Macro

• Fed’s “risk management cut” and a dovish outlook of 2 more cuts in 2025 are driving foreign flows back to Asia. US$11.5bn inflows in September till date underscores the sentiment.
• Korea (US$4.94bn) and Taiwan (US$7.5bn) grabbed the Asian flows entirely, driven by the rejuvenated AI capex theme. India (-US$904m) continues to be sold, though the selling pace has diminished.
• FIIs bought Indonesia (US$672m) in August and sold almost identical amount in Thailand. Philippines, despite being cheap and having a few sectors with upward earnings inflection, continues to be sold.

• Despite initial concerns about tariffs and policy uncertainty hurting global economy, many major metals have seen significant price gains this year
• Tariffs have been implemented, but manufacturers have absorbed costs in margins rather than passing them on to consumers
• Despite signs of economic strain in recent data, commodity prices remain strong due to US dollar weakness making commodities more affordable for importing countries

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• While Southeast Asian economies have often been grouped under one label, differences in trade, technology, and institutions warrant a more differentiated lens. 
• A group of high performers consisting of Vietnam, Malaysia, and Singapore offers expansive trading relationships, global value chain participation, and political resilience. 
• In contrast, Thailand and Indonesia’s prospects are stymied by reliance on legacy industries or commodities, less open trading arrangements, and chronic institutional fragility.

• Despite a mixed Fed meeting, EM markets continue to rally in FX and rates
• EM local markets still in a good place with upside potential in growth and improving flow picture
• Sovereign credit markets have had a strong performance year to date, with investors feeling optimistic but also acknowledging the need to be humble in assessing macro risks and valuations.

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• The Federal Reserve is expected to ease interest rates by 50 basis points this year, aligning with a forecast of 100 basis points of easing by next January.
• The Fed prioritizing its labor market mandate over its inflation target may lead to better growth and higher inflation outcomes next year.
• The yield curve has been volatile but is currently fairly valued, with potential for steepening due to asymmetrically dovish reaction function and Fed independence considerations.

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• Crude oil futures opened the week slightly firmer as traders continued to monitor disruptions to Russian flows amid ongoing attacks against infrastructure and sanctions threats.
• Front-month Nov25 ICE Brent futures were trading at $67.22/b (0735 BST) versus Friday’s settle of $66.68/b, while Nov25 NYMEX WTI was at  $62.90/b against a previous close of $62.40/b.
• The prospect of tighter measures against Moscow was seen increasing with European leaders pushing for a wider rollout, including secondary tariffs.

• China agreed to move forward with trade talks after reaching an agreement to sell control of TikTok to U.S. companies.  The threat to shut it down was a “paper tiger”.
• China has neutralized a major leverage point by instructing its companies to not buy Nvidia chips.  Instead China will rely on homegrown technology for companies like Huawei and Alibaba.
• For the first time since the 1990’s China has not purchased any U.S. soybeans since the start of the export season. Soybean spot prices for Midwest farmers are below cost.

• The US’s broadening protectionist arsenal against India creates substantial headwinds for the country’s economic outlook. 
• The H-1B visa fee hike has limited impact. But it does raise concerns of future curbs on US offshoring, and follows the steep tariffs on India’s goods imposed last month.
• A tactical truce with the Trump administration would allow India to prioritise its reform agenda with fewer external distractions.

• Gold’s current low-volatility phase, following its ascent to all-time highs, presents a strategic vol trading opportunity. This environment is characterized by steady gains and reduced expected downside.
• Recent market trends, including investor and institutional support levels, suggest that strategies designed to profit from time decay could be beneficial, noting the stability of physical flows, contained intraday volatility.
• While a short-term trading regime focused on range consolidation is indicated, potential risks from geopolitical shifts or unexpected central bank communications could quickly reprice gold’s volatility. 

• Set-Up and scale: 245 SLBs face 2025 KPI tests; applying a 19% 2024 miss rate implies ~50 step-ups of ~25 bps, worth ~20–60 bps PV. >$80bn notional, heaviest in Q4.
• Trade design, credit and equity: Pre-position where slippage exists and no pre-test calls; run structure pairs; trade post-print drift; for equities, SLB misses flag delivery shortfalls and funding-cost creep.
• Why the market is inefficient: ESG KPIs hide in footnotes and annexes, overlooked by analysts. Verification lags and slow vendor updates delay repricing, so step-up structures stay mis-weighted and mispriced.

