Read on the Trading Floor - 16 May 2024
Today’s focus… Bears throw in the towel
Macro Themes At Play
Theme 1 - All else being equal, stocks go up
Theme 2 - Copper demand review using HarksterAI
Theme 3 - but what about the USD?
Theme 4 - China playing 3D chess
Further reading and listening of note
Theme 1 - All else being equal, stocks go up
As the CPI reviews are printed, April's asset sell off is providing the fuel for May's rally. Take out the fear, the event risk, add in low vol, with a side of buybacks and index investing = higher we go, there's nothing standing in the way of pushing higher and higher to print new ATH's. The Fed are willing to run things hot, taking the hike off the table... "higher for longer" has become "on hold or cutting". The soft patch of data over the past few weeks as well as "inline" inflation prints has the mkt comfortable pricing a Sept pre-election cut with an outside chance of a July move if the inflation data plays ball over the coming weeks. All it took was the core print of 0.3% MoM slowing down for the first time in 6 months and the retail sales stagnation has amplified the calls for us to be entering a moderate US economic regime.
Copper, SPX, Nasdaq, XBT and meme stocks are all in play as the mkt climbs the wall of worry and only good times, long sunny evenings lie ahead. In particular, if we look at the event calendar, with bank holidays rolling into May half terms, there is nothing on the docket until the June 7th NFP. Sit back and enjoy some carry????
Bloomberg - Sorry Inflation Doomers, We're Heading in the Right Direction
Bloomberg - Fed’s Goolsbee Praises Disinflation, Says More Progress Needed
Steno Research - TRADE ALERT: TRADING THE CPI REPORT
Liberty Street Economics - Is the Recent Inflationary Spike a Global Phenomenon?
Steno Research - China Watch: No one has noticed that China is exporting INFLATION again..
Theme 2 - Copper demand review using HarksterAI
Metals, oil and everything else - just charts today
SAXO Bank - Gold and silver rally as soft US data fuels market optimism
Theme 3 - but what about the USD?
There is just no momentum in FX. After entering a new decade over the weekend and reflecting on my life choices (prob another day closer to a midlife crisis)... why did I choose FX as my principal vehicle for trading???
Copper ATH... FX Dead
China homebuilders rescue plan... FX Dormant
SPX 5300... FX Range bound
Gold 1m highs... FX, McFly...Hello? Hello? Anybody Home?
Fed repricing... FX moribund
ECB cutting cycle priced... FX stagnant
Oil up $10 then down $15... FX dull
Is the price action telling us something new about the USD? Brent Donnelly (Shifting to N) has been ahead of the trend on the moderate US growth regime and he's gone to neutral for his greenback exposure. Maybe the >5% carry the USD offers as well as its positive beta to oil mean it's no longer part of the funding basket when mkt wants to get long beta.
Theme 4 - China playing 3D Chess
1D - House Builders Rally: CSI 300 Real Estate Index has rebound ~20% off its April lows as the government indicate a significant shift in policy aimed at absorbing surplus housing inventory and creating more public housing. However, BNYM highlight that "Previous efforts to destock housing inventory in 2015 had limited success, and current challenges indicate a need for more robust intervention."
WSJ - China Property Stocks Rally as More Cities Unveil Rescue Steps
Bloomberg - China to Discuss Property Aid With Banks, Regulators on Friday
2D - Putin's arrival in China: Moscow’s trade with China hit a record $240 billion in 2023, approx 90% of payments were made in CNY or RUB. Their focus seems to be on securing commodity demand, as we well as ensuring secure banking ties and the increased use of national payment systems away from Western / USD forces.
FT - Vladimir Putin arrives in China to shore up close ties with Xi Jinping
Bloomberg - Putin and Xi Vow to Step Up Fight to Counter US ‘Containment’
3D - EV tariff war is now rolling towards Solar... Biden's focus is clearly on undercutting Trump at his own game as well as appealing to blue-collar voters in manufacturing regions. We've yet to hear Xi's response and with the USD softer, the mkt is underwater in its USDCNY calls and paid forward positions.
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