Morning Macro 27th November
No key global news sees risk rally on positive flows, S&P500 now just 1.5% below all-time highs, Bitcoin at $91.4 has rallied 13% from the lows, bonds rally both sides of the Atlantic, most shorted stocks rise (Beyond Meat +19% on the day), precious metals rally with silver close to ATH 54.46., and nicely correlated, margin debt makes new record highs!
The market reacts favourably to the UK budget, ‘better than expected’! Bonds and the Pound rallied. A mix of 88 different fiscal policies. GDP growth forecast down, inflation forecast up, tax burden the highest on record, and only a marginal rise in the fiscal buffer. From a macroeconomic standpoint, the government and the Office for Budget Responsibility (OBR) forecast that the new measures — combined with public spending discipline will bring debt down as a share of GDP by 2030–31, aiming to restore long-term fiscal stability. The pound rallied 0.5% against the dollar, with the 10-year bond yield falling 10bp, a big sigh of relief. The market now focuses back on employment with 10 yr yield creeping down towards key 4.38% support (Chart 1, Bloomberg), with a Dec 18th BOE 25bp cut fully priced and 66 bp of cuts priced over the next 12 months.
JP Morgan Chairman & CEO Jamie Dimon backs Rachel Reeves after the budget with an announcement to build a new HQ in London: “The UK government’s priority of economic growth has been a critical factor in helping us make this decision.”
Chicago PMI falls to 36.3 (est. 45.5), deepening what is now a two-year contraction in Midwest business activity. It starkly illustrates the continued dominance of services growth over a struggling manufacturing sector, and it points to the growing importance of AI-related spending in driving economic activity. Positive news was a fall in weekly jobless claims to 216k (est 225k)…… U.S. 10-year falls to below 4.00%.
YoY % Change in Home Prices in U.S. (via Zillow)… Miami: -3.1% Jacksonville: -4.4% Orlando: -4.5% Port Saint Lucie: -4.7% Tampa: -5.1% Fort Lauderdale: -5.3% West Palm Beach: -5.9% Key West: -6.9% Naples: -7.8% Sarasota: -9.7% St Petersburg: -9.9% Cape Coral: -10.4% Fort Myers: -12.1%…… this directly hits consumer confidence and retail spending.
Precious metals continue their rally. Silver targets 54.46 breakout level. (Chart 2, Bloomberg)
The stable coin Tether bought more gold than every central bank last quarter (Chart 3, FT, World Gold Council)
Berkshire Hathaway’s cash position is now almost 30% of their total assets, highest on record.
It’s not an AI scare. It’s an OpenAI scare. (Chart 4, Steno Research, Bloomberg, Macrobond)
The US Treasury posted a $284.4 billion deficit in October, the worst opening month to any fiscal year in history.(Chart 5, ZeroHedge)
US margin debt jumped +$57.2 billion in October, to a record $1.2 trillion. This marks the 6th consecutive monthly increase. Margin debt for trading has risen +$285 billion, or +32%, year-to-date. Over the last 6 months, margin debt has surged +39%, the biggest jump since 2000. This has been an even larger increase than during the 2021 meme stock mania…. What could possibly go wrong? (Chart 6, FINRA)
U.S. Thanksgiving holiday today.
