Chart of the Week and Weekly Report Highlights
This week: China Macro, European equities, EURUSD, UK Equities, EM ex-Asia, Frontier Markets, EMFX, Commodities, Corporate Bonds.
This email gives you a look at what was in the latest Weekly Insights report
The Weekly Insights Report is part of our entry-level service: summarizing the key points, themes, and charts from our institutional research service.
Chart of the Week - Another Headwind for Commodities
China Property vs Commodities: China in general, but especially its property sector, has been a major driver of commodity prices over the past couple decades. There has recently been a brief exception to that, but things are starting to change again.
The Chinese property sector directly influences demand for industrial metals, and indirectly plays a role in general commodity demand in that the path of property prices has historically been the major driver of monetary policy decisions in China, and hence the path of China’s economy.
While the correlation in the chart below (between property prices and commodity prices) broke down somewhat in the wake of the pandemic (due to pandemic-driven supply shocks and global stimulus-driven demand shocks), it appears to be re-coupling on the way down.
China’s property market downturn is intensifying, with prices declining 10 straight months in a row …and that comes just as global growth is starting to slip (and as some initial supply response has started to come online for commodities).
Hence, I would add this to my existing stock of charts and evidence for the commodity bear case (and hence the emerging case for disinflation).
Key point: The China property downturn adds to downside risk for commodities.
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Topics covered in the latest Weekly Insights Report
Aside from the chart above, we looked at several other charts, and took a bite out of some really important macro/asset allocation issues right now:
China Macro: waiting for stimulus as macro downdrafts weigh.
Europe: technical breakdown + macro headwinds = further pain.
UK Equities: review of the weight of risks across value and technicals.
EM ex-Asia: commodities didn’t help much before, but hurting now.
Frontier Markets: improved valuations, but not yet convincing tactically.
Commodities: sentiment and positioning coming full circle.
Corporate Bonds: some possible relief ahead, but clear risks remain.
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