Contrarian Updates on 22 Aug 2024

World Economies
 

 

Coin Market Cap

 
 
 

Global Indices

Chinese Exports Still Doing Decent

 

 

 

Market Commentary 

 

No real change in global macro aside from the fact that Fed didn’t cut rate last meeting. Markets reacting to the tone and messaging as per usual which keeps changing depending on which Fed person being interviewed. 

 

Significant volatility last 3 weeks with VIX spiking to 66 which is near the highs before falling back to 14 levels. SPX plunged from 5500 to 5119 within a few days and now finding its footing around 5300 – 5400 range which matches closely our prediction of 5225 – 5300 level. Right now its consolidation range between 5100 – 5600 unless ATH 5669 is decisively breached. Mixed signals from volume, candlesticks, DMI or any other technical indicators so best to be patient. Also, smart money been fading latest rally so it's really on a knife edge for now

 

ROW equities all sold off in tandem except for FTSE 100 and Chinese indices which is interesting. Indian equities mixed with Sensex dropping 81332 to 79705 but Nifty 50 staying around the same levels. If we look at style, the global equity sell-down has been agnostic to market-cap, value or growth but dividend, quality and minimum vol plays have been resilient. This suggest again more rotation play than actual US recession fearmongering which has been hitting the air waves last 2 weeks. Further reinforcement from NQFFUSLV and NQVMVUS not moving much which are low and minimum volatility indices.

 

 

Last US non-farm payrolls came in weak with 122k versus forecasted 147k suggesting a weak US economy. Unemployment rate also worse than expected at 4.3% versus 4.1%. Having said, that market reacted most Fed meeting on 31/07 where no rate cut happened. Initial jobless claims 249k and ISM manufacturing 46.8 disappointed expectations on 27/07 but well within the trend. US CPI again cooler at 2.9% on 13/08 versus forecast 3%, which sent the Dow above 40k levels

 

Interestingly, strategist now saying that Trump will use tariffs to make a grand bargain in China to attract Chinese FDI into the USA. Should it scenario materialise this will be in stark contrast with his first term where Trump pursued a long-term protectionist strategy with China. Goldman Sachs currently outlining the possibility of 20% increase in tariffs on Chinese imports with 10% increase for all other imports. Other analysts also argue the Chinese will be receptive due to increasing economic risks and need to diversify its investments.

 

Upcoming economic calendar has RBNZ rate decision on 13/08, UK GDP release and US jobless claims and retail sales data. Earnings calendar however pretty optimistic with more earning beats than misses which is encouraging. This week the earning calendar is much light with popular names such as WMT, AMAT, CISCO, INTU disclosing their numbers. Trending stocks will very tech heavy with NVDA, TLSA, AMZN, AMD leading the charge

 

Also, strategists are now saying falling inflation will not boost stocks given its relatively normal levels, the potential for it to surprise on the downside has diminished. As a result, market more focused on other factors such as economic growth and Fed policy, which implies that if retail sales and manufacturing data improves and if Fed Powell leaves the room for more rate cuts, it could reignite a rally in the stock market.

 

China’s long dated sovereign bonds have surged as investors seek safety from a slowing economy and volatile stock markets. This explains why the Chinese yield curve has not been reacting lately to US and other sovereign yields tightening. Also, Chinese economic data remains weak with last GDP print 0.7% and industrial production and new home prices also still very weak. However, the export machine is running decently with $300B in 07/24 being a respectable figure. Other data beats were there but investors interpreting them negatively, rising inflation atributre to bad weather rather than stronger domestic demand, import jumps reflecting frontloading chip purchases before expected US tech crubs and retails sales flattened by low comparison in 2023. All this is keeping up the political pressure to loosen the fiscal spigot further and consider dolling out shopping vouchers to get growth back to 5% target

 

 

Cellula introduces Programmable Incentive Layer to gamify asset issuances  which demonstrates that the crypto landscape still very speculative driven despite recent adoption by institutional investors. As the core of Cellula’s innovation is its virtual PoW consensus mechanism, which combines principles from Conway’s Game of Life, Variable Rae GDAs mechanism and Game Theory to revolutionize the way digital assets are distributed and liquidity allocated.

 

TD Cowen observed that the crypto lobby has leveraged the sector’s wealth creation to build political influence as the election approaches. However, they caution against mistaking campaign rhetoric for actual policy advancements such as more lenient regulatory actions in event of a 2^nd Trump term. Harris also perceived as more receptive than Biden towards supporting policy initiative’s, which encourage industry’s growth, but is unlikely to oppose efforts aimed at strengthening investor protections in crypto. 

