Macro

• Hi everyone, and welcome back to our weekly positioning update.
• I’ve been puzzled over the past weeks of just how much risk assets have been denying the underlying macro trends, and it very much mimics the pattern we saw in Q4 2023.
• Markets are not really responding to macro unless there is a major surprise to either side of the economic consensus as this is the only scenario which can change the expected rate path of the Fed.

• OPEC cut its 2024 demand growth forecast for the fifth consecutive time this year. It lowered its 2024 and 2025 forecast 11.5% and 5.8%, respectively.
• The EIA and IEA lowered their 2024 demand projections by 10.1% and 8.7%, respectively. However, they raised their 2025 projections by 5.7% and 11.1%, respectively.
• The EIA reduced 2024 and 2025 price forecasts for WTI and Brent, citing higher non-OPEC+ production and subdued demand, which are expected to drive global inventory builds after Q1 2025.

• For the week ending 06/Dec, US crude inventories fell by 1.4m barrels, beating expectations of a 1m barrel decrease. However, gasoline and distillate stocks rose more than expected again.
• US natural gas inventories fell by 190 Bcf for the week ending 06/Dec, beating analyst expectations of a 175 Bcf drawdown. Inventories are 4.6% above the 5-year seasonal average.
• Wells Fargo raised its 12-month PT for Chevron but lowered targets for Shell and Occidental. Exxon targets a CAGR of 10% in earnings and 8% in cash flow through 2030.

• 79% of ELTs consumed by end-use markets, up 10.5%
• Tire-derived fuel tops ELT use, followed by ground rubber
• Sumitomo Rubber USA announces closing of Buffalo plant

• Contrary to popular belief, the upward trend in global US$ exports, which has been in place since 1948 remains intact. World trade openness too is higher today than pre-GFC.  
• US consumers are the richest. However Asian affordability is growing quickly . The region’s share of the global imports is already on par with Europe’s.   
• Globalisation is not reversing but evolving. Regional trade is driving world exports while world manufacturing production chains are transitioning from horizontal to vertical integrated.

• The seasonal festival of packed macro releases before Christmas has shown policy divergence and surprise, with the SNB and the Bank of Canada cutting by 50bp, Brazil hiking by 100bp, and the ECB’s 25bp cut as expected.
• There is a firm consensus for no change for the BoE and a 25bp cut for the Fed, with one of the other announcements expected to shock.
• The UK CPI inflation call is relatively high at 2.6% on the data front.

• Smugglers / In Depth: How China is cracking down on border trade smugglers
• Pension /: China’s personal pension pilot is ready to go nationwide, sources say
• EVs /: Baidu-Geely EV brand pledges to maintain deliveries as backers’ support wavers

• The US Net International Investment Position (NIIP) as a debtor country has ballooned since the GFC, attracting global demand for US assets, which feeds demand for the dollar.
• Historically high dollar demand has allowed the US to enjoy the benefits of low interest rates and created a historic bull market in US equities.
• As the US continues to use its currency for geopolitical purposes, countries have begun to question dollar hegemony.  The US fights against any country that tries to weaken the dollar

• On Dec. 4, Michel Barnier became only the second Prime Minister in French history to be ousted by a no-confidence vote.

• Precisely one week later, the other major EU economy, Germany, submitted a motion of no-confidence of its own to be held on Dec. 16. What the heck is going on in Europe?!

• The political chaos in France and Germany has the same root cause: a sluggish economy and insurmountable debt levels.

• The biggest takeaway from President Yoon’s address to the nation today was his focus on election integrity and election fraud.
• He was basically implying that the biggest reason for declaring a martial law was due to severe concerns about security breach issues at the National Election Commission.
• One of the clear beneficiaries of President Yoon’s speech today will be the cybersecurity sector.

• Relending / Share cancellation key to ensuring PBOC’s relending tool stabilizes stock market, insiders say
• Chips /In Depth: Chasing chip talent to keep the boom alive
• Preview /Commentary: CEWC will endorse stronger policy support to counter headwinds

• The ECB matched our expectations by cutting its deposit rate by 25bp to 3%. Dovish hopes for a 50bp punch were disappointed, albeit mostly faded in recent weeks.
• Removing the reference to sufficiently restrictive policy was reasonable before reaching neutral, with the appropriate determination language being similar.
• 25bp cuts in January and March would take rates to the upper end of last year’s staff estimates for neutral, which may have risen, justifying not much easing beyond that.