• The Fed reduced the federal funds rate by 25 basis points last week, but offered somewhat hawkish forward guidance for 2026. Risks of higher unemployment have increased, requiring policy recalibration. 
• A growing number of commentators are expressing concern about a US recession, but the Sahm and Federal Reserve Bank of New York recession probability measures have been falling during 2025.
• Much faster rising unemployment amongst younger workers since April 2023 could indicate that greater embracement of generative artificial intelligence by companies has adversely impacted the number of entry-level jobs.

• The market’s bullish tone is constructive for the price of risk assets,
• But numerous negative divergences raise the risk of a short-term pullback.
• These conditions put a different spin on Lincoln’s famous quote of “a [market] divided against itself cannot stand”.

• The U.S. population will peak in about 2033 in the absence of immigration, and working age population would be peaking about now or in the near future.
• In the U.S., the combination of a weak labour supply and rising fiscal deficits is conducive to stagflation
• Investors would have to be very bullish on AI adoption to project significant gains in productivity beyond trend growth in the face of the pivot in immigration policy.

• A review of recent events/data impacting our investment themes and outlook
• The Precious metals and miners are potentially having blow-off moves
• Strategic Metals and Minerals get another boost from the Trump  administration

• Foreigners are increasing their hedges on dollar exposure to their US equity positions at a rapid pace this year.  This selling will continue to pressure the US dollar.
• Foreigners exited a record net $2 trillion in US assets during the first quarter of this year.  This reversal put further pressure on the dollar this year.
• Foreign investors are maintaining exposure to AI through Mag-7 investments but believe that U.S. exceptionalism will fade and the dollar will continue to weaken.

• Bank of Japan likely to remain on hold till January 2026 with risk of further delay 
• Once BoJ resumes hiking cycle, it will likely follow twice a year pace till 1.5% 
• With the Fed cutting rates, the long end of the JGB curve is firmly anchored

• Economic data releases revealed more resilience in labour markets than feared, while inflation remained high. Yet Western central banks broadly cut rates, albeit cautiously.
• The BoE’s caution left only two dovish dissents to its on-hold decision, while it cut QT by £30bn to £70bn to reduce the likelihood of gilt market indigestion.
• Next week’s SNB and Riksbank decisions should join the BoE in holding steady, although they have already cut much further. Flash PMIs are the data focus in a thin calendar.

• Iron ore fell as weakening Chinese economic activity, shrinking steel demand, and rising mill maintenance dampened production and demand outlook.
• Managed Money participants continue to increase their net long exposure, signalling renewed bullish sentiment and expectations of stronger demand and price gains.
• Bearish MACD crossover and Bollinger Bands pullback signal weakening momentum, highlighting growing selling pressure and short-term downside risk.

• The Federal Reserve cut rates by 25bps, but doubts remain over inflation control and credibility amid excessive US government spending.

• The Bank of Japan holds steady as inflation persists, with political transition potentially worsening fiscal and inflation risks.

• Fiscal discipline remains stronger in Asia, creating opportunities for emerging market investors while Western governments face looming bond market pressure.

• The BOJ held rates at 0.5% with a 7-2 vote. Hawkish dissent from Takata and Tamura voting for 0.75% signals rising tightening pressure within the board.
• Surprise ETF/J-REIT disposal announcement (¥330bn/¥5bn annually) marks a significant normalisation step despite external trade headwinds.
• Core inflation at 2.7% remains above target. Overall, October rate hike expectations rise to 55% after the hawkish tone despite the hold decision.

• A surprise rate hike proposals from two BoJ policy board members
• Governor Ueda and Vice Governor Himino are taking cautious stances incompatible with a hear term rate hike
• January 2026 seems the earliest window for the next hike

• Traders, Quants and Passive Investors have steadily crowded out most earnings signals for long term investors.
• Quarterly reports won’t be missed, and ironically their ending may help restore the role of fundamental analysis.
• However, narrative trading will simply go elsewhere and developments in AI, options and meme stocks are already creating a new asset class we might call ‘Equity as Crypto’.

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• The MPC unsurprisingly held rates while seeking an answer to its key question around inflation risks amid elevated expectations and a possible structural shift.
• It also trimmed QT by £30bn to £70bn, keeping active sales of long gilts steady in the next three quarterly auctions while skewing QT towards short and medium gilts.
• We still expect the MPC’s presumption of rate cuts resuming to fade out in early 2026 as hawkish pressures persist. Some offsetting fiscal space arises from QT being trimmed.

• Supply-Constrained asset: Mine output is growing <1% CAGR and recycling is flat, leaving gold’s supply side structurally inelastic.
• Demand shifting institutional: Jewellery’s share is falling below 30% by 2030, while central banks and ETFs could account for ~70% of demand.
• Macro-Driven pricing: Gold trades as a reserve asset, with real rates setting the ceiling — scenarios range from $2,800/oz (bear) to $7,500/oz (bull).

