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ICYMI: Macro-View in 10 Bullet Points

May 31, 2013
1.  The market is getting ahead of itself with ideas the Fed will soon taper its asset purchases.  
2.  A serious tapering discussion cannot take place until September and even then, depending on the data for early Q3,  the discussion need not lead to immediate action.  Talk of tapering serves Fed's purposes and has seen the markets re-price …
ICYMI: Macro-View in 10 Bullet Points ICYMI: Macro-View in 10 Bullet Points Reviewed by Marc Chandler on May 31, 2013 Rating: 5
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Dollar Regains Upper Hand

May 31, 2013
The dollar bulls have shrugged off yesterday's losses and have come storming back today, recouping much of the ground lost. The dollar-bloc and emerging market currencies are under the most pressure, while the yen is bucking the trend. But even here, the dollar's slippage in Asia to a new three week low near JPY100.30 was greeted with ne…
Dollar Regains Upper Hand Dollar Regains Upper Hand Reviewed by Marc Chandler on May 31, 2013 Rating: 5
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Japan: More Output, Less Deflation

May 30, 2013
Japan has released a number of reports early in the Tokyo session that show an economy seemingly on the mend and an easing of deflationary pressures. Ironically, the yen tended to weaken in response, whereas the dollar ostensibly sold off in North America after disappointing US data (downward revision to Q1 GDP and an rise in weekly jobless clai…
Japan: More Output, Less Deflation Japan: More Output, Less Deflation Reviewed by Marc Chandler on May 30, 2013 Rating: 5
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Emerging Markets: What Has Changed

May 30, 2013
(from my colleagues Dr. Win Thin and Ilan Solot)

1) The Brazilian central bank has shown its hawkish side; the focus turns to FX now.
2) Taiwan’s new stimulus plan disappointed markets by not surprising on the upside. 3) Indonesia may start stepping up support for the rupiah soon. 4) Bank of Thailand resumed the easing cycle.
1) The Brazilian centr…
Emerging Markets: What Has Changed Emerging Markets: What Has Changed Reviewed by Marc Chandler on May 30, 2013 Rating: 5
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EM: Bloom is Off the Rose

May 30, 2013
Emerging market equities, as an asset class, is turning in the worst monthly performance since last May, losing about 2.4%, so far. The MSCI Emerging Market (free float) Index is off 5% from the high recorded on May 9 and is about 6.5% below the year's peak reached in early January.
On top of the low measured inflation in the US, despite QE;…
EM: Bloom is Off the Rose EM: Bloom is Off the Rose Reviewed by Marc Chandler on May 30, 2013 Rating: 5
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Dollar Bowed by Month-End Pressure

May 30, 2013
The US dollar is trading heavily against the major currencies, though remains mostly firmer against most emerging market currencies. Real material developments have been light and it appears that position squaring, some of which appears related to position adjustments. The month has been characterized by a sharp backing of interest rates, led by …
Dollar Bowed by Month-End Pressure Dollar Bowed by Month-End Pressure Reviewed by Marc Chandler on May 30, 2013 Rating: 5
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Great Graphic: The Fall and Rise of US House Prices

May 30, 2013
This Great Graphic was re-posted from the Wall Street Journal on Barry Ritholtz' s blog The Big Picture.  The left side shows the magnitude of the decline, while the right side shows the recovery.  It is an interesting chart, though the dates seem peculiar.   
According to the charts, house prices in Dallas and Denver are at new highs. On the…
Great Graphic: The Fall and Rise of US House Prices Great Graphic: The Fall and Rise of US House Prices Reviewed by Marc Chandler on May 30, 2013 Rating: 5
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Japanese Investors Step Up Foreign Bond Sales

May 29, 2013
The persistence of Japanese selling of foreign financial assets continues to surprise Japanese policy makers and market observers. The Ministry of Finance reported last week's portfolio flows early Thursday in Tokyo. Japanese investors sold JPY1.12 trillion of foreign bonds and JPY105 bln of foreign shares.
The bond sales are the second …
Japanese Investors Step Up Foreign Bond Sales Japanese Investors Step Up Foreign Bond Sales Reviewed by Marc Chandler on May 29, 2013 Rating: 5
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Great Graphic: Swiss Franc and Yen Moving Together

