Read on the Trading Floor - 22 April 2024
Today’s focus… Relief rally, Tech earnings, EV oversupply and much more
Macro Themes At Play
Theme 1 - Relief rally ahead of Tech earnings
Theme 2 - China exporting deflation and in need of a deval?
Theme 3 - Oversupply of EV's?
Further reading and listening of note
Theme 1 - Relief rally ahead of Tech earnings
Positive start to the week as the weekend hedges get unwound and there is natural sigh of relief as tensions in the middle east have "eased" (for now). We've also entered the Fed black out window which will reduce vol in the fixed income market and with the docket for top tier US data limited this week, the focus has flipped firmly to Tech earnings. Growth is very much dependent on Nvidia! Finally if the BoJ was to do something, even a small hawkish surprise could accelerate a squeeze of record JPY short positions. (Bloomberg - Record Yen Shorts Increase Chances of Sharp, Painful Snapback)
Bloomberg - Ukraine Aid Passed by House With Mike Johnson’s Republicans Divided
Seeking Alpha - Tesla, Meta, Microsoft, Alphabet lead big earnings week
Bloomberg - Magnificent Seven Earnings Arrive With Stocks at Critical Moment
Steno Research - The week at a glance: Time for the BoJ to step up, while soft PCE numbers may fool some..
Theme 2 - China exporting deflation and in need of a deval?
There are two economies out there with Europe stuck in the middle. We've China deflating at the same time as inflation runs hot in the US. Stuck in the middle is poor old Europe, left behind on the AI chip train, political inability to match Biden's fiscal dominance and now the Chinese are cannibalising the EV market leaving the future of German manufacturing diminishing by the day. With the US data not supporting a cut and China importing the tight policy when its in need of further stimulus, currency war policies encouraged by CNYJPY hitting multi decade highs and the fix error needing a pressure release, there is natural focus in the market on continued upside potential for USDCNY. Could they deval before Trump's election campaign leaves the courts or Biden's tariff increase on steel lands on their doorstep. Will the PBoC want to get ahead of the Fed / ECB cuts? #ccywars
Brent Donnelly am/FX - CNY deval and equity valuation theories
Steno Research - A MAJOR DEVALUATION OF THE CNY COULD BE IMMINENT
Theme 3 - Oversupply of EV's?
We really have re-opened post covid. Long gone are the lockdown days when Tesla was a darling of the retail trading community and government ESG policy flooded the consumer with tax credits to convert into EV purchases when lockdowns simultaneously restricted their supply. After manufacturers retooled and refocused on EVs we're now seeing a race to the bottom as cheaper Chinese alternatives hit the market and Tesla's leadership gets eroded by historic high-end competitors (eg Porsche).
The NY Times - How Can Elon Musk Reassure Tesla Investors?
ZeroHedge - Weak EV Market Dragged Down European Car Sales In March
Motorhead - Tesla's Bad Q1 is Well Flagged, But Here's What to Watch for on Tuesday
Bloomberg - Tesla Spends Weekend Cutting Prices of Cars and FSD Software
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Top Pieces
Discovered on Harkster.com
The Lead-Lag Report - Defense Is Winning
Apollo Academy - Strong S&P 500 Earnings Expectations
Bloomberg - London Bankers Inch Closer to New York-Style Bumper Bonuses
Russell Clark - YOU CAN'T HANDLE THE TRUTH - PART II
PauloMacro's Substack - Silver Miners Have My Attention
Bloomberg - Israeli Military Intelligence Chief Resigns Over Oct. 7 Failure
Econostream - ECB’s Villeroy: Confident Enough to Cut Interest Rates in June
Bloomberg - BOE Warns of Risks With Private Asset Values Shrouded in Secrecy
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