Steno Signals is our weekly editorial on everything macro. The byline of the editorial is Andreas Steno Larsen, former chief strategist at Nordea Bank and CEO of Steno Research.
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Our thought on 4 important things to look out for for next week’s US election.
The stimulus being prepared by the NPC for announcement next week seems more like the work of a marketing agency than an economic council. While the numbers are substantial, it’s more of a debt swap than a true stimulus package. Here’s why!
While markets are busy revising the growth outlook down in the US, there are still reasons to believe that the growth party seen throughout September and early innings of October will continue, which favors (still) higher yields short-term.
Several markets are already trading as if liquidity has arrived in size, but we have yet to truly see it. The good news is that the ON RRP is close to depletion, which may lead to an early end to QT.
Our nowcasts on the US economy have continued to prove useful for predicting the direction of macro data, with a rebound in US growth looking like the most viable outcome currently, but the momentum in the rest of the world has yet to show, and we are hence on relative value watch this week.
We are left with a market pricing that mostly considers 50bp cuts a feasible scenario in the Eurozone, but the ECB is not a 50bp central bank, especially not if its peers aren’t moving that fast.
While traded prices show signs of exhaustion, market rates in USD have soared due to growth repricing, which aligns well with our nowcasts….
It’s time for another briefing from China, this time focused on the real estate market. We should get used to this flow of briefings, but is anything actually changing? Here’s an update on the status of real estate in China.
The ECB is likely to re-emerge as a dovish guiding star, and with the absence of any truly positive news from China, the opportunity to receive EUR interest rates is becoming solid again. Meanwhile, UK inflation is expected to soften.
While the Chinese fiscal briefing was a huge nothing burger, we are starting to see pockets of the USD-denominated asset space behaving as if a USD “whatever-it-takes” moment is just around the corner.
We saw the worst day in the Hang Seng since Lehman yesterday, but China used the opportunity to “feed the rally” with something to look forward to—a briefing on fiscal stimulus on Oct 12. Here is a comprehensive overview of the far-from-impressive stimulus announced thus far.
Rates market dynamics have swiftly flipped, and the inflation releases this week will likely underpin the shift in sentiment. The labor market is the main reason to cut, not inflation.
A better-than-feared jobs report, although somewhat “clouded” by a large public sector contribution. Overall, it seems like we are getting stimulus for an already stable economy, which is hard to construe as bad news.
The USD market will be flooded with liquidity in Q4, accompanied by rate cuts, providing Chinese authorities with a window of opportunity to ease policy. However, there is one issue: CNY liquidity is tightening now.
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.
China just pulled a market stunt right before a flood of liquidity hits, and the Fed is cooking up some magic liquidity tricks to keep things lively. Buckle up for Q4.
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.
This is yet another false flag from China, and we expect the stimulus to be insubstantial in size relative to the problem at hand. In this analysis, we will explain why China is allocating insufficient funds to address a major issue.
Markets are back on labor watch as Powell has signaled that conditions are not slowing down quickly enough for the Fed to promise more 50s. Meanwhile, expectations for Eurozone inflation are starting to look very soft. Are 50s potentially in play for the ECB if things start to sour quickly?
The Fed will get plenty of opportunities to frontload cuts further this year as the labor market remains weak. Is this all driven by the election season? And why is the labor market so out of sync with the markets?
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.
Markets are cheering for a 50bps Fed cut this week, but is it truly something to celebrate if it coincides with economic weakness? Lower rates are not always a positive for risk assets.
The decision between a 25bp or 50bp rate hike is of utmost importance this week. In either case, it likely makes sense to continue leaning into Fixed Income, as markets are neglecting inflation and focusing solely on growth.
Is it really feasible to expect the EM rates cycle to tighten while the DM cycle is clearly moving in the opposite direction? If history is any guide, such a scenario is highly unlikely, and any window for this would be short.
This week will host both US CPI and PPI figures, the Trump vs. Harris debate, an ECB meeting, and a UK employment report, which will truly set the tone across the main markets that we track.
There is more fundamental merit to the sell-off we are currently experiencing than the one we faced in July. China has come to a sudden halt, and we are facing a USD liquidity withdrawal. Dash for USD cash!
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?
This week’s job report will likely decide whether 25 or 50 bp is most likely in September.. Is the crowd of wall street economists getting too worried or too upbeat? The entire crowd of economists agree that July was a fluke.
The manufacturing rebound in H1 2024 was another head-fake, and we were correct in predicting that everyone would call off the recession. Now, the market is likely going to “reprice” the recession risk again.