Tag Archives: 5) Global Macro

Everything, including a rational, connected-to-reality, effective financial system, is on back-order and unlikely to ship any time soon. While the stock market euphorically front-runs the Fed and a V-shaped recovery, the reality is the crash has only just begun. To understand why, look at income and debt. Income–earned and unearned–is in free-fall, while debt–which must be serviced by income–is exploding higher. Bailouts are not a permanent substitute for income. In...

The FOMC meets Wednesday; first look at Q1 US GDP comes out Wednesday; weekly jobless claims Thursday are expected at 3.5 mln vs. 4.427 mln last week Italy dodged a bullet last Friday; ECB meets Thursday; eurozone reports Q1 GDP and April CPI data ahead of the ECB decision; Sweden’s Riksbank meets Tuesday BOJ meets Monday; Japan has a busy data week after the BOJ meeting The dollar continues to edge higher. On Friday, DXY traded at the highest level since April 6...

Our sovereign rating model suggests the US will lose its AAA/Aaa rating.  With fiscal stimulus efforts continuing with this latest $484 bln package, the case for downgrades just keep getting stronger but the timing is unclear.  How might markets react?  We look back to 2011 for some clues. RECENT DEVELOPMENTS The White House and House Democrats struck a deal on a new aid package worth $484 bln.  The extra $500 bln amounts to about 2.5% of GDP.  The IMF estimated...

The virus news stream is negative today; the dollar is trying to build on its recent gains Weekly jobless claims are expected at 4.5 mln vs. 5.245 mln last week; regional Fed manufacturing surveys for April continue to roll out ECB confirmed reports that it will accept sub-investment grade debt as collateral; EU leaders will hold a video conference today Preliminary April eurozone PMI readings were awful; UK readings were even worse Japan reported weak preliminary...

The major ratings agencies are punishing Emerging Markets (EM) credits much more than their DM counterparts.  Our own sovereign ratings model suggests that there is still more pain to come. We have produced this interim ratings model to assist investors in assessing relative sovereign risk across the major EMs.  While the situation is still fluid with regards to the ultimate coronavirus impact on the global economy as well as the policy responses, we thought it...

The virus news stream remains mixed; oil remains at center stage with still extreme volatility. The White House and House Democrats struck a deal on a new aid package worth $484 bln Canada reports March CPI; Mexico delivered a surprise 50 bp cut to 6.0% yesterday afternoon ECB will consider accepting sub-investment grade bonds as collateral in its operations; reports suggest Italy will boost its fiscal stimulus efforts UK reported March CPI data; Turkey is expected...

The lockdown vs. opening debate continues in just about every country; the dollar is consolidating recent gains Reports suggest the White House and House Democrats are nearing a deal on another aid package worth nearly $500 bln; the extra fiscal stimulus will add to downward ratings pressure on the US Chicago Fed National Activity Index for March will be reported; late Friday, Moody’s downgraded Mexico a notch to Baa1 with negative outlook The debate about re-opening...

The price of a great many assets will crash, out of proportion to the decline in demand. Oil is the poster child of the forces driving massive deflation: overcapacity / oversupply and a collapse in demand. Overcapacity / oversupply and a collapse in demand are not limited to the crude oil market; rather, they are the dominant realities in the global economy. Yes, there are shortages in a few high-demand areas such as PPE (personal protective equipment), but across...

There is no way authorities can limit the coronavirus and restore global growth and debt expansion to December 2019 levels. Authorities around the world are between a rock and a hard place: they need policies that both limit the spread of the coronavirus and allow their economies to “open for business.” The two demands are inherently incompatible, and so neither one can be fulfilled. The problem is the intrinsic natures of the virus and the global economy. This...

The virus news stream is mostly positive today; yet risk assets are starting the week under some modest pressure The dollar took a hit last week but we think it will recover; some US data releases from Good Friday are worth repeating With most of Europe closed today, the news stream from the region is very light; oil prices could not extend their gains today after OPEC+ finalized output cuts over the weekend India March CPI is expected to ease to 5.90% y/y from 6.58%...