Macro: Sandcastle economics
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Macro Digest: Is China's trade explainer really its G20 gambit?
Steen Jakobsen
Chief Investment Officer
Summary: What are the impending risks associated with the US-China trade war and the G20 summit and how can you adjust your positions to accommodate the event? Check out what Saxo Chief Economist, Steen Jakobsen, is planning.
Action: Take profit on short Nasdaq and neutralise risk-off – to neutral (Reinstate if two days break below 6,939 Nasdaq future) (Long 7,014 NASDAQ near future).
Why it matters: We have with some luck used small minute changes in the “official rhetoric” from China as input to allocation changes: See Goodbye global policy panic, hello false stability
Context: We still very much doubt that G-20 will produce a major breakthrough considering the negative step-up, but….we are close enough for the two parties to start “pretending” something could happen – the damage is clear to see: The Fed is now expected to cut by 75 basis points and China is desperately keeping China stocks in place at this time.
Also, the market has become cheap in mean-reversion terms – indicating risk of a bounce….
Interesting narrative from South China Post, a known part of the official China – They argue: This is actually to set the standard for talks @ G20 in the sense that here is our minimum demand /offers…
I still doubt that this is enough but if this starts “to be part of the propaganda” we could have seen the worst…(for now…)
Why it matters: We have with some luck used small minute changes in the “official rhetoric” from China as input to allocation changes: See Goodbye global policy panic, hello false stability
Context: We still very much doubt that G-20 will produce a major breakthrough considering the negative step-up, but….we are close enough for the two parties to start “pretending” something could happen – the damage is clear to see: The Fed is now expected to cut by 75 basis points and China is desperately keeping China stocks in place at this time.
Also, the market has become cheap in mean-reversion terms – indicating risk of a bounce….
Interesting narrative from South China Post, a known part of the official China – They argue: This is actually to set the standard for talks @ G20 in the sense that here is our minimum demand /offers…
I still doubt that this is enough but if this starts “to be part of the propaganda” we could have seen the worst…(for now…)
Comment: All the momentum indicators extremely OVERSOLD……..
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