Global Macro Monitor

Sarkozy Looks Devastated By Greek Surprise

Posted on November 1, 2011 by macromon

(click here if video is not observable)

Posted in Black Swan Watch, Euro, PIIGS, Sovereign Risk, State and Local Government | Tagged Euorpean Soveregin Debt Crisis, Greece, Sarkozy | 4 Comments

China’s official PMI records lowest reading since February 2009

Posted on October 31, 2011 by macromon

CNBC reports,

China’s big factories ran at their slowest pace in almost three years in October as new orders and exports slowed, but smaller firms are showing signs of a fight back against a deteriorating global backdrop, purchasing managers indexes showed on Tuesday.

China’s official PMI recorded its lowest reading since February 2009, coming in at 50.4 for October compared with September’s 51.2, according to the China Federation of Logistics and Purchasing (CFLP) which compiles the index on behalf of the National Bureau of Statistics.

The reading confounded market expectations of a third straight month of rising activity and a forecast of 51.6.

A separate PMI, compiled by UK-based private sector data specialist Markit in conjunction with HSBC, came in at 51.0 — just below the 51.1 level in last week’s flash release — a solid rebound from the 49.9 recorded in September to mark the first rise above the 50 level that demarcates contraction from expansion since June.

It’s not unusual for the two indexes to deliver divergent results as economists say China’s official PMI gathers more data from the country’s biggest manufacturers, while the HSBC index focuses on the small and medium-sized enterprises that provide around 75 percent of the jobs in China…

“The fall of PMI in October points to further economic slowdown in the future,” Zhang Liqun, a researcher with the Development Research Centre of the State Council, wrote in the CFLP statement.

But Zhang Zhiwei, chief China economist at Nomura Securities, said seasonal factors could be behind the lurch lower for the official index, pointing out that on average the October PMI came in 0.9 index points below September’s.

“Given the drop of the PMI is mostly driven by seasonality rather than economic weakness, we maintain our view that reserve rate requirements and interest rates will remain unchanged for the rest of 2011,” Zhang wrote in a client note.

Export Orders Drop

The official PMI recorded falls across key component parts with new orders, which make up 30 percent of the index, slipping to 50.5 from 51.3 and production — another 25 percent of the headline number — easing to 52.3 from 52.7.

New export orders dropped to 48.6 from 50.9.The National Bureau of Statistics (NBS) said in a statement on its website that the weak reading of the October PMI showed that China is feeling the effects of sluggish demand from European and U.S. economies

Interesting official PMI was less than the HSBC PMI, which was also released today. Are they paving the ~~way~~ data for an easing of monetary policy or to justify contributing to the Eurozone bailout? Just askin’.

Posted in China, Economics | Tagged China, PMI | Leave a comment

Charile Rose: The Economist on EU Debt Deal

Posted on October 31, 2011 by macromon

Excellent Charlie Rose roundtable on the global economy with Zanny Minton Beddoes, Editor, The Economist, Greg Ip US Economics Editor The Economist and John Micklethwait Editor-in-Chief The Economist.

This is a must see for any interested in the recent EU debt package announced last Thursday, which dominates the conversation. Click here for full interview and here for the Economist article.

(click here if pictures are not observable)

Posted in Black Swan Watch, Economics, Euro, PIIGS, Politics, Sovereign Debt, Sovereign Risk | Tagged Charlie Rose, Economist, European Debt Crisis, Greece, Greg Ip, John Micklethwait, Zanny Minton Beddoes | Leave a comment

Euro Fracture: “Matters are turning serious” in Italy

Posted on October 31, 2011 by macromon

It you’re looking for some Euro gloom, go no further than Ambrose Evans-Pritchard’s latest, Italy, Europe, and Red Brigade terror. He writes that Italy risks an outbreak of terrorism if the labor market reform is rushed as the EU demands.

Here’s the money quote,

The EU has woven itself into this drama by presenting Italy with an ultimatum last week, giving the country barely 48 hours to commit to very specific and radical reforms.

It is in effect taking sides in an intensely polarized debate within Italy, intruding in the most sensitive matters of how society organizes itself. It is demanding ideological changes – in this case in favour of employers, and against unions – as a condition for further action to shore up Italy’s bond markets.

“We have three deaths in front of us: democracy, politics, and the Left,” said Fausto Bertinotti, the elder statesman of Rifondazione Communista and one of Italy’s great post-war figures.

