Antipodean Capital Macro Strategy Daily Jan 3 2019 - Weaker US & China Markit Manuf PMI’s, along with Composite EU PMI’s are consistent with a global GDP downgrade cycle. That should hurt stocks and growth assets, but it didn’t last night.

Macro: Growth Assets: Will the buying seen over the last 4 days peter out and be followed by a new low? Or will it extend with a new sense of optimism for 2019 that drives stocks back to the highs? Our own view favours the new low, mainly because we see a US GDP downgrade cycle as being bad news for stocks, growth and thus corporate Fwd EPS. Time will tell whether that view pans out as we expect, or not. Last night saw weaker US Markit Manuf PMI data in the US, following on from weaker Richmond Fed, Dallas Fed and Kansas Fed PMI data (even if Chicago Fed Manuf PMI was softer near it’s highs). Also in the EU we saw French PMI’s dip below 50 along with Italy, and in China Markit PMI Manuf data dipped into the mid 49’s. That didn’t dent growth assets, as stocks regained early Asian 2% losses.

Summary: Markets started out the NY as they ended 2018, namely oscillating sharply. In Asian trade equity futures responded to weaker China PMI and EU Composite PMI readings by falling as much as 2%, but those losses were reclaimed from the US open and continued all through the session. The USD failed to fall due to weaker EU PMI data, while US 10yr yields continued to slide hitting 2.65%. The stronger USD stalled commodities.

New trades: None.
FX: Short $JPY at 112.80 risk 114.20 tgt 105. Long EUR$ 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.