Tag Archives: newsletter

There are three important economic events tomorrow.    The UK will release its December employment report and November weekly earnings data.  The US reports December CPI.  The Bank of Canada meets, and is widely expected to be the first central bank from a high income country to cut rates this year.   Sterling has lost 5.6% against the dollar since December 28.  The key factor is that the economy is slowing, which pushes further out in time a Bank of England rate hike.  Anxiety over the...

(from my colleague Dr. Win Thin) Brazilian central bank President Tombini said it will take into account the IMF’s revised forecasts for a deeper recession when it meets this week to decide on policy. Sorry, but we don’t buy it. No central bank should ever be affected by IMF forecasts. Yes, the IMF has great economists and often has excellent advice for its member countries. But no policymaker worth their salt should base their decisions on updated IMF forecasts. We’d add that the...

The China-sponsored Asian Infrastructure Investment Bank was formally launched over the weekend.  Many observers have seen it as a rival to the World Bank.  Others saw in another vehicle that would be used to facilitate the internationalization of the Chinese yuan.  We have consistently argued that these ideas are a serious exaggeration. News that AIIB will lend only US dollars supports our claim.  It seemed obvious that most members would fund their quota in dollars.  It also seemed...

The relentless pounding that investors suffered in the first two weeks of the year has subsided.  It is too early to have much confidence that a turn is at hand.  By various measures, the sell-off had stretched the technical condition.     In any event, the stability of the yuan, gains in the Chinese stocks, and a bounce in oil prices appears to be giving the bears a day off.  Chinese economic data (Q4 GDP, retail sales, industrial output, and fixed asset investment were a little softer...

EM ended last week on a sour note. The most important factor for global risk appetite has become China, with the Fed tightening cycle now on the back burner.  Our base case remains that China muddles through, but policymakers there need to communicate better with the markets.  The PBOC fix and Chinese equity market performance will likely be the biggest drivers for global markets this week.  Commodity prices continue to slide, with oil and copper making new cycle lows last week and...

The market is trying to get its bearings today. The large decline in the US equities before the weekend has had modest spillover effects elsewhere.  Equity markets, barring the Shanghai and Shenzhen Composites, are mostly modestly lower.  The MSCI Asia-Pacific Index is off about 1% while the Dow Jones Stoxx 600 is less than 0.5% lower in late-London morning turnover.   Iranian oil sanctions were lifted.  Oil prices are off a little more than 1% today, with Brent and WTI briefly slipped...

It has come to my attention that, perhaps, the great stock bull market is done. To most people, a bull market is good, and its end is bad. After all, a rising market signifies a healthy economy. Investors are making money. And it seems to prove that the free market is validated, able to deliver miracles despite Obamacare. Share prices are connected to business productivity, aren’t they? In a free market they are, of course. However—and this cannot be said too often—we don’t have a free...

There is a great lyric in Won’t Get Fooled Again by The Who: Then I’ll get on my knees and prayWe don’t get fooled again Remember last week, when the price of silver spiked? On Thursday that week, the price was moving sideways around $14. Then around 5am (Arizona time), the price began to rise. Before 11am, it had hit $14.38. And then it was all over. The price went downhill from there, the rest of the day and all day Friday. It closed at $13.93. The same thing happened this Thursday, with...

Two weeks into the year and most investors are nursing sizable drawdowns.  The recovery in the US equities on January 14 looked like a potential turning point. However, the coattails proved non-existent, and the bull trap was sprung with new downside momentum established before the weekend. The obvious takeaway is that the current driver is not to be found in New York.   And to be sure, we are not just talking about equities, but during this market meltdown, correlations between various...

Speculative activity in the CME currency futures picked up in the latest reporting period. There were six significant gross position adjustments, which in our work is more than 10k contracts.   The gross short speculative euro position was reduced by 17.9k contracts, leaving 209.6k. Since early December, 53k gross short euro contracts were covered.  During the same time, about 17k gross long contracts were added.   Speculators stayed long the yen for the second consecutive week, and...