May 29, 2013
This Great Graphic, constructed on Bloomberg, depicts the correlation of the yen and the Swiss franc on a 60-day rolling basis, on the level of percent change.  At  0.34, the correlation may not seem like much, but it is the highest since Jan-Feb 2012.   Moreover, recently, as in the past 30-days the correlation is more than twice as strong (0.79…
Great Graphic: Swiss Franc and Yen Moving Together Great Graphic: Swiss Franc and Yen Moving Together Reviewed by Marc Chandler on May 29, 2013 Rating: 5
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A Few Thoughts on the EU Recommendations

May 29, 2013
As widely tipped, the EU is recommending giving several countries more time to reach the budget deficit targets.   We have long argued that moving the goal posts was and remains the most likely course. 
EC President Barroso insisted that this is not a retreat from the austerity, but rather "because of the good progress made, we now have the …
A Few Thoughts on the EU Recommendations A Few Thoughts on the EU Recommendations Reviewed by Marc Chandler on May 29, 2013 Rating: 5
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Dollar Mixed, Bonds and Stocks under Pressure

May 29, 2013
The dollar is mostly weaker against the major currencies, except against the dollar-bloc, where the Australian dollar has fallen to new 20-month lows as the bearish sentiment and poor data continue to take a toll. On the other hand, the greenback is extending recent gains against most emerging market currencies. 
News that the IMF cut this year a…
Dollar Mixed, Bonds and Stocks under Pressure Dollar Mixed, Bonds and Stocks under Pressure Reviewed by Marc Chandler on May 29, 2013 Rating: 5
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Emerging Market Preview: Headwinds Generate Policy Response (but not in Brazil) Emerging Market Preview: Headwinds Generate Policy Response (but not in Brazil) Reviewed by Marc Chandler on May 28, 2013 Rating: 5
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Great Graphic: US Interest Rate Premium is Rising

May 28, 2013
This Great Graphic, composed on Bloomberg, show the 10-year interest rate differential between the US on one hand, and German and Japan on the other.   
The yellow line is the spread between the US and Japan.   Since early April, the US premium has been confined between 103 and 121 bp.  
It is currently flirting with the top of this range after US…
Great Graphic: US Interest Rate Premium is Rising Great Graphic: US Interest Rate Premium is Rising Reviewed by Marc Chandler on May 28, 2013 Rating: 5
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European Developments Ahead of the Annual Review of EU Budget Rules

May 28, 2013
With real or anticipated developments in the US and Japan dominating the markets' focus, Europe has been pushed off the front pages. The EC meets tomorrow and may dominate the headlines. The competition is mild due to a light data schedule in the North American morning, outside the Bank of Canada meeting, which is not expect to produce a cha…
European Developments Ahead of the Annual Review of EU Budget Rules European Developments Ahead of the Annual Review of EU Budget Rules Reviewed by Marc Chandler on May 28, 2013 Rating: 5
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Five Questions Facing the Market

May 28, 2013
What is the outlook for Fed policy? Can Japanese officials stabilize the bond market? Is the ECB going to adopt a negative deposit rate? What are the latest inflation readings?   Is the soft landing still intact for China?
What is the outlook for Fed policy?   The dramatic market reaction notwithstanding, we think Bernanke and the FOMC minutes wer…
Five Questions Facing the Market Five Questions Facing the Market Reviewed by Marc Chandler on May 28, 2013 Rating: 5
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ICYMI: Primer on Japan in Four Posts

May 27, 2013
Over the past few weeks, we have sketched out an alternative narrative about Japan.  We see the key problem Japan faces as stemming from surplus savings in the corporate sector.   There is little appetite for greater domestic investment (outside of reconstruction) nor a willingness to boost wages meaningfully.  
We argue that dollar's advance…
ICYMI: Primer on Japan in Four Posts ICYMI: Primer on Japan in Four Posts Reviewed by Marc Chandler on May 27, 2013 Rating: 5
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Great Graphic: Appliance Production and Italy's Decline

