Macro and Cross Asset Strategy

Weekly Top Ten Macro and Cross Asset Strategy – Jun 30, 2024

This weekly newsletter pulls together summaries of the top ten most-read Insights across Macro and Cross Asset Strategy on Smartkarma.

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1. CHINA: When Will Stocks Catch Up With Surging Debt Markets?

By David Mudd

  • China’s debt markets are experiencing an historic bull cycle as government and companies take advantage by ramping up issuances this year.  
  • Beijing will use its healthy balance sheet and continued debt issuance to clean up local government debt and simultaneously address the property sector problems.
  • China’s healthy external position will provide continued support for its currency and debt markets with equity markets to follow in the coming months.

2. Inflation Watch: What if the Cyclical Prices Are Not Truly Tamed? Lessons from Canada and Sweden

By Andreas Steno, Steno Research

  • If you know me, you know I have a thing for charts, especially those showing momentum in the macro cycle.
  • Forget nominal levels; it’s the rate of change that really drives asset markets.
  • This analysis is chock-full of rate of change charts, just to remind you that we’ve only managed to nudge inflation back to just above target levels—right as the cycle’s rate of change is shifting towards re-acceleration in many places.

3. EM Watch: Western investors are tired of China and Japan “crying wolf”

By Andreas Steno, Steno Research

  • Welcome to our weekly EM Watch, with a particular focus on China and metals.
  • Allow me to reflect on how the Chinese and Japanese investment cases look from the outside and how Western investors perceive the current rhetoric around the suffering local currencies in the region.
  • The CNY once again “slow burns” versus the USD this week and we are approaching the 7.30 handle, which has typically been the line in the sand for the PBoC in China.

4. The Week At A Glance: Time to bet against the USD?

By Andreas Steno, Steno Research

  • Greetings from Europe! The Week At A Glance replaces our Morning Report each Monday as it allows for a deep dive into the economic releases and major tradeable themes for the week ahead.
  • We see a couple of major tradeable themes in the week(s) ahead.
  • First, the Euro area data, which is still improving in forward-looking indicators, while spot data remains relatively soft, probably in part due to a plethora of (potential) election risks.

5. Energy Cable: Bullish Oil, Bearish Nat Gas, and Especially Metals! Here’s Why!

By Ulrik Simmelholt, Steno Research

  • We start with crude oil, where positions in crude oil futures have returned to Covid-19 pandemic levels, which we believe is overly bearish.
  • The economy is normalizing with rising travel and growing consumer energy demand.
  • Despite this, the futures market’s bearish sentiment seems misaligned with these positive economic indicators.

6. Why the November Election Matters to Gold

By Cam Hui, Pennock Idea Hub

  • The latest CBO fiscal update raises the odds of upside inflation surprises in the coming years, which would be bullish for gold.
  • The intermediate-term outlook for inflation will largely depend on the outcome of the November election.
  • We project that a Biden win would be bearish for bond prices and mildly bullish for stock prices. A Trump win would be bond and USD bearish and gold bullish.

7. The Heat Is On: News Flow and Sentiment in HONG KONG

By David Mudd

  • China ETF flows in June continued to show positive momentum while other categories remained flat.  Southbound Connect Flows were positive while Northbound Connect recorded a Net Sell.
  • Midea Real Estate Holdings jumped on plans to privatize its property development business
  • Shanghai Microport fell after launching a share placement at a 15% discount.  The share price  is hitting all time lows.

8. Positioning Watch – Markets are buying into US Fixed Income, but fast money don’t agree

By Andreas Steno, Steno Research

  • Welcome back to our weekly positioning watch, brought to you today from a sunny Copenhagen.
  • The standings at the Euros almost perfectly mirror the current cross-regional uncertainties in equity markets.
  • The European election has increased the option-implied volatility premium of European equities compared to US equities, while the FTSE 100 continues to stay “less volatile” in IV terms. 

9. Actinver – Macro Daily: Inflation 1h-Jun

By Actinver, Actinver Research

  • Headline inflation increased by 0.21% bw, pressured by agricultural prices, returning to an annual rate of 4.78%.
  • Core inflation rose by 0.17% bw, returning to an annual rate of 4.17%.
  • Headline inflation was slightly above our estimate (0.21% vs. 0.19%), because some agricultural products registered higher price increases than estimated.

10. Why the Breadth Divergence May Not Be Bearish

By Cam Hui, Pennock Idea Hub

  • Anxiety has been increasing among the technical analysis community over the blatant instances of narrow market leadership and negative breadth divergence. 
  • The bearish consequences of a negative breadth divergence can take over a year to be realized. Instead, they are warnings of bearish conditions than actionable tactical sell signals.
  • We interpret current market conditions as highly extended that can pull back at any time, but investors should also recognize that the situation could resolve itself in a benign manner.