Wednesday, 22 July 2015

A few quick macro headlines today

Too many interesting companies reporting so some brief macro thoughts this morning...

Greece - S&P raised its Greek sovereign bond rating to CCC+ from CCC- and argued that the risk of Athens defaulting on its private debt is "no longer inevitable" over the next six months to 12 months.  S&P sees Greek GDP growth of -3% in 2015…meanwhile votes later today on reform proposals (for the bailout monies).  Aim to wrap up such voting/bailout talks by mid-August in time for ECB bond repayment on 17 August.  We’ll see: some talk of backtracking in the press already...

Italy – demanding more budgetary flexibility from Brussels to accommodate Euro35bn in tax cuts over the next 3 years.  Hoping to do this and keep budget deficit <3% GDP…need to do a lot of economic reforms then.

China – Australian central bank governor optimistic despite recent market falls: ‘The effect this will have on the Chinese economy is not clear, but may prove to be relatively small. Share prices have stabilised in recent days and authorities have been making financial conditions more accommodative. Households' direct exposure to equity prices is relatively small, notwithstanding their large share of turnover’…however China’s business sentiment went negative with the MNI China Business Indicator dropped 8.8% in July to 48.8 below the 50 mark that separates optimism from pessimism and graph not looking great. 

Brazil – 7.7% approval rating for Dilma Rousseff's government, 63% favour impeachment - wow!  Not helped by today’s anticipated inflation news with consumer prices expected to rise by over 9% in July from a year earlier after hiked utility rates and other prices.  Something to watch. 

ETFs/hedge funds – useful statistics here from Fast FT (link here) the first time former bigger than latter: ETFs, including the smaller universe of exchange trade products, or ETPs, now account for $2.971tn globally at the end of the second quarter, according to industry research group ETFGI, Hedge funds also grew but by a smaller amount, from $2.939tn to $2.969tn according to Hedge Fund Research.

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