & the family is also alleged in corruption allegations)

• Whether or not it helps Trump, can be argued equally – key part will be, will Bloomberg’s supporters be as motivated as Warren’s or Trumps. Caveat being we spend so much time focus on extreme voters, we forget the middle tranche

Econ Data:

• US: TB, Richmond Mfg. Index, New Home Sales, Durable Goods, Sec. 3Q GDP 1.9%e/p, Chicago PMI, Personal Spending & Income, Beige Book
• EZ: GER IFO Biz Climate, GER Flash CPI -0.7%e +0.1%, EZ CPI Flash +0.8%e +0.7%p, U/R 7.5%e/p, Private Loans, M3 Money Supply
• CH: CB Leading Index, PMIs due on Sat – Mfg. 49.5a 49.3p, Non-Mfg. 53.1a 52.8e
• JP: BoJ Core CPI, Retail Sales, Tokyo CPI, U/R, IP, Cons. Confidence, Housing Starts
• UK: High Street Lending, House Prices, M4 Money Supply, Mortgage Approvals, Net Lending to Individuals
• AU: RBA’s Lowe, Construction Work, Private Capital Expenditure, New Home Sales, Private Sector Credit
• NZ: Retail Sales, RBNZ Financial Stability Report, TB, RBNZ Orr speaking, ANZ Biz Confidence, Building Consents
• CA: Wholesale Sales, Corporate Profits, CA, GDP

Chartography & Price Action

• We glance through charts showing our initial thoughts on Kiwi upside playing out well vs. the AUD & CAD
• Flattening on the US curve, after wks of strong steepening
• A disconnect between two wks of lower yields & subpar gold prices
• USDJPY volatility basically at 5yr lows, once again showing how low premiums are