The “Watch Series” is a collection of individual series such as Europolitics Watch, Inflation Watch, Real Estate watch and much more. Stay tuned for in-depth coverage of your favourite subjects.
The oil market is one of the few appealing commodity longs currently, as cluster risks in the natural gas and metals space will take center stage into July.
The US exceptionalism was once again solidified with the release of the PMI numbers. While we don’t find a lot of forward-looking signal value in S&P PMIs, it’s still fair to ask whether the slowdown is even happening.
Is there a path to a rate cut from the Fed due to receding inflation pressures in housing and insurance? If goods inflation remains muted, the Fed will likely get a chance to cut. We take a look at the details here.
We are not miles from the needed threshold level of USD reserves in the system and the Fed is aware of that. This is a strong reason to believe that liquidity conditions will remain benign from here on a trend basis.
The positioning in US Tech is still not out of the ordinary, while commodity positioning continues to stay out of whack with price action.
The net developments in Norges Bank rate path model suggest that Norges Bank will remain patient. Not much has changed since March. This is net hawkish relative to market expectations.
Bearish sentiment surrounding shipping equities these weeks.. Question is: Do we short?
We see a strong risk environment in July and the spending patterns could pick up again underpinning the “laggard” case in equity space. Find out which one here..
The French election risks leave Europe uninvestable from an equity perspective for now, which leaves opportunities ahead in USD markets. We continue to see strong performance in USD liquidity sensitive trades paired with softness in commodities.
Taking profits in natural gas!
There are no recessions in sight in positioning data, and it seems like markets are all in on the booming US story, on top celebrating the net dovish outcome of the CPI report and FOMC presser Wednesday.
Our models are signaling that it could be time to re-enter the NOKSEK trade again, as weaker inflation data from Sweden could be the catalyst for a bullish run in the pair.
More macro positivity after the month of May with both ups and downs in data print. The tide is turning on a couple of the major inputs in our Macro Regime model.
MXN sold off massively following the Mexican election last week but we still view the MXN as a clear-cut ‘trade balance’ play. As long as the trade ties between China and the US increasingly necessitate a ‘value-add middleman,’ Mexico remains in an advantageous position, regardless of whether the president is Sheinbaum or Obrador.
The US CPI report today was admittedly decently soft, which allows for the Fed to confirm a potential pivot later. However, we’re still fearful of the forward looking indicators and rising freight rates, making us believe that this is not something that markets should get used to.
The market reaction to the European elections does not serve as an indicator to buy into European assets, and we are hence dropping our European FX rebalancing bet.
The positioning is very negative in energy markets, which looks like a decent contrarian signal to us. We continue to like energy (both oil and Nat Gas) versus metals into July.
The NFP postpones the recession chatter (again) and markets will have to swallow that message as the FOMC meeting will be impacted by hawkish data surprises.
Despite the ISM figure for May showing weakness, there are numerous signs from both the market and forward looking indicators that we are in for a substantial boom in manufacturing. What should you buy if that’s the case? Find out here.
The positioning remains crowded in Copper, Gold and Silver (and to a certain extent oil). If economic surprises continue to be soft in the coming week or two, we may get an ugly washout ahead of the July contracts maturing.
Our oil bet admittedly didn’t go as planned, and we take the opportunity to take off some of our broader commodity risk, while keeping idiosyncratic commodity bets.
The OPEC group continues to keep the supply of oil artificially low, but the big question is now the demand side of the equation. This OPEC policy is bullish, if the demand side keeps improving.
We’re modifying the weighing of risk assets and commodities as the reflation story stalls, whilst the liquidity outlook will turn in early June. Read our portfolio thoughts here.
There are reasons to believe that goods inflation is on its way back with ETA during the summer, but while freight rates are on the move globally, the effects on price pressures should be more of a concern to the ECB and BoE compared to the Fed.
The slightly hawkish HICP print from Germany today has sent yields higher despite the CPI metric surprising dovishly. Meanwhile, the recently released Ifo details hint of a potential comeback in the German economy, which is far from consensus.
While macro is constantly moving, the AI wave (primarily NVIDIA) seems to be overshadowing everything else going on, being used as an argument for elevated asset prices. Will equities be wrongfooted by macro? The outlook is still positive, but risks are looming.
We are once again long the mother of all window maker trades, but there are interesting moves to trade in the energy space again, as the supply side of Nat Gas (and Oil) is back in the lime-light.
Liquidity will improve markedly from 16th of June and onwards, while we continue to see rolling melt-ups in real world assets. We see an increasing risk of a new melt up in commodity space.
On how to trade the rolling melt-up in commodity space relatively speaking..
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