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Affinity Policy Comment 23 january 2023

Fast Like A Rabbit, Or Slow Like A Tortoise?

China's declaration that it is open for business was welcomed by attendees at the World Economic as a probable boost to global growth, though many also expressed caution over how it could drive up global Covid-19 cases and inflation.

The topic of China's reopening came up at several discussions, both public and private, as China’s Vice Premier Liu He made a big pitch for foreign investment in Davos on the first visit abroad by a high-level Chinese delegation since Beijing shelved its three-year-old zero-Covid policy.

While Liu said that people in China were recovering faster than he had expected from Covid-19 after the dismantling of curbs unleashed a giant wave of infections, many executives with businesses in China said they were still forecasting a bumpy few months before things start to get better.

Still, the economic recovery currently looks frontloaded, starting already in early Q1 rather than late Q1 as the service sector is already showing clear signs of rebounding and companies are likely to raise production in anticipation of better demand in the coming quarters. It follows a Q4 2022 GDP release last Monday that came out flat at 0.0 per cent q-o-q, versus market expectations of -1.0 per cent q-o-q.

An earlier recovery boosts GDP expectations for 2023 to 5.5 per cent from 4.6 per cent, according to Danske Bank, as the stronger-than-expected Q4 lifts the carry over into 2023, and an increase in the Q1 2023 forecast lifts the starting point for 2023 further. However, a more frontloaded recovery leaves room for less growth in 2024 as the effect from pent-up demand fades earlier.

The new expectations also change PMI manufacturing ideas for the coming months, with a more rapid increase in the near-future and, while PMI is likely to continue higher into the autumn, it could then peak as the initial growth spurt starts to lose some steam.

And for Ngozi Okonjo-Iweala, director-general of the World Trade Organization, the reopening could help supply chains work better and also boost consumer demand. However, it remains to be seen what the opening up impact is on the pandemic.

Elsewhere, the Bank of Japan surprised markets on Wednesday by leaving their yield-curve-control policy unchanged, against market expectations of a widening of the target band or a removal of the policy altogether. This came as wage pressures keep rising in Japan, and on Friday CPI rose to a decade-high of 4 per cent, with core at 3 per cent.

The BoJ now owns close to all outstanding 10-Year government bonds, resulting a in poorly functioning market and a strongly dislocated yield curve. The price reaction to the surprise on Wednesday was reassuring however, as USD/JPY rose by less than 2.5 per cent, falling quickly thereafter, and is now trading almost unchanged to before the meeting around at around JPY 129.

Overall, the BoJ seems to just be postponing the inevitable and will probably eventually need to revise their monetary policy approach. Key catalysts to watch will be the choice of the new governor, who should be announced within the next month, and further wage developments in the country.

Meanwhile, dovish ECB members tried to push for smaller hikes this week, attempting to steer markets away from Lagarde’s December guidance for two 50 basis points hikes in February and March. The doves make a case of falling inflation driven by lower energy prices. More hawkish members including Lagarde, Lane, Knot, Rehn and Holzmann quickly pushed back against this, and said the guidance for several 50 basis points hikes remains valid.

December core CPI rose to 5.2 per cent earlier this month, but persistently higher wage growth in the Eurozone, around 5-6 per cent, will likely keep core inflation higher for longer.

On the other side of the pond, US economic data worsened this week, with retail sales dropping by 1.1 per cent m-o-m and the NY Fed Empire Manufacturing survey for current business conditions dropping to -32.9, much lower than the -8.7 survey.

For a while, bad economic data was seen as good news, because it gave investors confidence that demand-pressures to inflation could eventually subside and the Fed could slow down. However, this narrative is now turning. Markets are becoming confident that US inflation will fall quickly (market pricing sees June inflation falling to 2.1 per cent by June) and the Fed slows down to 25 basis points in February (market pricing implies 27.5 basis points).

This could be the sign of a looming recession and should therefore be taking with caution by the market going forwards. In fact, if data in the US continues to worsen, there could be some more downside for risk assets, and more upside for safe havens such as government bonds.


Affinity Research LLP

what we do

  • Carbon

    Carbon

    Using tailored analytics platforms, we offer client-specific advisory and trading services across the global carbon markets. Contributing to hedging strategies, sustainability reporting and financing requirements, our aim is to assist clients in managing their financial exposure to the approaching energy transition.

    Contact: Hugo Wilson
    [email protected]
    +44(0)20 3142 0121

    Containers

    Containers

    Our specialised Container team in South America arranges freight & logistic solutions primarily for the mining and perishable industries.