Contrarian Updates on 28 Jul 2024

Global Economies

Market Dashboard

 

 

 

 

 

 

 

 

Chart of the Week

 

Global macro remains the same with US GDP growth at 1.4% and Chinese growing 0.7% with their respective interest rates being above prevailing inflation. Jobless rates still within 4.1 – 5% range which is still healthy for the global economy

 

Major pullback in US equities due to Magnificent 7 sell-off with NVDA tumbling from $140 to $116 within a few days. There is actually upside tasuki pattern, which suggest that buyers are coming in but the seller will remain in control for the new few weeks. Also, SPX sitting 5450 which is above 100 SMA and Fibo confluence levels and 200 SMA coincide at 5300 – 5225 level which could be an favourable entry point for investors on sidelines or looking add exposure

 

European and Asian stocks have broadly followed suit except for FTSE with very minor dip in China. The sell-off has been indifferent to style with dividend, growth, value sectors all taking a hit. Surprisingly, US yields have also moved higher which favours sector rotation within US equities over the usual risk-off move. Chinese sovereign yield have tightened slightly and LQD, HYD, EMD have also softened. Commodities and even XAU have also dropped in tandem. In FX markets, there has been risk-selling however with EUR/JPY moving from 172.34 to 166.91 last 2 weeks. Crypto markets however have reversed course in the same period with BTC/$ and DOGE now back up to 67k and 0.1295 levels. Unsurprisingly VIX has jumped from 12.46 to 16.49 and all other sub-volatilities have done the same. 

 

Economic calendar mainly US and European inflation and employment data with US non-farm payrolls and unemployment rate due next Friday, 02/08/. FOMC and BoJ rate decisions also coming up. Earnings release for McDonalds, Microsoft and Starbucks and we are still running through the earnings season so plenty of surprises given recent price reactions. Popular trending stocks still NVDA, TLSA, AAPL, AMZN and MSFT.

 

Blackrock saying that most of their clients are interested in BTC and ETH and they don’t forsee many crypto-ETF beyond these digital assets for the foreseeable future. Also, most clients see BTC and ETH as complements which demonstrate the user base getting more mature and understand the different use cases particularly for Ethereum platform. On the other side, Franklin Templeton actually sees interest in SOL and other crypto FX

 

Trump’s plans to make a “strategic national bitcoin stockpile” led to BTC sell-off from $69k due to liquidation of $24M in long positions. Typical buy on rumour, sell on fact price action and nobody talking about Mount Gox anymore. Cantor Fitzgerald will open a BTC financing business which again another driver for the BTC to go mainstream. The company interestingly already does business with USDT and owns significant amount of BTC.

 

JPM Dimon talking hawkish citing that “inflation is moving in the right direction but it would be good for the Fed to wait” which raises suspicions that he might be talking his book. His commercial and retail banking arms clearly makes more money if interest rate spread stay wider for longer. With inflation is clearly much lower, his talk about government spending, re-militarization of the world, green economy investments and trade restructuring come across as red herrings. Fed Powell nowadays focusing on labour markets as a reason to cut rates sooner, which is actually more insightful. Fed Adriana also expressed optimism that US inflation heading back to the Fed’s 2% target. This has laid the groundwork for rate cut at 30 – 31 July meeting and reducing borrowing cost at 17 – 18 Sep gathering. Investors currently betting this outcome at +90% probability.

 

Surprisingly, Trump only leads Harris by narrow margin of 49:47% despite the recent shooting which come across as clear staging. Many videos by former US secret service personnel and other questioning how a 15-year old could have pulled such a stunt off. Having said that, plenty can happen to these numbers until Dec so will be interesting to watch. Harris going hard against Trump painting herself as an underdog and calling Trump “plain weird’. On the flipside, Trump called Harris’ “evil, sick and unhinged” and that if a crazy liberal like Kamala gets in power the American Dream is dead. In politics, it’s a well-known principle, that one must demonize their opponent to increase the legitimacy of their own arguments and candidacy. Truth is never the politician’s friend unless it can legitimize their opinions as unassailable fact, otherwise it is ignored or dismissed outright. 

 

Value investors such as Rayliant and M&G continue to pile into Chinese equities but it remains a slow-burning trade. Forward 12M P/B ratio stand at 0.95 versus 1.26 for Asia Pacific region. The country’s shaky economic recovery and lingering property crisis continue to overhand with EU and Sino-US tensions sustaining headwinds. Whilst the Chinese govt has been supportive, the rest of the world still waiting for the big bazooka stimulus, which the 3^rd CCP Plenum has failed to deliver so far.

