Read on the Trading Floor - 18 Oct 2023
Today’s focus…
Macro Themes At Play
Theme 1 - China... Putin, Chips, GDP and Property
Putin's visit to the Belt and Road Initiative (BRI) has garnered plenty of attention, with $200bln of annual trade, new gas pipelines planned to redirect Russia's supply eastwards away from Europe as well as a plan through 2030 to increase trade/integration... Xi's silk road 2.0 is getting a shot in the arm from Putin's energy and grain exports ....
Reuters - Putin praises 'dear friend' Xi, pitches Russia's Northern Sea route
Bloomberg - Belt and Road Forum: Xi Jinping Talks Up $1 Trillion Project as It Loses Steam
FT - Xi Jinping hails ‘deep friendship’ with Vladimir Putin as leaders meet in Beijing
Chips - Biden's focus on China's access to Nvidia's chips ...
Earning season has been strong, many names outperforming but still stocks remain heavy as some of this years stars, MVPs of the magnificient 7 are cut off from Chinese customers. (Fortune - Joe Biden closes Nvidia loophole to export chips to China).
Nautilus Research (Nvidia Vulnerable?) highlight the technical outlook for Nvidia is far from rosy... higher real yields, smaller potential TAM and at some point the pressure was going to come on the market's excessive EPS forecast ...
This legislation has also had an impact in Europe today, ASML Q3 results not only showed lower demand, but the chinese market represented 46% of their total revenues. Subsequently, their 2024 FY guidance was cut to flat as the ink was drying on the new Chinese restrictions.
I'm sure this topic and more will come up if Biden / Xi do meet on the sidelines of next month's Asia-Pacific Economic Cooperation Summit in San Fran. According to Nikkei Asia, Chinese envoy sets four conditions for Xi-Biden summit... "(1) Taiwan, (2) democracy and human rights, (3) China's path to development and its political and economic system, and (4) China's right to development."
The diplomacy won't end there, Xi has a vested interested in the middle east as China has become a larger trade partner than the US for some countries... FT - Israel-Hamas war tests China’s Middle East ambitions
Stronger GDP but property pain continues...
Q3 GDP exceeded the markets low expectations, printing at 4.9% (exp 4.4). Stimulus feeding through as retail sales, industrial production also bettered economist forecasts. Today's data means the governments 5% target is likely to be achieved. However there was more bad news from the property sector as Country Garden missed their bond payment for a second time.
Reuters - China's Q3 GDP growth shows economic recovery gaining traction
ABN Amro - China: Q3 GDP and September data confirm bottoming out
WSJ - China's Country Garden Was Given a Second Chance to Make a Bond Payment. It Failed.
Theme 2 - Diplomatic efforts in Israel/Gaza
The strength of the US data means, treasuries have unwound all of the "safe haven bid" since the initial attacks (FT). The localized pressure remains on ILS, domestic indices and supporting oil / gold. Iran’s Foreign Minister called for an embargo on oil exports to Israel pushing WTI Oil up close to 2% and as per Steno Research's chart below .... it's hard to bet against oil during conflict...
Users of our bespoke research aggregator have consumed some of the following key pieces as Biden visits Israel and looks for fresh funding from congress…
Reuters - Who funds Hamas? A global network of crypto, cash and charities
FT - Joe Biden tells Israel ‘other team’ appears to be behind deadly hospital explosion
Bloomberg - Biden to Seek $100 Billion in Ukraine, Israel Aid From Congress
ZeroHedge - Biden Admin Drafts $100 Billion Ukraine-Israel Foreign Aid Package
Steno Research - 5 Things We Watch: BoJ, JPY & CNY, Monetary trends, UST selloff & Biden’s visit in Israel - Steno Research
Telegraph - Three reasons why Israel has delayed Gaza ground invasion
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Top Pieces
Discovered on Harkster.com
Further reading and listening of note on the house leadership, Texas crypto mining, US mortgage rates hitting 8% and much more...
Axios - China, Russia pledge belt and road infrastructure integration as Xi, Putin lay out blueprints
Yahoo - Chevron Australia LNG unions agree deal on eve of strikes resuming
The Last Bear Standing - Riot's Gamble
Liberty's Highlights #455 - Rolex Pricing, Jensen & Nvidia, China Chip Ban 1.5, Costco, Google Maps to Optimize Cities, Bicycle for the Mind, and Beckham
ZeroHedge - As Mortgage Rates Hit 8%, US Housing Affordability At Lowest Level Since The '80s
Reuters - Chevron Australia, LNG unions agree pay deal on eve of strikes resuming
Brent Donnelly - Not Vigilantes
The Capital Spectator - US Q3 GDP Nowcast Still Indicates Accelerating Growth
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