APAC Global Macro Morning Brief – Happy Macro Thu 17 Oct 2019: Is “The Struggle” Real?

Macro 1 minute to read

Kay Van-Petersen

Global Macro Strategist

Summary:  Morning APAC Global Macro & Cross-Asset Snapshot


All market updates, research and trade ideas from our strategists in Copenhagen, Paris, Singapore and Sydney can be found at home.saxo => Traders => Market Analysis.

Latest Macro Monday: "Phase One" - here we go again... 

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

 

Happy Macro Thu 17 Oct 2019

 

APAC Global Macro Morning Brief – Is “The Struggle” Real?



Lets start off with a hats off to the contrarians out there, be it in thinking, approach to life or investment – trading style. KVP salutes you.

Most folks are moving out of SF – sick of the high property rentals, techies, homeless, hipsters - one of my most switched on buds & total stud is moving in.

Folks are moving out of HK, one of my buds & mentors with years of experience in markets & across different financial cities, is looking to move in.

There is something about going against the crowd, that is hard wired not to be done in our dna.

Back in the flintstone era, if you went again the crowd (the society/tribe/group) you were part of – the consequences could be literally life threatening.

So even though that outcome does not exist anymore (generally speaking) in modern day life, it is still hard wired in us. The paradox is, a good chunk of breakthroughs & innovations came through what seemed like contrarian approaches at the time.

From a trading/investment perspective, I have been neither married to being labelled a contrarian nor labelled a trend follower. To everyone their own, yet KVP is committed to finding exposure to the most profitable investments, over time.

There are some major super profitable points in Global Macro & investing in general, when it’s time to throw on the Captain Contrarian Cape (Its CCC time!), yet in my book & current view, they are literally 2-4x opportunities a year – yet you really only need one.

And no, currently, nothing stands out to KVP at least, so the CCC stays under the desk - for now.

-

The o/n session did not play out as envisaged from yest morning – Hang Seng cash equities closed up +0.61% to 26,665.

Updated thoughts?...

Status: Calibrating…  

Result: Unchanged…

You know the downside expression on puts that were flagged yest. A friend & mentor (Lets call him Vega), was also kind enough to flag a more concise spread play on the puts, 95 / 85  spread with Mar expiries, yet with a time stop of one month – with the thinking that your risking 2% premium yet could potentially make multiples of that premium.

Plus again, even if the bill does not go anywhere – its still a nice hedge over the overall US / CH trade talks… still that would be a separate trade view, as its over a longer horizon than the initial take from yest. Don't mesh-mash your trade views & horizons...  

Overall it does not look like the market thinks (currently at least) that a potential HK bill (if it passes the Senate, it has already passed the house) could be quite negative for US / CH trade negotiations.

KVP’s sources suggest its going to go through the Senate. Hard to see how Trump vetoing that bill looks good on his tough man stance on China, still early days.

-

Meanwhile it’s the first time in what feels like centuries that folks are not just optimistic about a Brexit deal, but also from conversations with clients & peers, actively positioned for it. The upward moves in sterling from last wk into this have been very strong for the bulls. 

Hats off & good luck over the next few days to  weeks – these things always look crystal clear in hindsight, yet for now still unclear to KVP.

Still continue to believe that post the event (worst thing for the UK is another extension, which bolts another period of uncertainty & the same bickering we have seen for +3yrs), it will be a once in a life-time opportunity to be long sterling assets, especially in London – yes there are risks & some of my esteemed peers things sterling goes down regardless of a deal, given the negative credit impulse, the UK destined for recession (where historically sterling has "always weakened") & the risk of a Corbyn government – catch that discussion that includes our Chief Economist Jakobsen here.

KVP believes firmly that its going to be one of those fireside stories (on the family ranch on a green carpeted mountain range in New Zealand an undisclosed location) with the grandkids (& grandandroids) pouring over their sterling candle charts & the events around this time, and saying “Grandpa Macro, how come you did not back the truck up & get long even more sterling assets – it was so obvious!”.

Some of the savviest investors KVP knows (be they UHNW individuals or family offices) are lifting property & land, as well as land & property for the +5 to +10/15/20yr horizone plays - & some of these assets will become crown jewels in the overall wealth of the family.

Again, there is only one London, Cambridge, Oxford, unique time zone location, talent pool, history, culture, arts & the ecosystems that go along with that.

Damn, guess we were wearing the CCC after all.    


Either way here is an excerpt from John Hardy on sterling from his daily FX Update:

“GBP – there are perhaps two more surges higher possible here in sterling – first a minor one if the uncertainty around the DUP is swept away and the two sides come to terms and then the second one if the UK Parliament has the votes to approve Johnson’s deal. But the options market is already skewed to pricing more risk of upside volatility in sterling.”

-

Morning Thu Asia has already started with strong jobs numbers out of Australia, that job market just will not die! #VampireZombie

The headline was in-line, yet big pickup in full-time jobs vs. a pullback in part-time jobs – basically a reverse on the previous month’s skew.

AUDUSD at 0.6785, is c. +15/20pip range from the 0.6769 it was trading prior to the numbers. Rest of the open here is looking mixed, US equity futures  are down a touch at -5-10bp… EZ EQ lower at c. -20-25bp, whilst Asia is mixed looking up in Japan & HK at +0.04% & +0.40%, whilst down in Australia at -0.40%

Gold, Silver, Oil are on the backfoot as well, with bonds yields tighter in US treasuries but wider in JGBs.

Will be interesting to see on Friday, whether China’s 3Q GDP will be a banger.

Good luck out there… stay profitable

 

Today:

  • AU: Strong set of jobs out this Asia morning, 15.0k e 14.7k a (Full Time vs. Part Time at +26.2k vs. -11.4k), U/R in at 5.2%a vs. 5.3%e

  • UK: Retail Sales, CB Leading Index

  • US: Phily Fed, Building Permits, Housing Starts, Weekly Unemployment Claims, IP & Capacity Utilization Rate, Crude Oil inventories (remember the US was out on Mon)
    • FOMC members speaking:
      • Bowman & Evans at 02:00 SGT/HKT (20:00 CET, 14:00 ET)
      • Williams at 04:20 SGT/HKT (22:20 CET, 16:20 ET)


Other:

Disclaimer

The Saxo Bank Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website. This content is not intended to and does not change or expand on the execution-only service. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Please read our disclaimers:
- Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)
- Full disclaimer (https://www.home.saxo/legal/disclaimer/saxo-disclaimer)
- Full disclaimer (https://www.home.saxo/legal/saxoselect-disclaimer/disclaimer)

Saxo Bank A/S (Headquarters)
Philip Heymans Alle 15
2900
Hellerup
Denmark

International

Trade responsibly
All trading carries risk. To help you understand the risks involved we have put together a series of Key Information Documents (KIDs) highlighting the risks and rewards related to each product. Read more

This website can be accessed worldwide however the information on the website is related to Saxo Bank A/S and is not specific to any entity of Saxo Bank Group. All clients will directly engage with Saxo Bank A/S and all client agreements will be entered into with Saxo Bank A/S and thus governed by Danish Law.

Apple and the Apple logo are trademarks of Apple Inc, registered in the US and other countries and regions. App Store is a service mark of Apple Inc. Google Play and the Google Play logo are trademarks of Google LLC.