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Kiron Sarkar
September 20, 2011
Hi there,
The ECB settled E10bn (E14bn the previous week) of bond purchases last Monday. The total amount of PIIGS bonds bought to date amounts to E152.5bn;
The Slovenian Government has fallen, as the PM lost a vote of no confidence. General elections are to be held in December, unless the politicians can agree to a new leader. What does that do to the timetable for the passage of the EFSF, which requires Parliamentary approval of all 17 Euro Zone countries, of which Slovenia is one. Will the debate by the Slovenes on the EFSF have to wait till new elections are called and the new set of politicians installed?. One of the likely new Slovene leader has expressed his opposition to a bail out for Greece.
The situation in Slovakia is also uncertain. The Slovaks have been opposed to bail outs generally. One of the 4 ruling Slovak parties suggests that the Slovak Parliament will reject the proposed changes to the EFSF. Its going to be an "interesting" last few months of the year !!!!
Brazilian consumer inflation is rising - it rose by +0.53% in the month to mid Sept (+0.27% to mid August), faster than the +0.49% expected. The Brazilian Central Bank unexpectedly cut interest rates by 50bps recently and further cuts are expected. As the Real has declined sharply, import prices will rise. Prices rose by +7.33% YoY, the fastest in 6 years. The target inflation rate of 4.5% to 6.5% seems totally unrealistic.
The IMF has cut its forecast for Global growth to +4.0% this year and next, as compared with +4.3% in 2011 and +4.5% in 2012. The US is expected to grow by +1.5% this year, significantly slower than the previous forecast (in June) of +1.5%. The Euro Zone is now expected to expand by +1.6% this year (+2.0%previously) and by just +1.1% next year (down from +1.7% previously). Developing economies are forecast to grow by +6.4% this year and +6.1% next, down from +6.6% and +6.4% previously. Japan was the only developed country which had its forecast raised, though a lower contraction of -0.5%, as compared with the previous forecast of a contraction of -0.7%The IMF warned of potential adverse developments in Europe and the need for the region to "get it's act together". It also urged Euro Zone politicians to recapitalise their banks, as banks are currently shrinking their balance sheet. A good stuff;
Little talked about, but have you noticed the copper price - considered the best economic indicator around. Its near a 1 year low. Oops. Not positive for the Aussie as well, I guess;
Summary
All the above has cheered me up - I'm fed up being long and want to return to my normal short positions - yes, I know, I am a miserable .....
Interesting comments from a friend of mine last night - the last US data showed a build of both Oil and products - not bullish for Oil. In addition the spread between WTI and Brent is huge - some US$24. Yes WTI is impacted by the pipeline etc, but still a massive gap. There is also reports that Libyan Oil will come on stream faster - need to check. We definitely need a lower Oil price, particularly as current prices are ludicrous given the reduced demand resulting from the global slowdown.
The Euro is all over the place today - its retreating from its earlier highs, though is well above its early morning lows.
US markets are chugging ahead. Still believe we will be in for a rocky ride later this year, though have fun as long as it lasts.
The Yen continues to strengthen - currently Yen76.40 to the US$. I wonder how long it will be before the Japanese do a Swiss - they certainly have a precedent and given their deflationary tendencies, a bit of money printing seems totally appropriate.
Don't understand the price action in Gold today - its off its highs, but still above US$1800 (currently US$1801 - spot).
Have fun.
Best
Kiron
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