Wednesday, 15 July 2015

A few macro and related stories today

A few macro and related stories today...

Greece – Greek Parliament vote on Monday morning’s tentative agreement today with the following potential local timings today: 

‘Discussion will begin at committee level at 10 a.m. and then move to a plenary debate at c. 2 p.m. Vote from 10pm'.  

Consensus is that wider support will pass. Nevertheless Tsipras on TV last night giving further updates on the realities of the deal ('Tsipras rules out depositor bail-in, says EUR25bn contribution from banks will be enough to avoid bail in...Tsipras: Deal covers all of Greece's medium-term fiscal needs, it was a better deal than was on the table on 25/June').  Nice summary of what they are voting on here:

Greece #2 – IMF throw in a curve-ball however ‘Greece’s debt can now only be made sustainable through debt relief measures that go far beyond what Europe has been willing to consider so far’ (link here). Feels correct to me and is reflective of underlying tensions. 

Now the question is whether this spills over into a more overt economic schism between Europe and the US (IMF)...

China - China's economy grew 7 per cent in the 12 months to June 30, in line with the year-on-year pace at the end of March, but above economists' forecasts for 6.8 per cent. Retail sales and industrial production data better than hoped.  Chinese stock market down as further rate cuts less likely!

More detail:

China Stats Bureau: Consumption Accounted For 60% Of H1 GDP Growth; Capital Formation Accounted For 35.7; Net Exports Accounted For 4.3%

Retail sales rose at 10.6 per cent year-on-year pace in June, up from 10.1 per cent in May, and above estimates of 10.2 per cent, while industrial production rose 6.8 per cent in June from a year earlier, compared to a 6.1 per cent pace in May and estimates of 6 per cent.

Stronger-than-expected growth in the June quarter is due to a surge in brokerage activity, which was rising as the equity market reached a peak in early June. This feeds directly into the service sector component of GDP.  

Hmm...this last comment has played out in the a weaker Q3 and hence further loosening?
(h/t @RealPhatDragon)

From an underlying economic perspective I thought this graph from today's Financial Times potentially gives a better view of growth reality...

Japan - the bank said it now sees core inflation at 0.7 per cent in the 2015 financial year, down from a 0.8 per cent forecast in April, and downgraded its FY15 growth forecast to 1.7 per cent from a 2 per cent estimate in April.  Japan’s stock market up…in anticipation of further stimulus?!  

The yen is starting to slide lower too...keep watching that 124/125 level.  Push through that and hello 140 against the US dollar in my view: 

"In long-term, the Iranian oil will actually be needed to keep the market balanced, especially as demand will generally rise for some time to come,"  Nice write-up here

US economy - shabby retail sales yesterday and these two observations below.  I remain unconvinced that a US interest rate increase in 2016 will happen...

And media / coffee - fantastic fusion! 

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