In today’s briefing:
- China – Policy Switches-Off
- Bearishness, Begone!
- Warning: The Market Is Massively Fighting the Fed
- Bulls & Bears: Near-Term and Short-Term View on Oil Prices
China – Policy Switches-Off
- Chinese net capital outflows are again picking up to a US$600 billion annual clip. Chinese Yuan has also been under-pressure from the strong US dollar
- People’s Bank (PBoC) forced to tighten domestic monetary conditions to help Yuan, despite COVID-19 lockdowns
- Tighter Chinese Liquidity hurts World economy, reinforcing recession threat and hurting commodity markets
Bearishness, Begone!
- The balance of upside and downside risks have begun to normalize.
- Signals from global commodity and equity markets are showing that the upside potential and downside risk of owning equities have become more balanced.
- However, downside risks remain in the form of a China slowdown and further risks from the Russia-Ukraine war.
Warning: The Market Is Massively Fighting the Fed
- Asset markets have gone risk-on in the wake of the FOMC meeting, but the market may be getting ahead of itself.
- The stock market advance has begun to take on a FOMO tone and could run further, but risk levels are rising.
- The Treasury and energy markets could be the guide to changes in risk appetite.
Bulls & Bears: Near-Term and Short-Term View on Oil Prices
- Crude price movements have been almost entirely dictated by sentiment in the broader financial markets since around mid-June.
- Prices rose in the week to July 29 as part of a broader relief rally in risk assets. The rally is exhausted but may help resist sharp downswings for now.
- For the mid-Aug to mid-Sep period, we are mildly bullish.
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