The Banking and Strategy Initiative

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US Economy: Everything’s A-OK ( under the circumstances) – Global Markets Preview Friday AM

Europe __________________ AsiaThe Greek Swap is done, 95.7% the official number from the Greek government for the no. of investors agreeing to the PSI interchange(exchange) . China’s retail inflation has ticked down lower to 3.2% and except for more business for the Aviation industry ( which is quite fine too!) the National People’s Congress seemed to like the way things are going as far as execution details are concerned. India has started the easing process with monetary liquidity injection supplemented by a 1.25% CRR cut in a month releasing $20  bln in CRR ( Reserve requirements) alone apart from another $20 bln in OMO and reopened speculation reasonably for Exporters after the Rupee stabilised at better February prices.   Brazil thinks the 4% GDP growth was the lowest it could go to, China is ready to help out its trade partners in aSia and Europe and Brazil with fresh currency loans and it seems GDP contraction has been localised in South Europe as Germany takes home the advantage of the integrated Euro system and makes noises about the imbalances of the T2 payments system.

Service PMIs have been buoyant making up for lost production and the ensuing downtick in Commodities should make inflation very dull and sad the way we want it. Germany, Australia, UK and Canada have all reported a annual GDP growth of nearly 2% and controlled inflation despite a big LTRO drawdown by European Banks. These are just a few things, that  have gone right and as you can observe none of these is about Jobs, Housing or any other indicator which started the year at the top of the ride ( like Gold for example, not the Apple stock, which technically hasn’t stopped rising) and neither is such extreme liquidity being even remotely provided to South governments that have started contracting at a faster pace than the paper plans said they would, everyone knew that would happen and everyone knew there was no more money for them, only banks in the region are flush with funds they have parked back with the ECB. Also from global highs in 2011, Euro’s correlation has dropped to the US Equities to barely 0.5, but expect it t o get tighter in these good times as banks parcel the liquidity accrual to friends, Romans and countrymen(hopefully)

However cliched that may all seem, this is the exact state of the global economy half an hour before the now almost infamous BLS Employment Situation Report or the Jobs report as we know it that comes out in half an hour! All sensible arithmetic says, Job additions should break the higher estimates at nearly 300k, but then it is not really arithmetic and seasonal adjustments in BLS led the ADP adjustments by a month completed in February. So get waiting, and keep buying yet!

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