While the street turns myopic focus to today’s Core PCE data – the most important inflation read since the last inflation reading – we look forward to tomorrow’s PMI data.

Last month, the aggregate Global manufacturing PMI started to turn, having spent a year in a bottoming phase of contraction. – The JPM Global Manufacturing PMI hit 50-expansionary territory for the first time since the start of 3Q22. – The highly cyclical markets of Korea and Taiwan have since pointed to this trend improving (Chart below has Global Manufacturing PMI vs Taiwan Exports yellow, Taiwan Industrial Production green, Korean Exports purple, Korean Industrial Production orange)

China’s official and Caixin PMI are due out overnight tonight. Last month saw the private metric for manufacturing swing back into expansion, the official data still hovering at 49 – but the rate of change has been improving.

Dependency remains on the Politburo to finally make some concrete noises to put in a backstop for the property market (have been floated in like of this WSJ article from last week but not backed up by official action) along with the various measures to stimulate consumption (electronics, autos etc in recent press) and support for stock markets. Consider the HSI index currently still has a forward P/E of 8.8x, off the January lows of 7.6x but still Covid/lockdown type valuations. Shorter term, it would not take very much to push a squeeze in this pocket of Asia.

If those stars align there is the potential for a big pro-cyclical rebalancing… something which would benefit old economy laggards of energy, miners, commodities, steels, capex plays (“the things you can drop on your foot”) – and likely start to suck the momentum out of the other end of the spectrum which have run hard when there has been very little impetus to put money anywhere else – and the quant black boxes (which are max long) will have to recalibrate