Antipodean Capital Macro Strategy Daily Nov 19 - Did the Fed Friday “blink”, and have they started a subtle dovish messaging shift re Fed Funds in response to a data cycle peak and falling stocks? We add USD shorts and some EM equity longs.

Today’s themes: Did the Fed “blink” on Friday, and telegraph a subtle shift in their view on Fed Funds due to a peak in the US activity/PPMI and inflation cycles? And have they finally responded, again subtly, to the falls seen in US equities over the last 8 weeks?

Macro: US: Are the Fed responding the data cycle peaks and stocks weaknesses by signalling a desire to slow rate hikes from here? (Theme: The LT daya cycle in the US may be peaking out, along with the ST and MT cycles. Activity/PMI and inflation cycles look like they are rolling over. If they are, then the Fed already has rates, with a Dec hike pencilled in, neutral or slightly tight compared to long run and current Core inflation estimates. We thought it would be at the -18/-20% S&P zone that they would respond to falling stocks too, but are they moving earlier than we thought? Possibly. If so, they may be set to provide relief to US and global stocks, and may lower US yields and the USD in the process).

Summary: US stock markets added further modest gains Friday, but most notable was the shift in Fed rhetoric around recent data outcomes and global growth concerns, and what it means for Fed policy as their stance approaches neutral. Finally we appear to be seeing Fed recognition of the data cycle, but also a response to equity weakness. The USD & yields fell, commodities and EM stocks regained ground.

New trades:. Close long JPYKRW from 10.03 at 9.94 (-1%). Close short AUDJPY from 82.20 at 82.50 (-0.4%) & short CADJPY from 85.85 at 85.75 (+0.1%). Sell $JPY at 112.80 risk 114.20 tgt 110. Add Kospi longs.
FX: Short EURSTG at .9010 risk .9150 target .84. Long AUDNZD 1.0750 tgt 1.12 risk 1.05. Long GBP 1.2770 risk 1.27 target 1.33.
BONDS: Long 2 units ASX Banks 5yr CDS at 54bps, target 140. Long NZ 10s sell NZ 2s at 104bps risk 130bps target 50bps. Sold Portugal 10yr bought German Bund at 158bps, risk 110bps target 350bps. Long US 2-10 curve flatteners at 26bps/35bps risk 40bps target 10bps.
EQUITIES: Long ASX All Ordinaries Top 100, Short ASX Small Ordinaries at 0.81x ratio. Short Homebuilders 755, add at 800 risk 850 target 650. Short R2K at 1550 risk 1575 target 1450. Long Dec VIX at 17.6%. Short ASX200 at 5840 risk 5945 target 5600. Long Kospi at 2088 risk 2050 target 2200, add 2 units at 2092.
COMMODITIES. Long Silver short Gold at 83.9x risk 87 target 65. Long Silver at 14.08 risk 13.85 target 14.80+