Chillin' out till it needs to be funded
Europe took everyone’s last breaths even as good economic data on the trot stopped only midweek by the dip in Service PMIs across the Eurozone failed to drill any new substitution to European Fixed income markets. The reason ostensibly, was the exit of junior coalition partners in Portugal somewhat reminiscent of the usual political plays by Thomson and Thompson in Tintin with Gaspar and Portas leaving in quick succession. A lot of cross border clearing ‘reform’ is still on the unfinished european agenda and S&P also followed up this week on London based banks hit by the new Liquidity ration and Dodd frank implementation on derivatves clearing and related accounting changes, downgrading banks and holding companies of Barclays’, Credit Suisse both A- and Deutsche Bank to A.
One is now fairly tentative as the coming redemption of LTRO in 2015 got an early panic start with banks probably looking at higher losses in their European Fixed income inventory while the US Treasury run has stabilised at 2.5% on the 10 year and the short term assets will continue climbing yields to catch up with their neutral use in long term balance sheets firmly balanced and yet a key strategy for the big banks hit by the new capital structure regulation
Both retail and manufacturing PMI data were robust and thus the mass exodus seen in opening prices on Tuesday and continuing on closed US markets today later is likely to be key long term asset moves for Funds and shadow bankers trying to get ahead of the run on US bonds likely to resume again sometime later this year and negating Friday’s expected optimism on the Jobs report. The ADP payrolls affirmed reasons to be positive on job increases and Gasoline consumption data released yesterday was again optimistic on a US recovery which itself continues to drive down sentiment in pockets in the US trying to one up the Central Bankers into an extended stimulus window as Gold and oil remain near two year lows at 41250 and $101(Brent) on the 4th of July holiday. Car Sales finally hit close to the 16 mln annual rate mark in June though the six month data showed almost half of the 80 mln light vehicles to be imports including 12 mln light trucks and 26 mln car imports not counting luxury SUVs in the truck category at all. Ford caught up with GM but not to the extent expected with cuts in sales MOM from May deeper at the brilliant non subsidised American no. 2, GM growing past expected levels to 264k cars including 1 in 5 fleet sales for the industry as a whole. truk segment sales grew 11% in the first six months of the year. Services PMI (ISM Non manufacturing data was a bit of a dampener in yesterday’s news.
Mexico and Chile continue to surprise with still positive growth but Brazil has not bounced back and nor has Argentina survived its national government yet while Chile is close to stalling despite reporting 4% plus GDP growth in the latest Q1 China is a happy enough story at 7% growth levels and commodity markets haven’t traced any further negatives though TRade and consequently the global jump in Transaction banking has petered off its expected high CAGR in the next two decades
China and India reported strong Services PMI data while the Aussie managed to glean back a large surplus on reductions in Imports while Masterchef Australia provides them a goodwill Ambassador that can transcend most of their current sphere of influence and grow the export related economy’s role a hope for the governments during these times. turkey and Egypt continue to show up on dashboard as continuing red alerts while the Yen and the Koreans seem to have it easy with the BOJ auction today passing by at sub 1.9% yields which should allow the currency room even as global investor sentiment dips on the continuing withdrawal of liquidity
Apparently Draghi’s policy pronouncements which amounted to continued possibility of non standard measures (of liquidity) and of course the 20 year low in car sales will continue to be defining weakness and decimation of European influence in the Global Economy ( so european Liquidity is not good any more)