Monday, 16 November 2015

A few macro thoughts today...

A few macro thoughts today...

Greece - can we be that surprised that the country misses bailout deadline as talks with creditors drag on as detailed here?  Meanwhile this graphic nicely captures the growing reality in Europe of not just low rates but negative rates...



Japan - Japanese GDP shrank more than expected in the third quarter, dragging the economy back into recession for the fourth time in five years. So much for a huge amount of QE...


The detail was not quite as bad as the headline as noted here: 

'Japan's economy shrank by an annualised rate of 0.8 per cent in the third quarter, versus forecasts for a 0.2 per cent decline. But details of the report weren't so pessimistic: businesses ran down inventories, knocking 2.1 per cent off of annualised growth, but consumption contributed an annualised 1.2 percentage points to growth, and net exports added 0.4 point' (FT)

However I cannot get away from the notion that Abenomics is correctly lampooned here: 


(h/t @RANSquawk)

Global FX - Gold has fallen for 4 weeks in a row, dropping 7.9%, ending Friday at the lowest weekly closing level in the 301 weeks since 5 February 2010 (via Predicted Markets). Meanwhile probably reflecting US dollar recent strength, the Chinese yuan Mid-Price falls 10 days in a row, longest in 7 years despite the IMF recommended China's currency be included in the Fund's special drawing rights basket, a move that would establish it as an international reserve asset. The board meeting at which it could be approved is slated for November 30.

Chinese yuan weakness reflecting the all-pervading strength of the US dollar.  Interesting to see the below too.  You would expect Chinese bond yields to be higher but don't expect the Chinese currency to be strategically weak - currencies over the longer haul reflect usage and perceived economic strength and SDR membership would be the latest route for the yuan to boost both of these factors.  



Sector performance when bond yields increase - super useful via @HumbleStudent.  In my view another reason (along with value, sometimes yield and general lack of sentiment towards) to be overweight sectors like energy and mining currently: 


S&P – what happens when you get 6 weeks or rises…and then a big fall (like last week).  Thought-provoking (if pessimistic!) chart via @RyanDetrick.  I am not quite this pessimistic but further volatility before a 'Santa rally' is certainly plausible...



Later - The two-day Robin Hood Investors Conference starts in New York on Monday. Hedge fund managers including Greenlight Capital's David Einhorn, Kase Capital's Whitney Tilson and Third Point's Daniel Loeb typically use the gathering to make public some of their trading ideas (qz). Also Eurozone inflation and Bundesbank monthly report.

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