• First Quantum Minerals (FM CN) is a play on African mining assets for copper/zinc with an optionality of resumption of the Cobre Panama mine that could double the share price. 
• We should not assign a high probability to the asset’s resumption and view it as a long-duration, very out-of-the-money call option.
• The company trades at an EV-EBITDA of 9.8x, which is more expensive than some of its peers. However, Cobre Panama’s optionality makes it attractive.

• India’s ethanol policy is driving increasing corn demand both locally and for imports
• India’s corn production is estimated to be around 38 million for the next year
• India primarily imports non-GMO corn from Myanmar and Ukraine for their ethanol industry, facing challenges in meeting the demand due to feedstock tightness and high import duties

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• The SNB cut its policy rate by 50 basis points to 0.5%, surprising consensus expectations for a lesser reduction because of lower-than-expected inflation and subdued economic conditions.
• Inflation projections remain well within the price stability range, with medium-term forecasts reflecting subdued second-round effects, though heightened global and domestic uncertainties may influence future rate decisions.
• The SNB is flexibly prepared to keep easing if inflationary pressures weaken further while maintaining readiness to intervene in foreign exchange markets to manage franc appreciation.

• Welcome back to our weekly editorial on everything commodity and energy-related!This week is all about China as the Politburo and PBoC have announced new (undefined) stimulus measures aimed at simultaneously countering tariffs from the Trump administration in 2025 and bolstering the economy, regaining confidence as China battles structural issues.
• This naturally raises the question of how this will impact commodities.
• As the world’s largest importer of commodities by a significant margin, China’s injection of capital into its economy could provide a substantial boost.

• With the US and China distracted from stabilizing the world geopolitical order, flare-ups and stresses will occur more frequently as various actors feel emboldened to undertake risky gambits. 
• The world, including emerging Asia, will have to contend with “much higher for much longer” geopolitical risk and its aftereffects on global trade, investments, and financial markets. 
• But most economies in the region retain agency to adapt to a more hostile environment by bolstering internal resilience and forming new coalitions of the willing to pursue shared objectives. 

• Squeezed supply owing to rains lifts prices in domestic market
• Exports down 23.4% MoM at US$79.5 million in Sept
• Michelin seeks proactive policies to up rubber production 

• Inflation for the second half of November stood at -0.12%, supported by the extended effects of “El Buen Fin” sales event.
• During this period, general inflation benefited from the continuation of discounts offered during “El Buen Fin.”
• This year, the discount season began on November 15 and extended through November 18.

• Autos / In Depth: China’s auto industry reaches turning point as EV exports slow
• Funds /: Chart of the Day: Value of China’s mutual funds comes down from peak
• Nvidia /: Nvidia asserts commitment to fair competition amid China antitrust probe

• Outlook for 2025 across commodities sectors discussed
• Bullish view on gold, base metals, and agricultural commodities
• Neutral to bearish outlook on oil prices for 2025 and 2026

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• Export restrictions have impacted the trade between China and the US, with potential for increased support for mineral imports from Canada
• The incoming Biden administration may focus on boosting domestic mineral recovery and supply chain security
• The copper market is facing challenges with potential oversupply, while cobalt prices are set for the worst year in history due to stagnating demand and increasing output.

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

• SGX IO Futures January 2025 contract fell $1.85/ton, closing at $102.55/ton on 6/Dec, with prices trading in a $3.45/ton range.
• Prices traded above the weekly pivot point of $103.20/ton until 6/Dec but failed to breach the R1 resistance at $106.05/ton, reflecting constrained upward momentum.
• Volume Put/Call ratio rose to 1.47; March 2025 expiry saw the highest put volume. Implied volatility increased modestly for December expiry but declined for January and February.

• December S&P 500 futures are up 116 basis points, trading at 6900, with potential levels to watch.
• US Dollar Index is down 11, consolidating 2-year highs.
• January WTI crude oil contract down 68 basis points, remaining in a primary downtrend.
• Additional points discussed include tech companies embracing nuclear energy, the uranium market outlook, and commentary on market trends for gold, bonds, and equities. Each market is assessed for potential trends and indicators that may influence future movements.

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

• The US oil and gas rig count rose by 7 to 589 for the week ending on 06/Dec, rising for the first time in four weeks
• For the week ending 29/Nov, US oil production rose to 13.51m bpd from 13.49m bpd the week prior. US output edged past its record high of 13.5m bpd.
• The number of active US oil rigs rose by five to 482, while the US gas rig count rose by two to 102.

• Not so Outrageous Commodity Predictions Saxo Bank published their annual “outrageous predictions” for 2025.
• I actually found a few theses that I don’t even find that outrageous in its directionaly.
• For example: “The crypto market quadruples to more than USD 10 trillion, the US dollar falls 20% against major currencies and 30% versus gold.