 

 

Contrarian Updates on 14 Jul 2024

Market Insights on 14^th Jul 2024

·        MSCI World 3627, SPX 5615, DJI 40k, Nasdaq 18397, MSCI APACxJ 75.3, FTSE ASEAN 834,  Shanghai Comp 2971, CSI 3472, Hang Seng 18293, Nikkei 41237, EuroStoxx 5044, FTSE 8252, CAC 7724, Nifty 24502, Sensex 80519

 

·         IJR 111.29, IJH 60.4, OEF 272.65, ILCG 84.05, IUSV 90.1, IUSG 131.9, QUAL 174.3, USMV 85.7, VYM 121.5, MTUM 199.3, DGRO 59, RSP 168.5

 

·         2Y UST 4.2%, 10Y UST 4.19%, 10s2s -0.01%,  2Y CGB 1.6%, 10Y CGB 2.26%, 2Y Bund 2.82%, 10Y Bund 2.49%, 2Y JGB 0.33%, 10Y JGB 1.05%, 2Y SGB 3.25%, 10Y SGB 3.1%, LQD 109.2, EMB 90.3, HYG 78

 

·         SPGSCI 572.4, XAU $2411, XAG $30.8, WTI Crude $81, Nat Gas $2.313,  

 

·         DXY 104.1, ASIADOLR 90.5, EUR 1.0910, JPY 157.9, GBP 1.2995, AUD 0.6784, EUR/¥ 172.34, AUD/¥ 107.3, SGD/ MYR 3.4822

 

·         BTC $60309, ETH $3207, XRP $0.5301, SOL $146.03, BNB $538.6, LTC $70.1, USDC $0.9997, USDT 1.0006, DOGE 0.11368

 

·         VIX 12.46, NQNDDVP 815.9, NQNDMVP 953, NQFFUSLV 1584, NQVMVUS 1858, EUR 3M Vol 5.2%, JPY 3M Vol 8.9%, GBP 3M Vol 6.15%, XAU 3M Vol 13.5%

 

·         Trending stocks

o   Tesla

o   NVIDIA

o   Apple

o   Meta Platforms

o   Microsoft

 

·         Trending crypto

o   BIAO

o   MOGU

o   DOGE

o   BTC

o   AMC

 

·         Upcoming Economic Calendar

o   Existing Home Sales

o   S&P Global US Manufacturing PMI

o   S&P Global Services

o   BoC Rate Decision

o   US New Home Sales

o   US Durable Goods Orders

o   US GDP

o   US Core PCE

 

·         Economic/ Earnings Releases

o   ISM Manufacturing PMI 48.5 lower than expected 49.2

o   Eurozone CPI 2.5% met forecast

o   US ADP Non-Farm Payroll 150k weaker than expected 163k

o   Crude Oil Inventories -3.443M much less than expected 700k

o   US Unemployment Rate 4.1% slight higher than expected 4%

o   Constellation Brand A (STZ) EPS $3.57 beat forecast $3.46

 

·         Last 2 weeks, global equities have been melting up significantly with China being the only exception. Sector style does not seems to matter whether its dividend, momentum, low volatility either. US yields have also dropped whilst IGB, HYB, EMD all moving higher with international sovereign yields stagnant. Commodities, FX and crypto have been a mixed bag. Volatilities broadly unchanged except for dividend, momentum and multi-factor US minimum volatilities

 

·         Seems money is flowing out from crypto into equities lately, which is interesting as they have been moving in lockstep for some time now. Also, its seems US economy is softening with non-farm payrolls and ISM manufacturing numbers being less than expected which has strengthened expectations for rate cuts.

 

·         Another major bank has thrown in the towel this cycle with RBC Capital Markets raising its end-2024 S&P 500 forecast from 5300 to 5700. Whilst RBC has characterized this pivot as a “a nervous raise”, from experience it’s not surprising as The Street forecast are typically lagging the market cycle and they need to save face to maintain credibility. CICC looking to expand in SEA by opening offices in countries such as Indonesia and Malaysia due to deal slump in its home market, reinforcing the SEA growth story

 

·         Earnings season in 2H24 will be a big test for the broadening of the S&P 500 rally beyond the Magnificent 7. The S&P 500 is trading around 21x forward P/E but if the top 10 stocks are excluded that figure drops to 16.5 which implies plenty of further upside potential in the index.

 

·         Some misinformation last 2 weeks with Biden apparently pulling out from the presidential race to be replaced by Kamala Harris then only to be debunked a few days later. Then last night, Trump conveniently had a assassination attempt during a rally which has help him secure votes for his bid. Sounds pretty staged and the usual distraction for the masses.

