Global Macro APAC Morning Brief - Thu Asia Morning Kicks Off With US Equity Futures Down Over -1.00%

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Happy Macro Thu 10 Oct 2019

APAC Global Macro Morning Brief – Thu Asia Kicks Off With US EQ Futures Down Over -1.00%

With US / China trade talks set to kick off today, looks like the risk is to the upside given the poor open early doors Asia Thu Mrn – i.e. for some positive headlines & near-term sentiment to change… do note how fickle the trade-is-on, trade-is-off button has been of late.

Worth noting that we are off the lows of the session… yet early days either way…

So apparently China is open to a partial trade deal, which perhaps may lead to a pocket of stability before the apple cart gets upset again – have to admit, if true, its surprising to KVP given some lines in the sand that China has previously outlined, including dignity & respect, as well as no more tariffs have been crossed many times by the US.

Most of the times, it seems that folks are just grasping to justify why markets went up or down, & that’s whether people are positive or negative on a US / CH trade deal.

Not saying that Trade is not important, it is, but the meta trend is still the structural move lower in global yields… that & when the Fed turns to full on QE -  going from nail-clippers to chainsaw cutting -  will have a way more powerful effect across asset classes, than any trade tariffs solution.

At the end of the day, global economic momentum is still to the downside for now.

KVP views remain the same, Trump is likely to run in 2020 on a Tariffs Campaign against China & Protector of all things American, think "USA", USA", "USA"!

Speaking of 2020 if you have not already, do check out Jakobsen’s current take on Warren Macro Digest: The Next President of the USA, Elizabeth Warren

And yes, its not about the facts… I came across an interesting stat… there are like c. 75,000 coal mining jobs across the US… vs. say over 500,000 jobs in California alone linked to Renewable Energy, where do you think the needle can be really moved? It depends on what needle you are talking about… if its to greater economic growth & cleaner US it obviously on the latter.

If its moving the needle from a voting perspective (swing states), it’s obviously on the former. I.e. Same dislocation applies in agriculture in regards to government subsidies & actual bang for buck on economic growth.

You would think my now, we should have a simple web page that shows government investment (input) & the output that results from it. Someone call up Peter Thiel or Bill Gates – speaking of Gates, if you have not seen the mini documentary on Netflix… it is a must watch… downright fascinating, inspiring & also disappointing.

“In no sense, is this QE” - Fed Chair Powell was once again on the docket yesterday, this time talking about an expansion of the Fed balance sheet not in a QE focused format, but in response to the need for liquidity in the money markets.

Latest Oct 30 & Dec 11 probability of a cut continue to climb, resting now at 86.3% & 94.7% respectively – with the Dec 11 implying a 53% chance of two 25bp cuts before today & year end.

Interestingly enough we start to factor in a third cut, once the market turns to 29 Jan 2020 meeting.

O/N econ data continued to see disappointments out of the US, as the JOLTs number missed 7.05m a 7.35m e.

Crude oil inventories came in greater than expected at 2.93 vs. 1.8m from a previous 3.1m – Brent ended the session up a small +14bp

Cross-Assets Snapshot:

Generally pretty subdued sessions across asset classes with those FOMC minutes that came out, this could be due to the fact that they were stale – given the poor misses in US ISMs (both Mfg. & Non-mfg.), NFP & AHE that we got last wk were post the last Fed meeting.

S&P cash 2920 closed up +0.92%, after a negative equity session in Asia but positive one in Europe. 

We continue to have the Dollar bid with DXY above 99.00 & DollarYen 107.33 climbing up +0.36%.

Gold managing to stay above $1500 with no change overnight is seeing some love this Asia Thu Mrn, up c. half a percent to 1514 lvls given the risk-off in equities & yields moving lower (UST 1.54%).

KVP would be itching for more downside expression here if we get into the 107.50 – 108.50 zone… we covered thoughts on positioning on yesterday’s Macro Brief… see the section titled Reflection of an investment strategist



Econ Data Today:

• JP: Bank Lending & Core Machinery have already missed this morning… 2.0%a 2.1%e / -2.4%a 0.0%e. PPI on the other hand was in-line at -1.1%

• AU: Home Loans missed at 1.8%a 3.6%e 5.0%p, we also have MI Inflation Expectations due

• EZ: GER Trade Balance, IP data our of France & Italy, ECB Minutes

• UK: Monthly GDP, Mfg. Prod., Construction Output, Trade Balance, IP, Carney @ 17:20 HKT/SGT (05:20 ET)

• US: Inflation 1.8%e 1.7%p, CORE 2.4%e/p, Weekly unemployment claims 215k e 219k p, 30-y bond auction

• NZ: Early doors Fri morning Business Mfg. Index
  
  
  4^th Quarter Outlook is out: Taking Down The Killer Dollar
• Please check out our latest quarterly which focuses on the key culprit that is sucking up all the oxygen in the global economy, the strong US dollar.

 

Other:

• To catch this wk’s Macro Monday Click here…  & replay of the call here

   

• Don’t forget to bookmark & check our Daily SaxoStrats calls from the European morning session c. 09:00 CET

   

• Looking for suggestions for a new name for the daily, any thoughts would be appreciated – pls drop a mail to macro@saxobank.com