    Contact: Andrea Meza Allemant
    [email protected]
    +51 99 115 2393

    Dry Cargo

    Dry Cargo

    Our dry bulk chartering teams in Sydney, Melbourne, Perth, Santiago, Lima, Montevideo, Buenos Aires, Singapore and London are cargo-focussed and they fix voyage, COA and time charter business on behalf of their clients with a wide range of ship owners.
    For Atlantic business please contact Hans Bredrup
    For Pacific business please contact Rahul Khanna

    Contact: Hans Bredrup
    [email protected]
    Contact: Rahul Khanna
    [email protected]

    LNG

    LNG

    Our young and dynamic LNG team possess wide-ranging experience of spot and term charters working with all major LNG shipowners and charterers. The LNG team has close interaction with the Newbuilding and Sale & Purchase divisions with an unrivalled track record of contracting LNG newbuildings and in the sale and purchase of LNG assets.
    We maintain up-to-date knowledge and an understanding of new technologies within the LNG sector to ensure that our clients can make the most suitable and cost-effective decisions on shipping solutions.

    Contact: Joni Mackay
    [email protected]
    +44(0)20 3142 0133

    Newbuilding

    Newbuilding

    Our Newbuilding team has concluded over 500 newbuildings of all types, including LNGCs, FSRUs, drillships, crude tankers, product tankers and dry cargo vessels. We have contracted in all major newbuilding centres globally, with particular focus on the Korean Shipyards.

    Contact: Nick Wood
    [email protected]
    +44(0)20 3142 0111

    Offshore

    Offshore

    Affinity Offshore is based out of our Oslo and Houston offices. The Team focuses on world-wide sale & purchase of offshore support vessels, as well as chartering – particularly in the Americas and Mediterranean/MENA regions.

    Contact: Tor-Øyvind Bjørkli
    [email protected]

    Research

    Research

    Our research department combines real time market information with econometric modelling and the latest technology. 

    Contact: Sevita Kondyliou
    [email protected]
    +44(0)20 3142 0182

    S & P

    S & P

    Our Sale & Purchase team has extensive experience of working with private clients, national shipping companies, major corporates, oil companies, grain houses and institutional investors. We provide a cradle to grave services across all shipping sectors. We operate from London, Singapore and Seoul to give 24-hour coverage of the markets, working for both newbuilding and second-hand buyers.

    Contact: Tom Morrison
    [email protected]
    +44(0) 20 3142 0128

    Tankers

    Tankers

    Our established tanker chartering teams serve the industry from London, Houston and Santiago delivering a highly proficient spot chartering service with a prime position in the fuel oil market. The team has close relationships with oil majors, national oil companies, oil traders and major ship owners and operators. 
    Our ethos for operations and post-fixture is simple: these roles are as important to us as the chartering/commercial function, and we continue to apply those same principles of professional ship broking throughout the life of each fixture.

    Contact: Tim Gurdon
    [email protected]
    +44(0)20 3142 0142

    Valuations

    Valuations

    We provide transparent, objective ship valuation service to major owners, banks and other financial institutions at short notice and a daily basis. We provide a retainer service for regular fleet valuations.

    Contact: Ben Pusey
    [email protected]
    +44(0)20 3142 0125

    Carbon

    Using tailored analytics platforms, we offer client-specific advisory and trading services across the global carbon markets. Contributing to hedging strategies, sustainability reporting and financing requirements, our aim is to assist clients in managing their financial exposure to the approaching energy transition.

    Contact: Hugo Wilson
    [email protected]
    +44(0)20 3142 0121

    Containers

    Our specialised Container team in South America arranges freight & logistic solutions primarily for the mining and perishable industries.

    Contact: Andrea Meza Allemant
    [email protected]
    +51 99 115 2393

    Dry Cargo

    Our dry bulk chartering teams in Sydney, Melbourne, Perth, Santiago, Lima, Montevideo, Buenos Aires, Singapore and London are cargo-focussed and they fix voyage, COA and time charter business on behalf of their clients with a wide range of ship owners.
    For Atlantic business please contact Hans Bredrup
    For Pacific business please contact Rahul Khanna

    Contact: Hans Bredrup
    [email protected]
    +56 99 887 3036
    Contact: Rahul Khanna
    [email protected]
    +61 418 448 677

    LNG

    Our young and dynamic LNG team possess wide-ranging experience of spot and term charters working with all major LNG shipowners and charterers. The LNG team has close interaction with the Newbuilding and Sale & Purchase divisions with an unrivalled track record of contracting LNG newbuildings and in the sale and purchase of LNG assets.
    We maintain up-to-date knowledge and an understanding of new technologies within the LNG sector to ensure that our clients can make the most suitable and cost-effective decisions on shipping solutions.

    Contact: Joni Mackay
    [email protected]
    +44(0)20 3142 0133

    Newbuilding

    Our Newbuilding team has concluded over 500 newbuildings of all types, including LNGCs, FSRUs, drillships, crude tankers, product tankers and dry cargo vessels. We have contracted in all major newbuilding centres globally, with particular focus on the Korean Shipyards.

    Contact: Nick Wood
    [email protected]
    +44(0)20 3142 0111

    Offshore

    Affinity Offshore is based out of our Oslo and Houston offices. The Team focuses on world-wide sale & purchase of offshore support vessels, as well as chartering – particularly in the Americas and Mediterranean/MENA regions.

