Macro
+5.7% GDP Growth in the World’s Largest Economy is not enough, apparently
There is a thin line between protectionism and war. In fact there is no line between them. That is, of course, because protectionism is war. Not military action, but the attack upon another country via trade wars. One country launches an assault on another by banning the sale of their products or by increasing subsidies and/or government leverage to an alien competitor. Even in the World of textiles or beef or rubber tyres, this all gets rather ugly rather quickly. But when it concerns the instruments of war themselves: weapons, arms, defense systems… and when the countries concerned are The US, China and Taiwan… well it gets all the more potent.
Have to make a comment about Friday’s number. Did you see it? +5.7% GDP growth for the US economy! That’s a big number and the component parts were encouraging too. But why on Earth did the stock market close DOWN? Very peculiar; could it be due to the reflexivity of the stock markets – reacting to the possibility that The Fed will exit stimulus early? Could it be due, in part, to Obama’s abrasive spat with Republicans shortly after? Could it be just that the market is overbought and needs a retracement irrespective of the growth numbers? Who knows, but if you’d told people in December that Q4 growth was going to come in at almost 6% annualized I don’t think that this was the performance one would have hoped for from the equity markets…
Macro Data to Watch:
- Hong Kong Retail Sales – we know Hong Kong is all about the shopping!
- Indonesian Inflation
- South Korean Inflation
- Thai Inflation
- US ISM Manufacturing – looks to be rising let’s see if we continue to inch towards 60.
Markets
Poor old Andy Murray, the Brit tried his utmost against the steady Swiss man but there is no substitute for the class and consistency. Much like comparing the British Pound to the Swiss Franc, in fact: one still gets 1.7 Swissies for every Quid you exchange, but only a couple of years ago you used to get 2.5 SFr!
Source: Bloomberg
In his latest comment, Ring of Fire, Gross refers, not to his alimentary escapades after consuming a Brick Lane Vindaloo, but to the prospects of the Pound. I’m afraid this is not pleasant reading for those who look to import produce (the entire British population!?) from other countries or who have assets/earnings/savings in Pounds. Gross concludes with:
Of all of the developed countries, three broad fixed-income observations stand out: 1) given enough liquidity and current yields I would prefer to invest money in Canada. Its conservative banks never did participate in the housing crisis and it moved toward and stayed closer to fiscal balance than any other country, 2) Germany is the safest, most liquid sovereign alternative, although its leadership and the EU’s potential stance toward bailouts of Greece and Ireland must be watched. Think AIG and GMAC and you have a similar comparative predicament, and 3) the U.K. is a must to avoid. Its Gilts are resting on a bed of nitroglycerine. High debt with the potential to devalue its currency present high risks for bond investors. In addition, its interest rates are already artificially influenced by accounting standards that at one point last year produced long-term real interest rates of 1/2 % and lower.
As far as the Dollar is concerned, the rally continues. The Dollar Index has rallied over 7% since I sounded the alarm back in early December on this. One should always be wary of too many people on one side of a trade, something tells me that this rally is not over yet either.
Source: Bloomberg
Global Stocks to Watch:
- Financials – Goldman Sachs stock hit the lowest level in 6 months and seems to be trending downwards, stock traded in decent volume last week… something to keep an eye on. Meredith Whitney called the banking sell-off in 2008, then she called for the bank rally in early 2009, then she called for the sell off again at the end of 2009 – I rote about it in November, citing:
Meredith Whitney on the state of the banks says that she has never seen this level of credit contraction. For all this talk of inflation, that pretty much puts her in Rosenberg’s deflation camp. The jury is indeed still out. Clearly Meredith thinks that the banking sector is one to watch over the next 6 months – from a volatility perspective, I do too for that matter.
Hmmm… she’s getting quite good at this, isn’t she?
- The big Techs drove the markets down on Friday: Apple, Microsoft, Intel – watch all the techs and tech-based economies today
- Watch all the oil companies, especially with Exxon Mobil out with earnings today – they also got sold off hard on Friday
- Earnings:
- Resources: Exxon Mobil
- Engineering: Larsen & Toubro
- Tech: Hon Hai Precision
- Consumer: Ajinomoto
- Transport: Ryanair
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