Thursday, 12 November 2015

A few macro thoughts today

Europe referendum debate - Europhiles think history is on their side – they could be in for a shock. By dismissing Outers as out-of-date traditionalists, the EU’s cheerleaders have made a big mistake which may cost them the referendum (link here). 

Upcoming QE2 scope…ECB board members protesting too much? - ECB’s Coeure: ECB Doesn't Have To Act In December. No Decision Made On More Asset Purchases. ECB's Constancio says list of measures the ECB can take, no decision yet, will examine options in December if needed...

Greece - faces a general strike. Thousands of government and private sector workers will walk off the job for 24 hours to protest further tax hikes and pension cuts. Syriza, the governing party, backs the strike, in line with its stance against forced austerity measures (  Hmm...

China - The central parity rate of the Chinese currency yuan against the U.S. dollar fell for the 8th straight day on Thursday to the lowest level in more than a month. Meanwhile Chinese govt spending in October rose at 4 times the pace of taxation revenue growth in October heightening thoughts that fiscal policy being used as a stimulus point. Finally ‘Only in China can an investment bank predict 300 percent returns from initial public offerings and call the estimate “conservative” with a straight face’ (link here). 

US corporate yields close to 2013 peak.  Hmm!

Corporate bonds generally: note the rising default rates

And high yield (HY) returns YTD has bounced back but overall has had a difficult return year (and quite rightly so given the low yields on offer given risks): 

(h/t @eurofaultlines)

Japan - does not look that hot to me...  The below via Fast FT (link here):

Japan's core machinery orders rose in September for the first time in four months, but companies forecast only modest gains in orders in October-December, a sign the economy's recovery from an an expected recession could be slow.

Core machinery orders, a leading indicator of capital expenditure, rose 7.5 percent in September versus the median estimate for a 3.3 percent increase, and followed a 5.7 percent decline in the previous month.

The real reason the US may want to raise rates? 

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