 

·         On a more pertinent note, BCA Research citing that a Trump re-election would lead to corporate tax raise not cuts, which is the popular opinion. With bond yields already over 4%, budget deficit at 7% GDP, and the trajectory of the federal government debt being unsustainable, moderate Republicans are expected to resist policies that could worsen the fiscal situation.

 

·         Latest data from IntoTheBlock shows that BTC whales have significantly increased by 71k BTC last week, taking advantage of the recent dip in price. This demonstrates there is pent-up demand for coin at the right prices. The significant drop from $70k to below $60k was primarily driven by fears of token liquidation from defunct crypto exchange Mount Gox in compensation for a 2014 hack.  Donald’s trump meme coin, MAGA surged more than 30% due to recent assassination attempt which ties in well with his promise to end Biden’s “war on crypto if elected” again demonstrating risk-on sentiment

Contrarian Updates on 30 Jun 2024

 

·         MSCI World 3511, SPX 5460, DJI 39119, Nasdaq 17723, MSCI APACxJ 71.9, FTSE ASEAN 798,  Shanghai Comp 2967, CSI 3461, Hang Seng 17722, Nikkei 39557, EuroStoxx 4892, FTSE 8164, CAC 7479, Nifty 24010, Sensex 79032

 

·         IJR 106.6, IJH 58.5, OEF 264.3, ILCG 81.4, IUSV 88.1, IUSG 127.5, QUAL 170.6, USMV 83.9, VYM 118.6, MTUM 194.87, DGRO 57.6, RSP 164.3

 

·         2Y UST 4.75%, 10Y UST 4.39%, 2s10s -0.36%,  2Y CGB 1.63%, 10Y CGB 2.22%, 2Y Bund 2.83%, 10Y Bund 2.49%, 2Y JGB 0.35%, 10Y JGB 1.03%, LQD 107.1, EMB 88.5, HYG 77.1

 

·         SPGSCI 578.4, XAU $2326, XAG $29.4, WTI Crude $81.5, Nat Gas $2.601,  

 

·         DXY 105.85, ASIADOLR 90.21, EUR 1.0714, JPY 160.88, GBP 1.2644, AUD 0.6669, EUR/¥ 172.34, AUD/¥ 107.3

 

·         BTC $61592, ETH $3391, XRP $0.4727, SOL $141.17, BNB $575.6, LTC $75, USDC $1.0019, USDT 0.9982, DOGE 0.1223

 

·         VIX 12.44, NQNDDVP 792.8, NQNDMVP 921.7, NQFFUSLV 1555.3, NQVMVUS 1815.1, EUR 3M Vol 5.3%, JPY 3M Vol 8.76%, GBP 3M Vol 6.15%, XAU 3M Vol 13.64%

 

·         Economic Calendar

o   ISM Manufacturing PMI

o   Eurozone CPI

o   Fed Chair Powell Speaks

o   US ADP Non-Farm Payroll

o   Crude Oil Inventories

o   FOMC Meeting Minutes

o   US Unemployment Rate

 

·         Earnings Calendar

o   Constellation Brands A (STZ)

 

·         After a month, US equities have moved higher with S&P 500 hitting 5500 level whilst European stocks have remained unchanged and mixed bag for Chinese equities with Shanghai composite, CSI 300 around the same levels whilst Hang Seng has dropped. US Treasury yields have come off a bit and yield curve still inverted whilst commodities remain unchanged too. Some DXY strength moving from 104.64 to 105.85 and risk taking with AUD/¥ moving up 3 big figures.

 

·         BTC has pulled well back from $70k psychological barrier to $61592 today and other coins have followed suit. The BTC drop suggest that traders are sceptical over the timing of interest rate cuts by the Fed. VIX unsurprisingly dropped given move higher in US stocks and other FX vols remains the same

 

·         Redid the Fibo price extension and there are price clusters around 5835 – 5935 which suggest that should be the potential peak for the S&P 500. If those levels are broken through, next price cluster 6339 – 6372, which is pretty significant as they tend to sit near the 1.414 and 1.618 extension levels.

 

·         Asian stocks lately have been reacting to rate cut bets with tech stocks gaining along NVDA bullish sentiment. Additionally, cooling labor markets are encouraging these bets with number of Americans filing for first-time unemployment benefits rising to 229k (Jun 24) from 221k (May 24) which is well above forecast of 220k.

 

·         Citibank now expects Fed to begin cutting rate in Sep 2024 rather than Jul 2024 with 75 bps of total cuts for the rest of the year. Fed Kashkari also saying that “it’ a reasonable prediction that the Fed will cut rate once this year waiting until Dec to do it”. Meanwhile, ex-PIMCO El-Erian is saying that Fed must cut interest rates sooner rather than later as its data-dependent approach lacks strategic view depriving fixed income markets of clear guidance resulting in volatility in US Treasury yields.

