Global Macro Monitor

Kospi and Nikkei diverge in the Bretton Woods

Posted on January 13, 2013 by macromon

Take a look at the divergence between Korea’s Kospi and Japan’s Nikkei over the past month. Clearly the result of Shinzo Abe’s policy to weaken the yen.

Recall how the last big dollar/yen reversal in 1995 helped set the stage for the 1997 Asian Financial Crisis,

…just before the Asian financial crisis broke out, the dollar rose considerably; versus the Japanese yen the dollar’s rise was close to 50 percent.

– Federal Reserve Bank of Atlanta

Doubt we see that again as those countries are not committed to a dollar peg as they were in the 1990’s. However, if the aggressive currency policy of Japan’s new government results in continued repricing of the yen, which we expect, economic tensions will only increase.

Still, even after a 30 percent apprecitation since early June, the Won/Yen cross remains well below 10.8, the 5-year high made in August 2008.

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Posted in Japan | Tagged Japan, Korea, Kospi, Nikkei, Won Yen Cross | 2 Comments

Most Overbought and Oversold Markets

Posted on January 13, 2013 by macromon

Asia x/Japan equities began to to work off overbought conditions.

Japan’s Nikkei continues to reprice higher on weaker yen. Italy’s MIB and Spain’s IBEX experiencing the “positive contagion” from Eurozone sovereign spread compression and now approaching an 80 RSI.

Profit taking in the dollar/yen was met by buyers. We could be wrong but this move feels different and $/yen may remain overbought for a while. Note we have changed to the market convention of quoting $/yen rather yen/$.

Click on chart to enlarge.

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Posted in Monetary Policy, Technical Analysis | Tagged Overbought, Oversold, Relative Strength Indicator, RSI | 2 Comments

Global Trend Indicators

Posted on January 13, 2013 by macromon

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Posted in Global Trend Indicators | Tagged bonds, Commodities, Gold, IBEX, MIB, Oil, Stocks, Trends | 1 Comment

Week in Review

Posted on January 13, 2013 by macromon

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Posted in Week in Review | Tagged bonds, Commodities, FTSE, Gold, Hang seng, IBEX, MIB, Stocks | Leave a comment

Global Risk Indicator Species: Hang Seng and Aussie/$

Posted on January 12, 2013 by macromon

Messing around with the charts while watching the game and came across this.

The Hang Seng and Aussie/$ are important — sometimes leading and sometimes confirming – risk indicators that should be monitored.

We have written about both. See here and here for the Hang Seng. Click here for the Aussie/$.

The Hang Seng is our favorite “indicator species” for global risk appetite and its delta usually leads the S&P500. After the post crash peak in November 2010, the Hang Seng tumbled on concerns about a hard landing on the mainland and the terrible price action in the Shanghai Composite.

The Hang Seng has led the S&P500 since their June 4th 52-week lows, up 28.8 percent compared to 16.2 percent for the S&P500.

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Posted in Equities, Uncategorized | Tagged Australian Dollar, Correlation, Hang seng, Shanghai Composite | 1 Comment

Positive vs Normative Trading

Posted on January 11, 2013 by macromon

Love this….

Hat tip JFinDallas at StockTwits!

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Posted in Video | Tagged Normative, Positive, Trading | 1 Comment

Weekend Lecture: Demystifying the Chinese Economy

Posted on January 11, 2013 by macromon

London School of Economics
Speaker: Professor Justin Lin
Chair: Professor Danny Quah
Recorded on 18 December 2012 in Old Theatre, Old Building.

Justin Yifu Lin is the former World Bank Chief Economist and Senior Vice President, Development Economics. In his capacity, Mr. Lin guided the Bank’s intellectual leadership and played a key role in shaping the economic research agenda of the institution.

Building on a distinguished career as one of China’s leading economists, Mr. Lin is undertaking an ambitious research program that examines the industrialization of rapidly developing countries and sheds new light on the causes of lagging growth in poor regions.

He took up his World Bank position on June 2, 2008, after serving for 15 years as Professor and Founding Director of the China Centre for Economic Research (CCER) at Peking University.

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Posted in Lectures | Tagged China, Economy, Justin Lin, London School of Economics | 1 Comment

Daily Interest Rate Monitor – January 11

Posted on January 11, 2013 by macromon

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Posted in Interest Rates | Tagged Government Bond Yields, Italy, JGBs, Spain | Leave a comment

U.S. Equity Sector ETF Weekly Performance – January 11

Posted on January 11, 2013 by macromon

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Posted in Sector ETF Peformance | Tagged Consumer Discretionary, ETFs, Health Care, SPY | 1 Comment

Weekly Eurozone Watch – “Positive Contagion”

Posted on January 11, 2013 by macromon

Key Data Points
German 10-year Bund 5 bps higher;
France 1 bp wider to the Bund;
Belgium 9 bps tighter;
Ireland 9 bps tighter;
Italy 13 bps tighter;
Spain 17 bps tighter;
Portugal 12 bps tighter;
Greece 50 bps wider;
Large Eurozone banks up 5-12 percent;
Euro$ up 2.11 percent.

Comments
– Ireland, Italy, and Portugal bond yields fall to post-Eurozone debt crisis lows;
– Ireland sold €2.5 billion of 5-year bonds at 3.35 percent;
– Italy sold €3.5 billion 3-year bonds at 1.85 percent;
– Spain sold €5.8 billion of two-, five-, and 13-year bonds at yields of 2.587, 4.03 and 5.57 percent, respectively. The auction was strongly oversubscribed;
– The ECB left interest rates unchanged;
– Greece’s unemployment rate soared to 26.8 percent—the highest rate ever recorded in the European Union;
– Moody’s slashed Cyprus’ credit rating three notches to Caa3 as negotiations over the €17 billion aid package remains deadlocked and banking system under heavy pressure.

…let’s not forget about one thing. We speak a lot about contagion when things go poorly, but I believe that there is also contagion, positive contagion, when things go well. And I think this is in play now. There is positive contagion.

– Mario Draghi, ECB President