CNY

The perils of August

There’s a myth in markets that August will be quiet with little going on. One of the reasons why this is often not the case is liquidity. When liquidity is low, moves are more exaggerated. Furthermore, on big moves, rumours then start to circulate as to what may be behind them. Tuesday was one of those days, with stock markets getting pummelled and bank stocks in particular. Many of the rumours surrounding France were way off the mark, with triple-A ratings affirmed from the main agencies and the 10-year bond yield hitting a new low for the year at the 3.06% level.
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11/08/2011 @ 07:15 GMT

Done deal on a duff deal

The political leadership in Washington has produced a deal over the weekend on raising the debt ceiling. Leaders of both parties in both houses are backing the deal and this should allow it to pass later today when it’s voted on in both houses. After the tragedy and farce of recent weeks, this news is understandably being met with some relief in markets, with the Swiss franc and yen softer, gold lower and stocks higher in Asia. Still, this is a deal fashioned on the floor of political theatre and seconds before the final curtain was due to fall.
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01/08/2011 @ 06:44 GMT

Glimmer of hope in sea of despair

As the single currency was preparing itself for another EU summit of disappointment, it seems that a rabbit may yet be pulled out of a hat. Few details are available on what was hammered out between France and Germany yesterday, but we should find out more today. Germany has said no further bail-out of Greece can occur without private sector bond-holders taking some of the pain, but up to now France had been standing firm, alongside the ECB, in insisting that Greece could not be allowed to default.
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21/07/2011 @ 06:48 GMT

Counter-trend Tuesday

Another sudden burst of risk-avoidance yesterday morning after the meaningless statement from EU leaders the night before resulted in some heavy losses for both risk assets and the single currency. The EUR fell to a low of 1.3830 and European equities suffered significant losses as yet another bout of risk-aversion provided a further boost for both safe-haven currencies (the yen, Swiss franc and the dollar) and core government bonds.
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13/07/2011 @ 07:06 GMT

China’s policy vexations

Any economy with 1.3bn people is never going to be easy to manage, and in China’s case the policy challenge is becoming ever more complex. This past weekend reconfirmed just how tricky China’s policy dynamics are becoming.

11/07/11 @ 09:55 GMT by Michael Derks, Chief Strategist

Europe’s contagion enters a new phase

Unsurprisingly, the euro has been the worst-performing major currency both over the past week and again yesterday. Portugal’s downgrade by Moody’s to below investment grade resulted in a spike of more than 100bp in short-dated yields. At the long end, the 10yr Portuguese yield soared by more than 160bp to a new euro-era high of 12.1%. Irish 10yr yields were also punished, up 80bp at one stage at 11.9%. Italy has not escaped the contagion, with the 10yr spread to Bunds out by another 20bp to a record post-EMU high of 220bp.
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07/07/2011 @ 06:56 GMT

China’s continuing inflation concerns

Those rumours earlier this week suggesting that the PBOC might hike rates before the weekend were right on the money, with the announcement this morning that both deposit and lending rates will be lifted by a further 25bp tomorrow. The one-year lending rate will be 6.56%, while the one-year deposit rate will rise to 3.5% (still well below the rate of inflation which is above 5%).
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06/07/2011 @ 11:05 GMT

FOREX: Dollar profits from euro’s ills, China rate-hike rumour

A constant drip-feed of negative news overnight has undermined the euro and helped the greenback. S&P’s warning that the current Greek debt rollover plan would constitute a default has weighed heavily on the consciousness of both traders and investors. In addition, it turns out that the German constitutional court is to meet today to consider a challenge against the legality of the two eurozone bailout packages agreed last year.
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05/07/2011 @ 07:29 GMT

Relief trade may be running out of puff

Signs emerged on Friday that the Greek relief trade that had supported risk appetite in previous days was already running out of puff. S&P’s warning that Italy’s deficit reduction plan contained significant delivery risk, especially their claims regarding the combat of tax evasion, soured the euro’s mood and encouraged some traders to retreat to the sidelines. Commodities went into reverse as well, with Brent crude back under $110 at one stage. Of particular interest recently is the sluggishness of the gold price, which fell back to $1,485 an ounce on Friday.
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04/07/2011 @ 06:51 GMT

FOREX: Tighter policy seems to be working in China

Although the Chinese economy still appears to be humming along nicely, there has been some evidence in recent weeks that the policy tightening implemented this year is bearing some fruit. Last month, the PMI produced by the China Federation of Logistics and Purchasing fell to 50.9 from 52.0 previously, the lowest outcome since early 2009. Another survey conducted by HSBC showed that manufacturing output actually declined last month for the first time in a year. Manufacturing represents around one-half of China’s economy, and so a slowing here is quite critical.
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01/07/2011 @ 08:03 GMT

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