Macro

• Discussion shifts towards the market consensus on China, highlighting a cyclical stabilization within a structural slowdown.
• China’s credit cycle, green shoots in the economy, and property market are discussed.
• Speaker shares insights on the Chinese real estate sector, mentioning a contraction and the need for new areas of investment.

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• We provide an analysis of the top 100 companies with the highest percentage of treasury shares as a percentage of market cap. 
• These 100 companies are prime targets of tender offers and M&As. Many of these companies have low PBR ratios.
• Number five in this list is Telcoware (078000 KS) which just announced a tender offer by the CEO who is trying to take the company private. 

• Steve Lowe, former managing director at Scotiabank, discusses his experience leading the iconic Scotia metals business
• Scotiabank’s success in the gold market was attributed to its broad scope and involvement in the physical business
• Focus on client service and cooperation among regions contributed to Scotiabank’s success in the gold market

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• Signals about underlying inflationary pressures remain the most interesting aspect of another unrevised euro area print of 2.2% in April, with the core at 2.75%.
• The median impulse was also steady at about a 2% annualised pace as national moves offset. Other statistical measures and wage growth remain stuck above the target.
• We expect the ECB to cut again in June, alongside forecasts that will be lowered due to Euro appreciation. The tight labour market should discourage cutting to a loose setting.

• Asia’s base oils demand could see earlier-than-usual seasonal slowdown in face of weak lube consumption and improving supply.
• Asia’s lube demand falls at end-Q1 2025 from year-earlier levels.
• Demand weakness shows signs of extending into Q2 2025 as uncertainty about US tariffs compounds signs of slowing economic growth.

• Asia’s heavy-grade base oils prices hold firm versus feedstock/gasoil prices.
• Asia’s Group II light-grade prices slip vs feedstock/gasoil prices faster than heavy grades and faster than Group I light grades.
• Supply-demand fundamentals likely to improve for light and heavy grades in coming weeks as plant maintenance draws to a close and demand slows.

• We summarize our gleanings from the Champion Iron (CIA AU) presentation, which captures the cost curve and other interesting details on the DRI market. 
• After declining below 100 USD/ton for 2 weeks, iron ore prices have slowly inched up towards 100 USD/ton, maintaining their level at the high end of the cost curve. 
• A 100 USD/ton level bodes well for the cash flows of the larger low-cost players like Vale (VALE US), Rio Tinto Ltd (RIO AU). 

• For the week ending 16/May, U.S. natural gas prices dropped by 12.2% on the back of mild weather, rising output, and lower LNG export flows.
• For the week ending 09/May, the EIA reported that U.S. natural gas inventories rose by 110 Bcf, moderately lower than analyst expectations of a 111 Bcf build.
• Henry Hub OI PCR remained unchanged at 0.92 on 16/May compared to 09/May. Call OI increased by 3.5% WoW, while put OI grew by 3.3%.

• US$16.9 mn initiative to enhance productivity and quality in Northeast  
• Stress on sheet-making infrastructure to fetch better price for farmers  
• INROAD creates over 136,000 new smallholders in the Northeast  

• While Duterte-allied candidates secured a strong showing in the Senate elections, they lack sufficient numbers to form a veto block against Sara’s impeachment. 
• Despite the Senate setback, Marcos can still govern viably from his allies’ substantial lower house majority and by forming new coalitions with a revitalised liberal, non-aligned bloc.  
• Even as policy will largely be unaffected by the elections, intra-elite politicking will continue to shape political dynamics in the run-up to the 2028 presidential election.  

• The bullish recovery of the S&P 500 has been astounding in speed and magnitude.
• We are upgrading the signal of our Trend Asset Allocation Model from bearish to neutral.
• In the short run, the rally has left the market extended and it may need to take a breather.

• What if the proportion of core CPI categories experiencing upward inflation momentum is on the rise?
• What if the improvement in the more persistent categories of CPI inflation has more-or-less stalled?
• What if longer-term inflation expectations are no longer wiggling sideways or actually creeping higher?

• The prospect of a Sino-American trade détente has taken recession risk off the table. 
• The S&P 500 is on course to recover from a bear market, but faces headwinds from policy unpredictability. 
• Investors should position in a diversified portfolio of global assets and gradually diversify away from USD exposure.

• The 90-day pause in tariffs between China and the US provides “tremendous” opportunities
• The headline volatility allows investors to scale in and out of positions
• Where we could be wrong in assuming the bear market is still on

• Equity and rates market prices normalised further as data remains too resilient to prompt cuts, and US trade policy still seems to be reversing its destructive aspects.
• UK GDP boomed beyond expectations again, albeit amid residual seasonality. US CPI data were soft and stable, as companies appeared to have smoothed the tariff shock.
• Next week’s UK inflation data could compound the pressure by exceeding the consensus to reach 3.4% on the CPI. The flash PMIs and RBA decision are other timely highlights.

