Friday, 7 August 2015

A few macro and related thoughts today

A few macro and related thoughts today...

Southern Europe – the better news was that the IMF said that Greece paid interest payments that were due yesterday…but new thoughts on Portugal indicate it might be a new problem child.  It is not over...

UK interest rates – FT front page text summary on the meeting/policy: ‘investors are sceptical that the committee will act before 2016’.  Certainly a bit of boy who cried wolf...

China – talk about stimulus lifting market but this observation seems more insightful to me: ‘Investor interest remains tepid, with trading values in Shanghai falling to the lowest levels since March on Thursday and Friday’s volumes slumping 40 percent below the 30-day average’

Meanwhile no such fear in this survey highlighted by @TonyNashOnAsia about China's place in the world:

Australia – cutting growth hopes but inflation forecast revised up: ‘RBA SoMP: Sees 2%-3% Average GDP Growth In 2016 (prev) 2.5%-3.5%,  Inflation Forecast Revised Up, Seen At 2.5% Next 2 Years’.  Not a pretty combination and tells you that life remains difficult for big exporters to China.  Unemployment at highest since 2002.  Interesting lower growth/higher inflation combo...some central banks would be raising interest rates at the thought of 2%+ inflation...

Deals – what could possibly go wrong with lots of private equity dry powder and high transaction prices?!

Global flows YTD – EM not the worst!

(h/t @eurofaultlines)

Consistent with the above Fast FT noted that junk bond flows go –ve on the year

Despite emerging markets not seeing the worst flows YTD they have still underperformed as per this chart...

...partially reflecting growth convergence too.  Note though that emerging markets are still growing faster net net.  EMs on any reasonable time frame feel opportunistic to me.  
And here is one reason why EMs feel opportunistic: the US dollar may go down.  Many reasons I could cite for this...but I like this one: just maybe a rate rise is all you need.  

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