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Ten Things to Watch in the Week Ahead

June 30, 2013
The third quarter begins with a bang this week. The main highlights include four major central bank meetings, Japan's quarterly Tankan survey, monthly purchasing managers' surveys and the US employment report.
The larger context in which the data and events will occur is important.  Retail and institutional investors are dramatically ad…
Ten Things to Watch in the Week Ahead Ten Things to Watch in the Week Ahead Reviewed by Marc Chandler on June 30, 2013 Rating: 5
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Great Graphic : European Demographics and the German Window

June 29, 2013
The combination of the fall of the Soviet Union and the rise of China ushered in a period. We live, not in the post-WWII period, but in the post-Cold War era. One of the main characteristics of this period is that it is not Euro-centric. 
We live in the earlier years of what may be a Pacific Century. The center of the world's economy has …
Great Graphic : European Demographics and the German Window Great Graphic : European Demographics and the German Window Reviewed by Marc Chandler on June 29, 2013 Rating: 5
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Currency Positioning and Technical Outlook: Dollar Finishes Q2 on Firm Footing Currency Positioning and Technical Outlook: Dollar Finishes Q2 on Firm Footing Reviewed by Marc Chandler on June 29, 2013 Rating: 5
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Great Graphic: World GDP

June 28, 2013
This Great Graphic comes from The Economist.  It depicts world GDP on a year-over year basis for the world, high income countries, the BRICS and other emerging markets.  
The Economist estimates that world growth slowed to a 2.1% pace in Q1 13, down a full percentage point from Q1 12.    The high incomes countries are barely growing net-net.  Eur…
Great Graphic: World GDP Great Graphic: World GDP Reviewed by Marc Chandler on June 28, 2013 Rating: 5
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Asset Markets Mostly Improve, but Dollar Retains Firm Under Tone

June 28, 2013
Reassuring words from a number of Federal Reserve officials, continued easing of the acute liquidity squeeze in China and mostly firm data in Europe has seen global equity and bond markets general trading higher, but in the foreign exchange market the dollar has retained the underlying firm tone seen this week.  Generally speaking, we anticipate …
Asset Markets Mostly Improve, but Dollar Retains Firm Under Tone Asset Markets Mostly Improve, but Dollar Retains Firm Under Tone Reviewed by Marc Chandler on June 28, 2013 Rating: 5
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Emerging Markets: What has Changed

June 27, 2013
(from my colleagues, Dr. Win Thin and Ilan Solot)
1. The “lesson” is over in China. 2. Brazil is in flux and there is some room to be optimist. 3. Indonesia is finally increasing subsidized fuel prices. 4. The Turkish central bank is stepping up even more. 5. The Czech National Bank is moving closer to weakening the koruna.
1. The “lesson” is over …
Emerging Markets: What has Changed Emerging Markets: What has Changed Reviewed by Marc Chandler on June 27, 2013 Rating: 5
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A European Camel is a Horse Made in Committee

June 27, 2013
European agreements seem to be always compromise formations.  The agreement struck several hours ago on the handling of failing banks is no exception to this generalization.  
On one side, that included German, the Netherlands and Finland wanted clear uniform rules that would allow investors and creditors to understand a transparent process.  On …
A European Camel is a Horse Made in Committee A European Camel is a Horse Made in Committee Reviewed by Marc Chandler on June 27, 2013 Rating: 5
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Dollar Mostly Softer, but still Muted Reaction to Developments

June 27, 2013
The global capital markets have continued to stabilize, but the response to recent developments has been muted. Yesterday's much sharper than expected downward revision to US Q1 GDP (1.8% vs 2.4%), owing mostly to weaker consumption and corporate spending, reassuring talk by several Fed officials, include some for the most hawkish camp, coup…
Dollar Mostly Softer, but still Muted Reaction to Developments Dollar Mostly Softer, but still Muted Reaction to Developments Reviewed by Marc Chandler on June 27, 2013 Rating: 5
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Great Graphic: Another Look at Japanese Stocks

