Wednesday, 10 December 2014

Asia today and charts today

The Chinese market is a little calmer today with this a pretty indicative ‘during the trading day’ comment via Fast FT:

‘In the first 20 minutes of trading alone the Shanghai Composite rose as much as 1.7 per cent but also fell as much as 1.4 per cent. Most recently it's up just 0.4 per cent’.

Nevertheless the scope for volatility remains e.g. China new stock accounts opened in the week ending December 5th was 598,261, up 61.7% and current outstanding money lent to stock investors under margin trading CNY 900bln vs. CNY 400bln 3-months ago.

Fascinating chart via Bloomberg showing the level of relative interest in the Chinese brokerage stocks versus the Macau gambling stocks.  The latter starting to exhibit relative value potentially…

I also note some continued attempts by the PBoC to keep the exchange rate up as it sets the US dollar-CNY mid-point at 6.1195 versus the last close of 6.1855 (previous mid-point 6.1231).  This is the strongest since early March.  The official rate continues to diverge however…

The still strong yuan combined with slower domestic growth no doubt helped induce China's producer price index to fall 2.7 per cent year-on-year in November, a 33rd month of deflation. Inflation for consumers slowed to 1.4 per cent year over year - the slowest since November 2009.

Meanwhile in Japan whilst I keep on reading headlines about Abe’s upcoming relative landslide election victory, the Nikkei225 fell over 2% to a fresh low for the month as the USDJPY exchange rate moved back below 119.00.  No surprises that this correlation still holds…

Reflecting the ongoing challenges I thought it was interesting that the Cabinet Office's monthly sentiment survey (which took place a couple of weeks after the announcement of the next QE application in Japan) showed a reading of 37.7 for November, falling from 38.9 a month before. Any reading below 50 indicates pessimists outnumber optimists; this is third straight reading below 40, meaning consumers are especially pessimistic.  Hardly a ringing endorsement for Abenomics…

Turning to Europe and the day after Greece’s biggest single day fall since 1987, I thought this excerpt from The Financial Times nicely summarised some of the realities in the country.  Chances of a debt restructuring in 2015 are far, far higher than a euro exit:

Two interesting excerpts on Russia / Ukraine too from the same source.  First the impact of that weak rouble

…and second the reality that Ukraine will need more money:

Doubleline's Gundlach says 10y yield in the US could drop to 1%.  Good summary link here of what he said.  

Certainly the 5 year breakeven is not signalling a near-term rise in US interest rates…

…but the correlation between crude oil and CPI is very mixed/low:

(h/t @groditi)

A few final interesting charts:

Why the internet remains such a compelling theme: 

In contrast to some of the Japanese measurements noted above, US (small business) optimism is back above the generational confidence neutral line: 

Finally, interesting iron ore / AUD correlation (and recent differential).  I do remain short Australian assets (although long mining stocks such as BHP Billiton where I see better relative value).  

(h/t @sobata416)

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