A hawkish Powell and a dovish Lagarde, while China’s case is losing momentum again, make October likely to deliver notable divergences in the macro landscape. Here’s how we plan to capitalize on them.
China-sensitive shorts are getting squeezed left, right, and center ahead of a big week for key US figures. The “low hiring, low firing” narrative is likely to persist, but risk assets are finding support from other factors.
The full Ifo report has just been released, and here’s our summary of the key data point from the report and our analysis of its implications.
Our thoughts on the PBOC’s stimulus implementations along with thoughts on the situation in Lebanon.
News this morning out of China that the PBOC will bring the big stimuli hammer to the table have been welcomed by markets with open arms. Meanwhile, the dovish EUR surprises will likely continue through the week.
Is there no end to the bid in Chinese longer-dated fixed income? Our growth, inflation, and liquidity models for China still suggest that Chinese fixed income remains the only worthwhile investment among liquid asset classes in the country.
We got the 50 bps cut from Powell & Co. that the markets wanted, along with a Fed that leans dovish for the rest of the year, as indicated by Powell’s press conference yesterday. We also see the BoE potentially being impacted by the 50 bps front-loading from the Fed today.
Investors not rushing in to price a more dovish BoE
Last week marked the largest week-over-week drop in freight rates since late 2022, as key factors driving previous rate increases are slowing down. With China facing ongoing economic malaise and global growth weakening, the future outlook for freight rates remains uncertain.
Trade data between China and USA has diverged
Money supply in China hints at cold PPI numbers
Crude prices haven’t responded to output delays as hoped, and we wonder whether that will prompt the alliance to change its strategy.
The UK labor market is also clearly weakening, which typically occurs with a time lag following weakness in the US labor market. The Eurozone lags further behind due to its more bureaucratic labor market regulations.
While we are waiting for Godot and his assessment of Payrolls, we take a look at Chinese momentum in the context of declining demand in the West. Are the wheels coming off in China?
Both IP and construction continue to look weak!
Germany is experiencing a bit of a China shock.
Thoughts on today ISM’s service report and crude oil along with updates from our models. The risk environment remains very fragile and we continue to like net short positions in Equities and Commodities.
The growth scare is spreading as China has come to a sudden stop. Is the commodity land-slide over?
Beginning this week, we’re merging our weekly coverage of the energy/commodity space and geopolitics. This will allow us to be even more actionable and specific when analyzing global events, as the ramifications of war and peace are most often felt in the commodity space.
Seasonal factors will be working against Powell in the fall and winter
The manufacturing rebound in H1 2024 was another head-fake
Two overwhelming themes are at the top of our watchlist for September: fading USD liquidity and a sudden halt in Chinese activity. Here’s how we plan to address them.
More on the weakness in China
Something for the German hawks to consider!
The dog days are over, and we typically see some interesting patterns into September. This year is potentially special as the Fed will start cutting rates, but we wouldn’t rule out a dash for USD cash alongside it.
Goldman Sachs raises alarms over potential OPEC supply increases that could disrupt global oil markets.
The latest Ifo data suggests an imminent recession in Germany, with expectations of slowing growth and inflation as autumn approaches. Despite concerning trends, high frequency and robust data provide a basis for cautious optimism, indicating stable conditions.
Can a Chinese repatriation flow turn into the next JPY story? The market remains max short CNH (and CNY to the extent possible), and if Powell pulls the rug from under USD rates forward pricing, it may alter the picture.
Like water, trade tends to find a way around barriers.
The Chinese rebound story is losing momentum fast, which has important implications for Western economies and assets, while the impact from freight rates on inflation might not be as large as previously feared.