MT GLOBAL MARKETS Momentum & Sentiment Recap as of 07Feb20 wk6
haven't done it for a while and it will be long (yawn) and one-off
1/n (50?)
• strong rebound, market shrugs off Coronavirus
• PBoC liquidity and China cuts US import tariff
• Global PMI rebound
haven't done it for a while and it will be long (yawn) and one-off
1/n (50?)
• strong rebound, market shrugs off Coronavirus
• PBoC liquidity and China cuts US import tariff
• Global PMI rebound
2/n the 2019-nCoV clearly left a mark in the YTD markets in regards of China's economic outlook, metals&energy commodities and their related sectors and currencies suffered the most. obviously. but market saw a strong rebound last week too
3/n therefore, most of the technical trends are intact (e.g. US SPX), but momentum weakened in those previous mentioned reasons. Some areas completely shrugged off any of this virus related potential global slowdown and are still "exhausted" (US Tech, Palladium recent parabolas)
4/n here some of the recent headlines
which brands or sectors are impacted
uk.reuters.com/article/china-…
which brands or sectors are impacted
uk.reuters.com/article/china-…
9/n so, clearly, the precautionary measurements must leave a huge dent on the global supply chain.
11/n so, as expected, Dr Copper and Prof Crude were sold off in a potential global slowdown (again, after trade war)
12/n ...and early RiskOff sentiment drove AUDJPY , bond yields, yieldcurve lower, they bounced back last week...
13/n and especially the strong technical trend in ES & NQ truly came to mind and BTFD mentality once again won.
VIX briefly mini-spiked and structure 1-3M were briefly in backwardation, retreated to normal levels yet again
VIX briefly mini-spiked and structure 1-3M were briefly in backwardation, retreated to normal levels yet again
14/n Copper/Gold ratio mirrors further disinflation, and while the "strong leadership" of NDX never buckled, S&P500 valuations are not necessarily cheap as seen here with the Yardeni blue angels testing 19x
15/n ok, there is a strong case of Trump being re-elected, more infrastructure. Democrats can't even do a proper caucus. China injected Yuan 1Trln, cutting RR, cutting 50% of US import tariff to counter the global supply chain precautions.
16/n when SARS hit in 2003, China's GDP was $1.6T and about 4% of global GDP. Now with the nCoV not yet under control, China is at $13T or 18% of global GDP contribution.
17/n as we know, "modern market" is reliant ever so quickly to liquidity and low cost of money (interest rates).
What really bothers me is the still ongoing inverted front end of the US MM curve.
US economy is booming, yet, market pricing in further FED rate cuts 2020/2021
What really bothers me is the still ongoing inverted front end of the US MM curve.
US economy is booming, yet, market pricing in further FED rate cuts 2020/2021
18/n US swap curves hovering since a while in those "late cycle" territory, and IMHO, while so far so good, a aggressive BULL-steepening due to FED cuts would trigger alarms.
net yet in sight.
net yet in sight.
19/n yesterday's US employment report was very strong.
After a mega ADP, we saw a mega NFP, and everyone got it too low, were too conservative.
UE rate picked up slightly, still near 50Y low, maybe bottoming, too early to say, but it's late cycle.
After a mega ADP, we saw a mega NFP, and everyone got it too low, were too conservative.
UE rate picked up slightly, still near 50Y low, maybe bottoming, too early to say, but it's late cycle.
20/n the domestic business surveys ISM and NMI were very good, Manufacturing rebound back > 50 and growth/inflation Y/Y momentum actually left the "expect dovish FED" quad.
Clearly, China phase one signed deal, 3 FED cuts and 50 other global cb cuts helped to bring optimism
Clearly, China phase one signed deal, 3 FED cuts and 50 other global cb cuts helped to bring optimism
21/n so, with 84% of global central banks dovish, trade war easing, global M.PMI rebounded as expected.
Perhaps the global precautionary nCoV shut downs are not seen yet in the January surveys.
Anyways, global at 9/10M H, EM at 19M H, Germany 11M H, Australia tho 55M low
Perhaps the global precautionary nCoV shut downs are not seen yet in the January surveys.
Anyways, global at 9/10M H, EM at 19M H, Germany 11M H, Australia tho 55M low
22/n global M.PMI rebounds from manufacturing recession. here is a Y/Y heatmap to visualise
23/n and here is why
• besides a handful CBs, almost every other central bank returned to dovish bias, has cut rates several times
• Germany weak, EU weak
• China weak, World weak
• see the nCoV marks on the right side of the board, USD$ strength, energy/metal weakness,
• besides a handful CBs, almost every other central bank returned to dovish bias, has cut rates several times
• Germany weak, EU weak
• China weak, World weak
• see the nCoV marks on the right side of the board, USD$ strength, energy/metal weakness,
24/n this "spurious" correlation is a reflection of almost every market now, stocks roaring, PMI rebound and actually lagged, PMI = yield move = macro move. stock market is not the economy as they say ;-)
25/n refinancing risk gauge
• outright interest rates (currently low)
• credit spread premium (currently low)
= cost of money or refinancing risk is not really an issue right now
• outright interest rates (currently low)
• credit spread premium (currently low)
= cost of money or refinancing risk is not really an issue right now
26/n credits lead they say, well, despite the previous mega run and rebound and a strong basis effect, CDX Y/Y vs SPX Y/Y have a good overall (negative) correlation.
here a snapshot of current status
here a snapshot of current status
27/n this hasn't changed... ECB remains in a hole (restarting QE) and FED delicately trying to keep a better balance
28/n recap:
• nCoV is not under control yet, perhaps real numbers are quite different
• global supply chain is disrupted
• money flights into US
• global dovish central banks
• cost of money (and cost of protection) is cheap
2019 threads
threadreaderapp.com/user/MacroTech…
• nCoV is not under control yet, perhaps real numbers are quite different
• global supply chain is disrupted
• money flights into US
• global dovish central banks
• cost of money (and cost of protection) is cheap
2019 threads
threadreaderapp.com/user/MacroTech…
29/end
have a good weekend
have a good weekend
@threadreaderapp unroll