    Contact: Tor-Øyvind Bjørkli
    [email protected]

    Research

    Our research department combines real time market information with econometric modelling and the latest technology. 

    Contact: Sevita Kondyliou
    [email protected]
    +44(0)20 3142 0182

    S & P

    Our Sale & Purchase team has extensive experience of working with private clients, national shipping companies, major corporates, oil companies, grain houses and institutional investors. We provide a cradle to grave services across all shipping sectors. We operate from London, Singapore and Seoul to give 24-hour coverage of the markets, working for both newbuilding and second-hand buyers.

    Contact: Tom Morrison
    [email protected]
    +44(0) 20 3142 0128

    Tankers

    Our established tanker chartering teams serve the industry from London, Houston and Santiago delivering a highly proficient spot chartering service with a prime position in the fuel oil market. The team has close relationships with oil majors, national oil companies, oil traders and major ship owners and operators. 
    Our ethos for operations and post-fixture is simple: these roles are as important to us as the chartering/commercial function, and we continue to apply those same principles of professional ship broking throughout the life of each fixture.

    Contact: Tim Gurdon
    [email protected]
    +44(0)20 3142 0142

    Valuations

    We provide transparent, objective ship valuation service to major owners, banks and other financial institutions at short notice and a daily basis. We provide a retainer service for regular fleet valuations.

    Contact: Ben Pusey
    [email protected]
    +44(0)20 3142 0125

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  • Floor 44
    The Leadenhall Building
    122 Leadenhall Street
    London EC3A 8EE

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    Carbon Dry Cargo Finance LNG Newbuilding Research S & P Tankers Valuations


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    Eagle Farm
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  • #703, Shin-A Building
    50 Seosomun-ro 11gil
    Jung-gu, Seoul
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    SEOUL

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  • 1301 McKinney Street
    Suite 2975
    Houston, Texas
    77010, USA

    T +1 832 925 7500

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    HOUSTON

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    Suite 2975
    Houston, Texas
    77010, USA

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  • Marco Polo Parkside Building 1204,
    Anli Road No. 80,
    Chaoyang District,
    Beijing, China, 100101

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    BEIJING

    LNG Tankers


    Marco Polo Parkside Building 1204,
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    Chaoyang District,
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  • 6/F Kimberley Plaza
    45-47 Kimberley Road
    Tsim Sha Tsui. Kowloon
    Hong Kong

    T +852 2154 2237

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    HONG KONG

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    6/F Kimberley Plaza
    45-47 Kimberley Road
    Tsim Sha Tsui. Kowloon
    Hong Kong

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  • Room 04, 10/F, 500
    Yan'an West Road,
    Shanghai,
    People's Republic of China


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    SHANGHAI

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    Room 04, 10/F, 500
    Yan'an West Road,
    Shanghai,
    People's Republic of China


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  • Jirón Cruz del Sur 140, of. 1712,
    Santiago de Surco, Lima,
    Perú

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    LIMA

    Containers Dry Cargo


    Jirón Cruz del Sur 140, of. 1712,
    Santiago de Surco, Lima,
    Perú

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  • Augusto Leguia Norte 100
    Office 710
    Las Condes
    7550155 Santiago
    Chile

    T +56 22 352 7100

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    SANTIAGO

    Dry Cargo


    Augusto Leguia Norte 100
    Office 710
    Las Condes
    7550155 Santiago
    Chile

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  • Misiones St. 1372,
    1st Floor "De Los Patricios" Building,
    11000 Montevideo, Uruguay

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    MONTEVIDEO

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    Misiones St. 1372,
    1st Floor "De Los Patricios" Building,
    11000 Montevideo, Uruguay

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  • Viamonte 174, 4 to B,
    C1053ABD Buenos Aires,
    Argentina

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    BUENOS AIRES

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    Viamonte 174, 4 to B,
    C1053ABD Buenos Aires,
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  • Rua Barão de Cotegipe, 443, room 1310
    Porto de Gale Business Center
    Rio Grande
    Brazil


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    RIO GRANDE

    Dry Cargo


    Rua Barão de Cotegipe, 443, room 1310
    Porto de Gale Business Center
    Rio Grande
    Brazil


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  • Fascinatio Boulevard 742
    2909 VA Capelle aan den IJssel
    The Netherlands


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    ROTTERDAM

    Dry Cargo


    Fascinatio Boulevard 742
    2909 VA Capelle aan den IJssel
    The Netherlands


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  • Inkognitogaten 35,
    0256 Oslo
    Norway

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    OSLO

    Offshore


    Inkognitogaten 35,
    0256 Oslo
    Norway

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  • 104-111 21st St
    West Vancouver
    BC V7V 0C2
    Canada


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    VANCOUVER

    Dry Cargo


    104-111 21st St
    West Vancouver
    BC V7V 0C2
    Canada


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  • Kaigaten 12, 2nd floor
    Bergen 5016
    Norway

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    BERGEN


    Kaigaten 12, 2nd floor
    Bergen 5016
    Norway

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