Tagged: Germany

The Day Today 9 Jan 2015

* China PPI falls further into deflation, -3.3% in Dec from -2.7% in Nov

* The ECB already owns 8% of Greek bonds – Coeure yesterday said it would be illegal to restructure this debt

* Fed’s dissenting dove (but now non-voter) Kocherlakota says the Fed “could have, and should have” added more stimulus and it won’t achieve its inflation target
* Rosengren says exact timing of hikes not a big deal, but the process may not be smooth. He is surprised at how much yields have fallen further out the curve
* Fed survey of primary dealers shows they don’t expect the Fed to cut rates in the two years after they raise them; and that half of the drop in inflation breakevens comes from inflation expectations falling, half from inflation risk premiums. Most of the fall in CPI comes from the lower oil price, the dealers said, while some comes from the stronger dollar. [That doesn’t sound like enough to worry the Fed about falling inflation, yet]

* Across OECD countries, energy prices fell by 2.1% in the 12 months to November; it was down only 0.3% in the 12 months to October! [And the OPEC failure to cut output only came at the end of November, so there should be more to come on this measure]. The inflation rate for OECD countries fell to 1.5% in Nov from 1.7% in Oct

* BOJ official: “I wonder when crude will stop tumbling” – they’re focused on this now because of Spring wage negotiations which will be key litmus test of whether they are managing to raise inflation expectations
* Toyota workers to demand 6,000 yen wage increase – last year they asked for 4,000 yen and got 2,700

* Under new Chairman Ana Botin, Santander plans to raise 7.5bn EUR of new capital and cut its dividend

* German think tank survey: 61% don’t believe Islam belongs in the West (up from 52% in 2012)

* Level of default on car-loans in November is highest since 2008, warns WSJ

* First Chinese property company to default on offshore loans

The Day Today 5 Jan 2015

* Speigel magazine reports that Germany expect the Eurozone could cope with Greece exiting the Euro – which a government source said was ‘unavoidable’ if anti-bailout party SYRIZA win the elections at the end of this month. “The danger of contagion is limited because Portugal and Ireland are considered rehabilitated”
* German officials are quick to backtrack saying they expect Greece to “continue to meet its obligations”
* German Vice-Chancellor and head of the SPD: “The goal of the German government, the European Union and even the government in Athens itself is to keep Greece in the euro zone”
… Expect more of these comments in the run-up to the election, but the fireworks will only really begin when SYRIZA try to push their agenda when in power. Will they take it to the brink? Or rather – will the Germans force them to?

* Syriza lead in opinion polls narrows but they are still ahead of New Democracy, by 3.1 pct pts, down from 3.4

* Syriza leader Tsipras: “Quantitative easing by the ECB with direct purchases of government bonds must include Greece”

* Economists expect ECB QE but are sceptical it will do any good for the Eurozone economy

* Fed Rosengren warns that the current 10yr rate is “not a rate that is going to be sustainable in a completely normalized economy, which does imply the 10-year rate at some point in the normalization process will not be as low as it currently is” and that normalisation may be a “bumpier ride” than in 2004  “just because there needs to be an adjustment at some point along the cycle.”
* Mester: ”even after we raise interest rates for the first time… monetary policy is going to remain very accommodative”. The economy is “on (a) very firm footing” although inflation is “running a bit low”
* Kocherlakota says there is “little evidence” of inflationary bias amongst Fed officials
* Ex-Fed financial stability guy Jeremy Stein warns that “How you manage the communication about a given amount of tightening or change in policy may be more important than the change itself”

* Big UK firms expect to raise investment this by 9%, that’s higher than last year’s 8%, despite the threat of the General Election
* The EU referendum could be brought forward by PM Cameron (remember UKIP’s Farage demanded this as the price for supporting a minority government): “If I think we could do that earlier I would be delighted. The sooner I can deliver on this commitment of a renegotiation and a referendum … the better”

* New parties popping up everywhere: New centre-right party in Ireland causes a headache for the right-wing parties that were already losing support

* Turkey raises banks’ FX reserve requirements, in order to support financial stability

* S Korea may ease banks’ FX Forwards rules, if there are capital outflows

* Jeffrey Gundlach thinks US yields could fall below their previous lows: “commodity prices have fallen back to their lows of 2009, which of course was at the height of the financial crisis. Something is obviously very wrong these days in the global economy”

The Day Today 23 Dec 2014

* Former Fed Governor Donald Kohn warns the Fed may be on hold for all of 2015 due to overseas risks and lower inflation expectations – note that he also sits on the BOE’s FPC

* Saudi oil minister: .“It is not in the interest of Opec producers to cut their production, whatever the price is,” he told the Middle East Economic Survey. “Whether it goes down to $20, $40, $50, $60, it is irrelevant.”

