Read on the Trading Floor - 24 Jan 2024
Today’s focus… RRR cut, Trump, Haley, T+1 and the King of the GPU
Macro Themes At Play
Theme 1 - China RRR cut
Theme 2 - PMI Day
Theme 3 - Will Haley stay in the race?
Theme 4 - Are you ready for T+1?
Theme 5 - Zuckerberg is The King of GPU's
Further reading and listening of note
Theme 1 - China RRR cut
After Premier Li Qiang chaired a cabinet meeting were officials mulled over the possibility of converting 2trillion Yuan offshore back into domestic assets (not a bad order, mine $278bln of the index pls... Reuters), we've now had a "surprise" 50bps RRR cut as well as last week's "short sale ban" from one of the key local brokers.
Coordinated economic support? Is this enough to turn the tide? Sceptics believe the deflationary spiral needs a lot more than "patchwork" liquidity pumping and its longer-term regulation changes in the tech sector, confidence boost for Chinese households and direct intervention/clean-up of the property sector that will turn the long-term trend, not generate a simple short-term squeeze.
After China rallied into the close (CSI and HSI > +1.5%), we've had a positive Ldn/NY session, with SPX in the green, USD softer against growth currencies (AUD, GBP, MXN and NZD), Brent clearing 80$, Crude breaking $75 and US10s 4.14% ...
Another day, another set of all time highs in the US (TKer by Sam Ro - At new all-time highs, the stock market has actually gotten cheaper) led by Netflix which is up over 10% as a result of higher growth forecasts, WWE deal and beating analysts' estimates.
Bloomberg - China May Need a Bigger Bazooka
FT - EU scales back China investment screening plans to avoid ‘turf war’
Unchained - So It Was a 'Sell the News' After All
The Lead-Lag Report - Catching China's Falling Knife
Theme 2 - PMI Day
French Composite PMI 44.2 vs exp 45.2
German Composite PMI 47.1 vs exp 47.8
UK Composite PMI 52.5 vs exp 52.2
US Composite PMI vs 52.3 vs prior 50.9. Services PMI is at a 7month high as manufacturing PMI pops to a 15month high.
A lot has been written concerning the inability of soft sentiment data to indicate the direction of travel of the economy (growth, UER, inflation and thus Monetary Policy), so why should we react to today's set? None of them really moved the needle on what the ECB, BoE and or Fed are going to do in the coming months. Afterall, it wasn't a recession in the US, it was a vibecession h/t
(for full video click here)... people are the economy and the vibes are good!!!!UniCredit - Data Comment - Eurozone PMIs: Weak but not dovish
ZeroHedge - US PMIs Unexpectedly Soar In January Amid Manufacturing 'Renaissance', But...
In regards to the Fed,
latest calls for a Jan cut but gives reasons why they will want to wait until MayFollow her excellent research here
Theme 3 - Will Haley stay in the race?
Will she run out of funding? She's already polling second in her home state of SC (primary late Feb) and she will struggle to turn around the momentum given Trump has the support of the Governor and the states two senators. Without a legal surprise or a different reason why Trump can't run, it seems like the trade is the fight for VP. Be there to take over from Trump if he has to drop out closer to election day... maybe that's why Vivek / Scott / Burgum all appeared on stage during Trump's NH victory rally. As the GOP is converging around Trump, will she withstand the pressure to drop out? For now, money will talk, and she still appears to have the public backing of the Koch brothers.
WSJ - Trump Won the New Hampshire Primary, but There Are Warning Signs for the 2024 Election in November
Bloomberg - New Hampshire Primary 2024: Donald Trump Is One Step Closer Toward Biden Rematch
The Rest is Politics - Why Trump's return wasn't inevitable
The New Yorker - The 2024 Republican Primary Was Over Before It Began
WSJ - Nikki Haley Says ‘Dozens of States Yet to Go,’ Stays in Race
Theme 4 - Are you ready for T+1?
This will have major implications for FX markets with activity extending into the early APAC session rather than the next London morning. for example, if a GBP denominated fund sold Apple stock, rec'd USD and then wanted to repatriate the GBP to its fund, rather than having 2days to process the FX along with the equity trade it will now all be done in 1 day thus changing the impact correlated equity moves can have on FX market around the London open and WMR fix in the afternoon. Instead, the FX flows may be activated in what is currently the twilight zone of post NYC close and early APAC session. Looks SGD and HKD FX trading desks could be busier soon.
Theme 5 - Zuckerberg is The King of GPU's...
I'll take 600k please ...
- Highlights - 473: Zuckerberg King of GPUs, Meta's AGI
ㅤㅤㅤ
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Top Pieces
Discovered on Harkster.com
Further reading and listening of note
The Next Economy by
- Housing vs Disinflation (nexteconomy.co)Reuters - Canada's top pension funds pile into private credit as banks retreat
Steno Research - 5 Things - Inflation Divergence, China, Euro PMIs, Nikkei and Suez
CoinDesk - Do Bitcoin ETFs Kill the Bull Case for Crypto Equities?
BMO - Bank of Canada Rate Decision & MPR — Patiently Waiting
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