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Dour Comments By China's Leading Supply Chain Manager Reinforce Citi's View For €1 Trillion ECB QE

Tyler Durden's picture




 

While the US Q2 earnings season is now largely in the history books, an interesting place to get some additional commentary on the world economy is none other than China's leading global sourcing/supply-chain management firm Li & Fung, which "supplies high-volume, time-sensitive consumer goods from an extensive global network of suppliers and distributors", which had some interesting comments on the current state of global economic developments.

Here is the summary of their latest results commentary from Deutsche Bank:

Li & Fung’s latest results yesterday offered some interesting anecdotes. The company’s performance for the first 6 months was hampered by ongoing macroeconomic weakness, geopolitical and weather events in its key destination markets (US and Europe). Price discounting remains a theme in US retail even beyond the end of June. The company also noted a reduction of foreign tourist flow by Russian tourists into Europe which is affecting retail markets there. This fits consistently well with some of the ECB’s geopolitical concerns outlined at its previous policy meeting.

In short, hardly the stuff "escape velocity" global recoveries are made of. The good news: considering the ongoing weakness in both the European and Chinese economy, this surely means, at least according to Wall Street penguins, that more easing is due any minute out of both the ECB and China. And sure enough, moments ago Citi'sGuillame Menuet saaid that the ECB will likely launch a €1 trillion QE some time in Q4.

From the note: "ECB QE: Why, When and How"

Reinforcing our QE view — The euro area recovery is struggling, as evidenced by Q2 GDP reports and Q3 surveys. Downside risks to economic activity, a still-strong euro, large output gap and persistent undershooting of its inflation target, all point even more strongly to the ECB announcing a large QE programme soon.

 

December more likely to September — We do not expect QE to be announced at the September meeting, mainly because of expectations that the June policy decisions will ease funding conditions further, uncertainty pertaining to the AQR and ECB stress tests, and the ECB’s hope of strong bids at the Sep and Dec TLTROs. However, we believe that the consensus underestimates the likelihood of QE in late Q4-14 or early Q1-15, and the ECB’s willingness to defend its inflation target.

 

€1tn asset purchase programme — Increasing signs that medium-to-long term inflation expectations are drifting lower and the need to defend its mandate and credibility will lead to aggressive action, in our view. We expect a 60/40 split between public and private sector assets, with the latter focused mainly on bank bonds and loans.

 

In other news, the only thing better than good news for stocks continues to be, what else, bad news.

 

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Fri, 08/22/2014 - 08:55 | 5129219 Sudden Debt
Sudden Debt's picture

so... about that recovery that's been going on for the last 7 years...

Fri, 08/22/2014 - 09:09 | 5129260 Haus-Targaryen
Haus-Targaryen's picture

So a 60/40 split, split evenly between the EMZ nations (assuming they are split evenly) -- because, how full on retarded would it be to focus in on a few countries, i.e., Spain and have greater demand for Spanish debt than say German debt coming from the ECB?   Would never happen, as pulling back from it would be suicidal.  Anyways, back on topic --

Means 600 billion will be used to purchase sovereign debt, of which Germany is about 20% of EMZ GDP. or 120 billion in Bund purchases.  

I bet you see negative 30 year notes. 

What will the German government spend it on?  I'd love see to a huge RE bubble in the Fatherland, that way when this whole thing goes to hell, we have new autobahns, and pretty buildings to look at.  I imagine though most of it will get sucked up by the various pensioners and lots of it would get pissed away on Green energy nonsense. 

The remaining 400 billion will be 20% invested in German bank bonds, so you'll see some true insanity here in Frankfurt.  

Can you imagine the poor Swiss though?  How many Francs are they going to have to print to keep that 1.20 peg?  

 

Fri, 08/22/2014 - 08:58 | 5129231 RiskyBidness
RiskyBidness's picture

Just buy the glory hole in jackson hole and you will be fine!!  hahaha

Fri, 08/22/2014 - 08:58 | 5129234 q99x2
q99x2's picture

That's not fair. I want another trillion.

Fri, 08/22/2014 - 09:01 | 5129241 Peter Pan
Peter Pan's picture

Europe continues to amaze me as to how it can continue to call a funeral procession a parade.

There was inadequate ground work and an inadequate framework for the Europeans trying to form a combined entity and their failure to achieve escape velocity from the GFC and from their structural problems will remain until they collapse from exhaustion or some black swan squadron.

Fri, 08/22/2014 - 09:02 | 5129244 LawsofPhysics
LawsofPhysics's picture

Debt grows exponentially, even if there is no real GDP growth.  This can create some serious fucking problems in a "debt-is-money" system.

 

Fri, 08/22/2014 - 09:17 | 5129298 Peter Pan
Peter Pan's picture

Debt does grow exponentially but just remember the time comes when it collapses at the speed of exponential squared. 

Fri, 08/22/2014 - 09:04 | 5129249 Unknown Poster
Unknown Poster's picture

Russian tourists go to Europe to buy Chinese goods? Russian-Chinese bilateral trade seems no need some work.

Fri, 08/22/2014 - 09:05 | 5129252 The Carbonator
The Carbonator's picture

The Shit train keeps on rolling on.

Fri, 08/22/2014 - 09:08 | 5129273 Winston Churchill
Winston Churchill's picture

With no wheels, time for some moar hopium.

Fri, 08/22/2014 - 09:07 | 5129263 Atomizer
Atomizer's picture

Sell some treasury bills, problem solved. Regaining your liquidity gives you more flexibility. Fuck the Jewish cunts operating out of Washington, DC. Crash and burn will stop this madness. 

Riches to Rags Kike reality show on the horizon. Thanks for your assistance in writing the script. You might want to write a kike cheque to cover debt.

Fri, 08/22/2014 - 09:17 | 5129299 Bill of Rights
Bill of Rights's picture

Many white Europeans on that list as well

http://thezog.wordpress.com/

 

Fri, 08/22/2014 - 09:12 | 5129280 ...out of space
...out of space's picture

for inflation in eu putin will take care when he close the nat gas pipe.

Fri, 08/22/2014 - 09:30 | 5129346 Xandrino
Xandrino's picture

And even better, it can be done with 1 simple coin!

Fri, 08/22/2014 - 10:25 | 5129559 DullKnife
DullKnife's picture

If we all could print our own money like the Fed does, we would all be rich!

I have a Chuckie Cheese coin I never used.

Can I say it is a 16 trillion dollar coin and buy all the stuff I want?

(and I want a lot)

 

Wait!   I found another Chuckie Cheese coin...now I have $32,000,000,000,000!

But because I like you, you can have one of them for half off.

 

DK

Fri, 08/22/2014 - 11:17 | 5129779 JRobby
JRobby's picture

It might rain

Looks like a war will start

Demand is stifled

 

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