3,000 Americans around the world renounced their citizenship last year. CNN Money introduces us to five U.S. citizens who have given up their passports -- or are thinking about it...
"There is a big flight to quality," warns one trader as the spread between interest rate swaps (implicitly bank risk) and government bonds soared to a record high. This "crisis gauge" flashing red is also followed by 3 month SHIBOR (short-dated interbank lending rates) surging to an 8-month high. China's CDS have jumped 30bps since the Fed taper and as Bloomberg reports that billionaire investors like George Soros and Bill Gross have drawn uncomfortable parallels between the situation in China now and the US before 2008 (when this crisis gauge was key in spotting the carnage to come). Simply put, the banks don't trust each other...
All eyes were on China overnight, where first the PBOC drained a quite substantial CNY 100 billion in liquidity via 14 day repos in the month following the biggest credit injection on record, pushing those worried about China's credit schizophrenia to the edge, and then things got even more bizarre when in an act of clear PBOC intervention, the CNY dropped to the lowest since August 2013 as concerns about the global carry trade's impact on China (as noted here previously) start to reverberate. We will have more to say about China's Yuan intervention, but what should be noted is that the Shanghai Composite has tumbled nearly 10% in the past week, and was down another 2% overnight and is once again just barely above 2000, a level it can't seem to get away from for years (which is fine: recall that the real bubble in China is not the stock but the housing market). Chinese property stocks dropped to 8-month lows as concern continues about bank's withdrawing some liquidity for the asset class.The USDJPY drifted along and after rising to a resistance level of about 102.600 has since slide just shy of its 102.20 support area which means US equity futures are now in the red, and concerns that the S&P 500 may not close at a new record high are start to worry the technicians.
Gloomy commentary on the world's ageing population appears overdone. We look at key silver linings and the significant investment opportunities ahead.
A technical look at the currencies. The phase that has characterized the first few weeks of the year has ended and a new one has begun.
Asia outperformed emerging market peers in Europe and Latin America during the recent selloff, which coincided with a drop in China’s PMI below 50. As Bloomberg's Tamara Hendereson notes, that was partly due to 'smoothing' by Asian central banks to temper volatility and partly because of the region’s reputation for strong growth and ample current-account cushions. Still, she warns, emerging market investors may in time focus more on Asia’s vulnerabilities, including higher valuations, lower real yields and greater sensitivity to Fed tapering and China’s rebalancing.
The Fed tightens by a little (sorry, tapering - flow - is and always will be tightening): markets soar; Turkey tightens by a lot: markets soar. If only it was that easy everyone would tighten. Only it never is. Which is why as we just reported, the initial euphoria in Turkey is long gone and the Turkish Lira is basically at pre-announcement levels, only now the government has a furious, and loan-challenged population to deal with, not to mention an economy which has just ground to a halt. Anyway, good luck - other EMs already faded, including the ZAR which many are speculating could be the next Turkey, and certainly the USDJPY which sent futures soaring last night, only to fade all gains as well and bring equities down with it.
This week, much of the market focus will remain on the policymakers' responses to the challenges emerging out of the, well, emerging markets. In particular, the response of the Turkish Central bank will be key. This week we also have eight MPC meetings, with the US FOMC on Wednesday standing out. Consensus expects the continuation of the tapering of asset purchases – by another USD10bn, split equally between Treasuries and MBS. Other than that, the announcement should be fairly uneventful. In India GS forecasts an out-of-consensus hike of the repo rate to 8.00% after the central bank published a report on suggested changes to the monetary policy framework. In New Zealand, South Africa, Israel, Mexico, Malaysia and Colombia, consensus expects no change in the monetary policy stance. Among economic data releases, the focus will be on consumer surveys, as well as business surveys (US, Germany and Italy). There are also inflation numbers from the US, Euro Area, Japan and Brazil. Advanced Q4 GDP data prints will come out for the US and the UK. US consumption and production numbers are due at the end of the week.
- Emerging sell-off hits European shares, lifts yen (Reuters) - but not really if you hit refresh since the latest central bank bailout announcement
- Apple’s Holiday Results to Show Whether Growth Is Back (BBG)
- Israel attacked Syrian base in Latakia, Lebanese media reports (Haaretz)
- Abenomics FTW: Japan Posts Record Annual Trade Deficit as Import Bill Soars (BBG)
- When all else fails, Spain's hope lie in a 16th century saint: Saint “might help Spain out of crisis,” says interior minister (El Pais)
- Global Woes Fail to Send Cash Into U.S. Stocks (WSJ)
- IMF's Lagarde sees eurozone inflation "way below target" (Reuters)
- Minimum wage bills pushed in at least 30 states (AP)
- AT&T Gives Up Right to Offer to Buy Vodafone Within 6 Months (BBG)
Overview of forces impacting stocks, bonds and currencies.
Overview of the dollar's outlook against the major currencies, without a preconceived notion that the US is in some kind of terminal decline.
- Carney Guidance Threshold Strained as BOE Holds Policy (BBG)
- Does one laugh or cry: China Tells Banks to Improve Disclosures in Shadow-Lending Fight (BBG)
- Big Business Doubles Down on GOP Civil War With Tea Party (BBG)
- CIA sued for records on possible role in Nelson Mandela arrest (RT)
- Bridge Scandal Destroys Christie's 'Nice Jerk' Image (BBG)
- Borrowers Hit Social-Media Hurdles (WSJ)
- U.S. Leverage in Iraq Tested As Fears of Civil War Mount (WSJ)
- Austerity drive cuts into Chinese inflation (FT)
- Dish Pulling Its Bid for LightSquared (WSJ)
- BlackRock agrees to end analyst surveys (Reuters)
- Germany defends economic policies after US criticism (FT)
- Bank of Korea Holds Rate Even as Yen Clouds Export Outlook (BBG)
Today (like pretty much every other day), it will be all about the Fed and the start of its 2-day FOMC meeting, whose outcome will be influenced by today's 8:30 am CPI report as inflation (Exp. 0.1%) according to many is the only thing stopping the Fed from tapering in light of better than expected recent economic data as well as a clearer fiscal outlook. Or at least that's what the watercooler talk is. The hardliners now agree that since the Fed openly ignored the bond market liquidity considerations in September, that it will plough on through December with no announcement, and potentially continue into 2014 with zero chances of tapering especially now that we approach the end of the business cycle and the Fed should be adding accommodation not removing it. To that end, the consensus still is in favour of January or March for the first taper so markets are not fully set up for a move; conversely a dovish statement would probably result in yet another pre-Christmas, year end market surge, which in the lower market liquidity days of December is likely what the Fed is going for, instead of a volatile, zero liquidity sell off, despite Thursday's double POMO.