Steno Signals is our weekly editorial on everything macro. The byline of the editorial is Andreas Steno Larsen, former chief strategist at Nordea Bank and CEO of Steno Research.
A better-than-feared jobs report, although somewhat “clouded” by a large public sector contribution. Overall, it seems like we are getting stimulus for an already stable economy, which is hard to construe as bad news.
The USD market will be flooded with liquidity in Q4, accompanied by rate cuts, providing Chinese authorities with a window of opportunity to ease policy. However, there is one issue: CNY liquidity is tightening now.
China-sensitive shorts are getting squeezed left, right, and center ahead of a big week for key US figures. The “low hiring, low firing” narrative is likely to persist, but risk assets are finding support from other factors.
China just pulled a market stunt right before a flood of liquidity hits, and the Fed is cooking up some magic liquidity tricks to keep things lively. Buckle up for Q4.
The full Ifo report has just been released, and here’s our summary of the key data point from the report and our analysis of its implications.
This is yet another false flag from China, and we expect the stimulus to be insubstantial in size relative to the problem at hand. In this analysis, we will explain why China is allocating insufficient funds to address a major issue.
Markets are back on labor watch as Powell has signaled that conditions are not slowing down quickly enough for the Fed to promise more 50s. Meanwhile, expectations for Eurozone inflation are starting to look very soft. Are 50s potentially in play for the ECB if things start to sour quickly?
The Fed will get plenty of opportunities to frontload cuts further this year as the labor market remains weak. Is this all driven by the election season? And why is the labor market so out of sync with the markets?
Is there no end to the bid in Chinese longer-dated fixed income? Our growth, inflation, and liquidity models for China still suggest that Chinese fixed income remains the only worthwhile investment among liquid asset classes in the country.
Markets are cheering for a 50bps Fed cut this week, but is it truly something to celebrate if it coincides with economic weakness? Lower rates are not always a positive for risk assets.
The decision between a 25bp or 50bp rate hike is of utmost importance this week. In either case, it likely makes sense to continue leaning into Fixed Income, as markets are neglecting inflation and focusing solely on growth.
Is it really feasible to expect the EM rates cycle to tighten while the DM cycle is clearly moving in the opposite direction? If history is any guide, such a scenario is highly unlikely, and any window for this would be short.
This week will host both US CPI and PPI figures, the Trump vs. Harris debate, an ECB meeting, and a UK employment report, which will truly set the tone across the main markets that we track.
There is more fundamental merit to the sell-off we are currently experiencing than the one we faced in July. China has come to a sudden halt, and we are facing a USD liquidity withdrawal. Dash for USD cash!
While we are waiting for Godot and his assessment of Payrolls, we take a look at Chinese momentum in the context of declining demand in the West. Are the wheels coming off in China?
This week’s job report will likely decide whether 25 or 50 bp is most likely in September.. Is the crowd of wall street economists getting too worried or too upbeat? The entire crowd of economists agree that July was a fluke.
The manufacturing rebound in H1 2024 was another head-fake, and we were correct in predicting that everyone would call off the recession. Now, the market is likely going to “reprice” the recession risk again.
The Chinese momentum has come to a sudden halt, and we think it is related to the front-loading of imports due to tariff fears. Could China become the victim of a wait-and-see approach until after New Years?
The latest Ifo data suggests an imminent recession in Germany, with expectations of slowing growth and inflation as autumn approaches. Despite concerning trends, high frequency and robust data provide a basis for cautious optimism, indicating stable conditions.
In a relatively quiet data week, we are on revisions watch. The second release of the US GDP report from the second quarter is out, and with the cat out of the bag the revisions will be heavily scrutinized.
The very late-cyclical pattern of a hawkish BoJ paired with a dovish Fed is now visible to everyone. How far will it take USDJPY lower, and will it pull the rug from under cross-asset markets?
Will Powell use the labor market as an excuse to cut rates quickly, while Ueda discusses raising rates in Japan? The QCEW-based revisions could give the Fed enough justification if they decide to move swiftly, even though the quality of QCEW data has been mixed lately.
We track the probability of rising growth, inflation, and liquidity momentum in real-time on a daily basis, and the developments since the start of July have been notably weak. This is the kind of setup needed to prompt central banks to restart their actions.
Chinese monetary authorities are fighting against gravitational forces when pushing for higher bond yields. Meanwhile, investors keep piling into bonds, while they are selling stocks. Credit growth is too weak to do otherwise!
We have a big inflation week ahead of us with US PPI & CPI inflation paired with final details from Europe. Meanwhile, we are watching the situation in Ukraine/Russia and the Nat Gas market.
Liquidity is stabilizing, and there are already signs that August will be better than July. We are aware of the risks in the labor markets, but we see strong signs of a cyclical bottom here, which may soften the impact of the uptick in unemployment.
The coming week is all about determining whether this is truly a recessionary meltdown or not, with the credit cycle and the ISM survey providing some much-needed clues. The credit cycle does NOT look recessionary as of now, but liquidity could turn abruptly worse.
Recessions differ in their impact depending on whether they are real or nominal, with the latter obviously being worse. Markets keep forgetting the nominal vs. real discussion this cycle, while the liquidity outlook is becoming increasingly mysterious.
The Fed looks likely to commence a cutting cycle in September, but can we use the typical cutting cycle playbook in EM- fixed income and Commodities? China is (potentially) wreaking havoc with the playbook!
Full focus on USDJPY ahead of a crucial central bank week. Will the BoJ confirm the turning tide and will get help by the Fed? In Europe, we are on inflation watch in France.