The Daily Update - UAE-China: Closer Economic Ties

The Daily Update - UAE-China: Closer Economic Ties

Xi Jinping’s state visit to UAE has perhaps been overshadowed by media coverage of the Trump-Putin meetings in Helsinki earlier in the week: the visit is part of UAE-China week running from 17-24 July focusing on bilateral relations and enhancing the trading and cultural relationship between the countries. Importantly, we see the event as highlighting the importance of China’s Belt and Road Initiative (BRI) (also known as One Belt, One Road  or OBOR) which also fits with a plan by Sheikh Mohammed bin Zayed Al Nahyan, Crown Prince of Abu Dhabi, to ‘Restore the Silk Road’ trading route.

The Daily Update - When to Worry About an Inverted Curve

The Daily Update - When to Worry About an Inverted Curve

Over the past week the term spread between 2-year and 10-year US Treasuries has averaged 25bps – equivalent to just one more Fed rate hike. Also earlier this week the 3-month Treasury bill yield touched 2% for the first time since 2008; this means that even short-term bonds now yield more than US stocks for the first time in a decade – becoming a viable alternative for those apprehensive about both stocks and bonds.

The Daily Update - Turkey - Keeping it in the Family

The Daily Update - Turkey - Keeping it in the Family

On Friday Fitch downgraded Turkey’s long-term credit rating by one notch, to BB, negative outlook; in-line with Moody's, and one notch above S&P’s BB- rating. We highlighted our concerns last month, ahead of the elections, as the economic fundamentals looked increasingly shaky and the lira collapsed; currently down 20.5% ytd. Also, inflation hit a 15-year high of 15.39% yoy in June off the back of the tumbling lira.

The Daily Update - The Real Yield Trap

The Daily Update - The Real Yield Trap

The real yield of investments is not so important over a shorter time horizon, however, the devaluation of the particular investment due to inflation, over time, really needs to be noted; historically it remains a good measure of value.

When you get to extremes and prolonged periods of fabricated adjustment - central banks call it the monetary tool box, the kick-back from the adjustment, the bounce back - the correction of the level of rates could be extreme.

The Daily Update - Moody's Upgrades Qatar

The Daily Update - Moody's Upgrades Qatar

On Friday, the rating agency Moody’s followed Fitch by raising Qatar’s outlook back to stable from negative, whilst reaffirming the long-term issuer and foreign-currency senior unsecured debt ratings at Aa3. According to a statement issued with the assessment Moody’s stated ‘Qatar can withstand the economic, financial, and diplomatic boycott by Saudi Arabia, the UAE, Bahrain, and Egypt in its current form, or with possible further restrictions, for an extended period of time without a material deterioration of the sovereign’s credit profile’, adding ‘This assessment is in part based on evidence of broad resilience of Qatar’s credit metrics to the economic and financial blockade over the past 13 months’.

The Daily Update - Oil & Trade

The Daily Update - Oil & Trade

The International Energy Agency’s (IEA) July report, released on Thursday, received some interest after the crude benchmark posted its biggest one day decline since September 2016 (on Wednesday) falling 6.9% to USD$73.40 at the close.  News that some Libya supply was resuming and escalating US-China trade tensions have been a factors unsettling the market and on Tuesday the US announced it is looking to impose additional tariffs on USD200bn of Chinese imports.

The Daily Update NATO - More Spending More Quickly

The Daily Update NATO - More Spending More Quickly

It’s a quiet day in markets with US Core CPI a non-event coming in bang on forecast at 2.3% yoy. Headlines were focused on Trump’s travels and the latest NATO Summit where a “very happy” Trump held a press conference confirming he can now “believe in NATO” whose members have committed to “up spending [by] $33bn” with a commitment from a “very unified and much stronger” Alliance to swiftly meet the NATO 2% of GDP spending target. Agreeableness does not a dealmaker make.

The Daily Update - Trade Wars; Watch Out Global Growth

The Daily Update - Trade Wars; Watch Out Global Growth

In yesterday's daily, we discussed our thoughts on the recent escalation of a global trade war and the subsequent effects, we continue to pen our views:

The dangerous consequence of the US administration’s decision to embark on this course of action is that it could easily lead to another financial collapse and world leaders will need to think quickly about how to avert this.

