Global Macro

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This is not a test

Sadly I’ve been right. The US is plunging into recession. Not just idling in, plunging. Last night’s collapse in the Philly Fed leaves no room for doubt. Europe will follow. Next up in the US will be a new round of job losses. Look at this chart from Zero Hedge which compares the Philly Fed Index

9

ECB moves into FX

Some interesting movements in Euroland last night. Last week I stated that the lack of definitive action by the Euro-elite was morphing the issue of sovereign debts slowly into a banking crisis. We have seen that recently in the European CDS market, and that continues: The cost of insuring European sovereign and corporate debt against

0

Fearful Symmetry sees intransigent Indian inflation

The inflation story remains a patchwork of trends feeding into an intransigent headline reading that has rarely dipped below 9% since early 2010. The overall situation has not deteriorated in recent months, but despite some kernels of hope, nor has it improved in concrete, unambiguous fashion. The RBI’s preferred core series is non-food manufactures. fearful symmetry buttresses that information  with

13

Euro doom

Delusional Economics has led the MB debate on Europe. His regular readers will know that he has identified the fundamental problem at the heart of the euro, structures that do not enable different members countries to be competitive. I have fought against this fundamental diagnosis, preferring to believe that the EU project is passionately supported

4

Austerity claims another victim

The big news from Europe last night was that the German consumer have followed their French neighbours into personal austerity. German gross domestic product growth slowed more than expected in the second quarter, weighed by a negative trade balance, flagging consumption and weak construction investment, the statistics office said. Growth dropped to 0.1 percent in seasonally adjusted

24

Fighting the Fed

Last night’s market action screams QE3. Anything physical – grains, oil, gold – went bonkers, whilst the $US and Treasuries got thrashed. Welcome to QE3 and a new  “undollar” rally. An “undollar” rally is, of course, the process of buying anything physical that is priced in US dollars and therefore is set to rise in price

7

Yes or no to Eurobonds?

Billionaire US investor George Soros gave an interview  to German Magazine Der Speigel yesterday in which he outlined his thoughts on the European Crisis. I have included the full interview transcript at the bottom of this post. In the interview Soros was scathing about the lack of leadership across Europe claiming that: “The politicians have not really tried

5

Is recession priced in?

Nope. Not even a bit. Sorry. That doesn’t mean that whatever it is that’s coming for Western growth isn’t priced in, but it definitely is not recession.  Needless to say, then, if you think a recession is coming then ipso facto markets are going much lower as well. The Economist has a very useful take on

9

Europe’s austerity GDP

A couple of updates for Europe over the weekend. The Italian parliament ratified the first stages of a larger austerity plan to speed up budget cuts. Italy’s cabinet has adopted sweeping austerity measures to cut the fiscal deficit by 45.5 billion euros ($64.8 billion) and balance the budget in 2013, a year ahead of its previous

18

French & Japanese GDP crash

Not a great week for the French to report that Q2 GDP was 0.0% against expectations of 0.3% and from 0.9% in Q1 2011. But that’s just what happened as the the screenshot from my Bloomberg above shows. The year on year data was equally disappointing coming in at 1.6% against market expectations of 2%

6

Shorting ban on Euro banks

The merry-go round of Europe continued last night. The CDS spreads on banks were up and down: French bank credit default swaps have recovered from early morning wides on Thursday but Societe Generale is still much wider than the previous session’s closing levels. BNP Paribas five-year credit default swaps reversed early losses to trade 7.5bp

6

Eyes back to Europe

As I said on August 1st: With the economic world firmly focused on the US debt debacle this week it is likely that Europe will slip off the radar a little. I suspect, as many people do, that for the US there will be an eleventh hour resolution followed by a short lived bounce in

5

Hunting France

Sentiment is an ephemeral beast and yesterday’s hopeful market bounce turned back into carnage overnight, not too strong a word, as markets decided that it is the looming global economic weakness that is the more important driver not the Fed’s friendly words. At the close of play the FTSE’s 3% fall looks good compared to 5% falls

25

Limits to growth

And so, I was right and wrong. Or perhaps, it is wrong and right. The FOMC has decided against a new round of QE. However, it has also signaled that it will do something, presumably another round of QE. Global equities bounced anyway from their extremely oversold condition and enjoyed a melt-up into the close.

