The local demand in China remains on the floor, which is an issue for the broad commodity bet with China typically being the largest net consumer. China is exporting a lot, but they are not (yet) raising prices. It may eventually arrive and we remain on PPI Watch accordingly.
It’s been a muddy July, not only weather-wise, but also in markets. The signs of an equity rotation, the turning tide in USDJPY, the metals volatility & softer rates probably align. Maybe the stars are finally gearing up for a risk-friendly 4-6 weeks upcoming?
The PPI serves as a friendly reminder of the cyclical dynamics brewing beneath the surface of the global economy, which contrasts with the current sentiment. We are not convinced of a major slowdown, but we obviously find insurance cuts more likely than a few weeks ago. Here is how to play it..
The positioning is very negative in energy markets, which looks like a decent contrarian signal to us. We continue to like energy (both oil and Nat Gas) versus metals into July.
We see an improving Manufacturing sentiment as a decent bet for 2024 and this trade typically loves such an environment.
China is de facto reopening by now as we rightfully forecasted a few months back, but is a reopening equal to good news straight away? Not necessarily. Here is our playbook for the Chinese reopening.