Tag Archive: China

That Can’t Be Good: China Unveils Another ‘Market Reform’

The Chinese have been reforming their monetary and credit system for decades. Liberalization has been an overriding goal, seen as necessary to accompany the processes which would keep the country’s economic “miracle” on track. Or get it back on track, as the case may be. Authorities had traditionally controlled interest rates through various limits and levers.

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FX Daily, August 19: China’s Rate Reform Helps Markets Extend End of Last Week Recovery

Overview: China announced some changes in its interest rate framework that is expected to lead to lower rates.  This helped lift equity markets, which were already recovering at the end of last week from the earlier drubbing.  Chinese and Hong Kong shares led the regional rally with 2-3% gains.  The Nikkei gapped higher for the third time in six sessions, and the first two were followed by lower gaps. 

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FX Weekly Preview: A Vicious Cycle Grips Markets

The capital markets are in their own doom loop. Poor data from Germany and China, coupled with the escalation of the US-China trade dispute and rising tensions in Hong Kong spur concerns about the risks of a global recession. Interest rates are driven lower, and curves flatten or go inverted, spurring more concern about the outlook. The problem is that it is not clear how this vicious cycle ends.

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FX Weekly Preview: Macro Deterioration

The US-China tensions remain the dominant driver of investor risk appetites. President Trump has repeatedly accused China of manipulating its currency on twitter, and finally Treasury Secretary Mnuchiin acquiesced after China failed to prevent the dollar from rising above CNY7.0.

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The Myth of CNY DOWN = STIMULUS Won’t Die

On the one hand, it’s a small silver lining in how many even in the mainstream are beginning to realize that there really is something wrong. Then again, they are using “trade wars” to make sense of how that could be. For the one, at least they’ve stopped saying China’s economy is strong and always looks resilient no matter what data comes out.

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FX Daily, July 31: Sterling Steadies, Attention Shifts to FOMC

Overview: After a shellacking in recent days, sterling has stabilized though there is not much of a bounce to speak of, suggesting the adjustment to the risk of a no-deal Brexit may not be complete. After the S&P 500 posted back-to-back declines, Asia Pacific equities struggled. Hong Kong shares led the regional decline.

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China’s Big Gamble(s): Betting on QE Again?

As an economic system, even the most committed socialists had come to realize it was a failure. What ultimately brought down the Soviet Union wasn’t missiles, tanks, and advanced air craft, it was a simple thing like bread. You can argue that Western military spending forced the Communist East to keep up, and therefore to expend way too much on guns at the expense of butter.

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Germany Struggles On

The popular image of the German industrial machine politics is one which has Germany’s massive factories efficiently churning out goods for trade with the South of Europe (Club Med). Because of the common currency, numerous disparities starting with productivity differences had left the South highly indebted to the North just as the Global Financial Crisis would strike.

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FX Daily, July 24: Poor PMI Weighs on Euro Ahead of ECB

Overview:  Disappointing flash PMI pushed an already offered euro lower ahead of tomorrow's ECB meeting. European bonds rallied and equities, amid a rash of earnings, is trying to extend the advance for a fourth consecutive session.  Italian and Spanish 10-year benchmark yields are off four-six basis points, while core bond yields are off two-three basis points.

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FX Daily, July 15: Marking Time on Monday

Overview: The new record highs in US equities ahead of the weekend coupled with Chinese data that suggested the economy was gaining some traction as Q2 wound down is helping underpin risk appetites to start the week. Japanese markets were closed today, but equities were mostly firmer in the Asia Pacific regions, markets in China, Hong Kong, Taiwan, and India firmed. 

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FX Weekly Preview: What to Watch if Fed and ECB are Committed to Easing

There is little doubt after the Federal Reserve Chairman Powell's testimony last week and the FOMC minutes that a rate cut will be delivered at the end of the month. Similarly, after comments by several ECB officials and the record of their recent meetin.g confirms it too is prepared to adjust policy. The timing of the ECB's move is more debatable, an adjustment at the July 25 meeting appears to have increased.

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As Chinese Factory Deflation Sets In, A ‘Dovish’ Powell Leans on ‘Uncertainty’

It’s a clever bit of misdirection. In one of the last interviews he gave before passing away, Milton Friedman talked about the true strength of central banks. It wasn’t money and monetary policy, instead he admitted that what they’re really good at is PR. Maybe that’s why you really can’t tell the difference Greenspan to Bernanke to Yellen to Powell no matter what happens.

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FX Daily, July 12: Greenback Limps into the Weekend

Overview:  Higher than expected US CPI and the second tepid reception to a US bond auction this week pushed US yields higher and helped stall the equity momentum. Asia Pacific yields, especially in Australia and New Zealand jumped 8-10 bp in response, and Spanish and Portuguese bonds bore the burden in Europe. 

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Hong Kong unrest

The extradition bill is 'dead' but political turmoil is not over yet.Since early June, a series of large-scale demonstrations took place in Hong Kong in protest of proposed legislation that would allow extradition of criminal suspects to certain jurisdictions, including mainland China.

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FX Weekly Preview: In Bizzaro Beauty Contest, the US is Still the Least Ugly

Our hypothesis that the market had reached peak dovishness toward the Fed remains intact after the employment data.  Job growth was the strongest since January.  The participation rate and the unemployment rate ticked up. Average hourly earnings edged 0.2%  higher, and, with revisions, maintained a 3.1% year-over-year pace, which is a bit disappointing.  

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FX Daily, July 05: Dollar is Bid Ahead of Jobs Report

Overview: The dovish response to news that Lagarde was nominated to replace Draghi was extended by the dismal German factory order report that has pushed the euro to new two-week lows and kept bond yields near record lows. The focus ahead of the weekend is squarely on the US employment data, where a second consecutive poor report will fan expectations for a large Fed cut to initiate an easing cycle.

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FX Weekly Preview: Macro Update: Melodrama Subsides but Capriciousness Remains

Since President Trump declared the end of the tariff truce with China in early May, an important focus for investors was the G20 meeting. It was only as it drew near was a meeting between the two heads of state confirmed. What was billed as an extraordinary meeting reportedly lasted less than 90 minutes, and the results were broadly as expected.

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Gold is the secret knowledge of the financial universe

Every seasoned gold investor and every student of monetary history has likely stumbled upon various theories about institutional manipulation of the gold market. While it is true that rarely is there smoke without fire, it is still important to approach this matter rationally and form opinions based on sound evidence and solid research.

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FX Daily, June 26: Biggest Drop in the S&P 500 in June Weighs on Global Equities

The S&P 500 fell nearly one percent yesterday, its steepest fall this month and this was a weight on Asia Pacific and European activity. Most markets have eased, though not as much as the US did. Hong Kong, India, and Singapore were notable exceptions in Asia, where the MSCI benchmark slipped for a second day.

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FX Daily, June 25: Heightened Political Risks Weigh on Sentiment

Overview: It is far from clear that the US sanctions against nine Iranian officials, with the foreign minister to be added later brings negotiations any closer. At the same time, US officials trying to keep expectations low for the weekend meeting between Trump and Xi. The heightened political anxiety will have to make room for Fed Chairman Powell's talk in NY.

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