• Market experiencing steepening yield curve, potentially indicating higher inflation and stronger growth
• Stocks rallying, with significant moves in earnings yield and small caps
• Asia and Europe markets up, Dow, S&P, Nasdaq, and Russell all posting gains; Gold and Bitcoin down, Oil up, Vix down

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• US stock market dependency on world index has increased significantly, reaching around 65-67%
• Tariffs implemented by Trump have had a bearish impact on stock market
• Small cap underperformance in US market is at its highest in 25 years, leading to interesting valuation opportunities

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• US and China have seen reduction in tariffs, with US tariffs on China now around 41%
• The macro impact of this reduction includes potential growth for the full year and quarterly profile
• Fiscal stimulus and monetary easing may need to be adjusted based on the current tariff situation

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• Iron ore futures surged to a six-week high as U.S.-China trade tensions eased, with both nations agreeing to sharply reduce tariffs for 90 days, boosting market sentiment and commodity demand. 
• Underlying demand remains weak, with China’s steel consumption pressured by a cooling property sector and ongoing structural shifts across its broader economic landscape. 
• On the technical front, the outlook is turning increasingly bullish as prices are holding above key moving averages. 

• The US and China have taken on a more constructive approach to their trade differences. Tariff rates will be immediately reduced significantly, and further talks will be held as well. 
• Still, the fundamental misalignment in interests and contradictory negotiating styles make elusive a substantive deal that restores bilateral trade to its pre-escalation level. 
• For China, falling export profitability and rising protectionism will limit further export growth. Economic recovery is held back by frailty in manufacturing and consumption.

• OPEC held its 2025 and 2026 demand growth forecasts steady. The IEA’s upward revision reflects a catch-up adjustment for 2024, not a fundamental shift in its forward outlook.
• The EIA raised its demand growth forecast by 7.8% for 2025 but cut estimates by 13.5% for 2026. Meanwhile, it raised supply forecasts and projected inventory builds for both years.
• The EIA expects Henry Hub prices to rise in 2025 and 2026 from current levels, though it revised its 2025 forecast 3.5% lower and lifted 2026 estimates by 4.3%.

• After falling to a 2025 low, Bean prices have rallied strongly to clock a nine-month high. Macro conditions augur well for the rally to be sustained. 
• Implied vols on bean options have dropped even as prices rise. Spike in skew points to reduced demand for downside risk hinting at upward price buoyancy.  
• Technical charts paint a broadly bullish picture with potential for rally ahead remaining intact. However, the bullish momentum might take a breather in the near term.   

• Hospitals /In Depth: China’s public hospitals face debt crisis amid health care reforms
• Rare earth /China resumes rare earth exports under tight controls as global prices soar
• Autos /China’s auto boom in Russia cools as tariffs, taxes and geopolitics bite

• What is a bit of extra cash between friends ? Do numbers mean anything anymore ?
• Long before Trump’s visit to the Gulf, promises of incredible investments were flying around.
• Now that the President touched ground we see a bit better. Saudi Arabia was first to fire and it will be 600 bn $ of commitments. 

• GDP’s resurgence caught the consensus off guard, as it failed to recognise the residual seasonality still skewing activity growth into the first half of the year.
• The 0.7% q-o-q outcome for Q1 matched our forecast and leaves a powerful carry-over to Q2, where GDP seems set to exceed the BoE’s 0.1% forecast at about 0.4% q-o-q.
• Strength discourages another policy rate cut. Disappointment in H2 is the hangover, but we doubt it will motivate renewed easing amid excessive price and wage inflation.

• Greetings from Copenhagen.
• The global macro landscape is shifting rapidly, with U.S. policy priorities evolving just as quickly.
• The administration is now 1) refocusing on the Middle East, 2) signaling that a Ukraine–Russia deal is inching closer, and 3) initiating currency policy discussions with Asian nations—many of which are active FX manipulators.

• We launch the Emmer Capital Asia ex Japan Equity Model Portfolio. We shall measure the absolute and relative performance (vi-a-vis MSCI Asia-ex-Japan Index) of the portfolio and rebalance it monthly.
• Our sector and market choices are governed by macro-economic and policy considerations. Asian consumption support, inflation divergence strengthening Asian currencies and market leading domestic exposures are some of the themes.
• We are overweight HK/China, India, Korea; underweight Taiwan, ASEAN. We like consumer discretionary, communication services and technology, despite the latter’s global footprint. We prefer high ROEs and dividend yields.