 

·         China opened an anti-dumping investigation into imported prok and its by-products from EU, targeted at Spain, Netherlands and Denmark in response to their EV export curbs. Other industries which are being investigated is pork, dairy, cars, brandy and plastics.

 

·         Peter Brandt hitting headlines again with arguments for Bitcoin relating to the eventual destruction of fiat currency units by comparing BTC with M1 money supply. John Bollinger also weighed in with his adage that “the bigger the base, the higher in space” in referenced to extended periods of consolidation in BTC.

 

·         Micron reported better-than-expected quarterly results but still slides down, whilst casino stocks push the consumer sector higher led by MGM Resorts and Caesar Entertainment. Levi Strauss slumped 15% due to earning miss, Walgreens Boots fell 22% after poor earning guidance and McCormick stock rose 4% after earnings beat. New orders for key US manufactured capital goods expectedly fell in May suggesting that business spending on equipment weakened in 2Q as borrowing costs remain elevated

 

 

Contrarian Updates on 03 Jun 2024

 

·         MSCI World 3450, SPX 5278, DJI 38686, Nasdaq 16735, Shanghai Comp 3078, Hang Seng 18386, Nikkei 38941, EuroStoxx 5009, MSCI Asia 1351, FTSE 8288, CAC 8011, Nifty 23221, Sensex 76272

 

·         2Y UST 4.885%, 10Y UST 4.496%, 2Y CGB 1.755%,  10Y CGB 2.323%,  LQD 106.89, EMB 89.05, HYG 77.13

 

·         SPGSCI 573.27, XAU $2324, XAG $30.15, WTI Crude $77.11, Nat Gas $2.685,  

 

·         DXY 104.64, ASIADOLR 90.41, EUR 1.0841, JPY 157.18, GBP 1.2721, AUD 0.6635, AUD/¥ 104.30

 

·         BTC $68890, ETH $3816, XRP $0.5212, SOL $165.03, BNB $625.17, USDC $1.0005

 

·         VIX 13.24, EUR 3M Vol 5.4%, JPY 3M Vol 8.75%, GBP 3M Vol 6.3%, XAU 3M Vol 13.4%

 

·         Economic Calendar

o   ISM Manufacturing PMI

o   ADP Non-Farm Payrolls

o   BoC Rate Decision

o   US Unemployment Rate

 

·         Earnings Calendar

o   CrowdStrike Holdings, CRWD

o   Hewlett Packard, HPE

 

·         No major movement from last week with the exception of commodities such as oil and natural gas. VIX has popped lately with the intraweek volatility. In particular, oil prices appear capped around 200 SMA which suggest it might make another dip lower for a few weeks

 

·         China manufacturing PMI unexpectedly contracted to 49.5 in May versus expectations of 50.5 which caused some pullback in Asian stocks. US PCE 2.8% matched expectations which restored confidence somewhat that the disinflation trend remains on track despite slew of hawkish Fed comments.  

 

·         The Street talking about ETH surging to $4500 now before ETF trading goes live. There lots of good volume and strong support around 50-day EMA $3225. Fed President Kashkari still talking hawkish saying “policymakers have not completely dismissed the possibility of further interest rate increases”. NASDAQ has closed above $17k for the 1^st time on 28/05. UBS raises XAG forecast to $38 per troy  ounce on the back of industrial demand which is expected to rise by 9% due to the photovoltaic sector and mining shutdown in Peru.

 

·         Temu has dethroned Alibaba to become China’s most valuable e-commerce company. Temu is the international version of Pindoduo both owned by PDD. Bargain-hungry Americans have been flocking to Temu as it continues to grow rapidly in the US whilst aggressively expanding to Australia, NZ, France, Italy, Germany, Netherlands, Spain and the UK. Alibaba’s $4.5B convertible bond sales oversubscribed allowing it to buy back its heavily beaten down stock.

 

·         DBS Bank is a ETH whale according to on-chain analytics firm Nansan amounting to 173,753 ETH which equals $647M position and $200M PnL. Binance has announced its intention to delist altcoins OMG, WAVES, WNXM and NEM due to sharp price declines. Coinbase followed Ripple and a16z in each giving a new $25M to their political action committee, Fairshake as the US general election 2024 approaches. Only 10.3% of total ETH supply is currently on centralized crypto exchange, the lowest level in years. Appears to be triggered by May 23 approval of spot Ether ETFs in the US signalling a potential upcoming supply squeeze