Tagged: UK

The Day Today 20 Jan 2015

* China data better than expected – the stock market rallies from the 7% loss of the previous trading day:
Q4 GDP 7.3% vs 7.2% exp
Dec Retail Sales 11.9% YoY vs 11.7 exp
Dec IP 7.9% vs 7.4 exp
Dec Fixed Asset Invmt 15.7% vs 15.7 exp

* France’s Hollande lets the cat out of the bag, appearing to pre-announce for the ECB!: “On Thursday, the ECB will take the decision to buy sovereign debt, which will provide significant liquidity to the European economy and create a movement that is favorable to growth”
* Germany’s leading tabloid Bild warns that QE risks unleashing a “dramatically devalued” Euro, reducing reform in the periphery countries
* Politicians are weighing in on the idea that ECB sovereign bond-buying will reside with national central banks rather than the ECB itself – Irish FinMin Noonan: “I believe that if it becomes the function of national central banks…then I think it will be ineffective”

* Mervyn King (remember him?) warns that more QE isn’t the answer: “We have had the biggest monetary stimulus that the world must have ever seen, and we still have not solved the problem of weak demand. The idea that monetary stimulus after six years … is the answer doesn’t seem (right) to me”

* European banks have fewer bad loans than the Japanese did before they began QE, but are not in as good shape as US banks before they did QE, according to JPM and MS

* Denmark cut rates back down to their 2012 lows, at -0.20% from -0.05%, and may do more after the ECB decision on Thursday

* Latest poll puts SYRIZA 6.5 pct pts ahead
* All you need to know about how Greece is going to pan out here – it’s the risk that Syriza falls apart that you need to worry about

* The Bundesbank is part way through its transfer of Gold from Paris and New York back to Frankfurt – they announced this plan in 2013, half of all gold reserves to be in FFT by 2020

* 3 reasons UK interest rates won’t rise this year: by Ernst & Young

The Day Today 13 Jan 2014

* ECB Nowotny confirms that the debate is all about whether national central banks should bear the risk of the QE purchases, or should it be shared amongst Eurozone members
* ECB Noyer: “In my view, such a program can be launched only if a majority of the debt would continue to be held by private investors” – so there should be a cap
* ECB Makuch (Slovakia) says a country’s exit from the Eurozone could be managed
* While RBS argues the programme will reach EUR 4.5trn, 10 yr German yields to hit 0.13%, 10 yr Italy 1%

* Japan 5yr yield falls to zero for the first time
* But the BOJ may have to do more, as nudged by economy minister Amari: Lower oil prices aren’t necessarily a bad thing for the economy, but they are a negative factor for the BOJ’s price target.”

* This is the kind of criticism happening in Germany: President of the Ifo says “The risk of deflation is just a pretext for quantitative easing, for hammering out a bailout program for southern Europe”

* Fed Williams: “I would expect by June that the argument pro and con for lifting off rates will be probably a close call”
* Fed Lockhart: ” “I’d excise ‘patient’ if at a given meeting I felt we were likely to want to move at the following meeting,”
* Fed Funds rate prices 15% chance of hike at June meeting, up from 5% a month ago but down from 20% pre payrolls; 51% chance of Sept hike and 79% by Dec
* Fixed income managers see US 10yr at 3% by year-end
* Although there are still articles quoting people like this: “The fact that rates are going up this year is not in people’s view . . . That could mean a big upward move in yields that will lose a lot of people money”

* NY Fed survey shows inflation expectations remain steady

* Saudi prince says we’ll never see $100 oil again, and that conspiracy theory that the oil price fall is designed to hurt Putin is “baloney”

* The Telegraph chooses to spin petrol at 99p as deflationary doom
* BRC Retail Sales shows worst December for retailers since 2008

* Alcoa upbeat as aluminium demand is strong and oil price fall means its cheaper for them to produce

* China’s exports and imports beat expectations

* Last year was the second-worst for John Paulson, one of his funds fell 36%

The Day Today 7 Jan 2015

* Dutch newspaper reports ECB looking at 3 options for QE:
1) ECB buys Govts in proportion to their shareholding in the central bank
2) ECB buys only AAA-rated Govts, taking their yield negative and pushing yields of other Govts lower
3) As for option 1, but national central banks buy the bonds rather than the ECB, theoretically leaving the credit risk within nations

* ‘Unnamed government sources’ say Germany is preparing contingency plans for Greek exit, including the possibility of a bank run in Greece

* Goldman Sachs predicts a Conservative victory in May, as they think UKIP voters won’t go through with it in the polling booth [how enlightening]. They say the outcome is “more uncertain than any in 100 years” [Blondemoney readers already know that, but as GS talks to rather more people this might see hedging strategies pick up]

* UK shop prices keep falling, -1.7% in Dec, vs the record low of -1.9% in Nov, according to BRC
* Demand for mortgages plummets in Q4, according to latest BOE Credit Conditions survey

* S Korea FinMin says oil price decline positive for economy

Personnel changes at the Fed:
* Thomas Laubach promoted to top monetary-policy strategy adviser position – Yellen credited him with the idea of linking zero rates to the progress towards meeting unemployment and inflation goals; Bernanke was his thesis adviser in the 90s
* Obama taps community banker Allan Landon for the Fed Board

* Finra to investigate US bond trading

* Bill Gross says 2015 is going to be terrible, thanks Bill

UK political risk isn’t going away

Take note of the comments yesterday from Gus O’Donnell, the former head of the civil service (and known, not unsurprisingly, by his initials as GOD):

“People should be ready for the fact that it might take rather longer to form a government than the five days last time,”

And also warned that the Prime Minister might not be either David Cameron nor Ed Miliband:

“There’s no constitutional requirement for that to happen, so it could well be that we do have a situation where the Prime Minister is leader of a party which has fewer seats than one of the others.”

This risk is going to keep growing, with UKIP and SNP currently holding on to their decent showing in the polls.

So it’s not just the Election on 7th May you have to worry about… but the days, weeks, and possibly even MONTHS following that… (let’s not even get started on the possibility of another election, even with the Fixed Term Parliaments Act!)

For all the eyes on the collapse in the euro, it’s sterling that has actually fared worse since the start of the year….EUR/GBP is up over 1%….


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”