Macro

• The weak yen could be a legacy of aggressive quantitative easing (QE), whereby the BoJ became the largest holder of government bonds, forcing traditional buyers overseas.
• Overseas cash hoarding by Japanese affiliates is being cited as another reason for yen weakness. Superior growth opportunities outside of Japan are a reason for the lack of cash repatriation. 
• Japan’s exporters currently face formidable competition with China, making a strong yen an unattractive option during a period of higher cost pressures, notably for labour.

• Conventional inflation hedge vehicles have exhibited subpar performance despite rising concerns over persistent inflation that will delay the Fed’s rate cuts.
• That’s because 1970s-style “bad inflation” is not present and “good inflation”, which is a by-product of an economic recovery and stronger growth expectations, is becoming dominant narrative.
• Market expectations are shifting from a soft-landing to a no-landing outcome, which should be bullish for cyclical stocks and neutral to bearish for bonds.

• Multiple breaks in rising trend lines are signs that a risk-off episode is under way.
• We are long-term bullish and investment-oriented accounts should regard weakness as a buying opportunity.
• We have outlined a number of bullish tripwires based on sentiment and technical indicators for investors to follow.

• Stocks and Gold rally as US economy shows continued strength in employment
• Under the hood, it is not looking quite so rosy
• Meanwhile the Bank of Japan faces its own credibility issue

• Even though the Santa rally in US STIRS has largely been reversed, markets are still pricing in 2.5 full cuts by the end of this year or so with the first to come around summer time.
• Currently, one of the most unappreciated risks by markets would be the Fed actually hiking rates in 2024 and thus we thought we would present 6 compelling and thought provoking arguments for why the Fed hiking in 2024 might not be impossible after all (our base case is a hold).
• The first argument has to do with year-on-year inflation seemingly having reached its equilibrium at 3%, a range in which it has found itself for the last year or so.

• This week, the price of gold surged past USD 2,300 per Troy Ounce for the first time, and it was not because Western investors were rushing in.
• Equity markets refuse to decline due to excessive fiscal stimulus, central bank eagerness to cut rates, and improving economic momentum.
• Despite falling bond volatility, the MOVE index remains elevated relative to the VIX index, a sign of changing times.

• Welcome to this week’s rundown of our portfolio, its performance, and our most clear-cut conviction for the period ahead.
• The cocktail of better economic activity and geopolitical tensions provided tailwinds for our long crude bet, which reached its take profit level Tuesday, and hence we are out of our oil position with a significant profit.
• Most notably, and reflecting our still cyclically tilted portfolio allocations, we see growth trending higher in the cyclical parts of the economy through April on our models and nowcasts.

• OPEC+ decides to keep output targets intact till June. Iraq and Kazakhstan vow to compensate for overproduction.
• OPEC+ pressed its members to improve compliance with production quotas in Q22024.
• Expansion in US crude stockpiles slightly dampens the bull run of oil prices. While gasoline and distillate drawdowns come in better-than-expectations.

• USA’s Strategic Petroleum Reserves (SPR) is currently at its lowest in 40 years. Should this be a source of concern? Perhaps not.
• USA is the world’s largest producer of crude oil. From being vulnerable to imported oil, US has become self-reliant.
• SPR expressed differently now, stands at 188 days of net imports compared to less than 100 days as was seen in the 1980s, 1990s, and early 2000s.

• We see growth trending higher in the cyclical parts of the economy through April on our models and nowcasts, and Korean industries are well-positioned to capitalize on global cyclical tailwinds.
• Especially as Chinese economic activity picks up pace.
• The Caixin PMI suggests expansion, and given trade ties and scarcity of semis this should, all else equal, continue to boost Korean exports.

• Chinese authorities are to limit steel production while pushing forward industrywide structural adjustments as steel mills suffer from growing losses amid sluggish demand.
• Several ministries led by the National Development and Reform Commission (NDRC) Wednesday said regulators will continue efforts to control crude steel production this year, focusing on energy conservation and carbon reduction.
• The authorities will foster industry strengths and weed out weak players to promote the structural adjustment and optimization of the steel industry.