5

The Ice Age rolls on

Societe Generale’s Albert Edwards has provided an insightful, but bearish, view of the state of the global economy. Here are some key extracts (full report below): As we see a short-lived economic recovery failing only two years into the cycle and a plunge back into recession, we remind investors that this was exactly the Ice

12

Trichet’s bazooka

The ECB’s bond market intervention did its job for Italy and Spain last night, but as I expected we also saw some risk shipping. While periphery bonds fell off, French bonds started wearing the risk and we saw French sovereign credit default swaps hit a record high of 160 basis points overnight. As I have

7

Europe flails

I thought I would provide some updates on Europe given that the response to the current turmoil is moving quite quickly, and there have been some major announcements  since I wrote my previous post late last night. Firstly we saw a statement from some EU leaders re-iterating …. well, everything. President Sarkozy and Chancellor Merkel

21

G7 spouts twaddle

Here is the full statement of the G7 released recently: In the face of renewed strains on financial markets, we, the Finance Ministers and Central Bank Governors of the G-7, affirm our commitment to take all necessary measures to support financial stability and growth in a spirit of close cooperation and confidence. We are committed

72

Crisis of the West

In one very important sense, the Standard & Poors downgrade of the United States credit rating is spot on. The debt ceiling debacle that preceded the ratings action showed an extraordinarily destructive political culture at work in Washington. To take the Federal Government within inches of default for no apparent reason was beyond infantile and

11

Europe’s end game

Last week there was a hint that the Europeans may have been finally grasping at a real resolution to their long running economic crisis. The speed at which the EFSF guarantee of the smaller periphery nations had led to contagion in Italy and Spain came as a surprise to the Euro-elite and under pressure from the

2

Data Vault

Australian Data At was another big week in Australia with the a number of the key monthly releases showing further deterioration in the non-mining sectors of the economy while the trade balance was a shinning light with another strong performance. The RBA also updated their medium term forecasts which are looking increasingly optimistic relative to reality.

20

Anatomy of a Crash

The mainstream media (MSM) have repeated verbatim their headlines of drastic downturns in stockmarkets, but what’s really going on around the world? In this post I want to illustrate the anatomy behind worldwide market ructions, placing them in context to the 2007/08 crash using some macro charts, and how its not just stock markets “suffering”.

31

Another Crisis – Live

It looks as if European crises have now become a bi-monthly event with the previous one just 2 weeks ago. Once again the Daily Telegraph UK has supplied insomniac Schadenfreudalists with some riveting entertainment with another semi-live blog of the unfolding drama. Latest update 10.00 Italy‘s GDP figures are out, and they’ve come in as expected. Official

34

The centre cannot hold

It’s quaint you know. Analysts faith in the system, I mean. There are a couple of really smart articles out this morning from really smart people about really smart things. And they’re making reassuring noises that there is no recession coming and that you should stay in your trades, that yesterday’s money making strategy is

18

Europe’s dominos

There is a now a well-worn path beaten out by European nations as they approach the alter of the markets to plead that they “are different” from the previous cast that have just made the same trek. The speech given to market gods  is always the same, “we are different”, “the market underestimates us”, “we

4

The OECD has had one too many ouzos

As I have stated many times the current plan of pushing austerity onto the indebted periphery of Europe is not a sustainable solution because the current macroeconomic environment of the EMU cannot provide an auto-stabilising mechanism that will compensate them for the lack of credit being issued into their economies. While Europe continues on this

39

Turning a soft landing hard

Sigh. I apologise for the ceaseless battery of bearish outlooks this morning but damn, that’s the way the world is going, and I’m not going to “pull a Yardney” and pretend it isn’t so that yours and my hard earned capital goes up in smoke. This morning we have two excellent pieces on the debt-ceiling