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• Weather related disruption resulted in spike in prices
• Despite some restocking Tire makers remind cautious
• Market expects rebound in Chinese buying ahead of the September peak tire production period

• The Norges Bank cut rates 25bp to 4% as expected, but signalled slower easing than June projections, revising the rate path 20-40bp higher across 2026.
• Committee projects one rate cut annually for three years to a terminal rate above 3% by 2028, reflecting stronger growth and persistent inflation pressures.
• The decision balances economic support with anti-inflation credibility amid trade uncertainty and 4.5% wage growth expectations, constraining future cuts.

• UK inflation data confirmed the substantial upwards drift in the consensus, worth 0.6pp since May and 1.1pp over the past year, while matching final forecasts for August.
• The consensus has shifted further than usual over the past month. It now aligns with our hawkish forecast until April, when hope again dominates in dragging inflation down.
• Although the MPC won’t be shocked by this outcome, the persistent excess in underlying inflation still seems set to keep it holding rates. We do not expect cuts to resume.

• Supply-Led Rally: Zinc has rebounded ~15% to ~US$3,000/t, driven by mine curtailments, smelter shutdowns, collapsing TCs, and low inventories.
• China Stimulus Tailwind: Beijing’s CNY 1tn package lifts sentiment for galvanised steel, which makes up ~60% of zinc demand, reinforcing price momentum.
• Valuation Impact: Hindustan Zinc justifies a premium on pure-play exposure, while Vedanta offers cheaper diversified optionality; sustainability of prices above US$3,000/t remains the key investor question.

• Malaysia imports tires worth US$816 mn a year; China pitches US$318 mn  
• Goodyear, Continental plant closures highlight Chinese competition  
• Recycling innovations aim to capture value and boost sustainability  

• Ehsan Ehsani, executive director at Crescendo Partners and adjunct professor at Columbia Business School, joins the discussion with Harmonic Insights and will be organizing the Generative AI and Investment Management Conference at Columbia.
• Futures markets are predicting a 25 basis point cut with more cuts in the future, while volatility and factor returns continue to be influenced by macro factors.
• Quantitative investors typically do not make significant changes to their portfolios based on short-term data, instead focusing on longer-term trends and statistically significant moves.

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• Fed cuts rates 25bp as expected, with new Trump appointee Miran dissenting for a 50bp reduction.
• Labour market weakness drove the policy shift as job growth averages 29k monthly, below the levels likely needed to maintain stable unemployment.
• Projections show a 9-9 split between one or two more cuts in 2025, and only one more in 2026. The FOMC is not as dovish as the market’s pricing.

• The crude oil market in September 2025 in a state of short-term equilibrium, where forecasts of oversupply are being counterbalanced by immediate and significant geopolitical disruptions to Russian oil supplies.
• Escalating geopolitical tensions, including the ongoing risk of expanded sanctions and persistent conflicts in the Middle East, are collectively driving current price increases, offsetting the longer-term bearish outlook.
• This range-bound market scenario, characterized by conflicting factors influencing prices, suggests that strategies focused on profiting from stable prices are more favorable than those based on strong directional trends.

• India’s agri sector achieves growth of 3.7% in June 2025 quarter
• CCI sell s 1.5 mln bales under bulk discount scheme 
• Two & three wheelers sales up 11% in August 2025

• Stability in unemployment at 4.66%, while payrolls only marginally decline, suggests the labour market has found its floor before disinflationary pressures accumulate.
• A narrative-breaking improvement could occur next month. Tax rises structurally explain the scale of the previous shock, with weakness seemingly not going beyond that.
• Excess supply is needed to break wage growth to a target-consistent trend. Without that, the MPC should hold rates before potentially reversing by raising them in 2026.

• China’s refined copper output is projected to contract 4–5% this month—the first seasonal decline since 2016—driven by smelter inefficiencies and concentrate shortages.
• Exchange inventories show divergence: LME and SHFE stocks are falling while CME stocks rise, amplifying regional supply tightness and premium volatility.
• CME Copper futures show strengthening bullish momentum, with RSI above 50 and MACD nearing a bullish crossover, signaling improving market sentiment.