* Leading shale producer Continental Resources will cut spending by 41% after the plunge in oil prices

* IMF sees oil price fall increasing global growth by 0.3-0.8% but “increasing vigilance” is needed over potential systemic spillover effects

* Merkel noted that Europe has 8% of the world’s population, 25% of its economy, and 50% of its welfare spending

* Bank of Russia bails out National Bank Trust, Russia’s 27th (!) biggest bank in terms of asset size, but 14th in terms of deposit size – and bank lost more than 3bn RUB of retail deposits last week
* Russia to introduce export tariff on grain
* Russia’s ex FinMin Kudrin warns real incomes will fall next year for the first time since 2000
* China offers Russia help with the rouble

* European money mkt funds set to record first annual increase of inflows in 4 years – you may get negative rates but it’s even more negative if you leave money on cash accounts

* Deputy Governor of PBOC says the yuan’s rise had been “very fast” over the past year

* Oil Price Drop, Nuclear Deal Delay Unsettle Iran’s Economy (WSJ)

* Japan Post to go public next September

* Thailand, China to set up central bank clearinghouses

The Day Today 9 Dec 2014

* China tightens use of corporate bonds as collateral – nothing under AAA allowed for repos, and explicitly says won’t apply to the bonds of local govt financing vehicles. This leads to a spike in yields which in turn triggered stops in USD/CNH due to scramble to unwind positions

USD CNH 9 Dec
* China’s big banks are pushing for a cut in reserve ratio requirements, says WSJ

* Hilsenrath interview with Stan Fischer:
Can the Fed start raising short-term interest rates at a time when there’s so much downward pressure on inflation in the rest of the world?
MR. FISCHER: Foreign demand or growth isn’t the main driver of the U.S. economy. If unemployment continues to decline, if the labor market continues to strengthen, and if we see some signs of inflation beginning to increase, then the natural thing is to get the interest rate up. We call it “normalization.” We’ve almost gotten used to thinking that zero is the natural place for the interest rate. It’s far from it. And although the first step is very important, there’s a process that is set off when the first step starts. Interest rates are going to go up and keep going up for some time, and we need to start thinking about what’s going to happen in the years to come as we go back to a normal situation.

* Hilsenrath says “considerable time” language to be debated again in Dec (no surprise there) – this was Fischer’s response to that: As the likely date nears, we will use different words, I assume, to describe the situation. We don’t want to surprise markets
* Fed’s Lockhart  “comfortable” with retaining “considerable time” to avoid implication that interest rate rise is “imminent”

* Greece brings forward Presidential election by two months – which could ultimately lead to snap general election

* BOJ forced to buy Japanese stock ETFs on a rally, rather than a dip, for the first time
* BOJ increasingly likely to cut inflation forecasts, “sources say”

* BOE Weale: “The MPC when we set interest rates is thinking about where inflation is going to be in two to three years’ time. We have to look through the short-term immediate effect”

* Bill Gross goes for yield – his two biggest positions are long China and Mexico

*European covered bond issuance at lowest levels since 1996,according to Dealogic – ECB purchase programme blamed
* …while high-yield bond issuance is surging, up one third on last year

* French FinMin warns Germany to back off the criticism or risk fuelling extremist parties

The Day Today 21 Nov 2014

* Japan FinMin Aso: “Over the past week the yen-dollar rate has weakened too fast –thats clear. It’s up to the market to set the currency rate and it’s not something where we intervene. Sudden currency changes aren’t welcome, whether it’s up or down”.

* Abe adviser Honda says that a limo ride with Paul Krugman sealed the deal for the postponement of the sales tax hike: ‘“That nailed Abe’s decision — Krugman was Krugman, he was so powerful,” Honda said in an interview yesterday in the prime minister’s residence, where he has an office. “I call it a historic meeting.”’

* ECB Mersch: Negative deposit rates shouldn’t be seen as punishment for the saver: “It’s not for the individual saver, but rather for larger firms that have a lot of money and aren’t investing it”

* Germany’s European commissioner questions whether Hollande has the “willingness to act” over reforms of the French economy

* Fed’s Bullard wants press conferences at every Fed meeting because “the probabilities about when the Fed would move off the zero bound are all piling up on this June meeting”
* Fed’s Mester wants even more communication – of each member’s forecast for growth, inflation etc, and also a consensus forecast

* UK drops its legal challenge to EU banker bonus caps after it was rejected by the adviser to the European Court of Justice

* Investors are taking off their inflation hedges. CIO of Fixed Income at Blackrock: “We are in a secular moment of low inflation due to technology and energy innovation, and that could last for three to five years”

* Moody’s: Half of China’s provinces deserve junk rating, according to FT -> triggers a media storm in China
* The Economist warns that China needs monetary easing even though the authorities are wary of providing it

* AliBaba’s first debt issuance is more than 6 times oversubscribed

* RBA’s Age warns mining investment will be ‘a significant drag’ on GDP

* Bill Gross to manage $500mm for George Soros in his new fund

* Goldmans trade recommendations for 2015 get a wide airing (maybe everyone is just glad to forget this year already!). Essentially they think Fed hikes at a faster pace so the dollar outperforms, and the ECB will be forced to ease aggressively. They see USD/JPY 140, EUR/GBP 0.6500, EUR/USD at parity