June 26, 2013
The US and Japanese equity markets have been among the best performing equity markets this year. The gains in US equities seem to be largely a function of domestic accounts. 
Foreign investors appear to have played a larger role in the advance of Japanese shares. Weekly Ministry of Finance data shows foreign investors have bought $79 bln worth …
Great Graphic: Another Look at Japanese Stocks Great Graphic: Another Look at Japanese Stocks Reviewed by Marc Chandler on June 26, 2013 Rating: 5
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Dollar Bulls Still in Charge

June 26, 2013
The US dollar is firm against most of the major currencies today. There seems no fresh impetus behind its rise. Global capital markets have continued to stabilize, with most equity and bond markets higher. Money market rates in China have slipped now for the fourth day running.
The euro's corrective upticks were brief and shallow, afte…
Dollar Bulls Still in Charge Dollar Bulls Still in Charge Reviewed by Marc Chandler on June 26, 2013 Rating: 5
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Great Graphic: The Growth of China's Shadow Banking

June 25, 2013
This Great Graphic was posted on the Financial Times' new news delivery service called fastFT.  In turn picked it up from BofA Merrill Lynch, who drew on data from the China's central bank.  
The orange-ish line are the yuan loans made by China's banks.  The blue line is a broader measure.  It depicts what China officials call "s…
Great Graphic: The Growth of China's Shadow Banking Great Graphic: The Growth of China's Shadow Banking Reviewed by Marc Chandler on June 25, 2013 Rating: 5
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Europe: Your Rope

June 25, 2013
European finance ministers will meet tomorrow ahead of the Summit that begins Thursday afternoon in order to see if more progress can be made on the banking union. Talks broke down at the end of last week, without resolution. There are four dimensions to the issue and, like a Mobius strip or an Escher drawing, it is difficult to know what comes…
Europe: Your Rope Europe: Your Rope Reviewed by Marc Chandler on June 25, 2013 Rating: 5
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Great Graphic: CaseShiller House Price Index and Change

June 25, 2013
S&P/CaseShiller reported house prices rose more than expected in April. The 12.1% year-over-year increase is the largest rise in seven years.
The first Great Graphic, from Bloomberg, shows this.  This is important for a number of reasons.  The one that strikes us as the most significant is the wealth effect of the rise in house prices.  Bro…
Great Graphic: CaseShiller House Price Index and Change Great Graphic: CaseShiller House Price Index and Change Reviewed by Marc Chandler on June 25, 2013 Rating: 5
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Calmer Markets, but Precariously So

June 25, 2013
A number of factors have helped stabilize the capital markets today. A partial recovery of US equities helped, though it took a nearly full recovery of the Shanghai Composite from an initial 5.5%+ decline to help lift the European markets. The recovery of US Treasuries yesterday and follow through today have help global bond markets recouped som…
Calmer Markets, but Precariously So Calmer Markets, but Precariously So Reviewed by Marc Chandler on June 25, 2013 Rating: 5
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Great Graphic: The Information Highway and the Great Divide Great Graphic: The Information Highway and the Great Divide Reviewed by Marc Chandler on June 25, 2013 Rating: 5
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Missed the Move? Be Prepared for Turn Around Tuesday

June 24, 2013
There has obviously been a boat load of US dollars bought over the last four sessions. There are some preliminary technical signs that the near-term momentum may have exhausted itself and short-term participants are better advised sell into a bounce rather than rush into it now.
Heavy selling failed to send the euro though the $1.3050 level an…
Missed the Move? Be Prepared for Turn Around Tuesday Missed the Move? Be Prepared for Turn Around Tuesday Reviewed by Marc Chandler on June 24, 2013 Rating: 5
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Emerging Markets: Preview of the Week Ahead Events

June 24, 2013
(from my colleagues Dr. Win Thin and Ilan Solot)

The Israeli central bank met today and as expected, kept rates steady at 1.25%. Given the turmoil in the global markets right now, we think it makes sense to stand pat, but we believe the bank maintains a dovish bias. We also think policy will remain dovish under Governor-elect Frenkel. The shekel…
Emerging Markets: Preview of the Week Ahead Events Emerging Markets: Preview of the Week Ahead Events Reviewed by Marc Chandler on June 24, 2013 Rating: 5
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Cool Video: CNBC Squawk Box--The Great Unwind is Dollar Positive Cool Video: CNBC Squawk Box--The Great Unwind is Dollar Positive Reviewed by Marc Chandler on June 24, 2013 Rating: 5
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Great Graphic: 10-Year Yields In US, Germany and Japan

