Sunday, 6 March 2016

Stories we should be thinking about

A few finance and related stories we need to be thinking about before Monday morning:

Macro matters:

Well what a last week...

(sourced via

A few notable global market statistics from late last week in equity markets...

The S&P 500's 3.5% gain to start March is its strongest 4-day start to the month since '02 and its 4th strongest start to March in history.

Brazilian stocks on track for best week in 20 years

...currency markets...

...and commodity markets: 

BlackRock has temporarily suspended the issuance of new shares in its iShares Gold Trust (IAU) exchange-traded product after a surge of demand on the back of a gold price rally.

But do we still have anything like a normal economy?  One of the more interesting press articles of the weekend was this one which observed about the UK economy and the upcoming budget that:

Without wages growth to boost consumption and tax receipts, the OBR (Office for Budgetary Responsibility) will need to trim Osborne budget outlook next week. And that will force the chancellor to make extra cuts or fall back on stealth tax rises

I felt Friday's non-farm payroll numbers were dominated by the lack of wage inflation in the US and without this you are not going to get a full economic revival.  Let's face it the lack of real median household income growth over the last decade or two is not great news even if the rate of job creation has been quite reasonable...

...and then of course there is debt too.  A wonderful chart from @DonDraperClone indicating another dampener on economic growth rates over the last generation or so: 

We know what the reaction by global central banks has been to much of the above: a money supply / QE boost. Both the above increases are dramatic but you need to be a little careful re compare and contrast as I noted on Twitter: 

don't forget MV=PT (or PY) where 'T' or 'Y' is making some reference to economic output levels, some influence here!
(h/t @from_10000ft)

Money supply however is not everything - and I have talked about a fading velocity of money as a reason why (so far) you have not seen higher money supply leading to higher prices.  This is especially true about Europe...

(h/t @jsblokland)

...and I am still amazed by this chart below:

Putting those two charts together...there really should especially be some stock picking opportunities in Europe.  And maybe helped by more stimulus on Thursday?  This from today's Sunday Times

'Policymakers will meet in Frankfurt on Thursday to unveil the details of the package. Investors hope Draghi will cut the ECB’s key overnight deposit rate, which is already -0.3, still lower to -0.4% — a big penalty for lenders parking cash at the central bank...Draghi is also expected to announce a €10bn (£7.7bn) monthly boost to the existing €60bn-a-month quantitative easing (QE) programme'

Staying with Europe, could be an interesting start to the week in Greece as not only will 'Greek Prime Minister Alexis Tsipras says his country will seek an immediate relocation of migrants stranded on its soil at Monday’s EU summit' (link here) whilst the Financial Times notes that: 

'Greece’s warring creditors will attempt to bridge their differences at a meeting of eurozone finance ministers Monday amidst mounting concerns Athens’ €86bn third bailout is already headed for crisis' (link here).  

I thought this was a good read on 'Media Attention and Investment Decisions' which concluded that

Investors exhibit ‘limited attention’ behaviour, and react to ‘information-free’ media attention. Financial intermediaries predict this behaviour, and exhibit tournament behaviour to try and capture flows caused by media attention

Yes, you can see the correlation:

Oil/energy has been very out-of-favour but as you get a little recovery in general commodity prices no surprises that the regional bourses in the Gulf have performed a little better...although markets in Saudi and Dubai are still clearly down since last August: 

Totally out of the woods though?  Well we will need higher oil prices sooner rather than later as the ratings agencies are getting more worried: 

Moody’s may cut Saudi Arabia’s credit rating
Bahrain junked by Moody’s, may face further cut

Talking about oil prices I liked this chart: generationally oil feels good value here despite the rise of renewables and alternative supply sources...  

...after all rig count is down to 1999 levels: 


The annual Chinese National Congress really got started over the last weekend (nice summary of articles here) with more disclosures on Chinese reserves (link here) from the Central Bank Governor and quantitatively and other headlines that included:  

China Sets 6.5% to 7% Growth Target, First Range Since 1995

China Raises 2016 Deficit to 3% as Leaders Seek to Boost Growth

Onto the ongoing Brexit debate.  On average 'remain' voters are proportionately greater than the 'leaves'...but note the high proportion of 'don't know's':

(h/t @MSmithsonPB)

I liked this chart medley from the weekend Financial Times especially the differentiation between the FTSE-100 and the Pound (given the proportion of overseas earners in the former perhaps no great surprise) and also the property market shifts which frankly is already troubled/extended: 
Creeping isolationism in the US as per military spending trends:

 (h/t @RANDCorporation)

Company-related observations:

Interesting report here under the title: 'BMW sees radical new future in world of driverless cars'

‘Today, software engineers make up just 20 percent of the 30,000 employees, contractors and supplier staff that work on research and development for BMW…need to get to a ratio of 50:50 within five years’

More wealth M&A? "Buyout firms Cinven and Warburg Pincus are said to have tabled a bid worth several billion pounds for Old Mutual Wealth"

Staying with the financial sector, one IPO to watch out for on Monday morning in the FTSE-100:
A couple of other stories from The Sunday Times:

'Insurance giants Prudential and Aviva are set to boost shareholder payouts after a jump in profits' 

'The American owner of the Chicago Mercantile Exchange (CME) has looked over both and its suitor (Deutsche Boerse) in recent is understood to view Deutsche Boerse as the more attractive target'.  Well that could make this bidding contest quite interesting...

And finally...

I found this interesting...and in some case a bit surprising!

(h/t @Paul1Kirby)

Have a good week.  

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