• Outperformers: Uranium, Coal & Battery Materials. The strongest performers this month were uranium and thermal coal producers, which benefitted from renewed institutional interest and long-term structural tailwinds.
• Underperformers: Gold Miners, Energy, and Select Coal. Despite a +5.2% increase in the gold price, key miners such as Barrick Gold (-7.6%) and Agnico Eagle (-0.9%) underperformed
• Equities vs Commodities. There was a notable decoupling between equity and commodity performance this month.

• Exporters / In Depth: China’s exporters get more help to withstand Trump’s trade war
• China-U.S. /: U.S. tariff relief offers limited reprieve for Chinese small-parcel exporters
• Takeaway /In Depth: JD.com wants to unseat China’s takeout king

• For the week ending 09/May, U.S. crude inventories grew by 3.5m barrels (vs. expectations of a 2m barrel fall). Meanwhile, gasoline and distillate stockpiles unexpectedly fell.
• The EIA reported a 110 Bcf storage build, slightly lower than the 111 Bcf forecast. Storage levels are 2.6% above the five-year average.
• Saudi Aramco’s Q1 profit fell 4.8% YoY but beat estimates by 2.8%. Morgan Stanley downgraded BP to Underweight from Equalweight, while HSBC lowered Chevron to Hold from Buy.

• US inflation remains elevated; interest rates likely to rise further amid persistent debt issuance and economic uncertainty.

• India and China show signs of easing policy; monetary conditions improving in China, rate cuts expected in India.

• Japan faces growth constraints due to full employment; focus should remain on globally exposed companies, not domestic demand.

• Investors ask whether threats to the USD’s reserve currency status are resting or dead, whereas we wonder if it was ever alive. Commentators routinely overextend narratives.
• The USD share of allocated FX reserves is already trending downward. A potential acceleration from smaller deficits and higher tariffs would partly offset the impact.
• Fuller hedging of USD asset holdings abroad may have already reached its limit. We still see more attractive mispricing elsewhere, such as excessively dovish rate curves.

• Bob Gilhooly, a senior emerging markets economist at Aberdeen, joins the podcast to discuss Trump’s first 100 days in office and his key outcomes
• Trump’s focus on trade deficits and tariffs has raised concerns about revenue raising and potential impact on the U.S. deficit
• Uncertainty surrounding trade negotiations and potential outcomes continues to be a key feature of Trump’s presidency

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• Despite the ongoing trade talks and tariff de-escalation between the US and China, there is no denying that US trade barriers have risen substantially.
• The downside risks to growth are high for export-oriented Asia and warrant a stronger policy response from central banks.
• Their cautious approach risks a sharper slowdown and output falling further behind pre-pandemic trend.

• China-U.S. /: Chinese exporters move quickly after tariff rollback, but remain cautious
• Whales /In Depth: The precarious fate of China’s only nearshore whales
• Covid-19 /: New Covid wave in Hong Kong is causing severe infections in children

• Asia’s base oils prices hold firm vs feedstock/gasoil prices, especially for heavy grades.
• Price-strength suggests supply-tightness continues to outweigh weaker-than-expected demand.
• That dynamic could ease as weak demand cushions impact of recent/ongoing plant maintenance, speeds up refiners’ stock-replenishment once plants resume operations.

• A new probe from EU on Chinese tire due to start May 19  
• Lack of clarity on the range of tires under the scope of US auto tariff  
• Lobbying to suspend or delay the implementation of auto tariff 

• US base oils demand likely to stay weaker in face of lower feedstock costs, steady prices and expectations of improvement in supply.
• Supply remains sufficient to cover demand even with heavy round of plant maintenance work in recent weeks.
• Lower crude oil prices and signs of slowdown in industrial activity increase incentive to minimize stocks and procure volumes on a need-to basis.

• Asia’s Group II base oils prices hold in relatively narrow range relative to US export prices, especially for heavy grades.
• Steady price levels leave arbitrage from Asia to Americas hard to work, pointing to limited surplus supply.
• US Group II light-grade export prices hold in narrow range or strengthen relative to CFR India prices since start of Q2 2025.

• Global base oils prices mostly extend rise vs feedstock/competing fuel prices.
• Sustained price-strength for most grades points to tight supply-demand fundamentals.
• Price-strength incentivizes refiners to maintain or raise output.

• US base oils prices hold firm vs feedstock/heating oil prices.
• Rising margins in Q2 2025 point to tighter supply-demand fundamentals.
• Cautious demand suggests supply is the key factor driving higher margins.