• Norway is currently considering a set of financial proposals that could significantly impact its currency and overall money market landscape.
• These proposals revolve around the handling of dividends and interest from Norges Bank, Norway’s central bank, which could lead to notable changes in the liquidity within the Norwegian economy.
• The primary focus is on the current practice of sterilizing dividends and interest, a method that could soon see a shift, including how to handle the growing volatility and nominal size of the Treasury account.

• The US presidential election’s direction has become clearer in the recent three months.
• Despite the recent commentary leaning towards a Trump victory, it appears to be premature and not backed by facts.
• The author remains in support of Joe for the time being.

• Local / In Depth: Frugality bites for China’s cash-strapped local governments
• China-U.S. /: Xi and Biden talk by phone on bilateral cooperation and differences
• Trade /: Moscow closes auto export loophole that had been a boon to Chinese traders

• Welcome to our Monthly Macro Regime monitor.
• Coming into March, we wrote that “We see little change to the optimistic and risk-favoring sentiment for March, and we thus remain in the goldilocks ‘Gung Ho’ regime.
• With tailwinds from both liquidity and growth, we continue to see a great case for continuing to move/stay further out of the risk curve when it comes to allocation.

• Oil prices are buoyant as the market largely expects OPEC+ to keep the supply cut policy intact till June. 
• Global oil demand outlook improves as the US and China see pick up in manufacturing activity after one-and-a-half years and six months, respectively. 
• Russia decides to focus on reducing oil output rather than exports in Q22024, implying a surprise shift in policy.  

• Welcome to our weekly ‘5 Things We Watch’, where we take you through 5 of the things we look out for in global macro.
• With markets hawking up Fed expectations, Euro Area inflation surprising on the downside, and commodities breaking out technically, there are plenty of things to shed some light on!
• This week we are watching out for the following 5 topics within global macro: 
  • EUR-Inflation
  • Central Banks pricing
  • The Business Cycle
  • Fixed Income Positioning
  • Commodities 

• Coffee / In Depth: Luckin challenger pushes China’s coffee price war toward boiling point
• Huawei /In Depth: Huawei’s HarmonyOS Next is set to rival iOS and Android
• Corruption /: Two officials of China’s non-communist political parties caught up in corruption investigations

• EA inflation reversed its previous upside surprise to print down at 2.44% in March. Core inflation was 2bps softer at 2.946% amid non-energy industrial goods price weakness.
• Services inflation once again surprised on the upside by refusing to budge from 4% for the fifth consecutive month despite potential Olympic-related weakness in France.
• The ECB can welcome headline disinflation, but without seeing a slowing in services inflation, we still believe it will not be convinced to start cutting interest rates.

• Shifting rate cut expectations and contrasting demand for treasuries creates a nuanced topology across various yield curves and inversion dynamics.
• Last Dec, expectations were for six rate cuts of 25 bps each to start from Jan. Two FOMC meetings have passed with rates unchanged. 
• FOMC meetings thus far have resulted in (1) No hike & No guidance, & (2) No hike & Reaffirm guidance. Expectation is for 3 cuts of 25 bps from Jun. 

• With the BOJ’s struggle to support the yen gaining traction,  the NKY and TPX both hit major resistance
• Hong Kong finally breaches resistance with a potential move to 20k in the near term
• Diversification opportunities are abundant with potential negative correlation between China/HK markets and US

• The newest set of PMIs is a positive, but ultimately tentative, sign that the cyclical position of China’s economy is finally firming up after prolonged woes in the past year. 
• But readers should not be carried away by one month of good data; bottom-up indicators in the consumer and business sectors have yet to show a convincing turnaround. 
• Given the elevated uncertainties in domestic and global demand, we do not expect a linear, smooth-sailing recovery. Expect more than a few speed bumps along the way. 

• Welcome to this week’s Great Game, where we cover current geopolitical events relevant to your portfolio!Israel-Hamas War takes toll on hospitalsSituation: Israeli troops have left the Shifa hospital in Gaza after reducing the site to rubbles.
• Meanwhile, Israeli strikes have hit the Al-Aqsa hospital as well as a ‘World Food Kitchen’ convoy, killing seven NGO workers.
• Finally, Israel bombed the Iranian embassy in Syria, killing a couple of high-ranking Iranian military commanders.