June 24, 2013
There has been a large rise in US and European bond yields. This Great Graphic, using Bloomberg data, shows the US (white), German (yellow) and Japanese (green) 10-year yields since the start of the year.  
What is striking now rather than 6 weeks ago when we posted a similar chart here is that Japanese government bonds have in fact stabilized, …
Great Graphic: 10-Year Yields In US, Germany and Japan Great Graphic: 10-Year Yields In US, Germany and Japan Reviewed by Marc Chandler on June 24, 2013 Rating: 5
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Capital Market Drivers

June 24, 2013
It may have many faces, but there is one dominant theme in the capital markets:  unwinding strategic positions that have been established in the post-Lehman environment.

Prospects for the end of the third round of asset purchases in the US has provided a major spur.  In addition, the dramatic reversal of Abe-inspired equity market advance and yen …
Capital Market Drivers Capital Market Drivers Reviewed by Marc Chandler on June 24, 2013 Rating: 5
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Currency Positioning and Technical Outlook: Dollar Catches the Big Mo'

June 22, 2013
The US dollar was trading at four month lows into the middle of last week against the euro, sterling and Swiss franc.  This was reflected in the Dollar Index, which was also at four month lows.   The greenback concluded the week with a strong three day advance that retraced a third to half of its decline since late May.  It also moved to new high…
Currency Positioning and Technical Outlook: Dollar Catches the Big Mo' Currency Positioning and Technical Outlook: Dollar Catches the Big Mo' Reviewed by Marc Chandler on June 22, 2013 Rating: 5
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EU Tweaks Rules for Rating Agencies

June 21, 2013
Yesterday the EU announced new rules of the conduct of rating agencies in terms of their sovereign assessments. The rules appear aimed at making the changes of ratings less disruptive for the both issuers and investors, but does not appear to impact the substance of decisions or curtail their use.
Starting at the end of this year, the rating a…
EU Tweaks Rules for Rating Agencies EU Tweaks Rules for Rating Agencies Reviewed by Marc Chandler on June 21, 2013 Rating: 5
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Fragile Markets Trying to Stabilize Ahead of Weekend

June 21, 2013
A somewhat calmer tone has emerged in the global capital markets, encouraged more, it appears, by position adjusting ahead of the weekend, rather new fundamental developments. China did inject a reported CNY50 bln via reverse repos that did help reverse most of yesterday's spike in rates. The Dollar Index is trading within yesterday's …
Fragile Markets Trying to Stabilize Ahead of Weekend Fragile Markets Trying to Stabilize Ahead of Weekend Reviewed by Marc Chandler on June 21, 2013 Rating: 5
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Emerging Markets: What has Changed

June 20, 2013
(from my colleagues Dr. Win Thin and Ilan Solot)
What has changed? In short, pretty much everything. The FOMC meeting and the market reaction has fed into a deeper re-pricing of assets globally.
1. The selloff in the EM space has been generalized and across all asset classes. 2. The liquidity squeeze in China intensifies. 3. Turbulence in the str…
Emerging Markets: What has Changed Emerging Markets: What has Changed Reviewed by Marc Chandler on June 20, 2013 Rating: 5
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Briefing by BOJ Executive Director: More to Come on Abe's Third Arrow Briefing by BOJ Executive Director: More to Come on Abe's Third Arrow Reviewed by Marc Chandler on June 20, 2013 Rating: 5
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Great Graphic: US House Prices

June 20, 2013
This Great Graphic comes from the NY Federal Reserve. It shows the changes in US house prices as of April from a year ago by county. The darker the green the larger the increase. The red reflects falling prices. The actual chart is interactive. Click here get to the original source. Of note the graph below shows the most marked increase in …
Great Graphic: US House Prices Great Graphic: US House Prices Reviewed by Marc Chandler on June 20, 2013 Rating: 5
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Ten Developments to Note

