Investors are still concerned over chinas economic recovery even though there have been signs of stability creeping in. A sliver of good news from developers as we mentioned. Country garden and rishi sunak with them winning and sunak winning bondholder approval. Lets check in with the Stock Exchange of thailand in bangkok. Very little change. The dollar continuing the lurch higher there against the tide thai currency. The tourist numbers from thailand coming through and they are dependent on visitors revenue. The Bangkok Administration say 90 million tourists have visited the country so far and received 795 billion baht of revenue. You can divide that by 35. You lets get more on markets. The chief strategist at union bank there is here. How would you characterize the price action we are seeing in the Market Sentiment as we await the Central Bank Decisions . We would characterize it as a market is trying to transition the mindset from the disinflationary story focusing on Central Banks and now focusing on what we think will be growth going forward. To be honest, we think we will skirt a recession in the u. S. In europe there is uncertainty but we will probably start one there as well. Skirt one there as well. Rishaad some people are saying the chances of stagflation are getting higher. Norman there is a risk of stagflation but the good news is on the growth side the consumer is still slowing but in the u. S. We are seeing the early signs of an industrial recovery driven by things like the inflation reduction act. That will be positive for corporate as we move into 2024. That is positive for equities but may bring another leg higher in terms of bond yields as we go into the new year. Rishaad will we see a flattening for the yield curve itself . The yield curve has been averted now for 16 months or thereabouts. It normally should be resulting in a recession. What is your take on this . Norman historically it has signaled a recession. We think there are two reasons why we have not seen us. A lot of people have talked about the consumer drawing on savings and staying robust. Not enough people are talking about the size of fiscal stimulus coming out of the u. S. Over the summer the deficit reached 8 of gdp and a lot of that is starting to kick in in the form of the chips act, infrastructure act and inflation reduction act. Rishaad from a strategist point of view, how do you play this . You must be look at the bond market because you are forecasting we could see yields even go higher across the board here. Where were the best risk reward be in terms of duration . Norman we want to stay short duration near the front bama the front end of the curve. The five types of yield on short duration are pretty attractive here into longer dated paper it is 5 . 10year gilts could see close to 5 by the end of the year and early 2024. Rishaad is this the reflection of Interest Rates as opposed to liquidity in the Quantitative Tightening Program and the amount of bond issuance from the corporate . Norman it is a combination of all of that they pointed out. What we have seen so far in terms of the steepening, has been on pricing the recession narrative that we have had for the first part of the year. The second piece of the puzzle we saw over the summer which is the treasury will issue more long dated bonds and we think the third piece will realize as we move into year end that the current yields the term premium that people paid for owning bonds is still negative and we think that should move positive and drive yields towards 5 . Rishaad dot plot, if that comes out and says they will not be in of the rate hike this year what does that do to the dollar because we have had some theorizing that it could mean the dollar gets killed. Norman we do not think it will get killed but we think the strength and the dollar that we have seen over the last few months starts to peak as we move through the fourth quarter. That is probably good for the euro. The bank of japan probably starts positioning the front end of the curve to remove zero rates and that will be positive for the yen in early 2024. Rishaad stay with us if you would. Norman villamin there and he will stick around to discuss the bank of japan, bank of england. We will tell you about latest efforts and dig into those from washington and beijing to try to improve their tense relations. We have Antony Blinken meeting with chinas vice president. We have the outlook for oil markets and traders are betting on brent topping 100 a barrel. We will have normans take on all that next. Id like to thank stitch fix. For taking care of the shopping. For getting my fit just right. For finding me looks that work for me and my budget. Now getting dressed is so easy. You just get me. They get me. You just get me. And theyll get you, too. Take your style quiz today. Rishaad there we go. The hang seng turning positive. We are seeing weakness there for the tech side of things with news which is optimistic and more than it has been of late. Lets turn to what is going on with china and a more holistic manner. Norman villamin as with us. What do you make of what is going on and is this property, you could call it a crisis because it is like whackamole right now. These are headwinds, geopolitical headwinds, the derisking as someone put it. It is a difficult position in this is coming at as a bedtime they are trying to at a bad time because they are trying to structurally change the economy. Norman getting property is a smaller part of the economy is part of the change they are trying to engineer. By allowing bankruptcy and restructuring, that is a good thing in the long term. That is why we are not getting the bazooka because they want to see that change. We think you will continue to see that going into the october meetings. In october we make it more cyclical support we do not think you will see the bazooka coming out. Rishaad what does this mean for the yuan which is of course weak. They want to in a way not have a lot of movements but they are waiting for the bank of japan to do something that would help them. Norman that would be helpful if the fed stopped raising rates as well. Through that lens, i suspect what we should expect to see as you on movements driven by the yuan movements driven by what is happening outside of china rather than inside. During the restructuring in the grand scheme of things, we should expect the yuan to have a weakening bias rather than strengthening bias to absorb pressure of restructuring. Rishaad the yen has had a weakening bias. On friday the boj is out with a decision and will they do anything . In contrast to the fed which is higher for longer, they are lower for longer. Norman they are lower for longer but what you have been seeing in the progression is first at the long end of the yield curve, the 10 year so we are 0. 