Global Macro

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Weekend Links 27-28 May, 2017

Surrealist Landscape, Peter Purves Smith, 1938, National Gallery of Victoria   China Regulator urges China banks to save ailing companies – FT.com The Boosterism Behind China’s Silk Road Story– Bloomberg China’s Addiction to Debt Now Threatens Its Growth – NY Times PBOC plans to adjust yuan fixing methodology as Fed interest rate rise looms –

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Bitcoin: Ponzi gone global

I haven’t written on bitcoin for a while despite it going nuts: The reason is very straight forward. This is a global ponzi scheme and that’s the end of it. As a super-national currency, the only appropriate comparison with bitcoin is gold or other hard assets that hold their value when sovereign paper money does

3

Fed repriced on fading US inflation

Except DXY which keeps breaking lower as Fed expectations reset. Euro hit new highs: Commodity currencies rallied: Gold too: Brent softened: Base metals rose: Big miners too: EM stocks a little: US high yield joined in, EM not so much: US bonds were flat: EU spreads closed: US and EU stocks lifted: And the bonus

35

UK Tories’ immigration reform a good model for Australia

By Leith van Onselen Over the past 20 years, net overseas migration into the UK has surged from below 100,000 to around 300,000 people annually: Much like in Australia, this surge in immigration has created all manner of problems for the incumbent UK population, including massively expensive housing (especially in London, where most migrants go),

3

Buy the f’n impeachment!

DXY rose overnight: Commodity currencies fell. BRL was poll-axed on political strife: Gold eased: Brent firmed: Base metals still look weak: Big miners were mixed: EM stocks were poll-axed by Brazil: High yield plods on: US bonds were sold a little: European spreads widened: US stocks were bid while European eased earlier: Buy the f’n

21

Markets impeached

DXY was hammered last night as euro and the yen soared: Commodity currencies were mostly weak: Gold soared: Oil rose too: Base metals were mixed: Big miners hit: EM stocks pounded: High yield too: US bonds were bid big: European stocks pulled back, US were hit hard: Markets impeached! Via the FT: Impeachment is not

4

Push now on for TPP 2.0

By Leith van Onselen The Turnbull Government’s hopes of resurrecting the Trans-Pacific Partnership (TPP) trade deal have received a boost, with member nations meeting in Vietnam this weekend to discuss a way forward without the US. From The Australian: Since President Donald Trump withdrew the US from the deal Japan has shown signs it would

6

Rotation to Europe soars

DXY is sinking and the euro soaring: Commodity currencies lifted: Gold too: Brent softened: Base metals were mixed: Big miners flew: EM stocks too:  But not high yield: US bonds were sold: European spreads tightened: US stocks fell a bit and Europe broke out big: The MB Fund rotation to Europe is powering. It appears

7

Technology, not immigration, is the solution to population ageing

By Leith van Onselen For more than a decade, the Productivity Commission (PC) has debunked the common myth that immigration can overcome population ageing. For example: PC (2005): “Despite popular thinking to the contrary, immigration policy is also not a feasible countermeasure [to an ageing population]. It affects population numbers more than the age structure”.

3

Rotation to Europe builds

DXY slumped Friday night as inflation tumbled in the US: Commodity currencies took off: Gold rebounded: Brent was stable: Base metals mixed: Big miners fell: EM stocks are pouring it on: Not high yield: US bonds were bid: European spread fell: European stocks rose, US fell: US inflation was very weak: According to the Federal

5

Gundlach’s bad call

DXY jumped last night: Commodity currencies sank: Gold hung on: Oil too: Base metals were hit: And big miners: EM stocks eased: High yield too: US bonds were sold: European spreads widened: And stocks fell back a bit: A good video here from Bond King Jeff Gundlach at the Sohn Conference gives us some meat

0

Morgan Stanley: This is not 2015

Morgan Stanley has come clear thinking today: Bottom line: We expect the DXY to break higher, led by JPY and commodity FX weakness. Tactically we turn neutral on EM FX, but regard this setback as a pause within a medium-term uptrend. DM risk appetite should remain strong, benefiting currencies where central banks are considering tightening

13

Mining GFC 2.0 roars as oil breaks

DXY was soft, euro strong: Commodity currencies were flogged: Gold was crushed: Brent broke: Base metals sagged: Big miners cliff-jumped: EM stocks reversed: High yield too: But here’s the kicker, US yields rose: And European spreads contracted: Plus stocks were strong in the face of it all: So, as expected all year, global reflation is

2

Global PMIs roll over

Via Macquarie:  April PMI data suggests the manufacturing recovery is slowing, with worse performance from China and the US. But the fall in the global PMI needs to be seen in context of its recent surge which had seemed an implausible guide to likely growth in the hard output data. We continue to expect

8

Mining GFC 2.0?

DXY soared last night: Commodity currencies were pounded: Gold was flogged: Brent appears weak: Base metals were crushed: Big miners too: EM stocks fell: High yield was fine: US bonds were sold: European spreads closed: Stock were flat: The big news on the nigh was the Fed remaining hawkish: Information received since the Federal Open

1

Reflation dies with oil

DXY was soft last night driven by a strong euro: Commodity currencies were mixed: Gold held: Oil was walloped and looks in danger of breaking lower: Base metals were weak: Big miners too: EM stocks were strong: High yield soft: US bonds were bid: French spreads have tumbled, Italian not so much: And US stocks

2

Trump tax plan sinks stocks

DXY rebounded a little last night: Commodity currencies were dumped: Gold held: Brent sold: Base metals were bought: But not big miners: EM stocks pulled back: High yield was stable: US bonds were bid: European spreads widened: European stocks rose, US fell: The big news was Trump’s tax plan: 2017 Tax Reform for Economic Growth