Daily Brief Macro: HEW: Crystalising Policy Divergence and more

• 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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