Read on the Trading Floor - 16 April 2024
Today’s focus… safe havens, China, equity headwinds increase and much more
Macro Themes At Play
Theme 1 - A must read from Brent Donnelly
Theme 2 - China
Theme 3 - Risk aversion
Theme 4 - Waiting for Israel's response
Further reading and listening of note
Theme 1 - A must read from Brent Donnelly
Today's free am/FX is an excellent analysis of safe haven assets during periods of high inflation. Some of the old biases that all traders live by... long JPY, long CHF, long bonds and/or long gold during heightened risk aversion may not perform as you would expect.
An Acute Shortage of Safe Assets
Theme 2 - China
#1. GDP for Q1 beat: 5.3% vs exp 5% and previous 5.2%
#2. CNY Fix allowed above 7:10 as US10s sell off, Trump tariff risks increase, JPY weakens through 155.00, relative inflation/growth outlook all point to USDCNY higher.. will they finally let it go?
#3. Retail Sales: 3.1% vs exp 4.5% (prior 5.5%)
#4. Industrial Production: 4.5% vs exp 5.4% (prior 7%)
#5. EV expansion knocks into Tesla's headcount and market cap.
#6. Overcapacity and government support... following on the heels of Tres Sec Yellen, Chancellor Scholz is in town to chat with Xi about overcapacity and of course the Chinese government support for EV's that are eating into Germanies auto dominance. Could we see EU tariffs imposed by the summer?
Bloomberg - Chinese Economy’s Strong Start to 2024 Is Already Fading
Reuters - China's Q1 GDP growth solid but March data shows demand still feeble
Nordea - China: Keeping up appearances
Bloomberg - China Loosens Grip on Yuan by Weakening Fix Amid Dollar Strength
Nikkei Asia - China's Gen Z turns frugal as economy doubts linger
Nikkei Asia - Xi tells Germany's Scholz to look at industry overcapacity 'objectively'
Bloomberg - Xi Rebuffs Scholz Pressure to Rein In Chinese Manufacturing
The Economist - China’s better economic growth hides reasons to worry
Bloomberg - EU Goes on China Trade Offensive After Getting ‘Played’
Gold, USDCNH and USDJPY trending higher
Source Tradingeconomics.com
Theme 3 - Risk aversion
SPX below its 50sma has the world excited as the “Fed pivot” trend from Nov breaks ...
Source Tradingeconomics.com
#1. April 15th Tax date added momentum to the equity unwind (....but as it has now passed, will flows reappear into QQQ and XBT?)
#2. Geopolitical risk premium has seen a spike in VIX, trigging VAR risk models. The low vol/high carry regime is being replaced by high vol and high uncertainty.