7 jgbs right now. We suspect as we go into the year end we will drift towards 1 . Then you will see them start to think about moving the front end of the curve and revisit their negative Interest Rate policies on the overnight rate. Rishaad i will turn now and have a look at the oil market. Stick around because i want to get your reaction. That is Norman Villamin from you pv. We have wti crude in the session at 92. 46 and brent is 94. 86. Traders are betting on 100 a barrel oil, at least coming from the chevron ceo. We will find out more on this because our analyst is an singapore. What is going on in the path of least resistance . It seems to be the upside. Wayne we are looking at a bunch of oil market indicators at the moment. One is Global Oil Inventories and especially how the levels are moving against the seasonal average. The idea behind that is to get a sense of how aggressive inventory levels are moving against historical trends. It is very normal for this time of the year to see Oil Inventories fall. What is unusual is that they are falling faster than historical norms. This indicates to us that the oil markets are tightening faster than what is usually the case. A few key reasons for that. Besides the saudi and russian cuts which have been discussed, one key difference this month is the russian government has opted to half it subsidies for domestic deliveries of gas oil and gasoline. The russian refinery profitability force them to cut production was translated into lower gas, oil, and gasoline exports. When refineries cut it is not any particular fuel production it gets affected. It is all fuels. It includes all of the oil production. Another key factor is chinas oil demand has remained quite robust and has grown steadily despite weak economic activity. Rishaad wayne, you see diesel which is hugely important and it has been on an absolute tear. These are all things which can prove to be inflationary. Wayne yes, for sure. There are a few reasons why. It is really just russia cutting their diesel exports and other fuels. A lot of the anticipation refinery capacity expansion that we expected to see this year did not materialize and got moved to next year. So a great example of this really as nigerias refinery which has about 600,000 Barrels Per Day of refinery capacity. It was expected to come online earlier this year but now we expected to ramp up and only taken in the middle of next year. That has tightened the oil supply the atlantic basin. More specifically, the u. S. And europe. There are other factors such as chinas diesel demand which saw an uptick in this is a oneoff this year. We dont think there is more upside for chinas diesel demand in the years ahead. There are some factors here. The european gas monthly we expect european gas to be pretty well supplied. That is for the upcoming winter season and would actually be a 30 something percent capacity fortysomething percent capacity by the end of next year. Thank you so much. That is wayne tan. We are still with Norman Villamin. The oil complex is crucial to the economy and if we see 100 a barrel is it stationary or is it on the other hand is inflationary or hike in Interest Rates that use a lot of or capitol hill . Norman we do not think it is a hike in Interest Rates but it prevents rate cutting cycle that the market is trying to price for 2024. Rishaad it becomes a vicious circle. Norman it does become a vicious circle and this is one of the reasons why the fed would like to remain higher for longer because without oil prices falling, that means they will have to rely on the or component to fall more meaningfully from here. At this point, they are stable at an elevated level. It does not cause the fed to say we have done the job we are ready to ease from here. It cuts off that left hale of rate cuts immediately coming onto the fed in 2023. Rishaad airlines have been warning about how it will erode their margins. American airlines and spear saying and spirit radically downgrading their forecast. The consumer is absolutely vital and youve got people who drive their cars. It is visceral for them and it has the ability to change mindsets. Norman it is an issue for the consumer but one of the good things we are starting to see israel wage growth for consumers is finally starting to turn positive. They can absorb some of that, but i suspect as we get to 2024 in the u. S. Especially since it is an election year, it would not surprise me to see the Biden Administration going back to the Strategic Petroleum reserves to try to get oil prices to be a bit more better behaved. Rishaad he has very little wiggle room. He has taken 300 Million Barrels out of their reserves so that gives him less leverage. Norman yes but 300 Million Barrels is still 300 million. They have taken it down from 500 but they still have several hundred million to go. They cannot do it too early. If you go into the summer driving season, they will want to see the prices stabilize from here. Between now and then, especially china picks up, the path of least resistance for oil is probably higher rather than lower. Rishaad we are seeing a big lift up in oil stocks. Is that where you want to go because this has been priced in my strategy point of view . What are you looking at . Norman