Daily Brief Macro: Weather Signals Point To Mixed Rainfall Across Rubber Belt and more

• South Asian Monsoon to be active till Sept-end, may disrupt supply  
•  Indian production to improve next month, can pressure prices  
• Cambodia, Laos equipped to forecast floods five days in advance

• Despite the growing chorus of comparisons, the backdrop to the late 1990s equity bubble was fundamentally different from the current environment, notably in the manner of Fed policy conduct.
• During the late 1990s, Fed policy conduct was characterised by pivots, particularly after the Asian financial crisis and bailout of Long Term Capital Management, helping to prolong the equity bubble.
• Forward P/E multiples on US equities were more elevated in the late 1990s compared with current levels. Valuations have been more volatile in the current cycle, courtesy of Fed policy. 

• Dollar undervaluation has closed in the past three months, but institutional Fed credibility news has not had a durable effect on the price.
• Concerns about exceptionalism in US equity market strength potentially pushing the dollar higher are countered by better growth not being US exclusive and the impact of inflation on currency.
• Despite large inflows into US equities in June, the dollar fell substantially, raising questions about the relationship between flows and dollar strength.

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• Near the end of the earnings reporting season, our earnings estimate tracker identified 11 robust earnings estimate gainers – with consensus EPS estimates up across 3-month and 6-month time horizons.
• Onshore China communications and financials, HK technology, Korean and Singapore financials are the prominent “winner” sectors. Five other ASEAN sectors also figure on the list. 
• Earlier, in June, we detected 16 “consistent winner” market-sectors. The earnings environment has deteriorated slightly. Of the prominent stocks, Tencent, Hana Financials and DBS Group figure in our Model Portfolio.

This Week’s Key Take Aways

• Lithium stock run may already be out of steam
• Like Oil, the Natural Gas markets appear well supplied and are showing near-term weakness.
• No love for North American lumber
• Copper continues to have us on edge, love the long-term story, but we have got to survive the short and medium term to get there.
• Renewable tax credit qualification has a new physical work standard; the race is on to build.

• Asia’s base oils demand likely to stay cautious even with round of stock-replenishment in coming weeks.
• Asia’s lube demand likely to rise over coming months after bottoming out in month of August.
• Lower demand in August likely triggers pick-up in surplus supplies in Asia-Pacific region.