• WTI futures dropped 1.8% for the week ending 06/Dec, as concerns of oversupply in 2025 offset the impact of OPEC extending cuts and rising geopolitical tensions.
• WTI options Put/Call volume ratio jumped to 1.24 from 0.82 (29/Nov) last week, as call volume rose by 19.8% WoW while put volume surged by 81%.  
• WTI OI PCR remained unchanged at 0.88 from last week. Call OI rose by 3.3% WoW, while put OI increased by 3.6%.

• US natural gas prices dropped 8.5% for the week ending 06/Dec, driven by volatile weather forecasts, which predicted a warmer-than-expected winter.
• Henry Hub Put/Call volume ratio fell to 1.06 from 1.47 (29/Nov) the previous week as put volumes fell by 20.6% WoW, while call volumes increased by 10.2%. 
• Henry Hub OI PCR rose to 0.84 from 0.83 compared to last week. Call OI rose by 5.3% WoW, while put OI increased by 6.7%.

• We summarize the sensitivity of high-yield stocks Vale (VALE US) and Fortescue Metals (FMG AU) to the iron ore price. We try to answer what’s priced in at 100 USD/ton.
• We provide sensitivity tables for both stocks based on a range of 90-130 USD/ton. At 100 USD/ton, Vale (VALE US)/Fortescue Metals (FMG AU)  trade at 7.4/6.4% dividend yields.
• Bullish iron ore participants subscribing to the 130 USD/ton forecast can see yields of 16.3%/11.4%. This forecast will be achievable if the China stimulus provides the expected impetus.

• Persistent fiscal deficits have almost become normalised, with politicians hoping that modern monetary theory might resolve their borrowing with private savings and assets.
• Foreign savings are the more likely release valve on discretionary fiscal easing. Pursuing countercyclically loose policy faces inflationary resource constraints even under MMT.
• Revaluations of heterogeneous securities mean higher deficits and debt are not neutral. Fiscal deficits encourage tighter monetary policy amid stagflationary pressures.

• Happy Friday! Every week, we dive deep into macro trends, analyze asset movements, and uncover the best value plays in the world of macro.
• These insights are shared with hedge funds and institutional clients, and each Friday, we’re bringing them directly to you.
• While the macro landscape can be complex, we believe it doesn’t have to be intimidating.

• Happy Sunday, everyone, and welcome to my weekly editorial on everything tradable in macro! I was confident heading into last week that the U.S. data releases would bring bond yields lower, and both ISM numbers and NFP aligned with our views.
• The NFP report was much weaker than it appeared, with the median duration of unemployment ticking up—a clear symptom of a low-hiring, low-firing labor market with little momentum for those who lost jobs in recent quarters to find new opportunities.
• Monthly job creation of around 225k is obviously decent, but this figure is skewed by employees returning from strikes and a lack of substantial positive revisions to the abysmal job creation in October.

• NR prices stage a comeback but then undergo correction
• Rubber Board convenes series of producer meets to tackle challenges
• Rubber Board proposes a fee to issue NOC to import NR

• Xi Jinping is likely to respond to escalating trade tensions with the US by accelerating the shift from global globalisation to multi-polarisation.
• This shift will require investors to adapt their global perspective and strategies.
• Therefore, the ongoing trade tensions could have significant implications for global investment approaches.

• The past week saw insights on PT Daya Intiguna Yasa Tbk (Mr DIY Indonesia), Aspirasi Hidup Indonesia (ACES IJ), Sarimelati Kencana PT (PZZA IJ), and Singapore Post (SPOST SP). 
• There was also an insight on Erawan Group (ERW TB) and a Malaysian Banks screener from Victor Galliano where he picks out RHB Bank Bhd as a standout value. 
• The Week That Was in ASEAN@Smartkarma is filled with an eclectic mix of differentiated substantive, and actionable insights, macro and equity bottom, from across Southeast Asia.

• The Fed’s latest report on financial stability indicated elevated valuations for risky assets versus Treasuries, while valuations for residential and agricultural properties are also historically high.
• Residential mortgage and company debt do not pose major risks to financial stability due to high levels of equity in owner-occupied real estate and robust corporate profits. 
• Continued fiscal profligacy poses the greatest threat to the US financial system via the banking system and raising the cost of capital for the corporate sector. 

