Huge rallies in risk assets greeted Trump's election win on Wednesday but quietly in the background China panicked with the announcement that local governments would be bailed out.
Immediatley after the election news and, as the People's Bank of China was busy trying to support the onshore Yuan, CEO's of foreign companies operating in China were saying that they would have to leave the country as tarriffs would make operating there unviable.
What Are Tariffs and How Do They Affect You? [Investopedia]
For America it's maybe a new start, but from a bad place but for China the writing is truly on the wall.
And for everyone the elephant in the room is back. On 1st Jan the US debt ceiling will be back in place and it's cap will be set at the current debt level.
It's difficult to know how the US Government is going to operate for the first quarter 2025.
And it's the Biden administration that is going to have to deal initially with the problem as Inauguration Day is 20 Jan. We feel sure that the first thing Trump would do is shut down the US Government and dramtically slash staffing and budgets. He's already said pretty much that.
Trump's got a lot of work to do (and Elon) but at least they know what they have to do.
For Xi things must look pretty bleak with tarriffs incoming, deflation, a banking and local government crisis not to mention the chaos of property markets. Currency devaluation and pegging the Yuan to gold must look like the only option.
It will break Xi and it will break the Chinese. economy. And the price of gold will go parabolic
Iran Vows a ‘Strong and Complex’ Attack on Israel, WSJ Says [Bloomberg]
Taxpayers can't pay for 'misconduct of banks' - Swiss finance minister [Reuters]
China Trade Balance October 2024
China CPI October 2024
USD / Onshore Yuan Daily
China Unveils $839 Billion Debt Swap to Rescue Local Governments [Bloomberg]
Six cities, one question: is China’s property market turning a corner? [FT]
China Reviews Debt Swap Plan as Top Legislature Meeting Begins [Bloomberg]
Chinese Economic Slowdown Looks Even Worse Across Some Provinces [Bloomberg]
Chinese Markets Rattled as Trump’s Return Stokes Tariff Fears [Bloomberg]
China Sets Yuan Fix at Weakest Since 2023, Greenlighting Decline [Bloomberg]
Japan Overall Wage Income September 2024
Nissan Cuts Outlook, Announces Restructuring With 9,000 Job Cuts [Bloomberg]
All quiet on the Japanese front and markets ( FX ) were quiet over the election.
FED cuts 25bps. A terse Powell did what the markets told him to do and the narrative changed from inflation being the concern to jobs being more of the focus. His opening remarks were telling, referencing inflation having eased to 2.1 % which is really cherrypicking his statistics.
US Durable Goods September 2024
US Non-Manufacturing ISMs October 2024
Although employment is holding up as Powell referenced in his speech, his mates at the St Louis FED surely must have been showing him the job job openings report - falling off a cliff. Job losses are continual so that unemployment rate will break higher soon.
US Job Openings - St Louis FED
Reverse Repo Facility
RRP show less liquidity around but it's still elevated in a longer context.
Facebook, Nvidia ask US Supreme Court to spare them from securities fraud suits [Reuters]
Pimco Says Private Credit Is Overvalued as Complacency Spreads [Bloomberg]
Bitcoin was one of the big winners of the US election, hitting an all time high. Trump's support of Bitcoin drew in a younger voter to his ranks, but more importantly his determination to purge the corrupt and politically motivated SEC and bring Crypto innovation to the US finally, resonated with the Make America Great Again mantra.
There is a bill going through the house to create a federal Bitcoin reserve for the US. And the states want that too.
Whether that is realistic now may be too hopeful but it's a change of narrative for the US Dollar.
The massive cup and handle formation below could lead to an explosion in price.
Bitcoin Daily
Canada Unemployment October 2024
Justin's Trudeau's time is up too. The next election has to be before October 20, 2025 but we doubt he'll last that long.
His many enemies ( tax paying Canadians ) will be following Trump's progress closely and yet more dithering from Trudeau will force an early election.
A hawkish cut from the Bank of England of 25bps.
Surprising were the forecasts for the coming years whilst expecting inflation to go lower short term:
RBA holds. Statement on Monetary Policy [RBA]
No surprises but further discord with central bank / government alignment. The big issue in Australia is inertia. Rates are too high for mortgage holders but inflation is not coming down because government is addicted to spending.
Australia's economy expanded as the Howard / Costello political partnership decided to sell Australia's wealth (minerals) to the ever expanding Chinese manufacturing machine and that lead to an increase in the value of the Australian dollar from below 50 UC cents in 2001 to a peak of 1.10 US dollars in 2011. But since then, as China buys less iron ore, and the Australian government deliberately antagonised China ( whilst standing behind the US ) we have seen a 13 year decline and we're now at a point where we may a sustained fall below 0.6275 US.
The Chinese economy looks unlikely to be able to help Australia.
AUD / USD Monthly
Australia Exports / Imports September 2024
Canberra takes on big tech – and Gen Alpha – with social media bans [AFR]
Bond markets trim rate cut bets on RBA’s inflation woes [AFR]
RBA baffled by home loan growth despite rate hikes [AFR]
NAB arrears hit highest since 2020, and could worsen[AFR]
Public servant wages rise to $232b at fastest pace in 15 years [AFR]
Yet more Trump.
US CPI and PPI are the key indicators
Will risk assets rally futher ? Will bond yields back up again as the debt ceiling issue comes into focus ?