May 27, 2013
This Great Graphic is part of a larger study by Euromonitor International by Lorenza Della-Santa.  It looks the number of appliances being produced in a select number of European countries in 2007 (dark bar) and 2012 (light bar).
Italy previously was the world's third largest appliance manufacturer.  Last year it was in ninth place.  Until th…
Great Graphic: Appliance Production and Italy's Decline Great Graphic: Appliance Production and Italy's Decline Reviewed by Marc Chandler on May 27, 2013 Rating: 5
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Cool Video: Periodic Table Song Cool Video: Periodic Table Song Reviewed by Marc Chandler on May 26, 2013 Rating: 5
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Great Graphic: Focus on US Equities

May 25, 2013
The S&P 500 has risen by 16.7% year-to-date and 25% over the past twelve months.  It has risen for almost 200 days without a five percent pullback, though ideas that the Fed may taper off its purchases of long-term assets prompted some profit-taking at the end of last week.
The Great Graphic here is from Goldman Sachs research that was posted…
Great Graphic: Focus on US Equities Great Graphic: Focus on US Equities Reviewed by Marc Chandler on May 25, 2013 Rating: 5
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Currency Positioning and Technical Outlook: What Next?

May 25, 2013
The main development in the foreign change market over the past week has been the short squeeze of the yen, and to a lesser extent, the Swiss franc.
The move coincided with a backing up in JGB yields, with the 10-year approaching the 1.0% threshold, a nearly three-fold increase since the BOJ announced its more aggressive monetary stance in early …
Currency Positioning and Technical Outlook: What Next? Currency Positioning and Technical Outlook: What Next? Reviewed by Marc Chandler on May 25, 2013 Rating: 5
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Durable Orders Glass Half Empty--Still

May 24, 2013
The headline of durable goods orders showed twice the rise the market expected, but the details are poor and it will reinforce the sense of a marked economic slowdown taking place in early Q2. In this regard it is similar to the non-farm payroll figures in which the headline obscured the fact that the work week fell sufficiently to more than off…
Durable Orders Glass Half Empty--Still Durable Orders Glass Half Empty--Still Reviewed by Marc Chandler on May 24, 2013 Rating: 5
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Great Graphic: G3 Bond Yields--One Global Capital Market

May 24, 2013
The rise of US Treasury and Japanese government bond yields has captured the imagination and focused the attention of investors. The rise in yields have knock on effects on bank's, which are significant owners of sovereign bonds. Unrealized gains get pared and the capital levels are eroded.
This Great Graphic, created on Bloomberg, shows …
Great Graphic: G3 Bond Yields--One Global Capital Market Great Graphic: G3 Bond Yields--One Global Capital Market Reviewed by Marc Chandler on May 24, 2013 Rating: 5
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Markets Trying to Stabilize Despite Official Rattle

May 24, 2013
Between Federal Reserve Chairman Bernanke and Bank of Japan Governor Kuroda, they have unsettled investors and injected volatility into the capital markets that has not been seen for some time. The markets are trying to return to some semblance of stability ahead of the weekend, but the ripple effects are still evident. 
The Nikkei initially retr…
Markets Trying to Stabilize Despite Official Rattle Markets Trying to Stabilize Despite Official Rattle Reviewed by Marc Chandler on May 24, 2013 Rating: 5
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Emerging Markets: What Has Changed

May 23, 2013
(from my colleagues Dr. Win Thin and Ilan Solot)

This is what has changed in the EM space in, our view. 1) In Brazil, government finances are back in focus and sparking calls for faster hikes 2) The Philippines government takes action on FX, more is coming 3) FX measures are also coming in Thailand 4) PBOC resumes CNY appreciation 5) Social-politi…
Emerging Markets: What Has Changed Emerging Markets: What Has Changed Reviewed by Marc Chandler on May 23, 2013 Rating: 5
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Japanese Corporates Not Yen Bears (Any More)

