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Kiron Sarkar
September 15, 2011
Hi there,
Chinese FDI in November fell by -9.8% to US$8.76bn, as opposed to the
increase of 8.8% recorded in October. I would expect that FDI will
continue to decline.
HSBC has reported preliminary Chinese December PMI of 49, better than
the 47.7 reported in November, though still in contraction territory;
The Japanese Tankan large manufacturer survey declined to -4 in
December, worse than the -2 forecast. Capex is expected to rise by just
+1.4%, less than analyst forecasts of +2.5%. Japanese manufacturers are
being affected by a slowing China and European economic woes;
Fitch raised Indonesia rating to BBB-(investment grade) from BB+ after
14 years, with a stable outlook. They cited "resilient economic
growth,low and declining public debt ratios, strengthened external
liquidity and a prudent overall macro policy framework". Both Moody's
and S&P are expected to follow Fitch's lead;
Euro Zone Composite (services and manufacturing) index rose to 47.9 in
December, from 47 in November, higher than the forecast of 46.5. The
manufacturing component rose to 46.9, from 46.4 previously, as better
numbers from Germany and France outweighed weaker data from the
peripheral countries. The services component came in at 48.3, from
47.5 in November, once again better than expected due to Germany and
(surprisingly) France;
Bloomberg reports that a steering committee representing banks and
insures are to appoint Blackstone and 2 legal advisers (White& Case &
Allen & Overy) to advise on negotiations with the Greeks on the proposed
debt swap - suggests that the financial institutions are not prepared to
concede;
Spain sold E6.04bn of bonds today, much higher than the E2.5bn - E3.5bn
initially indicated - much better results than expected. The
2016 bonds were priced at more than 100bps LOWER than the previous
auction on 1st December, though the 2020 and the 2021 bonds were priced
at a higher yield.
Whilst on the face of it much better results, the reality is that the
increased amount of debt sold could be due to banks wanting to get their
hands on collateral to use to get cheap ECB funding - the newly
instituted 3 year ECB financing facility just happens to take place next
Tuesday and Spanish banks are, lets be polite "somewhat stretched".
However, this "trick" has a sell by date written all over it. If banks
increase their leverage and/or take on riskier assets, depositors will
FLEE, given the increased risk. (source FT). The Euro rose on the news -
maybe currency traders should think about the above issue !!!! Dont be
fooled;
Fitch downgraded several Euro Zone banks, including Rabobank, Danske and
Credit Agricole. Expect many more similar announcements;
In an extraordinary outburst from a Central Banker, Mr Noyer, head of
the Bank of France stated that the UK should be downgraded rather than
France. He called ratings agencies "incomprehensible and irrational".
Clearly Mr Noyer has not been taking his pills and needs to lie down
with the curtains closed. His comments and those of Mr Fillon's (the
French PM), just confirms that France will be downgraded - by 2
notches?. That makes 4 leading politicians/officials to suggest an
imminent downgrade for France. Mr Noyer should also remember that the UK
has NEVER defaulted on its debts. However, the outburst just reinforces
the pressure that France is under, though is inexcusable, particularly
from a Central Banker.
Having said that, I remain of the view that the UK's AAA credit rating
will be difficult to maintain;
UK November retail sales fell -0.4%, slightly more than the -0.3%
forecast. YoY sales were only +0.7% higher.
Yesterday the US sold 30 year bonds at a record low yield of 2.92 times,
with an amazing 3 times bid to cover ratio;
US economic data continues to surprise to the upside.
Unemployment claims declined by 19k to 366k, the lowest since May 2008
and lower than forecasts of 390k. The 4 week moving average declined to
388k, from 394k The Empire State Index (manufacturing) rose to 9.5, from
0.6 in November.
November core wholesale prices increased by just +0.1%, less than the
+0.2% forecast.
US November PPI came in at +0.3%, slightly higher than the +0.2%
expected; Just ask yourself what the situation would be like if there
was no US;
Summary
European and US markets are higher today - good opportunity to increase
index shorts, in my humble view.
Euro is higher (currently US$1.3028) as is Oil and Gold - for how long.
Best
Kiron
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