Thursday, 22 October 2015

Some macro thoughts today...

A few macro thoughts today...in summary as it is a busy corporate reporting day.  

ECB day – in the run-up to the ECB rate decision and press conference, apparently the EC against German wishes is still pushing forward on euro countries supporting each other in the event of a bank collapse by bailing out depositors.  Lack of unity disappointing.

Meanwhile euro area lending still looks a bit like pushing on a piece of string (money supply up, lending down)
(h/t @minefornothing)

Europe other – BoE Governor Carney said at a lecture yesterday that ‘the UK is the leading beneficiary’ of the free movement of goods/services in Europe…although the BoE had not conducted a list of pros/cons to EU membership per se just how it impacted BoE operations. Still, more helpful to the ‘stay’ camp

Greece - Greek gov't & creditors to discuss bank recap today, said to agree on 1.3% GDP contraction, disagree on fiscal targets.  On a similar front I just tweeted out in response to observations by President Hollande of France that 'Greece needs debt relief discussion' 

I agree. Other powers don't however.

China sentiment
MNI China Business Indicator jumped 8.4% to 55.6. The jump is the largest since March 2011, which sounds impressive until you notice the indicator fell 8.3 per cent in September (via Fast FT).



Moody’s on China – change happening but tricky…(link here)

"While there is evidence that the economy is gradually re-orientating away from state-led, capital-intensive growth, the trade-offs are slower headline economic expansion, accelerating capital outflows, and a less certain policy trajectory," says Shi. "System leverage also continues to rise despite slower credit growth."

On a related point this Nomura GDP split shows the short-term +ve influence of the financial sector growth.  Interesting to see they don’t expect services to grow in ‘16


None of this, however, has stopped China business travel becoming the global #1


US fiscal ‘the US is set to hit is $18.1tn debt ceiling on November 3 and can only avert a default, which was only just avoided in 2011 and 2013, if Congress raises or suspends the debt limit.  So far neither the House nor Senate have announced bills that would do so without carrying controversial conditions’ (FT).  Meanwhile on Puerto Rico and its debts, President Obama has been pressing Congress to grant the US commonwealth access to bankruptcy courts, a move critics have denounced as a federal bailout.

US earnings season – revenues beats iffy, earnings beats ok %.  Both charts via @bespokeinvest



Commodities – out-of-favour clearly (and in some cases highly attractive to both capital and income investors).  An area I am still selectively optimistic in (big current holdings include Randgold and BHP Billiton amongst others): 


(h/t @Eurofaultlines)

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