May 23, 2013
Japan's Economics Minister Amari had initially suggested a few days ago that the correction to the yen's strength had been corrected. Reports suggested that under criticism from his cabinet colleagues, he softened his comments, now indicating that correction was ongoing. The dollar proceeded to recover and made new multi-year highs yes…
Japanese Corporates Not Yen Bears (Any More) Japanese Corporates Not Yen Bears (Any More) Reviewed by Marc Chandler on May 23, 2013 Rating: 5
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Market Responds Dramatically to Bernanke

May 23, 2013
The global capital markets have been thrown into a tizzy by comments from Federal Reserve Chairman Bernanke.  US bonds and equities sold off yesterday on ideas that Bernanke was signaling a tapering off of QE.    The knock on effect was seen in Asia, even before the disappointing the flash China PMI from HSBC that showed the first sub-50 reading i…
Market Responds Dramatically to Bernanke Market Responds Dramatically to Bernanke Reviewed by Marc Chandler on May 23, 2013 Rating: 5
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Great Graphic: Five Different Measures of US Inflation

May 23, 2013
This Great Graphic was posted on FT Alphaville and it comes from Credit Suisse.  It shows different measures of inflation.  The Fed's preferred measure is the core PCE (deflator).  However, it is sensitive to other measures as well. 
Perhaps it is like the different measures of unemployment.  There is no true or right measure of unemployment.…
Great Graphic: Five Different Measures of US Inflation Great Graphic: Five Different Measures of US Inflation Reviewed by Marc Chandler on May 23, 2013 Rating: 5
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Two Misunderstandings about Japanese Trade

May 22, 2013
Japan reported April trade figures earlier today. Given the decline in the yen and the positive contribution of exports to Q1 GDP, it is a closely watched report. However, there are two profound misunderstandings that distort how the media and some other observers comprehend the data. 
First, the decline in the yen does not automatically transla…
Two Misunderstandings about Japanese Trade Two Misunderstandings about Japanese Trade Reviewed by Marc Chandler on May 22, 2013 Rating: 5
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Central Bankers' Day

May 22, 2013
The US dollar is firmer against most of the major currencies, but is more mixed against the emerging market currencies. Although the US reports April existing home sales (consensus +1.4%), the focus is on Bernanke's testimony and then the FOMC minutes. 
Essentially we expect the Federal Reserve Chairman to say essentially three things: First…
Central Bankers' Day Central Bankers' Day Reviewed by Marc Chandler on May 22, 2013 Rating: 5
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Cool Video: How Tornadoes are Formed

May 21, 2013
This Cool Video was posted on The Atlantic and originally comes from NASA.  It explains the origins of tornadoes.   In a little less than four minutes you will have a better understanding of complex weather phenomenon.

Cool Video: How Tornadoes are Formed Cool Video: How Tornadoes are Formed Reviewed by Marc Chandler on May 21, 2013 Rating: 5
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Two Issues for the Fed: How and When

May 21, 2013
Federal Reserve Chairman Bernanke testifies before the Joint Economic Committee of Congress tomorrow. The market is anxious for the Chairman to weigh in on the recent comments suggesting that even some like-minded regional presidents like Chicago's Evans seems to be warming to the idea of tapering off purchases.
It is one thing for the more…
Two Issues for the Fed: How and When Two Issues for the Fed: How and When Reviewed by Marc Chandler on May 21, 2013 Rating: 5
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Sterling and Yen Aren't Waiting for Tomorrow

May 21, 2013
The US dollar remains largely in a consolidative phase, awaiting Federal Reserve Chairman Bernanke's testimony before the Joint Economic Committee of Congress tomorrow. There has been much talk about tapering asset purchases and Bernanke's views are critical. 
However, comments by Japan's Amari, seemingly trying to soften yesterday'…
Sterling and Yen Aren't Waiting for Tomorrow Sterling and Yen Aren't Waiting for Tomorrow Reviewed by Marc Chandler on May 21, 2013 Rating: 5
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Emerging Market Highlights for the Week Ahead

