Rabobank: “Nu?”

By Michael Every of Rabobank

In order to cover the divergent news that matters most today, I need to start with the definition of a word – “Nu”. According to the author of ‘The Joys of Yiddish’, Leo Rosten, “Nu”, which rhymes with “coo”, is an interjection, interrogation, and expletive, second only to “oy” in usage, and capable of expressing anything from doubt, pride, disapproval, and distrust to scorn. The difference is in how it’s delivered. As an example of two experts using it: “Nu?” says Farber; “Nu,” says Lipshitz; “Nu!” says Farber”; “Nu??” says Lipshitz; “Nu?!!” says Farber; “Alright, already!” says Lipshitz. “Monday I’ll send the check!” So, with that in mind, let’s begin the Daily news and “nus”.

Of course, it’s the US Labor Day holiday today, so markets are closed there. And on labor, nu, US payrolls came in at only 235K vs. 733K expected on Friday; and yet average hourly earnings were up 0.6% vs. 0.3% expected: taper, shmaper? Well, 10-year US Treasury yields went up from 1.28% to 1.33% on the release. Somebody thinks this kind of weak print must mean more fiscal stimulus, nu?

On the economy / Covid, Bloomberg is shvitzing “Delta Surge Means This Is as Good as It Gets for Global Growth”, as Rolling Stone writes and then, nu, ‘updates’ (‘retracts’), a story about US hospitals being too clogged with Ivermectin victims to be able to treat those with gunshot wounds. Meanwhile, in Israel, the virus czar is saying he expects a fourth booster shot will be required in six months’ time. Worse, the WHO are worried about the “Mu” variant, which may be vaccine and natural antibody resistant –nu, like a ‘flu– and which is following the usual pattern so far: Dr. Fauci says, nu, it is “not an immediate threat so far”; just as –nu!– Forbes reports 167 cases in LA. And you know what comes after the “Mu” variant in Greek, besides sheer exhaustion? The “Nu” variant.

China is saying that besides its “profound revolution” to guide capital where it needs to go to suit China (not the quick, easy, high returns capital wants), and a new stock exchange in Beijing for SMEs, there is an official plan to “draw foreign investors into commodities futures trading.” China will “accelerate the introduction of overseas traders, build an international commodity futures market priced and settled in renminbi, and develop widely representative futures prices that domestic and foreign traders will recognize and participate in,” says the cabinet. This sounds technocratic, but it takes us into lots of key areas: global commodity pricing, and at a time of structural rising commodity prices – and when China does not want to see rising prices; ownership of commodity production, perhaps; and certainly of ports; and of global shipping; and –nu!– even the US Dollar as reserve currency.   

And not to be a Rolling Stone (like Bob-eleh), but this comes against unconfirmed interwebs chatter that some shippers may be offering much lower than market shipping rates to goods from some factories; and as a coup takes place in Guinea, which holds the world’s largest reserves of bauxite, from which aluminium is produced; as Brazil cuts off beef exports to China following the discovery of two cases of mad cow disease; and as the Australian Treasurer will use a speech today to stress that China is increasingly “willing to use its economic weight as a source of political pressure,” but that the Australian economy has shown “great resilience to date” due to diversifying exports to other locations, and that “We have remained steadfast in defending our sovereignty and our core values, and we always will.” Which won’t exacerbate things on this front at all, nu? Oh, and the Sydney Morning Herald also publishes an ‘explainer’: “Forget ‘Asia-Pacific’, it’s the Indo-Pacific we live in now. Where is that exactly?” adding “As nations jockey for power, the geopolitical map is being redrawn. Where does Australia fit? And who are our friends in this new world?”

This doesn’t signpost that there are larger underlying issues for markets to (not) focus on than, nu, ticks up or down in yields in bond markets held artificially in the hands of central banks, and stock markets doing what any asset does when you pump billions of QE into it every day? (“Is this the “Everything Bacon” hotline? Nu, darling, do you have the wrong number!”)

On which, US Climate Czar John Kerry just came back from Beijing, where he stressed DC wants to put all things ‘green’ in a separate political lane to economic and geopolitical tensions: and, nu, the response was that “China-US climate change cooperation cannot be separated from the general environment of relations.”

This is vastly more important than scant media coverage suggests, because both the US and EU stress they are happy to collaborate with China on some fronts (e.g., green), while competing hard on others (e.g., trade/value chains/geopolitics), as if there is a happy medium between realpolitik and a market-friendly Fortune 500 world order. But Beijing says the issues are all linked – which given the politics of green production and value chains, the raw materials needed, shipping/logistics, and the currency dynamics, they always were. Nu?! Where does that leave EU and US policy?

Anyway, for those who want to say Kerry/shmerry and Aussie/shmaussie –China/shmina even– and just focus on payrolls (or rather shmayrolls) and expectations of fiscal (not the threat of shmiscal) – nu, I wish you well to wear it.