Friday, 21 August 2015

A few macro thoughts today...

A few macro thoughts today...

Markets – biggest fall of the year in the S&P500 index yesterday as fears about global economy mount. 

(h/t @RyanDetrick)

European futures weak today.  A close Friday below 10403 would make this the biggest weekly fall seen in DAX futures for at least 204 weeks (since 23 September 2011) as per @PredictedMkts.  

Better news re global tensions is that US dollar is slipping however this means that the euro is rising (>1.125) which puts pressure on European markets and heightens need for reform (as well as prolonged QE).  8 session FTSE100 losing streak worst since Nov ’11 (9 consecutive losing days). 

QE/inflation  - ‘Draghi Failed: European Inflation Expectations Slide To Pre-QE Level’(link here)  Consistent with the prolonged QE required. 

Let’s not also forget the benefit to European equities from a lower euro.  All this means is that European companies are going to have to reform more rather than rely on a weak euro.  

(h/t @MktOutperform)

China - Caixin's "flash" purchasing managers' index fell to a 77-month low of 47.1, in contrast to predictions for a slight gain.  Survey providers note use of stimulus policy plus economic reform will ‘lead the market to confidence and renew the vigour of the economy’.  Also some chat that ‘China flash PMI weakness may reflect disruptions due to Tianjin Blast and factory closures ahead of Sept 3 Beijing military parade (CapEcon)

Hong Kong finance chief says further yuan devaluation unlikely (link here). 

Talking about Hong Kong, interesting valuation (relative) chart:

Korean tensions – nice cartoon

(h/t @RANsquawk) 

Foreign exchange – after the big move in the Kazakh Tenge yesterday what other currencies may materially move? Nice article here.  

Asia military strategic – the conventional view is that China is still building its navy!

(h/t @Benjaminbland) 

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