China is concerned about US economic sanctions and tariffs, Chinese Vice Premier Liu He told Treasury Secretary Janet Yellen Tuesday. The Chinese side expressed its interest in issues including the lifting of additional tariffs on China, sanctions by the US and fair treatment of Chinese enterprises, Liu said in the video call, according to a statement from China’s Ministry of Commerce. 

The US 2s10s curve has inverted again, highlighting the burgeoning concerns that too-high inflation and too-low growth will be the themes for the rest of 2022. There’s an air of caution across a number of Asian markets Tuesday, even as the risk-on narrative gets a bump from US-China talks and the Caixin PMI report.

The spike in US yields and related curve inversion is ruining the good mood in markets from earlier in the Asia session. The CSI 300 Index is down about 0.9%, having been up as much as 0.8% earlier. The Hang Seng Index has erased a 1.7% gain to trade close to flat.

RBA Raises Interest Rates in Quickest Tightening on Record. Australia’s central bank delivered its first ever consecutive half-percentage point interest-rate hike and committed to keep tightening monetary policy to quell accelerating inflation.

London’s property market is in flux with house prices continuing to rise and apartments declining in value. Apartments are down more than 11% from their peak in August 2020, with the median sale now less than 400,000 pounds.

A potential rollback of US tariffs on Chinese goods has been received with little applause by Chinese stocks, which have edged lower. Any lifting of tariffs isn’t viewed as a fork in the road. Granted, they won’t be read as bad news -- it is bringing a bit of a bounce to some textile stocks. But these old growth drivers are now so insignificant in a market obsessed with EVs, green stocks, biotech and consumption, that it’s barely making a blip on the radar.

함의: 관세장벽이 되돌려지는 업종이 흔히 생각하는 최근 성장동력을 가진 곳이 아님.

In a worrying sign for global equity bulls, semiconductor stocks are once more leading the market lower.
The MSCI AC World Semiconductor Index has fallen to its lowest since 2020 relative to the broader gauge, down close to 40% this year. Often seen as a leading indicator for the stock market, chipmakers were already under pressure to increase prices to counteract the rising costs of materials and logistics. But Micron Technology’s profit warning last week -- the largest US maker of memory semiconductors -- flagged demand is now cooling for chips used in computers and smartphones.

함의: 경기를 선행하는 반도체 업종에서 반전의 여지는 아직 없음.

In a recession scenario, oil may fall to $65/bbl by year-end, and potentially to $45/bbl by end-2023, Citi analysts including Francesco Martoccia and Ed Morse say in a July 5 note.

함의: 물가가 경기침체로 낮아지는 시나리오임.

I find it laughable that many people think yields have already peaked for this cycle. Yes, yes, I know policy operates with a lag, and a growth slowdown is coming, and that supply-side issues aren’t solved by higher rates. But, in response, inflation doesn’t come down through hope and optimism alone, the growth slowdown won’t be severe without radical tightening, and supply-side price pressures still lead to higher inflation expectations and hence a stickier long-term problem. So, what’s the risk that I’m wrong? It’s that there’s a deep global recession coming very soon that is far more horrible than I can envision. Either way, it’s going to get much worse for US stocks in the second half.

함의: 금리는 물가 대비 여전히 낮고, 기대만큼 물가가 빠르게 안정되긴 어려움. 한 가지, 급격한 경기침체를 제외하면, 두 가지 경우에서 주가는 공히 부정적임.

The US economy is firmly in the middle of a slowdown that’s turning out to be worse than expected amid the war in Ukraine and China’s Covid Zero policy, according to Morgan Stanley strategists.

The euro sank to a 20-year low against the US dollar as investors pared bets on European Central Bank interest-rate hikes given the growing risk of a recession in the region. 

US Recession Chances Surge to 38%, Bloomberg Economics Model Says. The probability model, which incorporates a variety of factors ranging from housing permits and consumer survey data to the gap between 10-year and 3-month Treasury yields, is now flashing a 38% probability of a recession over the next 12 months. That’s up from around 0% just a few months before.

함의: 경기침체가 변수에서 상수로 이동하고 있음.

The Bank of England said the global economic outlook has “deteriorated materially” after surging commodity prices pushed up inflation around the world, posing a further downside risk in months ahead. The UK central bank said volatility in the cost of energy and raw materials poses a significant risk of disruption that could amplify economic shocks in the future. Officials will conduct a probe of the “opacity” and “lack of data” in commodity markets and how those links feed vulnerabilities.

