Since the beginning of the year there has been an unusually high correlation between oil and the US equity market, and to some extent the Chinese currency. All three have been in a down-trend this year. Oil and equities would not normally have a high correlation, but the very low level of oil and the […]
Oil has plunged further this year, adding to the weaker trend since November last year. Many analysts are now arguing that this is not sustainable, but the supply over-hang is severe and unlikely to be resolved for a long time. Broader commodity prices have also fallen to new long-term lows; outside of the 2008/09 GFC, […]
Despite another bad day on the Chinese stock market on Monday, China used its currency fix, jawboning and possibly intervention to calm volatility in the CNY exchange rate. This provided some calm to global markets. A statement by a PBoC official discussing CNY policy appealed for calm but also highlighted a more flexible approach to […]
Chinese capital and currency market upheaval last week was severe, and we presume that its authorities will turn their attention this week to further calming nerves. This may allow for a period of improvement in global risk appetite this week. The US labor market report was strong, but without stoking wage growth concerns. This might […]
The US stock market is exhibiting the weakest signals since the 2008 Global Financial Crisis. We see substantial risk that it breaks the lows set in Aug/Sep relatively soon and triggers a more severe period of global risk aversion. China may step-in to stabilize its markets after sharp deterioration so far this year. But this […]
China may have decided to bear down a little harder this year in dealing with the necessary restructuring of its economy and market reforms. The accelerated fall in CNY suggests it may allow more flexibility in the currency this year than most thought. This is likely to prove to be a bigger weight on global […]
The match has started and Fed Chair Yellen has played to script setting up the case for a stable to firmer USD. Pre-match jitters remain over the ECB, but the case for decisive action was bolstered by weak inflation data. We expect Draghi to act forcefully and we remain bearish on EUR. GBP has succumbed […]
The market is displaying some pre-match nerves as it approaches the Yellen speeches that begin today in Washington and the ECB meeting on Thursday. The policy divergence expected between the Fed and ECB is coming just as their economic data is converging more significantly, questioning the case for the Fed to hike and the ECB […]
The BoE is expected to announce some tightening in macroprudential measures tonight that should tend to weigh on the GBP. US economic reports continue to question the need for the Fed to hike in December, with soft manufacturing surveys, and some analysts are expressing more concern over rising corporate defaults and renewed strength in the […]
Markets have been reluctant to price-in firmly communicated central bank policy agendas at the ECB and Fed. Notwithstanding expectations that both will act, there is still considerable scope for the ECB to overwhelm expectations next week. The market is still not fully on-board even a gradual tightening cycle by the Fed, as such it will […]