Global Macro


The noose tightens around Portugal

After recent cuts in GDP growth from Europe due in part to austerity, or at least the threat of it, in many of the 17 nations it wasn’t really a surprise when it was reported last night that the PMI has fallen into contraction: Europe’s manufacturing industry contracted more than initially estimated in August, adding to


European soap

Overnight we saw more politico-speak over the the ongoing Greek collateral squabbling. We now seem to be in a new phase where all those involved claim that there will be a resolution even though their very obviously isn’t one yet: Euro zone countries are discussing ways to charge fees on any collateral Greece would use to back


Churning and burning Europe

It is interesting to compare brokers’ assessments of the European stalemate with the posts and comments on MB. After all, it is the markets that decide whether Europe is salvageable; if they deem that it is, it is. If they deem it is not, then it will probably not be. In that sense we are


EU marks to fantasy

Well I guess I shouldn’t be too surprised by this news given that it has been quite obvious for many months that the European banking system is in a far worse state than anyone has been saying. But the following is a bit embarrassing for Mr Trichet who only yesterday stated that “There is no


The Fed is boxed in

So, yesterday’s and today’s US data has come in mixed. So far, markets have twisted the results to the upside. On Monday, Personal Income and Outlays for July came in above expectations at 0.8 in July, and real PCE increased 0.5% as the price index 0.4 percent. Pending Home Sales Index came in below expectations with a 1.3


European schisms

As I noted recently the new IMF chief is having a bit of trouble communicating exactly what her strategy is for Europe. Last night we saw her struggling again: A fresh round of capitalisation for European banks was firmly ruled out by EU officials and bankers when they appeared before an emergency meeting of the


Chart of the Day

A Eurodollar breakout? The EUR/USD cross has finalised a descending triangle reversal pattern, but has surprised to the upside. This is a mixed signal at best, as the longer term weekly chart below shows significant resistance at 1.50 to the upside, and the usual status of the EUR is to weaken during a crisis (i.e


Eyes back on Greece

Over the last month the Greeks must have been thanking their lucky stars. For at least a short period the eyes of the financial world were peering somewhere else. Italy and Spain were under the spotlight while Merkel and Sarkozy held their own side show. We have now seen Italy state that it will be


Data vault

Australian Data It was another quiet week on the data front in Australia with the only release of note being Construction Work Done during Q2. The flow of data will pick up next week with a number of key data points scheduled for release. Construction Work Done After an enduring run of weak domestic data,


Bernanke Speech: no QE3 yet

Here is Chairman of the Federal Reserve, Ben Bernanke’s full speech at Jackson Hole this morning – no formal announcement of QE3, but September meeting may bring about a “different” policy. The Near- and Longer-Term Prospects for the U.S. Economy Good morning. As always, thanks are due to the Federal Reserve Bank of Kansas City


Fitch debunks decoupling

A new Fitch and Oxford Economics report nicely models the global knock-on effects in the event of a US recession. And its bye bye decoupling, even though the assumptions used are quite conservative. To begin, Fitch lays out a moderate recession scenario: Although a “double-dip” recession in the US is not Fitch’s base case, the agency


Cry Wulff

The German President looks to be attempting to single handedly destroy what is left of European economic stability. Yesterday, in front of  Nobel economics laureates and other financial experts, he opened the European economic conference with a speech that obviously was not proof read by anyone from the EU: In a cannon shot across Europe’s bows,


Groundhog day

So, here is what I wrote on the eve of the Jackson Hole conference last year: The S&P500 tilted at the the key 1040 level again today, the neckline of a scary head-and-shoulders top pattern, and held. The Dow is sitting right at the psychologically potent 10,000 level. Gold is sitting right below all time


Europe’s banker bloodbath

Well the news for the Germans didn’t get any better after the horrible ZEW: German business morale posted its steepest drop this month since the aftermath of the Lehman Brothers collapse in late 2008, raising fresh doubts about the broader European economy as it grapples with a crippling debt crisis. The Munich-based Ifo think tank said on


Euro investor confidence smashes banks

European data was looking ok last night right up until the ZEW: The cost of insuring European bank debt against default rose to a record as German investor confidence fell to the lowest in more than 2 1/2 years on concern the region’s debt crisis will curb growth. The Markit iTraxx Financial Index of credit-default


European data

It is a busy day for economic data in Europe today with many countries reporting their national PMI. Given how sensitive the European market is at the moment I thought I would post some of the data as it comes out. Swiss trade data Swiss exports fell in July as the strengthening franc curbed companies’


The Jackson hole

I haven’t seen a single commentator predict that QE3 will be foreshadowed at the Federal Reserve Jackson Hole meeting this Friday (US time). The blogospheric consensus is that instead, we’ll get ‘Operation Twist’, a contorted effort to stimulate without stimulating by manipulating the yield curve. Calculated Risk, the FT, and Gavyn Davies all provided commentary on the likely


European stalemate

It is getting very difficult to determine what is going to happen next in Europe. Over the last couple of days we have seen a renewed and very strong message from Germany and France that a supra-European debt instrument is not going to happen without some significant adjustment in policy governing national fiscal independence. European


Good news for oil (and Libya)

The FT is reporting that: Colonel Muammer Gaddafi’s 41-year rule over Libya was collapsing as rebel forces advanced deep into the capital, capturing his son, Seif al-Islam. As jubilant crowds filled Green Square at the heart of Tripoli on Sunday night, the rebels said they would grant safe passage to Col Gaddafi and his family


Big trouble ahead (posted by Leith van Onselen)

Back in May, former Reserve Bank of New Zealand advisor, Terry “Macca” McFadgen, wrote a guest post on MacroBusiness entitled: Will Aussie housing go bust?  Now Terry is back with another serving of ‘Maccanomics’. In this installment, Terry provides a sobering assessment of the global economy, and maps-out how events might unfold. This is a



Anyone who has been following my posting for any length of time would know that I am certainly not a friend of the IMF. In my opinion their persistent “one plan fits all” ideology has been very damaging to the world’s economy and has made the recent crisis in Europe far worse. The IMF has


Data vault

Australian Data In a rather quiet week of local data we had a couple of key releases. The major highlight was wages data where had mixed outcomes. Over the long run however the leading indicators of employment continue to signal that there is further weakness ahead which should keep a lid on wage pressures much


An exit plan for Europe

Over the last year or so Europe has been moving towards a “crunch” point where a decision must be made between fiscal-political unity and separation. I have explained at length that the austerity measures introduced to periphery nations would not work as suggested by the IMF and EU because the reduction of debt would lead


Squabbling over the carcass

I find it odd how equity markets move. The credit markets have been continually screaming about Europe for weeks and if you have been reading you would know that the economic system in Europe has been slowly collapsing inwards on the ECB’s balance sheet. None of this should have been a surprise to share markets,


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


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


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


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


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


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