“We are living in a neo-Bonapartist financial system. Not a single decision has been taken by the Italian parliament since the end of August except those imposed by the foreign power that now us under administration.”

Gulp. Maybe it’s time we dust off Yeats.

Posted in Black Swan Watch, Budget Deficit, Euro, Fiscal Policy, PIIGS, Sovereign Debt, Sovereign Risk | Tagged EU, European Debt Crisis, Italy, The Red Brigade | 1 Comment

Super Mario’s dilemma, inflation fighting vs stimulus

Posted on October 31, 2011 by macromon

(click here if video is not observable)

Posted in Euro, Monetary Policy | Tagged ECB, European Monetary Policy, Mario Draghi, Trichet | Leave a comment

Seasonal Greetings!

Posted on October 31, 2011 by macromon

Great chart with all the right colors from our friends over at The Chart Store. They have an amazing collection of financial and economic charts and data going way back.

Tough to trade on historic average monthly returns. The chart shows that August has historically been the best month for the Dow.

This August? Down 4.36 percent. Followed by a horrendous September, down 6.03 percent, setting up the monster October run with the Dow rising 9.54 percent.

(click here if chart is not observable)

Posted in Equities, Global Stock Performance | Tagged Dow Jones Industrial Average, Monthly Returns, Seasonal Stock Patterns | 1 Comment

China Appoints New Financial Regulators

Posted on October 31, 2011 by macromon

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Posted in China | Tagged China, Financial regulation | Leave a comment

M.F. Euro Takes Down Equities

Posted on October 31, 2011 by macromon

Lots of debate out there what took the market down today. We’re not certain you can tag the first 15 S&P points on a single factor — MF Global, euro, Italy, yen intervention and strong dollar, or simple profit taking — but willing to up our bet the last 15 points, which began around 2 PM, was the floppy Euro. The news that Greece will “hold a rare national referendum on a new debt agreement” hit right around 2 PM. Take a look at the first chart.

Though some place the blame on MF Global dumping positions, which we doubt, markets are growing increasingly concerned as the Italian 10-year bond yield has spiked to over 6 percent in the past few days, up from 5.87 percent prior to Thursday’s EU Summit deal announcement.

Markets have honed in on the one part of the deal that is most ambiguous — the bolstering of the EFSF. Japan and China waffled over the weekend on committing resources to the Euro debt bailout and as the Economist writes,

So we turn to the EFSF. Here is the biggest problem facing European leaders; they want to let Greece default and to stand behind Italy and Spain, without making a specific pledge that would upset their domestic voters.

The EU leaders really desire a magic “money tree” which would come up with a new source of wealth to deal with this issue. The French hoped that the European Central Bank would act as the tree, guaranteeing all Italian and Spanish debt. The Germans vetoed the idea. Of course, the ECB has no “wealth” of its own; European governments stand behind it. So an ECB bailout would be another back-door way of having the rest of the euro-zone support Italy and Spain, but without telling the voters.

The Euros will have to find a way — and soon — to come up with a hard number and clear path to the big bazooka EFSF to head off contagion to Italy. This whole exercise is about restoring confidence because that is what, at the end of the day, drives sovereign credit fundamentals. If Italy blows, game over.

We’re a bit surprised, and a little poorer, how quickly the market has loss faith in the European deal. Markets were overbought, so some profit taking is not surprising. But 6 percent plus Italian bond yields worry us.

Note also the Euro is now trading below where it was when the deal was announced on Thursday. Exit Trichet, enter Super Mario. The Fed begins their two-day meeting tomorrow. Lots of moving parts.

The S&P500 needs to hold its 100-day at 1230. Gonna’ get interesting.
(click here if charts are not observable)

Posted in Black Swan Watch, Bonds, Dollar, Euro, PIIGS, Sovereign Debt, Sovereign Risk | Tagged Euro, European Debt Crisis, Greece, Italian bond yields, S&P500, Trichet | Leave a comment

Rehn: Tackling sovereign debt ‘first priority’

Posted on October 31, 2011 by macromon

Here’s an Euronews interview with one of the EU’s top debt crisis policymakers.:

Olli Rehn is the European Commissioner for Economic and Monetary Affairs, a key role in defining strategy against the back-drop of the debt crisis. The latest proposal concerns the recapitalisation of the banking sector. Dozens of banks would be forced to raise more than 200 billion euros according to initial studies, although some analysts say much more is needed.