• HarmoniQ Leadership Role: HarmoniQ Insights co-sponsors the September 30th Generative AI Investment Management Conference at Columbia, with Bill Mann and Debby Goan leading fireside chats with industry leaders.
• Industry Transformation Moment: Conference addresses how fundamental investors can leverage AI to scale from analyzing 15 companies to screening 100+ opportunities, as discussed in yesterday’s New Barbarians podcast.
• Practical Implementation Focus: Attendees access 20+ AI providers, real-world case studies, and networking opportunities addressing build-vs-buy decisions to capitalize on AI’s performance advantages.

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• Nasdaq is moving to tighten its listing standards, a step that could sharply limit the flow of smaller Chinese companies onto the exchange even after U.S. audit disputes have been resolved.
• In a proposal announced Wednesday, the exchange said it would raise the minimum public float and fundraising requirements for new listings, while enforcing faster suspension and delisting procedures for companies that fail to meet ongoing standards.
• For companies listing under income-based standards, the minimum public float would rise from $5 million to $15 million. Firms with deficiencies and a market value below $5 million could face swifter suspension and delisting. For companies that primarily operate in China, new IPOs would need to raise at least $25 million.

• US base oils demand likely to stay muted.
• Expectations of sufficient supplies, downward-pressure on prices and seasonal slowdown in consumption at year-end incentivize buyers to trim stocks.
• Outright demand likely to stay weak even as recent fire at major blending plant triggers shift in consumption to other blenders, boosting their base oils requirements.

• UAE’s imported Group I SN 500 price extends rise relative to prices in Europe and Asia in H1 Sept 2025.
• UAE SN 500 price-strength reflects tight availability of Group I heavy neutrals in Middle East market.
• Tight availability contrasts with improving or surplus availability of Group I heavy neutrals in Asia and Europe.

• Global base oils prices mostly hold firm versus feedstock/competing fuel prices.
• Firm margins point to strong supply-demand fundamentals, incentivize refiners to maintain or raise output.
• Demand would need to hold firm to absorb steady-to-higher supplies.

• Asia’s base oils demand could get support from signs of steady requirements in markets like southeast Asia and India.
• Regional demand could get additional support from blenders’ balanced-to-tight stocks in some markets.
• Balanced-to-tight-stocks would boost need for regular replenishment supplies.

• US base oils prices hold firm in narrow range versus vacuum gasoil prices.
• Still-firm margins curb pressure on refiners to adjust output.
• Moves to maintain steady-to-high output would help to cushion impact of planned plant-maintenance work in coming weeks.

• Global growth has been better than expected, particularly in emerging markets, due to strong export performance and tech cycle strength
• China’s growth is expected to slip below 3% in the second half, with domestic demand slowing sharply
• Despite the growth resilience in EM, central banks are expected to continue their gradual cutting cycle due to weak domestic demand and disinflation trends

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• China’s share of US imports will halve in 2025 from Mar’18 peak of 21.8%, and ASEAN’s share (led by Vietnam) will rise to 14%. India, Korea, Taiwan’s shares gain too. 
• There was a big surge in Asian exports to the US in Jun-Jul’25 to beat tariffs, but tariffs will alter patterns in 4Q2025, cutting export growth and reducing US disinflation. 
• The rebound in US steel production (+4.6%YoY in Jun-Jul’25) and ISM manufacturing new orders suggests select American industries (metals, automobiles, electronics) will gain but downstream users will suffer steadily more. 

• Chairman Powell has effectively locked the Fed into lowering its policy rate this month with another pivot towards forecast-dependent policy conduct, analogous to the events during 2024 Q4.
• The credibility of Chairman Powell’s view of labour market conditions has been significantly undermined by  recent weaker gains in non-farm payrolls, as well as due to the annual benchmark revision.
• Policy uncertainty remains elevated, particularly with respect to final tariff outcomes due to legal issues. Financial markets need to focus on evolving longer-term inflation trends under new Fed leadership. 

• OPEC’s Group of Eight discussed unwinding production cuts and increasing oil production, led by Saudi Arabia to bring energy prices down
• OPEC’s cooperation with non-OPEC producers, including Russia and Kazakhstan, resulted in a 2 million barrels per day production cut in late 2022
• Dr. Anas Alhaji, Energy Outlook Advisors managing partner, discussed OPEC’s actions and outlook on oil prices in an interview with Macro Voices host, Eric Townsend

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• Rick Reeder, Chief Investment Officer of Global Fixed Income at Blackrock, discusses the importance of income over duration and the opportunities in the market
• The US economy is in good shape with potential for 5% nominal GDP growth, but risks exist with high inflation and debt levels
• Reeder emphasizes the need for investors to be mindful of complacency, exit strategies, and downside protection in their portfolios

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• During the week, Anglo American bought the Canadian copper miner Teck Resources – creating a $50 billion copper giant. The company will be rebranded to Anglo Teck.
• With the deal, the company expects to give shareholders close to 70% copper exposure.
• Anglo Teck will hold a portfolio of producing operations, including “six world-class copper assets, alongside high-quality premium iron ore and zinc businesses.” 