• Underlying unemployment rates are broadly stable, despite higher headline and underemployment rates, where the latter lacks relevance to disinflationary pressures.
• Activity levels are expanding healthily and redundancies fell in April, suggesting no substantial jobs impact from the NICs rise, contrary to dovish fears.
• Wage growth should slow to accommodate some of the tax cost increase, but there isn’t much evidence yet. Total pay growth is little changed in recent years.

• On the heels of the US/China “pause” announcement in the trade war, here’s a quick take on market implications and what to watch next:The initial market reaction has probably been more muted than many anticipated.
• Bond yields ticked slightly higher, gold softened, and there were modest tailwinds for regions and countries previously hammered by tariff exposure following yesterday’s “deal” in Geneva.
• But beneath the surface, several dynamics warrant a closer look.

• A marginal downside surprise in headline US inflation measures preserves uncomfortably excessive trends, even without a significant tariff shock and with ongoing airfare falls.
• Companies may have helpfully smoothed out the tariff shock such that volatile policy never hits consumers. Services (ex-shelter) continued to grow too rapidly for rate cuts.
• Being in the right ballpark of the target isn’t good enough when the labour market remains tight. At least core price and wage inflation in the US isn’t as bad as in the UK.

• The Fed left its policy rate unchanged last week. Chairman Powell is concerned about high consumer inflationary expectations .  The Trump administration will play a role shaping interest rate expectations.
• The legacy of US economic activity on global capital flows will not vanish overnight. Any replacement for the dollar must be convertible and able to fund borrowers in offshore markets.
• Dollar depreciation against Asian currencies will produce economic headwinds due to the continued regional reliance on net exports. Trade finance is dominated by the dollar, even in regional transactions.

• Initial projections hint at 4.93 million ton output in 2025  
• Pre-tariff war Q1 2025 reports robust export returns  
• Highest earnings from exports in 8 years at US$577.1 million in Feb  

• Asia’s base oils demand likely to ease as signs of weaker-than-expected lube consumption incentivize blenders to trim inventory levels.
• Prospect of seasonal slowdown in consumption starting in a few weeks would coincide with expected completion of wave of plant maintenance work, boosting supply.
• Firm base oils margins, prospect of weaker fundamentals and low crude oil prices add to incentive to procure sufficient volumes just to meet term commitments.

• The clocking is ticking for both Trump and Xi. We have reached half time. The de-escalation phase has started
• Trump has underestimated China and overestimated the leverage of America’s US$300bn trade deficit with the country. China is now less dependent on the U.S. market than it was in 2016. 
• If China is playing hard ball its to gain leverage. A spike in US consumer inflation and/or a sharp slowdown in US domestic demand is the leverage it needs.

• Gaokao / Cover Story: China’s decade-long quest to ease stress on pupils from an exam that shapes their life
• China-U.S. /: China, U.S. cool trade row with temporary cut in tariffs
• China-EU /: China, EU could keep clean tech partnership alive in other countries, economist says

• YTD our absolute return strategy is up 10,2% Will the India/Pakistan Conflict Push Cotton Prices Higher?
• India is an important exporting and producing country of cotton.
• According to the latest USDA data, India is the second-largest cotton producer behind China.

• US foreign direct investment (FDI) is shifting away from China and Hong Kong towards countries like Mexico, India, and major European nations due to geopolitical concerns.
• US multinationals are also showing early signs of reshoring and localizing supply chains in high-tech and advanced manufacturing sectors. Overall, these changes indicate a response to geopolitical tensions, although the process may take time to fully develop.
• The Techno-Industrial Policy Playbook discusses the need for effective policies to support U.S. industries in adapting to changing technologies. 

• Concerns raised in D.C. about potential restrictions on expatriating funds, taxes, and foreign ownership of treasuries
• International investors expressing preference for investing in private assets over U.S. Treasuries
• Potential increase in gold prices due to redirection of foreign assets into gold, with estimates suggesting a 33% boost in quarterly gold demand and historical relationship between demand and prices.

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• Riyadh is rapidly reducing cuts to oil output, perceived as an attempt to push out high-cost producers like US shale.
• The success of this strategy is uncertain due to the unpredictable nature of tariff-related economic factors.
• This situation mirrors the uncertainty faced during the 2014-16 period, despite changes in crude oil prices.

