Wednesday, 12 August 2015

Some macro thoughts and charts today

Some macro thoughts and charts today...

China – new 1.6% Chinese yuan fall as PBOC Fixes Yuan Reference Rate At 6.3306 (prev 6.2298). Biggest 2 day drop in 21 years. Reactions from 15 major banks to the new PBOC yuan fixing procedure here

(h/t @RANsquawk) 

My view: the distortion of the strong $ grows.  For Europe means euro cannot fall and so regional reforms matter so much more now. Check out just how weak the euro has been

And new Chinese economic data out this morning – (via Fast FT)

New data show industrial production slowed in July to a year-on-year pace of 6 per cent, its weakest since April and down from 6.8 per cent in June (which was its best reading since December). Economists had anticipated a pace of 6.6 per cent.

Retail sales grew at a 10.5 per cent pace, missing forecasts and falling from the 10.6 per cent pace in June.

Also, fixed-asset investment—which includes spending on infrastructure, factory equipment and property construction—weakened back towards the 14-year low seen two months prior. The year-to-date pace fell from 11.4 per cent in May to 11.2 per cent last month, missing forecasts that it would rise to 11.5 per cent.

Surely more stimulus to come...

As for Chinese effective growth for this year, down to 6%+

IMF – busy commentary day as they say re China that ‘New Mechanism For Yuan Central Parity Is A Welcome Step…should allow market forces to have a greater role in determining the exchange rate’ whilst reported by DJ newswires that ‘reportedly IMF officials have told Eurozone officials that they are ready to participate in Greece bailout package in October’.  On latter need detail as to whether they are pushing still for debt restructuring or not.

Greece - Greek Economy Minister Stathakis says Greece will post a small increase in GDP in 2016.  Should do – some easy 2015 comps!

US interest rates  - CME Fedwatch now pricing Fed rate lift-off at the following probabilities Sept: 45% (Yest. 54%), Oct: 51% (Yest. 60%), Dec: 72% (Yest. 75%).  Let's face it a rate hike of any materiality being pushed back...

Japan - Japanese producer prices contracted by the most in four-and-a-half years as steep drops in the price of energy continue to weigh on inflation. The producer price index shrank by 3 per cent in July from a year earlier.  Abenomics!  Yen should still weaken in my view...

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