Antipodean Capital Macro Strategy Daily Feb 11 - Growth assets have rallied too far relative to growth and inflation estimates and Fwd earnings estimates. Beware. Equity technical are toppy. Buy Gold & Silver, sell USD Index today.

Today’s themes: Last Thursday should have produced a peak in global stocks, commodities and HY bonds, and should have ended the 7 week run higher from late Dec lows. All major growth assets are at risk of either a significant 50-61.8% retracement of that 7 week rally, or at worst a retreat back to new lows below those of Dec. It appears that building growth pessimism, the absence of a trade tariff deal with China along with a new “tariff front” against EU auto exports, and threats this poses to global equity earnings, may be the key catalysts for lower growth assets. Central banks are now recognising the risks, but are a ways away from cutting rates in response. Until they do, growth pessimism may continue to rise, and growth estimates weaken.

Macro: Global: The downgrade cycle for growth and inflation and thus Fwd EPS estimates for 2019 continues. This was, of course, a major theme in our Q1 review, and now the world’s central banks are starting to sit up and take notice. However central banks don’t move from hiking to cutting rates, they instead move to neutral first, and that is where most central banks now are at, but their forecast downgrades are unsettling investors bullish on growth, rightly so. Until growth estimates stabilise, growth assets will weaken, and likely from current levels.

Summary: Markets initially declined Friday on renewed pessimism around US-China tariff resolutions, and the threat of US tariffs on EU auto exports. Stocks fell into mid-session but endured an afternoon rally in US time to end unchanged. US yields fell, and the USD edged higher yet again. A higher USD is weighing on Oil & Copper prices, although weaker stocks buoyed Gold & Silver. AUD & NZD finally stabilised, but sell rallies.

New trades: Buy Gold at 1314 risk 1304 target 1350. Buy Silver at 15.82 risk 15.64 target 17. Sell USD Index at 96.40 risk 97 target 94.
FX: Short AUD .7170 risk .72 target sub .70.
BONDS: Long 2 units ASX Banks 5yr CDS at 54bps, target 140. Long NZ 10s sold NZ 2s at 104bps risk 130bps target 50bps. Sold Portugal 10yr bought German Bund at 158bps, risk 110bps target 350bps. Sold HYG at 84.81 risk 85.25 target 79.
EQUITIES: Long ASX All Ordinaries Top 100, Short ASX Small Ordinaries at 0.81x ratio. Sold Transports 10198 risk 10500 target 8500. Bought March VIX 17.42%. Sold ASX200 at 6060 risk 6110 target 5600.
COMMODITIES. Long Silver short Gold at 83.9x risk 87 target 65. Sold Copper at 2.83 risk 2.90 target 2.50.