Posted on March 31, 2014 by Sam Wardwell
Do you believe Putin’s words or actions? Putin continued to say he wanted a diplomatic solution to Ukraine while continuing to mass troops along the Ukrainian border. Meanwhile the International Monetary Fund (IMF) approved a line of credit of up to $18 billion to Ukraine and the Ukrainian parliament passed a law to implement IMF-demanded austerity measures. The “West” cancelled a G8 meeting scheduled for Sochi, and so the G8 reverts to the G7 with the expulsion of Russia. Continue reading
Filed under: Equity Market Insights, Europe, GDP, Macroeconomics, Political, Sam Wardwell, United States | Tagged: Bonds, Capital Markets, ECB, emerging markets, equity markets, Fixed Income, GDP, Sam Wardwell, Ukraine | Leave a comment »
Posted on March 25, 2014 by Sam Wardwell
As expected, quantitative easing (QE) was tapered another $10 billion last week and the Fed dropped its earlier guidance that it might start raising the Fed Funds rate when unemployment is 6.5% (confirming that it will wait longer than that, since we’re almost at 6.5%).
The U.S. stock market sold off sharply on this news (even though the outcome was widely expected), then rallied the next day. Some observers think it was computer algorithms that (seeing unexpected hawkishness) triggered the selling; the dip was a buying opportunity. The bond market moved to price in a stronger economy and faster pace of Fed Fund rate hikes.
Filed under: Equity Market Insights, Fixed Income Market Insights, Macroeconomics, Sam Wardwell, U.S. Dollar, United States | Tagged: Bonds, Capital Markets, commodities, currencies, economy, equity markets, Fed tapering, inflation, markets, Sam Wardwell | Leave a comment »
Posted on March 17, 2014 by Sam Wardwell
Observations on the Capital Markets – Week Ended March 14, 2014
China’s downbeat economic data raised fears as softness in Chinese economic data (below-consensus growth in industrial production, retail sales, and CPI) fueled concerns over the health of its economy.
The price of copper fell 5% on the week and is down 12% year to date, raising fears that the Chinese financial system is facing cascading margin calls like what happened to U.S. CDO (Collateralized Debt Obligations) prices in 2007-9 (lots of Chinese copper positions appear to be leveraged).
A referendum in Crimea about seceding from the Ukraine to rejoin Russia, only rumored at a week ago, took place Sunday March 16; the Russians report that 93% voted in favor of doing so. Regardless of how the people might have voted under other circumstances, the outcome is almost certain: Russia is effectively conquering/annexing Crimea.
The U.N. will not act. Russia has a veto on the Security Council. On Saturday, it vetoed a draft resolution against the Ukraine referendum (China abstained). Western diplomats continue to cry foul, but it’s hard to make a clear moral case against Crimean self-determination when the Kiev “government” was not elected. Continue reading
Filed under: Sam Wardwell | Tagged: Chinese copper, copper prices, Renminbi, Russia, Ukraine, war, Yuan | Leave a comment »
Posted on March 14, 2014 by Giordano Lombardo
During the press conference that followed the European Central Bank (ECB) meeting held in Frankfurt on February 6, 2014, ECB President Mario Draghi commented on the current low level of inflation in the Eurozone. These are some of the highlights from his discussion: Continue reading
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Posted on March 13, 2014 by Paresh Upadhyaya
China’s currency, the renminbi, depreciated 1.4% in February 2014, essentially tying the record for the largest monthly drop since the Chinese government’s “peg” policy officially ended in 2005. This jump raised the question of whether or not the renminbi has come to some turning point or just another road bump before resuming a 9-year modest bull rally. We believe the recent depreciation of China’s renminbi is government-engineered and potentially signals a change in China’s exchange rate policy.
In 2013, the renminbi (abbreviation CNY), also called the yuan, was among the top 5 best performing emerging market currencies to appreciate against the U.S. dollar (USD), rising 2.9%. The seeming one-way trend in the currency, and, more importantly, the widening interest rate differentials between China’s onshore version of its currency (CNY) and its offshore version (CNH) has led to capital inflows domestically and from offshore investors.
Filed under: Equity Market Insights, Europe, Fixed Income Market Insights, Macroeconomics, Paresh Upadhyaya, U.S. Dollar | Tagged: China, China Central Bank, China economy, China GDP, Exchange Rate, Foreign Exchange, FX, PBoC, Renminbi, Yuan, yuan forwards | Leave a comment »
Posted on March 10, 2014 by Sam Wardwell
Having bloodlessly consolidated his control of Crimea, Russian President Vladimir Putin announced he hoped there would be no shooting (e.g. military response to the invasion). Most markets rallied, regaining the ground they’d lost when the invasion occurred.
There won’t be a NATO military response: pushing the Russians out is effectively impossible in practical terms. (How the Ukrainians themselves will act is uncertain. As one analyst put it, “The only question now is whether the new Ukrainian government will accept the loss of Crimea quietly or try to retaliate against Russian speakers in Ukraine – offering Putin a pretext for invasion, and thereby precipitating an all-out civil war.”)
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Posted on March 3, 2014 by Sam Wardwell
Last week’s U.S. economic data was again on the soft side, but we still can’t rule out bad weather as the cause. New factory orders for durable goods were down 1% month over month (m/m) in January but up 4.6% year over year (y/y). Excluding the volatile transportation segment, they were up 1.1% m/m and 1.2% y/y. This is consistent with bad weather superimposed on a slowly-growing economy – no big surprise. In other data:
- The Markit flash services PMI fell from 56.7 to 52.7 . . . still above 50.
- The Chicago Fed’s National Activity Index fell to – 0.39
- The (local-focus) Chicago-area PMI was strong, at 59.8.
- The Kansas City Fed index came in at +4, even after citing weather as a headwind.
- The Richmond Fed index fell to -6 . . . details were weak . . . weather is blamed.
- The Dallas Fed’s February Manufacturing Outlook Survey showed general business activity, at 0.3, barely in positive (slow-growth) territory. However, factory activity was notably strong, rising for the tenth month in a row.
- Initial unemployment claims rose to 348k – the high end of the recent range.
Filed under: Equity Market Insights, Europe, Fixed Income Market Insights, GDP, Mutual Fund Industry, Sam Wardwell, United States | Tagged: China, currencies, Japan, Sam Wardwell, Slow growth, the Fed, U.S. housing market, Ukraine | Leave a comment »