June 20, 2013
The dollar is the king of castle, extending yesterday's post-Fed rally across the board. Emerging market currencies have been particularly hard hit and we note that the Turkish lira is at new record lows.  Asset markets are also under strong downward pressure. The MSCI Asia-Pacific Index lost 4%. The MSCI Emerging Markets Index is off about…
Ten Developments to Note Ten Developments to Note Reviewed by Marc Chandler on June 20, 2013 Rating: 5
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Dollar Soars, Assets Hit on Fed's Assessment

June 19, 2013
The Fed statement noted that the downside risks have diminished since the fall when it more than doubled the size of the its asset purchases. Bernanke noted that tapering is possible later this year, with QE purchases ending around the middle of next year. 
These two components outweighed the downgrade in this year's growth and inflation fore…
Dollar Soars, Assets Hit on Fed's Assessment Dollar Soars, Assets Hit on Fed's Assessment Reviewed by Marc Chandler on June 19, 2013 Rating: 5
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China Snugs, Signals Banks Should Get Used to It

June 19, 2013
While all eyes are on the Federal Reserve today as the market awaits clues into when the central bank will begin slowing its liquidity provisions, China's central bank continues its own snugging operation, keeping the money market rates at lofty levels.
Rather than inject liquidity into the money markets, as the banks were clamoring for, the P…
China Snugs, Signals Banks Should Get Used to It China Snugs, Signals Banks Should Get Used to It Reviewed by Marc Chandler on June 19, 2013 Rating: 5
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Marking Time Ahead of the Fed

June 19, 2013
The US dollar is trading quietly, largely within yesterday's ranges ahead of the much anticipated FOMC meeting. Even more broadly, the capital markets are relatively quiet. Asia-Pacific equities were mostly lower, except for Japan, Thailand and Australia. Of note, Chinese shares edged lower to new six month lows amid the rising money marke…
Marking Time Ahead of the Fed Marking Time Ahead of the Fed Reviewed by Marc Chandler on June 19, 2013 Rating: 5
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Bad Loans Continue to Rise in Spain and Italy

June 18, 2013
Spain and Italy reported today that the share of bad loans have continued to rise. There is nothing to suggest that this is the peak. In fact, further deterioration is likely.
Bad loans at Spanish banks rose to 10.87% in April from 10.47% in March and 8.73% in April 2012. These doubtful credits rose to 167.1 bln euros. Spain's problem s…
Bad Loans Continue to Rise in Spain and Italy Bad Loans Continue to Rise in Spain and Italy Reviewed by Marc Chandler on June 18, 2013 Rating: 5
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Dollar Mostly Firmer, Data Ignored as Market Awaits Fed

June 18, 2013
The US dollar is firmer against most of the major and emerging market currencies, though is weaker against the euro and Swiss franc. The strength of the euro and franc appears to be a result of cross play amid position adjusting. The euro had already extended its gains to almost $1.34 prior to the release of the better than expect ZEW survey (38…
Dollar Mostly Firmer, Data Ignored as Market Awaits Fed Dollar Mostly Firmer, Data Ignored as Market Awaits Fed Reviewed by Marc Chandler on June 18, 2013 Rating: 5
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Emerging Market Highlights for the Week Ahead

June 17, 2013
(from my colleagues Dr. Win Thin and Ilan Solot)
Emerging market currencies will remain under pressure this week. We continue to think that countries with poor fundamentals and high financing needs (twin deficits) will fare poorly as fears of scarcer global capital build ahead of the FOMC meeting this week.
Central bank of Turkey meet…
Emerging Market Highlights for the Week Ahead Emerging Market Highlights for the Week Ahead Reviewed by Marc Chandler on June 17, 2013 Rating: 5
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Fed and Flash PMIs Dominate the Week Ahead

June 17, 2013
The Federal Reserve meeting that concludes Wednesday is the most important event of the week. There are now few participants, if any, that expect the Fed to reduce its long-term asset purchases now or even next month. Many see the September as a more likely time frame and a recent poll found the median expectation for tapering to take place in…
Fed and Flash PMIs Dominate the Week Ahead Fed and Flash PMIs Dominate the Week Ahead Reviewed by Marc Chandler on June 17, 2013 Rating: 5
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Great Graphic: ECB Monetary Policy Transmission Mechanism

