EM ASIA CREDIT: POSCO Holdings: Measure for steel sector incoming

The USD/CNY fix printed at 7.1062, versus a BBG market consensus of 7.1369.

• The fixing rebounded in line with stronger USD levels, but it only puts us back to where we were at the end of last week. The fixing error was slightly wider at -307pips, versus -241pips yesterday.
• USD/CNH is little changed in the first part of Wednesday dealings, the pair last at 7.1270/75.
• Coming up soon we have the August inflation data. 

• CHINA SETS YUAN CENTRAL PARITY AT 7.1062 WEDS VS 7.1008

The Russell 2000 Friday night range was 2370.209 - 2393.554, closing -0.55%. The Russell 2000 continues to consolidate its recent break back above 2300, the cooling labour market pointing to a rate cutting cycle potentially coming. This scenario could see some further rotation back into small caps which will benefit the most from a cutting cycle, though this premise does ignore the risks to growth. The market will be laser focused on the all-time highs just above 2450, a break of which could trigger another wave of short covering. 

• Julian Brigden on X: “If I hear another so-called expert suggest buying the Russell I'm going to vomit! The $ was a key component of US Exceptionalism, and it's peaking. In that scenario, the RTY might rally on money illusion, but vs tangible assets like Silver it will underperform.” See Graph Below.
• Daily Chartbook on X: “The Russell 2000 has now gone a record 960 days without reaching a new all-time high, surpassing the streak that followed the GFC.” - via @granthawkridge
• Seth Golden on X: “Fed cutting should be good for Small Caps, but… Only good when it satisfies 2 conditions: 1. Lower rates or consistent easing cycle, 2.Stronger economic growth. If it doesn't satisfy THE 2 conditions, it's a mean reverting trade.”
• CFTC data shows leveraged funds only slightly pared back their shorts last week to -76948( previously -78059). 
• There are some large shorts still being held by hedge funds in the Russell which CFTC data shows has already started to be reduced in recent weeks.

Fig 1: Russell vs Silver Ratio

Source: MNI - Market News/Bloomberg Finance L.P