Global Macro Monitor

Eurozone Finance Ministers Weigh Up Debt Relief

Posted on June 21, 2018 by macromon

At the 20th Eurogroup meeting of Eurozone finance ministers, the Greek economy was on the agenda. They are weighing up the question of debt relief for Greece as well as the surveillance of its economy in the years to come.… READ MORE : http://www.euronews.com/2018/06/21/eu…

Posted in Euro, Eurozone Sovereign Spreads, Uncategorized | Tagged Debt Relief, Greece | Leave a comment

Swan Lake – June 20

Posted on June 20, 2018 by macromon

The Global Macro Monitor defines “macro swan” as any global macroeconomic or financial event with the capacity to spill over into world markets causing risk aversion and lower asset prices. – GMM

Another relatively quiet day on Swan Lake.

Italian 2-year yields continue to come in with the sovereign curve steepening by 16 bps today.

Deutsche Bank continues to flounder, and now down 40 percent YTD.

Brazil 10-year and currency the weakest of the lot today.

The risk markets caught in a struggle between better economic growth in the U.S. relative to the rest of the world, tighter money, and valuations.

North Korea

Just a quick note on North Korea. Glancing at headlines over the days since the Trump-Kim summit, it appears China is coming out the big winner.

We noted yesterday there will be no deal without President Xi’s blessing.

The FT is out with a piece today on North Korea’s preference for the Chinese economic model.

When Donald Trump outlined his vision for the economic development of North Korea, he played on western ideals of luxurious apartments with sea views.

But just days after a landmark summit with the US president, North Korean leader Kim Jong Un has made clear he has a different model in mind: China.

… As the scramble for North Korea picks up pace, however, it is becoming clear that Pyongyang is veering not towards unfettered capitalism but rather a state-guided model along the lines of its huge neighbour. Beijing — with its long history of friendship and political affinity with Pyongyang as well as its geographical proximity — appears poised to reap its dividend. – FT

We are not taking a victory lap but we can honestly say “you heard it here first.”

Our best case scenario is the South and North move closer together, but also closer to China. China’s influence and power in the region is on the rise while the U.S. is in decline. – GMM, April 28

China’s chief goal in the region is to exert its relative influence and diminish American power. It looks, to us, Xi is manipulating the North Korea situation to obtain that objective.

The danger is that the Chinese and North Koreans push too hard and Trump becomes embarrassed and believes he’s been played. Then all hell breaks out on Twitter.

Jun20_NorKo_Map

Source: FT

Jun20_NorKo_Official Jobs Ratio

Jun20_NorKo_Wage Growth

SwanLake_Table

Posted in Black Swan Watch, Uncategorized | Tagged Macro Swans, North Korea | 3 Comments

Greece’s economy at a turning point?

Posted on June 20, 2018 by macromon

Eurozone FInance Ministers will on Thursday settle the future of Greece’s debt relief programme. After 8 years of austerity, the country is showing signs of progress. But Greeks abroad show no sign of coming home, according to a recent survey.…

READ MORE : http://www.euronews.com/2018/06/20/gr…

Posted in Euro, Eurozone Sovereign Spreads, Uncategorized | Tagged Greece Economy | 1 Comment

Swan Lake – June 19

Posted on June 19, 2018 by macromon

Surprisingly few ripples on Swan Lake today.

The Turkish lira, Argentine peso, and SA rand a bit weaker.

We are stunned at the complacency in the markets given the hawkish Fed and now coupled with trade war jitters. These are tectonic events.

Many believe the admin’s hardline on trade is just the “Art of the Deal.” Haven’t we learned anything in the last 15 months? There is no method to the administration’s madness. It’s all impulse, one transaction at a time.

Furthermore, many think the Chinese will run out of tit for Trump’s tat. Total nonsense! President Xi orders the domestic market closed to Apple products. with the world’s largest market cap, and its lights out for the U.S. equity market. See here.

FED

Finally, the Fed has already reduced its SOMA portfolio by $116.3 billion since October, and we estimate another $250 billion into year-end. The cumulative $360 billion reduction by the end of December is not insignificant and equivalent to almost 10 percent of the U.S. adjusted monetary base.

We expect a market epiphany sometime soon.

Jun19_SOMA_Port

SwanLake_Table

Posted in Black Swan Watch, Uncategorized | Tagged Macro Swans, SOMA Portfolio, Trade Wars, Trump | Leave a comment

QOTD: North Korea Deal Or China Deal?

Posted on June 19, 2018 by macromon

In Beijing’s worldview, everything’s connected. Kim Jong-un was in Beijing Tuesday talking strategy with Xi; there frankly won’t be a deal between North Korea and the U.S. without the Chinese leader’s blessing. So what does Trump want more: a “deal” with Kim Jong-un, or a fight with China? He’ll have to settle for one or the other—but not both. – Paul Brandus, MarketWatch

(QOTD = Quote of the Day)

Posted in China, Geopolitical, Uncategorized | Tagged China, North Korea, Trump, Xi | 3 Comments

Kim Jong-un visits China following historic Trump summit

Posted on June 19, 2018 by macromon

North Korea’s leader met with Chinese President Xi Jinping on his third trip to Beijing since March. They were expected to discuss sanctions and the denuclearisation of the Korean peninsula.…

READ MORE : http://www.euronews.com/2018/06/19/ki…

Posted in China, Geopolitical, Uncategorized | Tagged China, Kim, Summit, Xi | Leave a comment

Swan Lake – June 18

Posted on June 18, 2018 by macromon

Same story, different day.

Euro periphery continues to recover with short-end outperforming.

LatAm currencies stable x/ Brazil. South Africa lower.

Brazil and Mexican stocks lower.

SwanLake_Table

Posted in Black Swan Watch, Uncategorized | Tagged Brazil, Macro Swans, Mexico, South Africa | Leave a comment

Two Weeks And Counting For Angela Merkel

Posted on June 18, 2018 by macromon

Coalition gives her two weeks to find European deal… READ MORE : http://www.euronews.com/2018/06/18/me…

Posted in Germany, Politics, Uncategorized | Tagged Angela Merkel, Immigration, Politics | Leave a comment

Week In Review – June 15

Posted on June 17, 2018 by macromon

Summary

Friday’s markets were surprisingly resilient given the escalation of the trade wars
Big recovery in Euro periphery sovereign spreads on the back of Italian FinMin’s statement backing the euro currency
Angela Merkel is having big problems within her government. Some speculate here days are numbered. Watch this space
Turmoil in EM financial markets continues. Turkey 10-year up 117 bps on the week, Brazil up 45 bps
2-10’s yield curve continues to flatten in the U.S.
Junk spreads tighter on the week with CCC in big
The relentless hammering of the Argentine peso continues. A move this large is not sustainable unless the country is monetizing. Take a look at the chart below; the monetary base is growing 30 percent on an annual basis. Argentina does not have the luxury of being a reserve currency. In order to stabilize the peso, the central bank must tighten up base money growth.
EM currencies weak across the board as monetary screws in the S. continue to tighten
The dollar index hit significant resistance in low 95’s. An interesting chart is forming. Is it a head and shoulders bottom forming or just a pause before the breakout?
Euro stock markets outperformed last week, led by Italy
Tech continues to outpace other sectors in the U.S. stock market
Natural gas had a decent week
Oil continues to correct in front of this week’s OPEC meeting