June 16, 2013
A couple of weeks ago, we posted a graph that depicted the transmission mechanism of US monetary policy.   We follow up that with a Great Graphic of how the ECB understands the transmission mechanism of its monetary policy.  
A compare and contrast essay of the two is stuff that a dissertation is made of.  For our purposes here, note that the out…
Great Graphic: ECB Monetary Policy Transmission Mechanism Great Graphic: ECB Monetary Policy Transmission Mechanism Reviewed by Marc Chandler on June 16, 2013 Rating: 5
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Great Graphic: Importance of Exports to China

June 15, 2013
China is the world's largest exporter. It is also among the largest importers. This Great Graphic was posted on Business Insider, who took it from Societe Generale's new quarterly economic outlook.
Exports to China account for more than 1/5 of Taiwan's exports and about 1/8 of South Korea and Malaysia's exports.  They seem to …
Great Graphic: Importance of Exports to China Great Graphic: Importance of Exports to China Reviewed by Marc Chandler on June 15, 2013 Rating: 5
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Currency Positioning and Technical Outlook: Downside Risk for the Dollar?

June 15, 2013
The US dollar lost ground against all the major currencies over the past week. The yen (3.5%) and New Zealand dollar (2.0%) led the pack against the greenback. Canada, Australia and Norway were the laggards, the worst was flat and the best--up almost a percent.  
We had anticipated a better showing for the US dollar. Yet, indicators suggest we w…
Currency Positioning and Technical Outlook: Downside Risk for the Dollar? Currency Positioning and Technical Outlook: Downside Risk for the Dollar? Reviewed by Marc Chandler on June 15, 2013 Rating: 5
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Great Graphic: Nikkei and the Yen

June 14, 2013
We have shown versions of this chart before, but given the recent price action it is worthwhile to revisit.  This Great Graphic, constructed on Bloomberg, shows the dollar against the yen in white and the Nikkei in yellow.   It shows them moving in lockstep.  
Most recently the dollar-yen has been lagging a day or two behind the Nikkei.  Despite …
Great Graphic: Nikkei and the Yen Great Graphic: Nikkei and the Yen Reviewed by Marc Chandler on June 14, 2013 Rating: 5
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Economic Surprises Keep Dollar Bid

June 14, 2013
Unexpectedly firm producer prices and a smaller than expected Q1 current account deficit helped the US dollar extend gains recorded in Asia and Europe.
US producer prices rose for the first time in 3-months and the 0.5% headline increase contrasts with market expectations for a 0.1% increase and the sharper than expected decline in import price…
Economic Surprises Keep Dollar Bid Economic Surprises Keep Dollar Bid Reviewed by Marc Chandler on June 14, 2013 Rating: 5
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Markets Calmer into Weekend

June 14, 2013
The global capital markets are calmer and the US dollar is somewhat firmer, as the volatile week draws to a close. With the help of a Wall Street Journal article, more participants have come over to our view that talk of tapering by the Federal Reserve as early as next week is premature and exaggerated.
The article helped spark the biggest ral…
Markets Calmer into Weekend Markets Calmer into Weekend Reviewed by Marc Chandler on June 14, 2013 Rating: 5
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Emerging Markets: What has Changed

June 13, 2013
(from my colleagues Dr. Win Thin and Ilan Solot)
Emerging market equities and fixed income as asset classes have been hit hard by the storm caused by the dramatic short squeeze of the Japanese yen, which was an important funding currency for the past six months or so, and the backing up of US interest rates amid talk that the Fed may taper its ass…
Emerging Markets: What has Changed Emerging Markets: What has Changed Reviewed by Marc Chandler on June 13, 2013 Rating: 5
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Retail Sales Point to Downshift by US Consumers

June 13, 2013
The strong headline gain of May retail sales disguises the underlying pullback, which is the real signal.  Retail sales rose 0.6% after a 0.1% rise in April.  The consensus was for a 0.4% increase.
The weakness is evident though on an underlying trend basis.  The 3-month annualized pace for the headline, ex-auto measure and the core measure used…
Retail Sales Point to Downshift by US Consumers Retail Sales Point to Downshift by US Consumers Reviewed by Marc Chandler on June 13, 2013 Rating: 5
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Yen Soars, while Dollar Stabilizes