• This year was one of American exceptionalism and asset return domination, led by the leadership of the Magnificent Seven.
• . We believe Magnificent Seven leadership is likely to fade in 2025.
• We expect that 2025 will be a year of transition from growth to value, large caps to small caps and paper to hard assets.

• Now that Bitcoin has exceeded the psychologically important 100,000 mark, it is becoming evident that the FOMO risk-on stampede is in full force.
• Our review of market internals leads us to conclude that the risk-on FOMO stampede that’s driving the animal spirits is on the verge of becoming exhausted.
• Our base case calls for a brief period of consolidation or shallow weakness, followed by a rally into year-end.

• This is a follow-up to our initiation, Fenix Resources (FEX AU): Small Cap Iron Ore Miner With Great Upside. The flagship mine added another 5 years to the existing 3-year mine life. 
• At a 60 AUD/ton operating margin for 1.4 million tons/Yr (assuming 100 USD/ton iron ore price), this is an additional 60-65 mn AUD of cash profit for 5 years.  
• The company has commenced production in the Shine iron ore mine (1.2 mtpa) and will shortly begin production in the Beebyn-W11 mine (1.5 mtpa) in early 2025 after obtaining permits.

• In the countdown to the China Economic Work Conference (CEWC), which will be held on December 11th/12th, the iron ore market remains range-bound, expecting further clarity on the economic stimulus.
• Stocks like Vale (VALE US) and Fortescue Metals (FMG AU) continue to trade at double-digit dividend yields (9-10%), assuming 100 USD/ton.
• With China’s PMI improving, despite high inventories, there is an expectation of a restock for iron ore in the short term. We remain skeptical and continue to see range-bound activity.

• In the countdown to the China Economic Work Conference (CEWC), which will be held on December 11th/12th, the copper market remains range-bound, expecting further clarity on the economic stimulus.
• The market has looked through the PMI uptick due to the seasonal uplift and order inflows in anticipation of Trump tariffs, although equities seem a little more positive. 
• We prefer Southern Copper (SCCO US) in the copper space for its high ROIC and future growth. Check out our recent initiation, Lundin Mining (LUN CN): Cheap Play on Copper. 

• For the second half of November, we forecast headline inflation at -0.08% bw.
• This would bring November inflation to 4.57% YoY.
• Our estimate of -0.08% bw is below the historical 0.07% bw for this period as we identify prices reductions in some agricultural products.

• Happy Thursday, and welcome to our weekly positioning watch, brought to you just before the crucial NFP report tomorrow.
• From what we see across markets, it looks like participants are starting to take risk off the table in equity space ahead of the report.
• Markets have struggled this week to settle on a clear narrative for USD assets, especially USD rates.

• One of the most important questions about the martial law three days ago is why did President Yoon send special forces (297) to the National Election Commission?
• President Yoon may have ordered troops to be deployed to the NEC to get to the bottom of the election fraud since all the important election servers are stored there.
• It is EXTREMELY DIFFICULT to prove an election fraud. Even if President Yoon declares a war on election frauds, he must have extraordinary pieces of data to back this up.

• During Hong Kong’s market correction during November, we noticed that the Put/Call spread stayed below 1 and the skew moved to its lowest level in 3 years both bullish signals.
• Yum China Holdings (9987 HK) share price had a golden cross breakout on December 3, as the casual dining sector in China shows growth going into next year.
• MINISO Group Holding (9896 HK) had a breakout from a falling wedge pattern relative to MXEF.  The gap up in the share price and momentum signals confirms the uptrend.

• FAQ and guidance documents bring clarity
• Synthetic rubber out of the purview of EUDR
• Allows for rubber suppliers in countries like Vietnam and Indonesia to catch up

• OPEC+ extends crude oil supply cuts to the end of 2026, a year longer than planned. It also pushed its planned output hikes by three months to April 2025.
• OPEC+ revised its output hike plan, reducing monthly increases to 138k bpd over 18 months, down from 180k bpd over 12 months.
• OPEC+ approved a 300k bpd output increase for the UAE, starting in April 2025 through September 2026, delayed from the original January 2025 start.

• Despite core inflation being below its (headline) inflation target of 4% since Dec’23, the RBI has rigidly failed to cut its policy rate, thus constraining RGDP (& EPS) growth. 
• Vegetable inflation (6% of CPI) has indeed surged, but monetary policy can do little to influence that. Vegetable and cereal inflation are likely to moderate sharply now, after strong harvest. 
• We thus expect 75bp of rate cuts in Feb-Jun’25. Near-term RGDP growth will disappoint (7.5% in H2FY25, driven by rebounding government spending), but a rate-driven recovery will occur in H1FY26. 