The Daily Update - Trade Wars; Watch Out Trump

The Daily Update -  Trade Wars; Watch Out Trump

In our two-part daily, we'll be discussing our thoughts on the Trump administration's tariffs:

Donald Trump’s decision to start a global trade war, and subsequent escalation by the US administration could become very damaging for the world economy. How this impacts the consumer can be seen through the recent decision by Tesla to raise prices in China in an effort to pass on the additional costs.

The Daily Update - Trade War Looms

The Daily Update - Trade War Looms

For the first time in many years, tomorrow’s Non-Farm Payrolls, thought to come in at around +195k, is taking second stage as the next wave of Trump tariffs on Chinese imports is due to be imposed. Broadly, a tariff of 25% on $34bn of China’s exports to the US tomorrow with a further $16bn to come at a non-specified later date. China have already responded saying it would retaliate ‘equal scale, equal intensity’ targeting food products such as soybeans and rice but also autos in the first round.

The Daily Update - Bond Connect - The Story Continues

The Daily Update - Bond Connect - The Story Continues

As we mentioned, in yesterday’s daily, we expect Chinese government bonds will SIGNIFICANTLY outperform as the internationalisation of the renminbi continues.

So, the fact that investors will hold more renminbi in the future is a close to a certainty as one can get in the uncertain global financial markets; the only real debate is how these holdings will eventually come about.

The Daily Update - Happy Anniversary Bond Connect!

The Daily Update - Happy Anniversary Bond Connect!

Last week we put a piece out on the Bond Connect, and today marks the first year anniversary since its launch. 

Foreign institutions who can access Chinese Government bonds via Bond Connect now total around 315; although the aggregate amount still represents less than 2% of the Chinese bond market. Those numbers are, however, growing rapidly and will likely accelerate further once UCITS funds are given approval.

The Daily Update - As One Honeymoon Starts, Another Ends

The Daily Update - As One Honeymoon Starts, Another Ends

As we mentioned on Friday, it was indeed third time lucky for Andrés Manuel López Obrador’s (AMLO) as he won a landslide victory in yesterday’s Mexican Presidential Election. Figures suggest that AMLO could have won over 53% of the vote, well above what the polls were indicating beforehand. In contrast, the leader of a right-left coalition Ricardo Anaya, polled about 22%, with centrist candidate José Antonio Meade taking approximately 16%, both well below what was being suggested by the polls.

The Daily Update - Third Time Lucky?

The Daily Update - Third Time Lucky?

Mexico’s tide of political fortune certainly looks to be in Andrés Manuel López Obrador’s (aka AMLO’s) favour as the country heads to the polls on 1 July for the Presidential Election. This is the third time that the hard-left candidate AMLO has run for President but this time his campaign looks to have gained sufficient traction with the voters to put him in poll position. More recent polls such as Consulta Mitofsky (excluding non-respondents) show AMLO ahead by a considerable margin at 48.1% of the vote.

The Daily Update – Bond Connect - One Year On

The Daily Update – Bond Connect - One Year On

The 3rd of July 2017 marked the launch of Bond Connect, which in years to come will probably be remembered as a watershed moment along the path of internationalisation of the renminbi. If looked at narrowly, the significance of Bond Connect can sometimes be overlooked, so as we approach the first anniversary of it’s launch, we revisit the scheme and the implications for financial markets in China, and the longer term impact on the global financial system.

The Daily Update - Treasury Yields, The TINA Trade and Trump Tariffs

The Daily Update - Treasury Yields, The TINA Trade and Trump Tariffs

Stocks have continued their 2-3 week sell-off (since June 11th) with the S&P and Dow down more than -2% and -4% respectively, US Treasury 10-year yields have today fallen below 2.85% (from above 3% earlier in the month) as have 30-year yields from 3.15% to 3% – after a strong auction yesterday demonstrated support at these levels. Meanwhile, Bloomberg splattered their front page with “Hedge Fund Managers See Echo of Past Crashes in Markets” with the likes of Greg Coffey calling, “The ghosts of 2000 are upon us”.