May 20, 2013
(from my colleagues Dr. Win Thin and Ilan Solot)
In the EM space, disinflation and slow growth remain major themes for most of the countries. Certainly, weaker Chinese readings have gotten the headlines but the malaise is spreading well beyond Asia. 
Today, it was Chile that reported Q1 GDP growth at a much weaker than expected at 4.1% y/y, down …
Emerging Market Highlights for the Week Ahead Emerging Market Highlights for the Week Ahead Reviewed by Marc Chandler on May 20, 2013 Rating: 5
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Spanish Banks: New Look at Restructured Loans

May 20, 2013
Germany, the tightfisted task master, is encouraging Spain to draw down more than the 40 bln euros it already has of the 100 bln euro line secured from the ESM to recapitalize its banks. Spain's budget minister denies there is a need. Germany does not typically encourage countries to take on more debt needlessly. We suspect by late Q3 or e…
Spanish Banks: New Look at Restructured Loans Spanish Banks: New Look at Restructured Loans Reviewed by Marc Chandler on May 20, 2013 Rating: 5
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Amari and Holidays Spur Consolidation in FX

May 20, 2013
Most of continental European markets are closed today for Whit Monday and Canadian markets are closed for Victoria Day. With important data and central bank officials speaking later this week, the market is content to keep most of the major currencies within the ranges seen before the weekend.
The yen is an exception. Comments by Economic Minis…
Amari and Holidays Spur Consolidation in FX Amari and Holidays Spur Consolidation in FX Reviewed by Marc Chandler on May 20, 2013 Rating: 5
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Central Banks Dominate Forces of Movement in the Week Ahead

May 19, 2013
The most important force that has lifted the US dollar across the board is the sense, encouraged by official comments, of the potential divergence in the trajectory of monetary policy between the US and most of the other major high income countries. 
In particular, the pendulum of market psychology has swung back toward speculation of tapering off…
Central Banks Dominate Forces of Movement in the Week Ahead Central Banks Dominate Forces of Movement in the Week Ahead Reviewed by Marc Chandler on May 19, 2013 Rating: 5
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Cool Video: Time-Lapse of World Trade Center Building Cool Video: Time-Lapse of World Trade Center Building Reviewed by Marc Chandler on May 19, 2013 Rating: 5
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Great Graphic: Diverging Growth--Is it the Euro's Fault?

May 18, 2013
This Great Graphic was found on the Economist's blog Free Exchange in a post titled "What the euro has meant". Under the impression that the charts speak for themselves, with little analysis, the author concludes that most of the euro area would have been better off being the US or Great Britain, even in per capita terms. Seeing h…
Great Graphic: Diverging Growth--Is it the Euro's Fault? Great Graphic: Diverging Growth--Is it the Euro's Fault? Reviewed by Marc Chandler on May 18, 2013 Rating: 5
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Currency Positioning and Technical Outlook: Dollar Bull Run

May 18, 2013
The US dollar posted strong across the board gains. It is being driven by the anticipation of favorable developments in the US, in the form of a possible slowing of the Fed's asset purchases, and less favorable developments abroad.
While it is technically poised for additional gains, the biggest risk to the dollar comes from Fed Chairman Ber…
Currency Positioning and Technical Outlook: Dollar Bull Run Currency Positioning and Technical Outlook: Dollar Bull Run Reviewed by Marc Chandler on May 18, 2013 Rating: 5
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Great Graphic: Yen and the Nikkei

May 17, 2013
This Great Graphic, made on Bloomberg, shows how well the dollar-yen and Nikkei have moved together in recent years.  The dollar-yen rate is represented by the white line and the Nikkei by the yellow line.  
Conventional wisdom would suggest that the weakening yen is good for Japanese stock prices through an increase in exports.    This seems lik…
Great Graphic: Yen and the Nikkei Great Graphic: Yen and the Nikkei Reviewed by Marc Chandler on May 17, 2013 Rating: 5
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Strong Finish to Week for US Dollar

