Smartkarma Daily Briefs

• Observable crude inventories in key regions have steadily drawn down, reaching 40 million barrels below December levels.
• Global onshore crude inventory is at a record low of 4.4 billion barrels, signaling increased demand.
• Refinery runs and healthy refinery cracks and margins are drawing down on crude inventories, supported by strong gasoline cracks.

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• I am sitting here on a Saturday evening (by the time of writing) waiting for the opportunity to say hello to the second junior analyst at home as my wife’s due date is approaching fast.
• In between the frightening thoughts on how to deal with not only one but two diaper-wearing boys at home (myself excluded), I keep pondering why I receive so many questions on the timing of the first rate cut.
• Is it really that important?

• The increase in news articles mentioning tariff and trade war risks is making it difficult for cyclical currencies like the euro to factor in any potential growth outside of the US.
• US exceptionalism is evident in strong services ISM and relative equity performance, which is leading to the dollar’s dominance in capital flows.
• The Chinese yuan is facing bearish sentiment due to double-digit drawdowns in onshore equity indices, deepening deflation, weak sentiment in the housing market, and limited policy options for policymakers. Outbound travel restrictions during the Chinese New Year season also add to the pressure on the currency. However, there have been some positive signs in financial flows, such as stabilization in equity flows and increased bond purchases by foreigners. Overall, the outlook for the yuan remains bearish.

This podcast is sourced from an online content aggregator through publicly available sources and is displayed below for general informational purposes only.

• Gold platinum ratio (“GPR”) measures the price of gold relative to platinum. it is affected by recessions, monetary policy, and stock market returns.
• GPR has been rising since 2008, it has outperformed gold and platinum individually since 2006 and other gold spreads (gold-silver, gold-palladium, gold-copper) since 2000. 
• The outlook for both gold and platinum remains uncertain. A bullish view of the GPR looks more favorable.

• The Conservative right-wing is determined to persist despite facing challenges.
• They suffered two more by-election defeats on 15 February, further weakening their position.
• This likely ensures that the UK will not see a Tory government after the upcoming general election for at least five years.

• More deflation reported in China and the implications for markets
• Chinese authorities keep pushing liquidity into the system and focusing on the stock market
• Parts of the Chinese Economy not as bad as the doomsayers would have you believe

• The crude market is rife with subtle tit-for-tat politics, and there’s little to indicate this dynamic will change.
• We delve into the current state of the oil market and share our thoughts on our current position at this stage. First we broke USD 80, then Al Jazeera reported a ceasefire between Israel and Palestine, which was retracted 15 min later.
• The market didn’t care and pounded the sell-bottom all the way back below 78 even with (on the paper) strong jobs and PMI prints out of the US coming out in the meantime.

• The past week saw insights on Bank Mandiri, Thai Credit Bank IPO, Digital Core REIT placement, and a look at Singapore’s most defensive High ROE and low PER stocks. 
• There were also macro insights on Thailand, looking at its economic malaise and the direction of policy rates, and the Philippines looking at its recent inflation figures.
• The Week That Was in ASEAN@Smartkarma is filled with an eclectic mix of differentiated, substantive, and actionable insights, macro and equity bottom-up, from across Southeast Asia.

• Cocoa Reaches All-Time High – First Time since 1960 A long-held commodity price record has fallen: The price of NY cocoa futures has surged to almost $5,400 a ton, surpassing the $5,379 peak in place since 1977 ( roughly 46 years ago).
• Cocoa was one of the few commodities that hadn’t set a fresh nominal price record in the 2000s.
• The current rally is fuelled by the El Nino weather phenomenon which is causing drier temperatures in West Africa, where three-quarters of the world’s cocoa is produced – this fundamental weather event has now led to a short squeeze situation in the cocoa futures market.

• Happy Monday, and welcome to our weekly positioning update!Markets seem to be back to normal dynamics, with US indices slowly drifting higher with S&P 500 passing the historic 5000 USD level, despite most economic data prints surprising to the upside, almost forcing risk-asset investors to believe that the economy has survived higher interest rates for good.
• Although rates traders have made what looks like a u-turn in the # of cuts priced in for 2024, the promise from central bankers that policy rates will come down has been anchored in expectations, and the cocktail of slightly better than expected economic data and the perception that central bankers will cut interest rates (albeit slightly slower) anyway produces a perfect environment for risk assets to perform and drift higher.
• With USD liquidity looking to continue its upward trajectory, equities are still a buy given the current narrative – momentum is king.