Antipodean Capital Macro Strategy Daily Dec 18 - Falling Oil & commodity prices are finally driving an EPS downgrade cycle for ASX resource shares. This theme will soon spread to global and US miners and energy shares, like in 2015.

Macro: US data softness: Further hefty falls in the NAHB housing survey last night (60 to 55) and a 13 point Fall in the Empire NYK PMI survey (23 to 10) did little to assist stocks, and did dent somewhat the USD, although it remains within its multi month range for now. Our sense remains that data globally is slowing, and that the US will soon play catch up. This should weaken stocks and US sensitive growth assets, the USD and lower US yields. The Fed Wed night AEST remains a key development though, and we sense markets will be disappointed as the Fed is unlikely to take a scythe to their dot points without meaningful changes in macro forecasts, of which we expect only small inflation related changes.

Summary: US markets fell by another -2% last night, but the most noticeable aspect of the fall was how orderly it was. There was modest demand for safe haven assets – Gold, JPY, Bonds, volatility – but not to the extent as would normally occur during a panic driven sell off. This suggests to us that we are nowhere near a panic driven low for stocks as yet. Weaker US regional PMI and NAHB housing data didn’t help the cause.

New trades: None.
FX: Short $JPY at 112.80 risk 114.20 tgt 110. Long EUR$ at 1.1360 risk 1.1260 target 1.18. Sold NZDJPY 78.30 risk 78.90 target 75. Long JPYKRW at 9.85 risk 9.76 target 10.30
BONDS: Long 2 units ASX Banks 5yr CDS at 54bps, target 140. Long NZ 10s short NZ 2s at 104bps risk 130bps target 50bps. Sold Portugal 10yr bought German Bund at 158bps, risk 110bps target 350bps. Bought US 10’s at 2.91% risk 3.1% target 2.6%. Sold HYG at 83.55 risk 85 target 80.
EQUITIES: Long ASX All Ordinaries Top 100, Short ASX Small Ordinaries at 0.81x ratio. Stay short 1 unit Homebuilders at 751. Short US Banks Index at 93.25 risk 100 target 80. Stay short Dow Transports at 10375 risk 10800 target 9000.
COMMODITIES. Long Silver short Gold at 83.9x risk 87 target 65. Long Silver 14.08 risk 13.85 target 14.80+. Bought Gold at 1243 risk 1230 target 1300.