Wednesday, 16 December 2015

A few macro thoughts today

A few macro thoughts today...

Well we are here - 5 things to watch at the Fed meeting later today (link here). 

As a warm-up the US market had its first back-to-back gain for the first time in 28 sessions which ties the longest duration record without such a move (only three previous equivalent observations since 1970).

(h/t @RyanDetrick)

Meanwhile Ryan also noted this about inflation. Something for Janet Yellen to comment about later? 

Now that would potentially get the bond market excited...and of course that matters for far more than just the United States...

I still say that the key is where the US$ is trading.  I am watching dollar trade weighted carefully - which so far has not decisively broken that round number 100 level: 

Meanwhile as for UK interest rates – Mark Carney in today’s FT on why UK rates are not going up soon: ‘The Bank of England, rather, is focused on curbing excessive credit growth in a “low for long” interest rate environment, he said. With little sign of inflation, Mr Carney said the priorities for the central bank were to increase the resilience of the banking system in the event of a downturn and reassess the safety of the buy-to-let lending market’

Meanwhile I read in The Times that: 'Almost a third of households would have to cut spending, work longer hours or change their mortgage terms if interest rates rose by just 2 percentage points without any increase in pay, according to the Bank of England. Research by the Bank found that the number of vulnerable UK households remained high six years after the end of the recession, but they “appear a little better placed to cope with a rise in interest rates than a year ago” '

In combination that sounds like no UK rate rises for a while...

M&A market – interesting graph below as the positive acquirer performance impact declining.  As I noted on Twitter:

More subtle strategies required than probably overpaying and hoping to find new cost cuts in today's financial mkts

(h/t @eurofaultlines)

Asia – ok but dull Japan Nikkei Manufacturing PMI (Dec, P): 52.5 (prev 52.6).  Meanwhile in China The People’s Bank of China weakened the renminbi fix by 0.1% to a new four-year low of 6.4626 against the US$. While the move is small, it’s the eighth weakening in a row. Elsewhere 6 out of 12 economists surveyed by Bloomberg last week say 2018 will be the turnaround year, while five said it will take until 2019 or after for growth to re-accelerate (link here).  

Feels like lots of pessimism given the still strong services sector growth in China.

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