Quarterly Outlook
Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges
Althea Spinozzi
Head of Fixed Income Strategy
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Macro Monday Week 47: Alibaba, Flash PMIs & FOMC Mins
Kay Van-Petersen
Global Macro Strategist
Summary: So wk ahead from macro perspective will be on Flash PMIs, as well as mins across the board from RBA, ECB & the FOMC. Also countdown for Alibaba listing in HK, which should be next Tues (Nov 26 & yes, Saxo will have shares & CFDs ready to go from day one). Geopolitics is on the same themes: US / CH Phase One Deal almost done (risk to the downside? Long rumour / short fact?), HK heating up, Impeach Investigation cont. Rate decisions SA, ID & HK.
(Note that these are solely the views & opinions of KVP & do not constitute any trade or investment recommendations)
2019-Nov-18
A replay of the call is available HERE
Macro Monday Week 47: Alibaba, Flash PMIs & FOMC Mins...
So week ahead from macro perspective will be on Flash PMIs, as well as minutes across the board from RBA, ECB & the Fed. Worth keeping a look out to the countdown for Alibaba listing in HK, which should be next Tues (Nov 26 & yes, Saxo will have shares & CFDs ready to go from day one)
On same breath, Geopolitics globally is on the same themes: US / CH Phase One Deal almost done (risk to the downside? – Is this going to be the classic buy the rumour, sell the fact?), HK heating up, Trump Impeachment Investigation continue, etc.
Once again KVP is reflagging the very low vol environment, suggesting that option premiums are cheap, whilst equity indices YTD performance is phenomenal! I.e. for KVP picking up some downside here on 4 – 6 – 12m put options, just makes rationale sense.
S&P 500: +25% DAX: +21% Nikkei: +18% CSI-300: +27% ASX: +16%
Meanwhile VIX is basically making lower lows over the last month
VIX: 12.05, -53%
Wishing everyone a great wk ahead, keep in mind that back end of next wk is Thanksgiving in the US
Namaste
-KVP
-
Summary of Prior Week:
- GeoPolitics: HK heating up… with pictures & video from over the wkd looking like a Hollywood dystopian movie. Meanwhile US impeachment show continues to play on
Trump speech calling for neg. rates & going after Fed again
Powell Testimony: US economy is the star economy. Cont. to have base case of reasonable growth. Risks remain the same, sluggish global growth, trade developments & low CPI
Current Fed = Sidelines
- RBNZ Surprises: for the second time this year, this time on the non-dovish side, as it keep s rates at 1.00% rather than deliver the 25bp cut that was widely expected by markets, kiwi bulls have an absolute field day/wk. KVP feels more upside to follow, i.e. NZDCAD
- EQ: Asia struggled for the wk, HSI clear & logical underperformer at c. -5%. US & most EZ indexes though still powered ahead
- FI: Big reversal from previous wk, USTs yields lower by about 10bp to these 1.83 lvls
- FX: -0.36% on DXY to 97.99, with quite interesting lvls around JPY, CNY & GBP
- CMD: Gold & Silver lagging big pullback in USTs, likely bulls still licking their wounds, post previous big sell-off. Nickel clear
- Vol: Again just amazing, how little vol we are getting. -5.3% for the wk to close at 12.05
COT Report: [@Ole_S_Hansen]
- 4wk up, 3 wk dwn, now reversing to 1wk build-up of USD with a +18% increase to $14.4bn ($12.3bn)
- Continue to see shorts increasing in the JPY contracts +32%
- Pullback in the CAD long trend, as we get a reduction -22% last wk
- Big addition to AUD shorts +52% to -41k (-27k)
- Now, its wk 5 of commodity net-long expansionWe finally see the CoT capturing the capitulation in Gold & Silver longs from a few wks back
Week Ahead
Key Focus:
- US / CH | FOMC Mins | SARB & ID Rate Decisions | Flash PMIs | Hong Kong
Central Banks (SGT):
- SARB 6.50% e/p (21) ID 5.00% e/p (21) HK 1.02% p (19)
FOMC Speakers (SGT):
- Williams
Other (SGT):
- Worth noting back end of next wk, will be Thanksgiving weekend in the US (Thu Nov 28), BoC’s Wilkins Speaking, Buba’s Weidmann
Econ Data:
- US: Building Permits, Housing Starts, Philly Fed Mfg. Index, CB Leading Index, Existing Home Sales, Flash PMIs, UoM, FOMC minutes @ 03:00 SGT (14:00 ET)
- AU: RBA minutes, MI Leading Index, Flash PMIs
- NZ: PPI & Milk auction, Credit Card Spending
- CH: Data light wk
- EZ: ECB Minutes, Flash PMIs, ECB Financial Stability Report
- UK: House Prices, Public Sector Net Borrowing
- CA: CPI, ADP, BoC Financial System Review, Retail Sales
Chartography & Price Action
- We look at different levels on the HSI, which clocked c. -5% last wk – KVP continues to think that 25,000 (-5%) is still higher delta than say 27,500 from these c. 26,400 lvl (-4%)
- FX we take a look at some of the interesting levels on USDCNH around the 7.00 lvl – likely the best barometer of a US/CH phase one deal
- Plus we look at a lot of Kiwi crosses including AUDNZD, NZDCAD, NZDUSD, EURNZD as KVP feels there is a lot more upside on Kiwi in general
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