we think the valuations of oil stocks remain attractive and they can rally going into the year end on the back of High Oil Prices but we also talked about starting to see Industrial Production numbers start to firm up and leading indicators suggesting that the industrial sector of the economy is bottoming and turning back up. Rishaad it has not been a broadbased rally. It has been the magnificent seven people have been talking about. Does it leave things a bit rich and do you look elsewhere because people have been looking at the u. S. As the only destination to put their money . Norman people have a look at the u. S. Is the only place to put their money but if we look at other places, japan has done as well as s p 500 year to date. That is a good place but when we look for places that are attractive, you are right, the magnificent seven are probably richly priced. It is too early to get in. We want to look at the other 493 companies where we see valuations looking good, earnings starting to pick up. Again, if we think industrials are starting to turn, that should be good for more industrially oriented economies like europe especially if we get some stimulus out of china in october. Rishaad you mentioned the other 493 and that tells a tale of an equal weighted s p 500 which is only up 4 this year. What are those Companies Pricing and which are representing the vast majority because there forecasts have not exactly been brilliantly optimistic . Norman they are actually pricing what the industrial economy has done. We had the ism down near 45 which is essentially recession and they have priced recessionary outcomes. Now that is starting to turn so that is one of the reasons why we think that is a place they price that recession and as the economy starts to stabilize and rebound, they should follow as well. Rishaad always a pleasure. Norman villamin, chief strategist at ubp. Equity markets are showing positivity with the hang seng now actually extending gains here as well. With a dollar bed and chinese properties stocks helping to support what is going on in hong kong. This is bloomberg. Is it possible to fall in love with your home. Before you even step inside . Discover the Magnolia Home james hardie collection. Available now in siding colors, styles and textures. Curated by joanna gaines. Thanks to avalara, we can calculate sales tax automatically. Avalarahhhhhh what if tax rates change . Ahhhhhh filing sales tax returns . Ahhhhhh business license guidance . Ahhhhhh crossborder sales . Ahhhhhh item classification . Ahhhhhh does it connect with acc. . Ahhhhhh ahhhhhh ahhhhhh rishaad equities are turning around here in hong kong. We are also seeing at the moment the shanghai composite with about eight minutes of trading left. We are looking at a shanghai up 0. 1 . The csi which yesterday before recovery it was at the lowest level this year. Overall, perhaps some people are looking at the worst being over with and indeed that could be the subject of the next move that we could see out of the central bank. Bloomberg economics expecting chinas banks to trim prime rates on shortterm loans wednesday despite the pboc keeping its key policy rate unchanged last week. Bloomberg economics is predicting a cut in the oneyear lpr which is among the 18 forecasts which were surveyed by bloomberg. Eric joins us now. You are the outliers. Tell us why. Eric we only forecasted a five cut and the main reason is this period usually follows the mf move. It is widely expected they will not move this week but we think there still room for banks to make it lower in the key recent as last month in august the pboc lowered the mf rate by 15 basis points but banks only followed by a 10 bp cut in the one your outlook. There is billion five bp cap they could do a catch up. Attach a five bp havegap. We dont expect a move and there is more support measures in the past weeks. There is no urgency to lower the fiveyear right now. I think the banks were probably wanting to cut the existing rates and not new mortgage loans. Rishaad the epicenter is property and have taken some piecemeal action but not coming with a bazooka because perhaps they want to see some rationality come into this reticular industry group. Are we seeing evidence of that actually working . Eric the big picture is that china Property Market facing longterm adjustment because of oversupply. The oversupply must be aligned with the demand which means we face a longterm adjustment. I think the aim for the government in trying to slow and mitigate the sharp slowdown of the Property Market is why we see one more supporting measure although incrementally. I think they want to put a floor on the slide of the Property Market but they do not want to engineer another boom which is inevitable. Rishaad they want qualitative and not quantitative. Eric we are waiting for made more data to see if measures are working. It is too early to judge. Rishaad when they get the 5 target . Eric i think so if the policies they have ruled out will work the second half of the year. That can help them to meet the targets. Rishaad eric zhu of bloomberg economists. Taking a look at the property and how the developers are doing. Country garden and sunac. Country garden unchanged after won approval to extend bonds. The can has been kicked down the road. Looking at sunac, it had a Restructuring Plan approved. There is relief concerning those but evergrande still suffering from detentions taking place with some of its members of its Asset Management arm. What about asian markets overall . Lets check in on what is the picture. Volumes are low. Investors are looking into rate decisions coming out as well. It is the bank of japan at the end of the week. Msa asiapacific index is 0. 25 to the downside. Energy is falling back with the oil market now seeing gains for a fourth week. Brent is 94. 79 a barrel. Lets leave you with these live pictures of hong kong. There we go. Looking at that. This coming on the backdrop of more and more at those taking place out of the country in terms of capital