• Solid PMI numbers out of China supporting the reflation story
• Steel Production looks ok. There is still potential for the USD to throw a wrench in the works
• This week we’ll pick up where we left off last week and continue to talk about China as we have had a surprise in PMI numbers.

• BRI / Cover Story: How a China-built railway is connecting Ethiopia to the world
• FDI /Foreign direct investment into China plummets to 23-year low
• Personnel /Provincial officials moved to key leadership jobs in Beijing

• Prime minister Anwar Ibrahim and his government are struggling to keep a lid on ongoing controversies surrounding religious tensions and citizenship reforms. 
• At the core of its difficulties is continued insecurities over the relatively low level of support among Malay-majority voters. 
• There are consequences for economic policy; measures that are seen as harming bumiputra interests will face difficulties in being carried out. 

• Hello everyone, and welcome back to our weekly positioning watch! Hope you all had a great time off during the Easter break.
• The market narrative has remained more or less intact after the break, with equity sentiment still going strong until today despite a bit of a hiccup delivered from the Fed, with especially Waller but also to a certain extent Powell pushing back on the 3 rate cuts priced in just a couple of weeks ago.
• The scenario with 0 Fed cuts in 2024 is looking to come into play, right as European central banks have likely received the final evidence for them to start cutting rates, with German CPI surprising on the dovish side, and UK Retail Prices collapsed, paving the way for both BoE and ECB to cut rates before the Fed, which admittedly has a more difficult time battling inflation.

• Gold price is a reflection of underlying global stress in currency markets
• Gold price is a reflection of actual not reported real rates of interest
• Gold price is a reflection of global increased demand from central banks and consumers

• Goldman also highlights that cyclical risks from the business cycle are fading.
• An upswing in the global industrial cycle typically leads to broad metals upside over the next 12 months the investment bank added.
• According to data from PIERS, a trade flow analytics tool within S&P Global, Baltimore port held just 4% share of the total trade volumes on the East Coast compared with other major regional ports like New York, with a nearly 38% share according to S&P Global.

• A monthly review at how the markets and our themes are currently performing
• Analysing what went wrong and what went right in stocks and sectors
• Highlighting positions added or removed from the thematic investment portfolio

• Happy Easter and welcome to our flagship editorial! The tide is turning on USD liquidity and the four most recent bills auctions have seen net negative issuance, which is a harbinger for the trend into April, which is typically strongly net issuance negative due to tax seasonality (see chart 1).
• Only during the first lockdown in 2020, did the net amount of outstanding bills increase through this period, which makes for a solid hit ratio in predicting (much) weaker USD liquidity in Q2 this year.
• We wrote on New Years eve of 2023 that “USD liquidity is likely going to increase massively in Q1 due to a series of technicalities surrounding the BTFP, ON RRP and TGA facilities, which makes us set for a material rally (or a blow off top) in Q1.”, which I guess was as precise as it could be.

• The past week saw insights on Ultrajaya Milk (ULTJ IJ), Mitra Adiperkasa (MAPI IJ), PT Nippon Indosari Corpindo (ROTI IJ), Bukalapak.com (BUKA IJ), and Semen Indonesia (SMGR IJ). 
• There were also insights on Bank Mandiri (BMRI IJ), Siloam International Hospitals (SILO IJ), Kawasan Industri Jababeka (KIJA IJ), Multi Bintang Indonesia, and Far East Hospitality Trust (FEHT SP)
• 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.

• Further weakness in the JPY poses a risk to RMB stability
• If major stimulus is unleashed in China, it is likely the RMB will weaken
• Continued incremental easing will benefit the economy in the long term but may disapoint equity investors looking for a quick fix despite Chinese data improving

• The S&P 500 ended the quarter exhibiting a series of “good overbought” conditions which are signals of strong momentum. Can the bullish momentum continue?
• Equity price momentum in Q2 is dependent on continued rising EPS estimates, a tame bond market response to higher Treasury coupon issuance, and a possible liquidity squeeze. 
• The market is vulnerable to a setback. A lot has to go right.