함의: 영국 중앙은행은 에너지 및 원자재 가격이 촉발시킬 불확실성에 경제가 악화되고 있음을 지적함.

There are signs equity traders are entering the acceptance stage of handling a bear market.

A flattening S&P 500 index options skew -- the difference between the price of puts and calls -- suggests the implied risks of up and down moves are becoming more equal. The Cboe VVIX Index, a measure of expected volatility in the VIX gauge expected stock volatility, is falling. There’s also no clear bias in the flow of money into exchange-traded funds betting on either higher or lower volatility. The lack of clear direction from options markets isn’t great news for stocks, but it’s not terrible either.

함의: 옵션 시장은 지수가 레인지로 트레이딩 될 때의 포지션이 구축되어있음.

Today has seen a sharp sell-off in the EUR, not helped by weak French data, with the currency dropping against almost all G10 peers. Europe is uniquely exposed to the unfolding global energy crisis, and it will be a miracle if the region avoids a recession, while high inflation is already here.

함의: 에너지 수급에 가장 취약한 유럽이 경기침체를 겪지 않는게 오히려 기적임.

Until now, France could boast the lowest inflation in the entire euro-area -- with the exception of island state Malta -- after 25 billion euros ($26 billion) in pre-election giveaways kept the rate in check. Macron’s so-called “tariff shield” aimed to protect consumers from surging oil and natural gas costs. Yet rising prices are becoming harder to offset as they spread beyond energy to engulf food, goods and services. Meanwhile the government’s fiscal power is narrowing as rising borrowing costs mean public finances reach what Finance Minister Bruno Le Maire describes as an “alert level.”

함의: 소위 관세방패로 유럽서 가장 낮은 인플레이션을 유지한 프랑스도 재정지출 한계에 도달함.

The sharp decline in new orders while inventories remain robust is unambiguously bad news. The odds on a recession are rising. That feeds into a narrative that had already taken root among asset allocators. The latest survey of international money managers by Absolute Research Ltd. asks respondents to estimate the probability of various outcomes and shows that “TINA,” the idea that There Is No Alternative to stocks, is more or less at an end.

함의: 'TINA'라는 신조어가 만들어질 때야말로 거시경제 환경을 무시한 투자의 정점이었음.

The Fed must hike to 4-5% by next year, Bill Ackman said, which hopefully will be enough to snuff inflation. The mild and transitory price growth being priced by the market as of Friday is a fiction, he tweeted. Rates are going up a lot soon. The sooner the Fed quells inflation, the better for longer-term bonds and long-term financial assets like equities. That will save the economy in the longer term at the expense of short-term pain.

함의: 시간을 끌지않고 단기에 큰 폭으로 금리를 올려야 장기적으로 자산시장에 도움이 된다고 주장함.

At Bill Hwang’s Archegos Capital Management, staffers publicly professed their allegiance to “God, Hwang and Archegos” and the founder often described himself as “the money guy who teaches the Bible to pastors.” The “personality cult” of the collapsed family office is at the heart of a lawsuit filed Tuesday by former Archegos managing director Brendan Sullivan, who is seeking to recover $50 million he says is owed from deferred bonuses he was forced to invest with the company. Hwang, he says, did whatever it took to make money, with the goal of becoming the “richest person in the world.”

함의: 우상숭배에 가까운 기형적 구조의 조직, 그리고 끝없는 탐욕이었음.

In all this excitement, it can be easy to forget that the current bear market at the index level is so far shallow and short compared to previous downturns. The S&P has been in a bear market for six months, which is below the median of eight months and average of eleven months for bears going back to 1929. The tech-led bear market in the early 2000s lasted over two-and-a-half years. Even when we take into account how far the market has fallen, this year’s bear remains gentle by past standards. The “speed” of the current decline -- the market’s fall per month of the bear market -- stands at 3.4%, versus the median of 4.2% per month and the average of 6.2% per month. Much worse has been seen such as the cataclysmic 20% per month fall seen in the 1929 crash (and the less said about 2020’s “crash by fiat” the better).

함의: 최근 시장의 하락 기간, 하락 폭에 대해 이야기할 때 기간을 좀 더 과거로 보면 평균에도 미치지 못함.

Signs of a rapidly deteriorating US economic outlook have spurred bond traders to pencil in a complete policy turnaround by the Federal Reserve in the coming year, with interest-rate cuts in the middle of 2023.