The Daily Update - Hello Trump, Bye Bye Global Growth

The Daily Update - Hello Trump, Bye Bye Global Growth

“Protectionism” and “Trade-Wars” have been some of the most commonly used phrases across newswires this year, with no signs of concerns abating anytime soon as Mr Trump marches ahead with his aggressive trade and investment policies. Just what he will achieve is completely unknown, but what we do know is that trade wars and protectionism are never a good thing for any nation, and are the greatest threat to global growth.

The Daily Update - Turkey's Elation / Germany's Rejection

The Daily Update - Turkey's Elation / Germany's Rejection

The President of Turkey, and leader of ruling Justice and Development Party (AKP), Recep Tayyip Erdogan has won the highly charged election that will allow him to govern for the next 5 years. The win will allow him to introduce sweeping new powers, which some, opposition included, are seen as a ‘blatant power grab’. Under the new system, the president is permitted wide-ranging executive authority, curtailing parliament's powers, as well as the office of prime minister being abolished. With 99 percent of the votes counted, Erdogan has 53 percent of the vote, with his closest rival, Republican People’s Party or CHP, trailing with 31 percent of the vote. With around 59mln people eligible to vote, it is claimed the participation rate was an astonishing 90%.

Please read this important information before proceeding. It contains legal and regulatory notices relevant to the information on this site.

This website provides information about Stratton Street Capital LLP ("Stratton Street"). Stratton Street is authorised and regulated by the UK's Financial Conduct Authority. The content of this website has been prepared by Stratton Street from its records and is believed to be accurate but we do not accept any liability or responsibility in respect of the information of any views expressed herein. The information, material and content provided in the pages of this website may be changed at any time by us. Information on this website may be out of date and may not be updated or removed.

The website is provided for the main purpose of providing generic information on Stratton Street and on our investment philosophy for the use of financial professionals in the United Kingdom that qualify as Professional Clients or Eligible Counterparties under the rules of the United Kingdom Financial Conduct Authority (the "FCA"). The information in this website is not intended for the use of and should not be relied on by any person who would qualify as a Retail Client. Products and services referred to on this website are offered only at times when, and in jurisdictions where, they may be lawfully offered. The information on this website is not directed to any person in the United States. The provision of the information on this website does not constitute an offer to purchase securities to any person in the United States (other than a professional fiduciary acting for the account of a non-U.S person) or to any U.S. person as such term is defined under the Securities Act of 1933, as amended.

The website is not intended to offer investors the opportunity to invest in any Alternative Investment Fund ("AIF") product. The AIFs managed by Stratton Street are not being marketed in the European Economic Area ("EEA") and any eligible potential investor from the EEA who wishes to obtain information on the AIFs will only be provided with materials upon receipt by Stratton Street of an appropriate reverse solicitation request in accordance with the requirements of the EU Alternative Investment Fund Managers Directive ("AIFMD") and national law in their home jurisdiction. By proceeding you confirm that you are not accessing this website in the context of a potential investment by an EEA investor in the AIFs managed by Stratton Street and that you have read, understood and agree to these terms.

No information contained in this website should be deemed to constitute the provision of financial, investment or other professional advice in any way. The website should not be relied upon as including sufficient information to support any investment decision. If you are in doubt as to the appropriate course of action we recommend that you consult your own independent financial adviser, stockbroker, solicitor, accountant or other professional adviser. Past performance is not necessarily a guide to the future. The value of investments and the income from them may go down as well as up. An application for any investment or service referred to on this site may only be made on the basis of the offer document, key features, prospectus or other applicable terms relating to the specific investment or service.

Where we provide hypertext links to other locations on the Internet, we do so for information purposes only. We are not responsible for the content of any other websites or pages linked to or linking to this website. We have not verified the content of any such websites. Such websites may contain products and services that are not authorised in your jurisdiction. Following links to any other websites or pages shall be at your own risk and we shall not be responsible or liable for any damages or in other way in connection with linking.

By using this site, you should be aware that we may disclose any information that we hold about you to any regulatory authority to which we are subject, or to any person legally empowered to require such information.

This website uses cookies to improve user experience, by clicking the "I Accept" button below means you consent to the use of cookies on our website.