Macro Afternoon

A steady as you go session across Asian risk markets today as traders await the return of the US from its long weekend. Locally, all eyes were on the RBA which failed to act, keeping interest rates steady and arresting the terminal dive in the Pacific Peso, while the Chinese Yuan was again fixed lower against USD.

The Shanghai Composite looks set to close with a scratch session, down 0.2% but still just above the 2900 point level at 2918 while the Hang Seng Index fell 0.4% to 25525 points. Pressure is continues to build here as price remains below the low moving average on the daily chart, still anchored nearer the terminal low just below 25000 points:

Japanese share markets have put in scratch sessions as Yen remained firm, but steady with the Nikkei 225 closing a handful of points higher at 20625 points. The USDJPY pair is forming a tight band, remaining just above the 106 handle and still below the previous Friday session lows:

The ASX200 also put in nothing result, falling 6 points to close at 6573 points with no support from the RBA today. The Australian dollar went into a steep dive after the retail figures were published this morning, breaking well below the 67 handle before coming back as the RBA held this afternoon, but there is so far no threat to the overall downtrend:

S&P and Eurostoxx futures are down 0.1% or so as confidence remains elusive. with the S&P500 four hourly chart still showing price unable to make a break for it above the 2940 point resistance level:

The economic calendar ramps up tonight with the latest ISM Manufacturing print from the US plus a few Federal Reserve key member speeches to watch out for.

Comments

  1. Was there really much market expectation of an RBA cut today? I figured a hold was pretty obvious… yet the poo did what poos do and bobbed back up!

  2. Dear editor

    I thought I would write in and tell you that I’m making shedloads of money on these markets.

    Long live

  3. Another goodun from Michael Pettis.

    Wealth should trickle up, not down.
    https://carnegieendowment.org/chinafinancialmarkets/79338

    “For economies in which investment is constrained not by the lack of savings but mainly by weak demand, however, rising income inequality can actually suppress investment and reduce growth by reducing consumption. This point is very poorly recognized by most economists, but to understand why this is true, it is enough to see that there are basically two kinds of investment:

    – Investment that is not sensitive to changes in demand. This kind of investment—typical of underinvested economies (usually developing countries) or underinvested sectors (such as a new technological sector in its early stages) in which there is not enough investment to satisfy existing demand—is limited by the high cost of capital, so when additional savings cause the cost of capital to decline, businesses will increase their investment.

    – Investment that is sensitive to changes in demand. In such cases, typical of advanced economies, businesses justify investing in additional productive capacity only when they expect demand for their products to grow.

    Much investment in the United States is of the second type, meaning that if increases in income inequality in advanced economies reduce expected consumption growth, businesses typically respond by cutting back on investment. This is probably what happened in Germany after the Hartz reforms of 2003–2005 and what has been happening in the United States and other advanced economies over the past several decades. Because of weak growth in demand, business investment has grown more slowly than most economists would have liked, and even then much of it has occurred in the high tech sector (which in its early stages is more like the first kind of investment than the second). Demand growth would have been even weaker if rising household debt and fiscal deficits hadn’t boosted consumption.

    The seeming paradox under these conditions is that rising income inequality cannot raise total savings even as it raises the savings of the rich. This is because in a closed economy, like the global economy, savings by definition must equal investment, and if investment does not rise, savings cannot rise.”

  4. The government is likely to take some strong action in Beijing and the surrounding regions to ensure an “azure sky” for the ceremony, Nomura Economist Lu Ting wrote in a note dated Sept. 2. The surrounding regions are heavily industrialized and concentrated in the steel-making sector, and any temporary shut down of factories would slow production.

    https://www.bloomberg.com/news/articles/2019-09-03/blue-skies-for-beijing-parade-may-drag-on-growth-nomura-says

    We don’t need to wonder, they’ve started announcing the shut downs already.

    Surplus is looking short lived 😁

  5. The Traveling Wilbur

    Timmeh. Stop. Watching. The. Downunder Trouser Brownsnake.

    Please.

    (ps DTBS… not bad that one… might stick… heh.)

    • Talking about DTBS .. many years ago I was out the back of a mates place with their about 3-4YO boy. I’m having a smoke and he’s doing kid stuff when he suddenly squats for a bit, gets up and proceeds to shake his leg and work a fresh steamer down his trakky daks until it falls onto the ground. Yeah, that’s stuck with me for 25 odd years. Kids are feral.