May 17, 2013
The US dollar is capping this week's strong performance with new gains and the Dollar Index is at new highs for the year.  It was the dollar-bloc currencies that had the dubious honor of being the weakest currencies over the past week, taking the baton from the Japanese yen.  
Although the US reported some soft economic data in recent days, i…
Strong Finish to Week for US Dollar Strong Finish to Week for US Dollar Reviewed by Marc Chandler on May 17, 2013 Rating: 5
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Emerging Markets: What Has Changed?

May 16, 2013
(From my colleague Dr. Win Thin)

This is what has changed in the EM space, in our view: 
1) The Bank of Israel surprised with a 25 bp rate cut Monday, an intra-meeting move
2) EUR/CZK traded above 26 for the first time since November 2011, as Q1 GDP came in much worse than expected at -1.9% y/y vs. -1.7% y/y in Q4
3) On the other hand, EUR/HUF mo…
Emerging Markets: What Has Changed? Emerging Markets: What Has Changed? Reviewed by Marc Chandler on May 16, 2013 Rating: 5
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Aussie Smack Down

May 16, 2013
The dramatic sell-off of the Australian dollar is the latest of a series of price developments that have surprised the market. The sell-off in JGBs, which appears to have stabilized, has seen 10-year yields in Japan nearly double, despite the BOJ's commitment to buy 70% of the new supply. The sharp decline in gold prices has taken place des…
Aussie Smack Down Aussie Smack Down Reviewed by Marc Chandler on May 16, 2013 Rating: 5
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Great Graphic: Euro Area GDP

May 16, 2013
The euro area provided its first estimate of Q1.  The 0.2% decline in GDP comes after a 0.6% contraction in Q4 and confirms the euro area as the weakest among the high income  regions.  It is the sixth consecutive quarterly contraction, a record of dubious distinction.  
This Great Graphic was posted on lemasabachthani blog. The first chart shows…
Great Graphic: Euro Area GDP Great Graphic: Euro Area GDP Reviewed by Marc Chandler on May 16, 2013 Rating: 5
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Japan: Stronger than Expected GDP and Bought Foreign Bonds for Third Week

May 16, 2013
Japan reported a stronger than expected Q1 GDP expansion, confirming it was the fastest growing economy in the G7. Separately, the Ministry of Finance reported the third consecutive weekly net purchases of foreign bonds.
Japan reported that the world's third largest economy grew at an annualized rate of 3.5%, faster than the 2.7% expected an…
Japan: Stronger than Expected GDP and Bought Foreign Bonds for Third Week Japan: Stronger than Expected GDP and Bought Foreign Bonds for Third Week Reviewed by Marc Chandler on May 16, 2013 Rating: 5
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Cool Video: CNBC Squawk Box--Bearish Euro View Cool Video: CNBC Squawk Box--Bearish Euro View Reviewed by Marc Chandler on May 15, 2013 Rating: 5
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Thinking about Prices

May 15, 2013
Investors have a robust appetite for risk as financial assets remain strong, but there is a nervousness below the surface. The current trajectory cannot be sustained. The US equity market, for example, has gone nearly 180 days without a 5% correction.
With the central banks of the US and Japan buying a combined $160 bln a month in assets, the E…
Thinking about Prices Thinking about Prices Reviewed by Marc Chandler on May 15, 2013 Rating: 5
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Great Graphic: Bearish Euro Pattern

May 15, 2013
This Great Graphic is a weekly bar chart of the euro on Bloomberg. It appears to be carving out a large head and shoulders pattern since last September. 
The neckline is being approached near $1.2750, which is why we bring it to your attention now. The important point about technical patterns is the price projection.

The pattern, from head to n…
Great Graphic: Bearish Euro Pattern Great Graphic: Bearish Euro Pattern Reviewed by Marc Chandler on May 15, 2013 Rating: 5
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