• Smarter Markets podcast discusses outlook for silver in energy transition and investor portfolios with Michael Duranzo, President and CEO at the Silver Institute
• Recent conversation at India Silver Conference focused on silver’s underperformance compared to gold, supply deficit, and opportunities for investment in silver market

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• Fed’s focus on keeping inflation expectations well anchored, stable rates markets after meeting
• Market optimism over potential trade deals with UK and China, potential tariff rate reduction
• Forecast for US Rates largely unchanged, expect labor market weakness prompt Fed response, adjusted yield forecasts reflecting later start to easing and elevated uncertainty

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• WTI futures rose 4.7% for the week ending 09/May, aided by easing U.S.-China trade tensions, lower U.S. output, and falling crude inventories.
• The U.S. rig count fell by six to 578. The oil rig count fell by five to 474, while gas rigs remained flat at 101.
• WTI OI PCR fell to 0.81 on 09/May from 0.84 on 02/May. Call OI rose by 4% WoW, while put OI inched up 1.2%.

• For the week ending 09/May, U.S. natural gas prices rose by 4.6% on the back of lower output, higher LNG exports, and improved demand outlook.
• For the week ending 02/May, the EIA reported that U.S. natural gas inventories rose by 104 Bcf, moderately higher than analyst expectations of a 103 Bcf build.
• Henry Hub OI PCR fell to 0.92 on 09/May compared to 0.94 on 02/May. Call OI increased by 4% WoW, while put OI grew by 2%.

• Let’s not join the crowd of those happy to bash on experts, specialists, economists of all kind.
• It is true though for example that 3 years ago, after Putin launched its special military operation in Ukraine and the following harsh sanctions, most predicted that Russia’s economy would shrink by 10 to 15 % and the currency to collapse.
• It did go down by ..1.5 % in the first year and then recovered nicely showing growth for the past two years above 4 % ; the currency initially weakened and then recovered stronger. 

• In the third quarter of 2024, Japan’s economy grew by 0.90% (QoQ).
• This growth was primarily driven by an increase in real private final consumption expenditure, which rose by approximately 3.58% QoQ.
• Additionally, real government final consumption expenditure contributed to the growth, increasing by about 2.05% QoQ.

• Jan-Mar 2025 shipments for Australian miners RIO AU, BHP AU, and FMG AU  were sluggish, registering -9.3%,-4.3%, and 0.4% YoY, respectively, due to inclement weather.
• Vale (VALE US) shipments were comparatively better, up 3.6% YoY to 66.1 mn tons. The big four kept their annual production guidance intact. 
• Positive news came from Vales China clients, as blast furnace utilization passed 90%, and some mills are now making cash profits of 200 RMB/ton. 

• Initial bearish outlook on Asian effects due to President Trump’s tariff storm
• Unexpected multi sigma moves in Asian currencies, sparking speculation of currency accord
• Uncertainty surrounding flow types, behavior of Asian exporters, and Asian central banks, with key questions hanging over China’s influence on Asian FX appreciation

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• Treasury Secretary Bessent has warned about a detox period for the U.S. economy.
• While the recent dramatic stock market recovery m0ay have raised hopes of a bullish revival, we think the detox period isn’t over.
• The market templates of today’s market are the false dawn recoveries after Bear Stearns bankruptcy in 2008 and the February 2020 rally before the full effects of COVID-19 were known.

• A review of factor and sector leadership in the U.S. equity market reveals short- and intermediate-term cross-currents.
• The underweight of risk by hedge fund, vol control funds and other systematic traders are likely to put upward pressure on stock prices.
• On the other hand, investors cannot ignore signs of growing anxiety over the health of the U.S. economy and confidence in USD-denominated assets.

• China’s copper and concentrate imports surged 24.4% YoY to 2.92 million tons, while the Yangshan Premium exceeded $100/ton, reaching a one-year high, indicating robust demand and tight supply conditions.
• The easing of US-China trade tensions, with the US expected to reduce tariffs, could potentially support a more bullish market outlook in the near term.
• We provide updates on Lundin Mining (LUN CN )’s latest Q1 results and updates from their call on Vicuna Minerals. 

• Iron ore prices remain around $97/ton, down 0.5% WoW, staying within a long-term range of $95-$130/ton over the past four years, indicating sustained price stability at the lower end.
• With weather conditions improving in Australia, we expect iron ore shipments to start increasing and China to import more than 100 million tons/month.  
• We like Fenix Resources (FEX AU). The company recently presented at the RIU Resources Round-up Conference in Sydney on 7 May 2025. 

• China’s exports to the US dropped $7bn in April from March as the impact of tariffs kicked in. 
• But its overall exports were barely impacted due to a jump in shipments to the rest of the world.
• This should ring a few alarm bells as to how the world will absorb the coming flood of Chinese imports, given Beijing’s struggles to lift consumption at home.