June 13, 2013
Japanese markets seem to be driving the developments in the capital markets. The powerful short squeeze in the yen continues and the Nikkei's 6.3% slide is serving to drag down global equity prices.
The dollar was pushed through the JPY95 to hit a low near JPY93.80. These losses mean that the greenback has surrendered 38.2% of its appreciat…
Yen Soars, while Dollar Stabilizes Yen Soars, while Dollar Stabilizes Reviewed by Marc Chandler on June 13, 2013 Rating: 5
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Foreign Investors Not Responsible for Nikkei Decline

June 12, 2013
The Nikkei fell about 6.5% last week. There was speculation that foreign investors, who had bought tens of billions of dollar worth of Japanese shares since Abe was elected prime minister, had begun taking profits. 
Yet the weekly Ministry of Finance data shows foreign investors were net buyers of (JPY113.6 bln or ~$1.1 bln)Japanese shares in th…
Foreign Investors Not Responsible for Nikkei Decline Foreign Investors Not Responsible for Nikkei Decline Reviewed by Marc Chandler on June 12, 2013 Rating: 5
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Thoughts about Friday's Transatlantic Trade and Investment Partnership Talks Thoughts about Friday's Transatlantic Trade and Investment Partnership Talks Reviewed by Marc Chandler on June 12, 2013 Rating: 5
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Hump Day: Fragile Stabilization of the Global Capital Markets

June 12, 2013
After dramatic moves yesterday, the global capital markets are stabilizing today. The S&P 500 recovered after gapping lowing at the open yesterday and although the close was not particularly constructive is called to open firmer. 
Asian equities were heavy, though China, Hong Kong, Taiwan and the Philippine markets were closed for public holid…
Hump Day: Fragile Stabilization of the Global Capital Markets Hump Day: Fragile Stabilization of the Global Capital Markets Reviewed by Marc Chandler on June 12, 2013 Rating: 5
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Great Graphic: Potentially Bullish S&P Chart

June 11, 2013
The recent price action in the S&P 500 is  constructive.  The case for new highs we suggested seems intact with the recovery from the early losses.  
This Great Graphic, from Bloomberg, shows the price action over the past month.  Recall that last Thursday the S&P 500 extended its pullback to 5% and reversed higher.  After the jobs data t…
Great Graphic: Potentially Bullish S&P Chart Great Graphic: Potentially Bullish S&P Chart Reviewed by Marc Chandler on June 11, 2013 Rating: 5
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Yen Rallies, Dollar-Bloc Sinks, Stocks Slide--Tumultuous Tuesday

June 11, 2013
There are two main developments in the foreign exchange market as North American participants return to their posts. First, the yen has rallied in response to the BOJ's failure to take fresh initiatives to ensure the stability of the bond market. There had been some hope/expectation that Kuroda and Co would extend low rate funding supply op…
Yen Rallies, Dollar-Bloc Sinks, Stocks Slide--Tumultuous Tuesday Yen Rallies, Dollar-Bloc Sinks, Stocks Slide--Tumultuous Tuesday Reviewed by Marc Chandler on June 11, 2013 Rating: 5
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German Constitutional Court Hearing Begins

June 11, 2013
The German Constitutional Court will hold hearings today and tomorrow on the ECB's Outright Market Transaction program announced last year, but yet to be implemented. In fact, documents to explain the precise procedures and operation of OMT have yet to be published.
The complaint has been registered by several politicians, include euroskep…
German Constitutional Court Hearing Begins German Constitutional Court Hearing Begins Reviewed by Marc Chandler on June 11, 2013 Rating: 5
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Emerging Market Preview in the Week Ahead

June 10, 2013
(from my colleagues, Dr. Win Thin and Ilan Solot)

Emerging market currencies remain under pressure at the start of the week. We continue to think that countries with poor fundamentals and high financing needs (twin deficits) will fare poorly as fears of scarcer global capital build ahead of the FOMC meeting next week.
Turkey reports Q1 GDP on Tues…
Emerging Market Preview in the Week Ahead Emerging Market Preview in the Week Ahead Reviewed by Marc Chandler on June 10, 2013 Rating: 5
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