• The rebound in US payrolls resulted in a disappointing increase in the unemployment rate, leading to the possibility of another 25bp rate cut. Meanwhile, upward revisions to UK employment and unit labour costs are pushing the BoE to maintain the current rates.
• Uncertainty regarding the upcoming ECB decision has lessened, primarily due to the lack of support for a 50bp expectation. The current data does not justify such a move.
• Other economic announcements are expected from Australia, Canada, Switzerland, Brazil, and Peru.

• Birth / In Depth: Why China’s piecemeal child subsidy policy failed to deliver
• Index /: China’s new economy industries gain on record tech, capital inputs, Caixin index shows
• Meat /: Australia’s red meat exports to China fully resume as Beijing lifts ban on final two companies

• In Germany, “debt hawks” are slowly but surely waking up to the reality of their manufacturing industry being brought to its knees.
• In Angela Merkel’s recent book, she pleads for a softer stance on the debt brake, and the political landscape in Germany seems to be softening on the “Schwarze Null” in general, with also the Buba member Nagel now advocating for a softer stance.
• The future government would need a two-thirds majority in the Bundestag and Bundesrat to change the debt brake.

• European bodies agree to dump ‘no risk’ category of countries
• Dec 30 is deadline for endorsing delay by publishing in official journal 
• ETRMA, GPSNR ask European Parliament to solve remaining issues

• France sovereign debt reached a record €3.228 trillion, amounting to 112% of GDP in June, well above the 60% cap set by EU regulations.
• France growing debt have slowly been chipping away at investors’ confidence in French bonds.
• After Macron called a snap election in June resulting in a hung parliament, risk premiums on French 10-year bonds have shot up.

• OPEC+ will meet today (05/Dec), following a postponement from 01/Dec, to decide whether to delay planned output increases further.
• The postponement caused market jitters, with WTI and Brent futures falling 1.1% and 0.6%, respectively, on 29/Nov. The uncertainty eased as the delay was attributed to scheduling conflicts.
• For the week starting 02/Dec, WTI and Brent crude oil futures rebounded, rising 0.9% and 0.8%, respectively, driven by expectations of OPEC+ delaying planned output hikes due to price declines.

• For the week ending 29/Nov, US crude inventories fell by 5.1m barrels, beating expectations of a 1.6m barrel decrease. However, gasoline and distillate stocks rose more than expected.
• US natural gas inventories fell by 30 Bcf for the week ending 29/Nov. Inventories are 7.8% above the 5-year seasonal average.
• UBS raised its 12-month price target on Chevron. Shell and Equinor plan to merge their UK offshore oil and gas assets to create a new company.

• Chips /: Chinese chip firms play down impact of new U.S. export curbs
• Batteries /In Depth: For Chinese battery-makers, Europe is losing its spark
• Stocks /:Rise in foreign investors’ holdings of Chinese stocks was likely modest, fragile, analysts say

• US Focus Shift: Trump’s reelection likely prioritizes domestic issues over international tensions, with potential prolonged high US interest rates impacting global economies.
• Asia’s Resilience: China stabilizes growth, India continues its upward cycle, and regional PMI figures reflect steady economic activity despite global uncertainties.
• Global Divide: Asia holds steady, while US manufacturing contracts and Europe faces deepening recession, highlighting stark contrasts in economic performance.

• In this insight, we discuss the potential impeachment of the South Korean President Yoon Suk-Yeol and the implications on the Korean financial markets.
• We would put a 50-60% probability that there is more than 200 votes to impeach the South Korean President Yoon Suk-Yeol right now by the members of the Parliament.
• We would attach about 30-40% probability that at least six justices of the Constitutional Court vote in favor of impeaching President Yoon. 

• Donald Trump threatened punitive tariffs on China, Canada, and Mexico over fentanyl, but this didn’t significantly alarm investors.
• Jamieson Greer’s nomination as USTR also didn’t cause much concern among investors.
• However, Wall Street’s confidence in Scott Bessant’s ability to moderate trade policy could potentially be misguided.

• The OPEC+ meeting is finally taking place after the Kremlin managed to get Zoom working on Windows 7.
• Early reports from delegates suggest that OPEC+ is solidifying a deal to delay a planned 3-month output hike.
• Essentially, OPEC is postponing what could become a bloodbath in physical oil markets.

• Cars / In Depth: Amid China’s EV boom, conventional carmakers cry foul
• China-U.S. /Analysis: How China can prepare for Trump’s return
• Payment /BRICS: Pay cross-border payment system exposed as hoax by crypto currency promoters