Sunday, 13 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:

After the European Central Bank unveiled their latest monetary boost last Thursday...


...it is the turn of the UK budget this coming Wednesday and a column by the Chancellor of the Exchequer ahead of this event pulls no punches:

The Chancellor’s pre-Budget plea to Sun on Sunday readers: Graft now, gain later

Yes those cocktail of risks are building up...


...and the budget deficit is just coming down far too slowly.  I think you bank on UK fiscal deficits for the balance of the decade: 

(h/t @ST_Business)

Of course fiscal issues are uppermost in other parts of the world too.  China undoubtedly will be looking to the fiscal side as a stimulus boost source as indirectly implied by the People's Bank of China Governor Zhou Xiaochuan at the National People's Congress earlier in the weekend:


"The current monetary policy is prudent with a slight loosening bias...We also want to stress that monetary policy should be adjusted dynamically depending on the judgment towards the economic situation"
(h/t @WorthWray)

I think tactically the Chinese economy will muddle through...despite a financial system that is - to put it tactfully - changing fast...

(h/t @Fritz_100)

...but structurally there are some demographic concerns that will need to be tempered by ongoing supply side reform to boost general flexibility to counter these issues including the less reported rising gender imbalance: 


Talking about gender issues some pretty clear recent migration data trends into Europe: 


Clearly immigration is not going away as an issue short-term within Europe.  Of course as this graphic below shows one person's 'immigrants' are another's 'ex pats'...


...but it will have an impact on voting trends in today's German regional elections that are occurring in part of the country.  Mrs Merkel was always likely to get a bloody nose voting-wise...
(h/t @Schuldensuehner)

...and that turned out to be the case for her ruling CDU party.  Of course all the headlines are re the support for the anti-immigration AfD party...

Debacle for Merkel in state elections: Rhineland-Pala. SPD 37.5%; CDU 32.5%; Ba-Wue: Greens 32%; CDU 27.5%, Saxony-Anhalt: CDU 29%; AfD: 23%

Meanwhile as per this report 'according to a Survation poll of more than 2,000 people, more than one in three surveyed said they would be more likely to vote to leave the EU if Turkey became a member'.

Dangerous times for Europe...and political direction and leadership are required.  Of course generally the global economy has a few challenges...


 ...but I am very much of the opinion that a lower US dollar is good for the balance of the global economy:
(h/t @acemaxx)

The lower US dollar takes some pressure off the Chinese yuan specifically.  General excessive fear about China combined with this recent trend has unsurprisingly led to hedge funds loosing out on some of their speculative positioning as per this report (h/t @fion_li): 

'At least $562 million of options that pay out if the currency drops below 6.6 per dollar -- its weakest point since the devaluation -- have expired worthless since August. Another $807 million will lapse within three months'

Chinese data over the weekend was ok but consistent with a need for further stimulus as noted above already too:

Industrial output rose 5.4 percent from a year earlier in January and February, the National Bureau of Statistics said Saturday, compared with the 5.6 percent median estimate of economists surveyed by Bloomberg. Retail sales climbed 10.2 percent from a year earlier, missing the 11 percent projected gain in the survey, while fixed-asset investment exceeded estimates with a 10.2 percent increase.

Generally though easier at-the-margin times for the emerging markets via a lower US dollar is shown by this potential development noted by the Financial Times

'Brazil and Turkey are rushing to tap international debt markets for the first time this year as rising oil prices and radical central bank stimulus plans create an opening for bonds from emerging markets'

Of course there are the upcoming US elections too.  Fascinating to see risk perceived much more to the downside than the upside...especially for certain candidates: 



Company-related observations:

I think I know where I see better relative value in the markets today: 

(h/t @neckarvalue) 

Is this driving volume uplifts from a low base in the NYSE or not I wonder?


(h/t @callum_thomas) 

Meanwhile shifting to company specifics: 

As per Seeking Alpha '(T)alks between Orange and Bouygues to combine phone businesses and create a new French phone giant are going slowly as it hits hitches over asset sales to competitors.
The deal, expected to be around €10B, may fall out of March now, Bloomberg reports. In mid-February, Orange said any deal would take "several" more weeks to complete. Orange will need to sell assets to rivals Iliad and Numericable-SFR to dodge antitrust concerns, and while the talks are likely to end up with a deal, they are complicated. The biggest block is said to be Iliad's desire for Bouygues' mobile frequencies and network'

Meanwhile in The Sunday Times today: 

'WPP advertising tycoon Sir Martin Sorrell is this week expected to land a £60m bonus - one of the biggest-ever paydays for a British company boss' 

'Troubled security giant G4S is braced for its debt to be slashed to junk status as it struggles to escape four years of crisis' 

'J Sainsbury is preparing to raise its £1.3bn bid for Argos as the deadline looms (this coming Friday) in its takeover shoot-out with a South African furniture giant...Sainsbury is due to report on its quarterly trading on Tuesday' 

'AstraZeneca faces an embarrassing shareholder revolt over an £8.4m pay package handed out to its chief executive last year' 

'Xcite Energy is in a race against the clock as it tries to avoid becoming the latest North Sea oil company to be sent to the wall by the collapse in the crude price....faces a US$139m bond repayment in June but does not have the cash to meet its obligation' 

And finally...

A nice graphic on technological progress over recent years...

(h/t @panthera_s)

Have a good week.  

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