Thursday, 21 May 2015

A few macro and related thoughts today

Greece - ECB increased ELA limit for Greek banks by €200 mln to €80.2 bln. That’s not very much (some kind of message here?) Meanwhile German press rumours that the Euro group is considering extending Greece's programme to the fall.  Extend and pretend…

Greece #2 - Greek FinMin: 'On 5/Jun, If we can repay IMF and pay salaries/pensions, we shall; if not, we will prioritise pensioners and workers' (Rtrs).  Getting closer to an end game which - in my view - has to end in a material debt restructuring.  

Europe - ECB will no longer release in advance the speeches of its Exec board to journalists under embargo.  Well, there was just a little volatility around the euro and equity/bond prices this week after a certain speech!

China - China HSBC Manufacturing PMI (May, P): 49.1 (exp 49.3 prev 48.9).  3rd consecutive months of sub 50. You have to say more interest rate cuts are likely.  

However, MNI China Business Indicator registered its first month-to-month gain since December, rising from 48.8 in April to 49.7 this month - if you can get out your magnifying glass to spot it!!

What does all this mean for the Chinese market?  Well it should mean volatility increases - and judging by selected (usually Hong Kong listed) names moving around materially this is a-coming.  And then there is the leverage (a wonderful chart via @S_Rabinovitch)

Japan's market continues kicking around a 15 year high despite the dodgy GDP numbers I mentioned yesterday (for a further nice succinct write-up on this see this from @sophia_yan).  The Nikkei has really stepped away as a 'risk' trade recently - I guess it is still amazing what you can do with a weaker currency and lots of QE

 Finally, thoughts on US Fed minutes here with a key interpretation of:

“it will be known as the loosest tightening in the modern history of central banking”

And why is that?  Something to do with the dodgy real wage growth as nicely summarised  below when looking at the underlying minimum wage in the US economy: 

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