Category Archive: 5) Global Macro

Drivers for the Week Ahead

We get the first February data from the US manufacturing sector this week; the US economy remains strong; FOMC minutes will be released Wednesday. Canada reports some key data this week. Preliminary eurozone February PMI readings will be reported Friday; UK has a busy data week.

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The Fed Has Created a Monster Bubble It Can No Longer Control

The Fed must now accept responsibility for what happens in the end-game of the Moral-Hazard Monster Bubble it created. Contrary to popular opinion, the Federal Reserve didn't set out to create a Monster Bubble that has escaped its control. 

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You Shouldn’t Miss The Cupom

I actually wanted to focus on this yesterday but confirmation wasn’t forthcoming until today. So, it ended up being a broader note on the dollar which only included some mention of Brazil in passing. Still a worthwhile couple of minutes.

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Virus Concerns Resurface

Markets are reacting badly to upward revisions to coronavirus cases in China. The euro fell to the weakest level since mid-2017 against the dollar. UK housing data adds to relatively upbeat figures since the December elections. Malaysia’s government is joining in the counter-cyclical fiscal effort.

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As the Data Comes In, 2019 Really Did End Badly

The coronavirus began during December, but in its early stages no one knew a thing about it. It wasn’t until January 1 that health authorities in China closed the Huanan Seafood Wholesale Market after initially determining some wild animals sold there might have been the source of a pneumonia-like outbreak. On January 5, the Wuhan Municipal Health Commission issued a statement saying it wasn’t SARS or MERS, and that the spreading disease would be...

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China’s Fatal Dilemma

Ending the limited quarantine and falsely proclaiming China safe for visitors and business travelers will only re-introduce the virus to workplaces and infect foreigners. China faces an inescapably fatal dilemma: to save its economy from collapse, China's leadership must end the quarantines soon and declare China "safe for travel and open for business" to the rest of the world.

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Two Years And Now It’s Getting Serious

We knew German Industrial Production for December 2019 was going to be ugly given what deStatis had reported for factory orders yesterday. In all likelihood, Germany’s industrial economy ended last year sinking and maybe too quickly. What was actually reported, however, exceeded every pessimistic guess and expectation – by a lot.

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Controlling the Narrative Is Not the Same as Controlling the Virus

Are these claims even remotely plausible for a highly contagious virus that spreads easily between humans while carriers show no symptoms? It's clear that the narrative about the coronavirus is being carefully managed globally to minimize the impact on global sentiment and markets. 

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Drivers for the Week Ahead

Risk-off sentiment intensified last week; the dollar continues to climb. This is another big data week for the US; the US economy remains strong. Fed Chair Powell testifies before the House Tuesday and the Senate Wednesday; the Senate holds confirmation hearings for Fed nominees Shelton and Waller Thursday.

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COT Black: German Factories, Oklahoma Tank Farms, And FRBNY

I wrote a few months ago that Germany’s factories have been the perfect example of the eurodollar squeeze. The disinflationary tendency that even central bankers can’t ignore once it shows up in the global economy as obvious headwinds. What made and still makes German industry noteworthy is the way it has unfolded and continues to unfold. The downtrend just won’t stop.

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Dollar Firm Ahead of US Jobs Report

The number of confirmed coronavirus cases and deaths continue to rise; the dollar continues to climb. The January jobs data is the highlight for the week; Canada also reports jobs data. The Fed submits its semiannual Monetary Policy Report to Congress today; Mexico and Brazil report January inflation data.

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Pandemic, Lies and Videos

Will we wonder, what were we thinking? and marvel anew at the madness of crowds? When we look back on this moment from the vantage of history, what will we think? Will we think how obvious it was that the coronavirus deaths in China were in the tens of thousands rather than the hundreds claimed by authorities?

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Dollar Firm as Markets Await Fresh Drivers

China cut tariffs on $75 bln of US imports by half, while the US said it could reciprocate in some way. The dollar continues to climb; during the North American session, only minor data will be reported; Brazil cut rates 25 bp. Germany reported very weak December factory orders; all is not well in the German state of Thuringia.

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Don’t Forget (Business) Credit

Rolling over in credit stats, particularly business debt, is never a good thing for an economy. As noted yesterday, in Europe it’s not definite yet but sure is pronounced. The pattern is pretty clear even if we don’t ultimately know how it will play out from here. The process of reversing is at least already happening and so we are left to hope that there is some powerful enough positive force (a real force rather than imaginary, therefore...

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Dollar Mixed as Some Risk Appetite Returns

The dollar continues to climb; one of side-effects of the virus has been a swelling of the amount of negative yielding debt globally. The US primary season got off to a rocky start for the Democrats. During the North American session, December factory orders will be reported; the US economy remains strong.

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Brace for Impact: Global Pandemic Already Baked In

If we accept what is known about the virus, then logic, science and probabilities all suggest we brace for impact. Here's a summary of what is known or credibly estimated about the 2019-nCoV virus as of January 31, 2019: 1. A statistical study from highly credentialed Chinese academics estimates the virus has an RO (R-naught) of slightly over 4, meaning every carrier infects four other people on average.

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EM Preview for the Week Ahead

EM remains vulnerable to deteriorating risk sentiment as the coronavirus spreads.  China announced a series of measures over the weekend to help support its financial markets, but this may not be enough to turn sentiment around yet.  China markets reopen Monday after the extended Lunar New Year holiday and it won’t be pretty.

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History Shows You Should Infer Nothing From Powell’s Pause

Jay Powell says that three’s not a crowd, at least not for his rate cuts, but four would be. As usual, central bankers like him always hedge and say that “should conditions warrant” the FOMC will be more than happy to indulge (the NYSE). But what he means in his heart of hearts is that there probably won’t be any need.

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Three Straight Quarters of 2 percent, And Yet Each One Very Different

Headline GDP growth during the fourth quarter of 2019 was 2.05849% (continuously compounded annual rate), slightly lower than the (revised) 2.08169% during Q3. For the year, the Bureau of Economic Analysis (BEA) puts total real output at $19.07 trillion, or annual growth of 2.33% and down from 2.93% in 2018. Last year was weaker than 2017, the second lowest out of the six since 2013.

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Second-Order Effects: The Unexpectedly Slippery Path to Dow 10,000

Dow 30,000 is "unsinkable," just like the Titanic. A recent Barrons cover celebrating the euphoric inevitability of Dow 30,000 captured the mainstream zeitgeist perfectly: Corporate America is firing on all cylinders, the Federal Reserve's god-like powers will push stocks higher regardless of any other reality, blah blah blah.

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