• Price structures have remained resilient in 2025, with Brent and WTI in backwardation despite OPEC supply hikes and increasing crude inventories
• Five conditions were needed for crude prices to start reflecting year-end weakness, but only two have materialized so far
• OECD crude inventories have not built as aggressively as expected, with a lopsided increase in global stocks outside of Western markets, particularly in China

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• The dollar has not been able to break out of its range, despite various economic factors at play
• Asian currencies, such as the Chinese yuan, have seen more traction and movement compared to the dollar
• Continued US-China negotiations are impacting the market dynamics and influencing the direction of currencies like the yuan

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• China’s economy outshines the U.S. economy on nearly all metrics, yet its stock markets continue to trade at a substantial discount.  That is beginning to change.
• Net International Investment Position of U.S. reversed in 1Q25 by $2 trillion, the largest net outflow in history.  In China, onshore repatriation is increasing adding pressure for a stronger CNY.
• China’s significant household savings continue to provide a cushion for the government program to deleverage the economy.

• The leadership of AI-driven stocks is starting to stumble from bubbly valuation levels, which brings up the warning from Bob Farrell’s Rule #4.
• The debate is ongoing as to whether the AI bull is evolving from hyperscaler leadership to the next phase of companies that can better exploit the technology.
• The lack of cyclical market leadership is concerning from a technical perspective. We are therefore tactically cautious about the short-term outlook for U.S. equities.

• There has been a lot of excitement over the productivity-enhancing promise of artificial intelligence.
• We need to distinguish between  how AI affects the economy, and how the benefits of AI adoption are divided between all of the participants in the value chain.
• It may be time to look for AI 2.0 investment plays or industries that are likely to capture more of the value of the AI revolution.

• After a year of fiscal consolidation, in 2026 public spending will return to growth to address pending needs.
• To achieve this, the Government will rely on a combination of new revenue sources and increased financing.
• As a result, debt is expected to remain stable, at around 4.0% of GDP.

• In July, industrial activity posted a -1.2% MoM contraction, reflecting weakness in the manufacturing sector.
• Mining stood out with a rebound across all of its components.
• The observed figure came in below our estimate of -0.3% MoM and the market consensus of -0.2% MoM. 

• Spreads between ECB and Fed expectations widened again this week as the ECB held rates with a neutral bias while disappointing US labour market data drive dovish hopes.
• Underlying US services inflation was soft, and initial jobless claims spiked, albeit over Labor Day. We think US pricing has gone too far, and political pressure won’t dominate.
• Guidance with the Fed’s upcoming cut could start to correct that. The BoE will hold rates, after more hawkish macro news next week, and should trim its QT plan this year.

• HSTECH index is showing increasing strength as Hong Kong continues it Secular Bull Market.  Continued strong market breadth indicates both rotational buying and new investors entering the market.
• Southbound buying from mainland investors remains strong after the “Liberation Day announcement.  Mainland investor volume is now 20% of total volume in the Hong Kong market.
• China Biotech and Drug sectors were hit as the U.S. administration indicated it may begin restricting import of Chinese-made drugs and to cut off the pipeline of Chinese-invented experimental drugs.

• Supply jitters and China’s steel rebound lifted prices, as Rio faces local refining pressure and Brazil fire fears linger.
• Managed money participants are rebuilding bullish bets, lifting net longs and open interest, signalling revived demand and expectations of further gains.
• Prices pulled back after hitting the upper Bollinger band, hinting at profit-taking as traders watch the basis band for support.

• U.S. tariffs intensify strain on the petrochemical sector, shielding domestic producers while redirecting Chinese exports into Asia and leaving European firms most exposed.
• Trade barriers amplify oversupply pressures, benefiting U.S.-centric petrochemical firms, granting Middle Eastern players new market share, and pushing Chinese exporters into low-margin Asian markets.
• Global petrochemicals face a reset, exposing Europe’s vulnerabilities, capping Asian gains, and reinforcing domestic advantages for American producers.

• US producer prices softened in August, but structural factors keep inflation pressures elevated despite Fed rate cuts.

• Labour market revisions show weaker US job growth, raising doubts on monthly payroll data reliability.

• Japan’s GDP growth headline looks strong, but weak domestic demand and lower business spending reveal fragile fundamentals.

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