Macro Monday - Week 12 February 2024

Good Morning.

When I think about China after last week, I think of Schr?dinger's cat. The destiny of the Cat 'China' is determined by the behaviour of a subatomic particle 'Chinese Communist Party'; thus, it remains alive and dead until the collapse of the wave function 'deflation and projected growth’.

As of last week, the CPI decreased for the fourth consecutive month in January by 0.8% from the previous year, marking the most substantial reduction in more than 15 years. Similarly, after the Chinese regulator halted short selling last week, the government intervened quickly, with the China sovereign wealth fund purchasing ETFs’ in the Chinese market reviving an ailing stock market. There will be caution for global growth, and contagion will be evident throughout the commodities market in 2024.

South Africa

President Ramaphosa delivered his final State of the Nation Address for this term. While no shocks were revealed, we expect the economy will continue on its present course. We will keep a close eye on the approaching Budget Speech at the end of this month. Furthermore, the corruption perception index issued last week did not provide a favorable picture of South Africa; yet, when compared to our BRICS rivals, we are reasonably steady despite our national challenges.

This week's notable data releases include gold and mining output and retail sales for December. However, the rand may be eclipsed by US macroeconomic data this week.

To visualise outcomes, I used a blend of classic technical analysis and statistical likelihood scenarios. Importers can use this as a gauge for a currency hedge of a 60/40 split on their invoices. This methodology is based on a USD50,000 invoice with a horizon of 3 months and weighs the gain and loss if you buy F.X. outright today vs. hedging over the scenario period.

Global Macro

Most Asian markets will experience lower volumes due to the Chinese Lunar New Year. The U.S. stock market continues to be resilient, with the S&P closing above 5000, breaking the previous ATH of 4821. The U.S. market will be in focus this week, with a combination of inflation prints and Federal members speaking. We will keep an eye on inflation print but still support higher for longer, with cuts closer towards the end of Q3. Additionally, equity market analysts will be diving into Hedge fund filings as the 13F deadline approaches, and equity narratives will be cautious to know how these institutions positioned the magnificent seven.

The market will also be digesting tons of figures from the U.K. market, with the BOE keeping a watch on inflation and employment figures. The Asian market will be fairly quiet, but expect some movement in the JPY supported by BOJ's restrictive stance comments and Singapore's non-oil figures later this week.

Calendar for the week

1.????? FOMC members speaking (Bowman, Kashkari) – Monday

2.????? Gov Bailey of the BOE speaks – ?Monday

3.????? UK Claimant Count Change – Tuesday

4.????? US CPI Figures – Tuesday

5.????? UK CPI Figures – Wednesday

6.????? Euro GDP – Wednesday

7.????? Japan GDP – Thursday

8.????? Australia Employment Change – Thursday

9.????? U.K. Manufacturing and Production Data – Thursday

10.? U.S. Retail Sales – Thursday

11.? US PPI – Friday

Insights By: Shiven Moodley (COO & Macro Strategist)