Wednesday, 23 December 2015

A few macro thoughts today

A few macro thoughts today...certainly the newsflow is getting a little thinner.  Still a number of noteworthy stories however. 

Greece - The Board of Directors of the European Stability Mechanism (ESM) yesterday authorised the disbursement of €1 billion to Greece. This disbursement, which follows the Greek government’s completion of the second set of reform milestones, will be used apparently by the government for debt service, budget financing, and co-financing projects funded by EU structural funds.  Further structural reform discussions to continue into 2016 including the critical pension reforms of course...  The size of the continuing challenge shown by this chart from today's FT:

Russia / Ukraine – Russian parliament voted to suspend its free trade zone with the Ukraine from the start of January.  Bilateral trade has fallen from $50bn in 2011 to $12.5 in the first 10 months of this year.  Relations getting worse again…and they still haven't sorted out the outstanding bond issues. 

UK banks and tax – “Seven big investment banks in UK paid just $30 million tax in 2014.  Between them the banks generated revenues of $31 billion in the UK, profits of $5.3 billion and employed 33,000 staff” (link here).  Merry Christmas Mr Taxman. 

China tests longer onshore yuan trading hours. The Chinese Foreign Exchange Trade System will close at 11:30pm instead of 4:30pm local time. The trial, which lasts through Dec. 30, will allow China to overlap with European markets and potentially boost its case for the yuan as a global reserve currency (via  The latter point feels important to me.  In other China news today famine/feast news today: 

Other China news: China Regulator Halts P/E Arms Of 17 Banks – Caixin

China May Speed Up IPO Issuance Next Year -- Sec. Journal

A bit of a two-way pull there but one clear trend is that strikes are up!  Job insecurity talking...

Still the Chinese market overall did perform better than the world index…

Talking about broader markets – it really is all about the US dollar: S&P futures have rallied for 2 days in a row adding 2.0%, making this strongest start to a week since 3 February 2015, 46 weeks ago.  Funny how this happened after the 1.30 cent (+1.2%) rally seen in EUR/USD over Monday and Tuesday marks the strongest start to a week for 28 weeks (stats via Predicted Markets). 

Staying with the US indices, will the US index end positive for the seventh year in a row?  5 years of commodity losses however... 
(h/t @MktOutperform)

Re commodity prices, Oil noteworthy over the last 24 hours. U.S. crude prices briefly rose to a premium over internationally traded Brent on Wednesday following a report of a surprise dip in U.S. inventories and the potential for more exports in an oil market which still suffers from ballooning oversupply.  Unusual over recent years.  

Watch out for the 2016 OPEC report out later. 

Back to markets, the current post-2008/09 crisis, 82-month S&P 500 rally, is set to be the second-longest bull market in history in 2016.

(h/t @vexmex)

But still an unusual world?  Absolutely.  Great chart citing the pre global financial crisis boom and bust as well as QE inspired 'recovery' via @Mick_Peel:

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