• Fed Chairman Powell’s assessment that monetary conditions are restrictive is questionable due to issues surrounding the neutral federal funds rate. Secondary signals of the Fed’s policy stance are worth following.
• Commodity and risky asset price trends, exchange rate movements and yield curve changes are viewed as secondary indicators of the Fed’s policy stance. 
• Policy is not tight based on commodity and risky asset prices. Exchange rate movements are inconclusive. Yield curve inversion is associated with tight money, but this condition no longer holds. 

• The incoming inflation data has received more attention and scrutiny as G3 (Fed, BoJ and ECB) policymakers up the ante  
• Ideally, the emphasis should be on “trend” or “underlying” inflation, not the monthly data wiggles  
• My estimate of the G3 underlying inflation rate is currently hovering around 1.5%-points above the pre-pandemic average     

• We believe the market hasn’t discounted Powell’s political need for unanimity for the first decision to cut rates in an election year. 
• Current consensus expectations call for the first quarter-point rate cut at the June FOMC meeting, which is probably a stretch for FOMC members.
• It will be difficult to form a consensus for a June cut in the absence of either lower inflation data or weakness in the labour market.

• China’s Local Government Financing Vehicles remain a major obstacle to faster GDP growth and confirm that the country is quickly reaching its debt limits.
• A lack of liquidity has kept Chinese stocks from rallying even though central authorities have deployed a massive amount of targeted stimulus measures
• My new Bitcoin price projection is between USD 224K and USD 288K, two to seven years from now. 

• The Bank of Japan is caught between a rock and a hard place
• The JPY’s only hope is a US recession and lower US interest rates
• Japan’s inflation problem to resume as imported inflation bites into purchasing power once again

• Russia has pledged to cut oil output to 9 million barrels per day by June, potentially causing Brent oil prices to rise to $90 in April and above $100 in the future
• The US has the option to release up to 60 million barrels of crude oil from the Strategic Petroleum Reserve to mitigate the impact of high oil prices
• SPR inventories currently cover 188 days of net import demand for crude oil, suggesting that the reserve may not need to be as large as it once was and could be used for funding infrastructure and federal spending priorities

This content is sourced through publicly available sources and has been machine generated. Information displayed is for general informational purposes only.

• Javier discusses high olive oil and chocolate prices due to peak crop arrival and increased demand
• Tracy shares her favorite chocolates, including Hershey’s and Milka, and discusses expensive Swiss chocolates
• The surge in cocoa prices is attributed to increased global chocolate consumption and crop failures in West Africa, leading to comparisons with Nvidia’s performance.

This content is sourced through publicly available sources and has been machine generated. Information displayed is for general informational purposes only.

• Stagnant growth and price deflation have defined the term Japanization, and, due to rapidly rising debt levels in conjunction with aging populations, long been the striking worry for many economists.
• Post-Covid inflation has shifted the narrative however, and fears of it becoming structural has taken over as the new doom-scenario globally.
• For Japan though, inflation is not so much a fear as a hope, and we see signs that Japan is in fact achieving sustained inflation.

• IPOs / In Depth: China IPO slowdown pits startups against investors
• Pakistan /: Beijing pushes Pakistan to hunt down ‘terrorists’ after bombing kills five Chinese
• TikTok /: Rivals vie to fill market void as U.S. business ban looms over TikTok

• As of the week ending 15/March, crude inventories fell more than expected (2 million barrels vs 900k barrels expected) led by higher exports and refinery activity.
• Refineries operations have picked up faster than anticipated, with the utilization rate jumping from 80% in early February to nearly 88% by 15/Mar.
• OPEC members like Iraq, UAE, Gabon, and Kuwait, have exceeded their production quotas, raising concerns about adherence.

• Nominal disposable income continues to surge amid widespread enormous pay rises. Unmatched by productivity, the nominal boost is eroded by inflation to real stagnation.
• The regime of high nominal increases nonetheless inflates away the debt stock, helping sustain affordability despite forceful interest rate increases.
• An inflationary reduction in debt burdens is not real wealth. The UK’s net worth is crashing to record negatives as corporates and households suffer post-pandemic.