Macro and Cross Asset Strategy

Weekly Top Ten Macro and Cross Asset Strategy – Mar 17, 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. Steno Signals #90 – More Liquidity to the Most Hated Rally in Recent History

By Andreas Steno, Steno Research

  • Welcome to our flagship editorial! Is it the year 2021, 2007 or 1995?
  • These historical analogies are often used in sell-side reports, and we are going to jump the bandwagon with a few semi-fishy analogies today.
  • I do get some vibes that are reminiscent of melt-up years ahead of crisis years.

2. China Moves to Directly Support the Market

By David Mudd

  • China has now moved from supporting its economy to directly target its markets.
  • Market demand and volume is supported through government buying and company buybacks.
  • New regulatory measures will substantially decrease selling pressure going forward.

3. The Bank of Japan Plays Footsie with the Market-Will They or Won’t They?

By Rikki Malik

  • US economic data while surprising on the upside fails to buoy the USD vs the JPY
  • BOJ awaiting shunto talks for more evidence of a sustained move out of deflation
  • What are the implications for global markets if mass repatriation of Japanese capital

4. Walker’s Weekly: Dr. Jim’s Summary of Key Global Macro Developments | 8 Mar 2024

By Dr. Jim Walker, Aletheia Capital

  • Gold Prices Surge: Gold reaches all-time highs against the US dollar and fiat currencies worldwide, signaling skepticism towards central bank policies.
  • Economic Indicators: India maintains strong economic activity despite political uncertainties, while China’s export performance exceeds expectations.
  • Corporate Profits and Currency Impact: Japan’s corporate profits fall short of expectations, highlighting vulnerabilities to external factors like currency values.

5. 5 Things We Watch – US CPI, Japan, China, Germany & Central Banks

By Ulrik Simmelholt, Steno Research

  • Welcome back to our weekly 5 Things We Watch, where we go through 5 things that we keep an eye on in the world of global macro.
  • With Japanese wage negotiations and the US CPI report out, there are plenty of things to shed some light on, so let’s get to it!This week we are watching out for the following 5 topics within global macro: US CPI, Japan, China, Germany, Central Banks.
  • 1) US CPI Report leaves the Fed in a difficult situation. Yesterday’s CPI report revealed that the inflation outlook is not as benign as the Fed would have hoped, with energy / transportation services dragging the MoM figure higher.

6. Positioning Watch – Bye Bye Japanese Consensus Case?

By Andreas Steno, Steno Research

  • Hello everyone, and welcome back to our weekly positioning watch, which today will start at the growing number of BoJ officials who are now supporting an exit from NIRP possibly already in March, sending Nikkei 225 down >2% in Asia hours yesterday, while China and China-proxies were bid – quite a surprising dynamic in Asian equities, which we won’t rule out to continue over the next weeks, as markets are likely shifting away from Japanese equities if a hike actually comes through.
  • Our 250-day prediction from our PCA-tool (the blue line) has also been flagging the rally in Japanese equities, and now see a major divergence in the trend relative to the macro fundamentals, which has left a >2 standard deviations fair value gap, which seems likely to be closed via a retracement lower in Nikkei.
  • Chart of the week: Our models have been bearish Japan since early 2024It looks like some parts of the markets had already sniffed out the slight overpricing of Japanese equities given risks of substantial moves in JPY-rates, and inflows into US-traded Japan ETFs have decreased since early February, while China ETFs began to see modest inflows, but has now went back into negative territory.

7. US Inflation: Bad Enough for Powell to Change Course?

By Jeroen Blokland, True Insights

  • For the second consecutive month, inflation has exceeded expectations, raising questions about the ‘stickiness’ of core inflation.
  • The real shocker was the Core Services, excluding Housing CPI, which increased to an eye-popping 6.8% on a three-month annualized basis.
  • Most likely, the latest CPI numbers aren’t the catalyst that ends the stock market rally.

8. Energy Cable #60: Copper getting some help from China?

By Ulrik Simmelholt, Steno Research

  • Take aways: Chinese deflation and high USD rates really putting a damper on copper. Interesting divergence in the USD and crude oil. Russia not sticking to its production cuts pledge. The risk/reward in commodities is getting increasingly compelling across the board, but it is early days. Since the beginning of last year when the world had all its chips on the Chinese reopening copper has been range bound between USD 360 and 390.
  • In other words copper has almost been as boring as watching paint dry.
  • It hasn’t gotten much help either up until now.

9. Monday Macro – a deep dive into housing plus Trump Vs2 and the markets

By Adventurous Investor, The Adventurous Investor

  • When I first started writing for Money Week, I found myself in a slightly awkward position.
  • At the time – this was many years ago – editors Merryn Somerset Webb and John Stepek were notably bearish on the UK housing market.
  • I think it fair to say they were the masters of doom and gloom, not for entirely unfair reasons (you can guess all the rational drivers they focused on).

10. US Inflation Watch: OER a one-off?

By Andreas Steno, Steno Research

  • We see US inflation printing at 0.37% MoM in headline terms and 0.26% MoM in core terms.
  • That leaves us in line with consensus, but with a bias/tilt towards an 0.1%-points surprise on the low side of consensus.
  • The re-acceleration of owners equivalent of rent to levels close to 0.6% in January looked odd, but on a “good day” we should likely expect a reversal to the trend just above 0.4% MoM in February (see chart 1).