Tuesday, 1 December 2015

A few macro thoughts today

A few macro thoughts today...

Countdown to Draghi – ‘ECB likely has no choice but to increase euro-area stimulus this week’ (link here). 

Interesting report and great graphics but “no choice”. Sorry, everyone always has a choice but ECB feels backed into a corner by a lack of structural reform.  I wonder if they will cut the inflation or growth forecasts...

Yuan SDR inclusion - Moody's Investors Service says that the inclusion of the renminbi in the International Monetary Fund's (IMF) Special Drawing Rights (SDR) basket will provide a confidence boost for global investors (link here).  

Recall the changes:

The PBoC this morning set the reference rate around which the "onshore" renminbi (CNY) trades weaker by just 0.02 per cent to Rmb6.3973 per dollar. It's the fourth day in a row the fix has been set weaker, but it's hardly earth-shattering stuff.

Dollar – extreme...and still the key metric to be currently watching for the risk environment in my opinion: 

 (h/t @deadlyfrom80yds)

Greece – apparently the December bailout milestones list said to include sale of Non-Performing Loans (NPL) – something to watch out for more.  Meanwhile in other news apparently Donald Trump's net worth is bigger then the market capitalization of the entire Greek banking system!

November markets - FTSE futures have rallied for two months in a row adding 5.1%. The market has not rallied for 3 successive months since May 2013.  Meanwhile EUR/USD finished November at the lowest monthly close since December 2002 (155 months ago)  (both stats via Predicted Markets).  So no Santa rally...and a higher euro?

Meanwhile I liked this chart...although a bit warped by the two year Treasury performance! 

Asia - China's services sector was a brighter spot, with the non-manufacturing PMI rising 0.3 points to 53.6 in November. Caixin-sponsored preliminary manufacturing PMI was 48.6 in November, versus expectations of 48.3, it was last above 50 in February. Official manufacturing PMI for November came in at 49.6, the fourth consecutive month of contraction.

Note the interesting observation from the Caixin survey however despite all the above: 'overall the economy is still on track to become more stable' 

Meanwhile Reserve Bank of India has left rates on hold.  Meanwhile PMI a bit shabby so maybe rate cuts on the agenda again sooner rather than later...

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