David Llewellyn-Smith | Aug 01, 2023 09:53
DXY was firm last night:
The whole Crap Complex roared on the China stimulus delusion. AUD, commods, miners, EM and junk:
Yields were stable:
Stocks eked out gains
It’s not easy positioning for long-cycle events. But that is what is underway in China. A long-cycle credit adjustment, like that in the US in 2008.
Markets are hopeless at discounting such events. They follow the cyclical pulses on muscle memory instead. Everything I read from Wall Street is glowing about the Chinese stimulus. A kowtowing Morgan Stanley (NYSE:MS) is shopping it as a pivot on the scale of 2018 which is absurd.
It is a near complete bust for commodities (my comments in caps) :
There is nothing of magnitude to offset the structural real estate adjustment. Especially so for commodities and uniquely so for bulks.
It looks to me like this is some combination of:
Whatever it is, Beijing knows it can’t drive its previous growth model any further but is unwilling to embrace a new one.
The stimulus is a bust. China is ex-growth. Europe is buggered by it. EM as a viable asset class is in question.
DXY wins. AUD toast in due course.
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