Global macro/China PMI

The China data over the weekend was probably enough to arrest what looked like a sizeable sell-off in iron ore, over the weekend. At one point IO was down some 4%, but rallied back and then some, most likely on the stronger China PMI data, below (where, more or less, everything improved).

The US ISM manufacturing data also possibly explaining the spike in US bond yields, alongside that stronger China data, with “prices paid” indices pushing a little higher.

We continue to think inflation will be well behaved, but the US is assuredly not on the verge of a near term recession, with growth and employment data trundling along nicely.

Each strong print pushes out the “rate cut window”; recall at one stage late last year we were talking about whether we’d see a “surprise January cut”, which has then become the “surprise March” cut, and now the “post June” cut.

Cuts are coming, but the push back means yields stay somewhere around this “low 4s” level (i.e. no capital gains expected) for now, and that these “low 4s” don’t seem high enough to threaten equities (more specifically, corporate profits, who have termed out their debts).

This is just “soft landing” narratives, written a different way, and it is good for stocks, and okay for bonds.

We’d stress that US equities are pretty pricey, and we prefer spreading the capital around, but we remain slightly overweight international equities at the DAA level.

Important Information: This document has been prepared by Aequitas Investment Partners ABN 92 644 165 266 (“Aequitas”, “our”, “we”), a Corporate Authorised Representative (no. 1284389) of C2 Financial Services, (Australian Financial Services Licensee no. 502171), and is for distribution within Australia to wholesale clients and financial advisers only.

This document is based on information available at the time of publishing, information which we believe is correct and any opinions, conclusions or forecasts are reasonably held or made as at the time of its compilation, but no warranty is made as to its accuracy, reliability or completeness. To the extent permitted by law, neither Aequitas nor any of its affiliates accept liability to any person for loss or damage arising from the use of the information herein.

Please note that past performance is not a reliable indicator of future performance.

General Advice Warning: This document has been prepared without taking into account your objectives, financial situation or needs, and therefore you should consider its appropriateness, having regard to your objectives, financial situation and needs. Before making any decision about whether to acquire a financial product, you should obtain and read the relevant Product Disclosure Statement (PDS) or Investor Directed Portfolio Service Guide (IDPS Guide) and consider talking to a financial adviser.

Taxation warning: Any taxation considerations are general and based on present taxation laws and may be subject to change. Aequitas is not a registered tax (financial) adviser under the Tax Agent Services Act 2009 and investors should seek tax advice from a registered tax agent or a registered tax (financial) adviser if they intend to rely on this information to satisfy the liabilities or obligations or claim entitlements that arise, or could arise, under a taxation law.

Receive our investment insights

Something went wrong. Please check your entries and try again.