Economics
Inflation in Europe is Sticky – Another Reason the ECB to Remain Balanced
December inflation data was released this morning in France and Germany. In both countries, the inflation rate was higher than expected and failed to come down relative to prior months. EU harmonized German inflation was reported at 2.3% and EU harmonized French inflation was 2.7%. Two large economies yet to report inflation data are Spain…
Read MorePhilippine Central Bank – Another Emerging Market Set to Ease Monetary Policy in the First Quarter
The Philippines is a very large nation that is off the radar of most mainstream economic analysis. The country has a population of 93 million, and the economy has enormous potential but exhibits inconsistent growth. The economy of the Philippines has a decently developed electronics/semiconductor industry and a large export industry for fruits, palm oil,…
Read MoreNegative German Yields – Implications for Risk Averse Financial Markets
On Monday, Germany gained entrance to a rarified club of sovereign nations paid to borrow money. This US accomplished this feat during the depths of the financial crisis. Now Germany is able to achieve the same feat during the Eurozone sovereign debt crisis. In a debt auction on Monday, Germany was able to sell 3.9B…
Read MoreSpain & Germany – In Sickness and in Health
The plan forward with the Eurozone crisis is the German plan forward. Germany proposed closer fiscal union and increased austerity for EU-17 nations with high deficits and/or high debt burdens. This path suits German interests well because there is little that needs to be changed. Unfortunately from Spain’s standpoint, the German path forward is not…
Read MoreInvesting Ahead of a European Recession
Investing ahead of a recession is like a trip to the dentist for a filling when the Novocain isn’t quite right. You know you are in for some pain, but it’s unclear just how much, and how long it will last. Europe is accepting the German path forward, which will at a minimum, lead to…
Read MoreECB Cuts Rates 25 Basis Points to 1% – Hawkish Press Conference Q&A Squashes Hopes of Sovereign Debt Purchases in Larger Amounts
The ECB issued a terse press release detailing an interest rate cut for the main refinancing operations of the Eurosystem (from 1.25% to 1.0%) commencing on December 14th. In addition, the ECB cut rates on the marginal lending facility and deposit facility by 25 basis points. This move was widely expected and had a limited…
Read MoreISM New Orders – A Strong Indicator of GDP Growth Improved Sharply in November
The financial crisis in Europe detracts from a normal focus on the underlying strength of the US and global economy. Despite the US economy being relatively solid, an escalating Eurozone crisis has the potential to derail economic growth because of the enormity of the impact from a financial seizure. While the solution to the Eurozone liquidity…
Read MoreChina Starts Monetary Policy Easing Cycle & Rest of World Provides Additional Liquidity
Overnight, financial market sentiment turned around pretty dramatically. The China A-Share market sold-off by 3.3% and approached the vicinity of recent lows. Fears started to mount that Chinese central bankers were going to be slow to ease monetary policy based on continued inflation concerns. After Asian markets closed, the People’s Bank of China announced that…
Read MoreBlack Friday Retail Sales Strong – Demonstrate the US Economy is Nowhere Near a Recession
A number of Black Friday retail sales surveys were released over the weekend. All measures pointed to a robust start to the holiday shopping season. Strong data were received from the National Retail Federation, ShopperTrak, and Comscore. None of the individual sales measures are completely reliable, but the collective strength is likely indicative of a…
Read More“Super” Committee – Lack of Progress Heightens Risks to Economy and Financial Markets
The US “Super Committee” failed to make any progress on the sole task it was created for: deficit reduction. It now appears probable that there will be an announcement today stating the committee has “failed to reach its mandated goal of reducing deficits over the next 10-years by $1.2 trillion dollars”. An announcement of this…
Read MoreUS Housing Permit Activity Improves – Strongest in 3-Years
Housing is slowly and steadily showing signs of a bottom. Housing permits are required in most states before a housing start and are a leading indicator of overall housing demand. Housing permits improved to 653k which represents a 10.8% increase from September and a 17.6% improvement vs. last year. Both single-family and multifamily permits improved.…
Read MoreMagnifico! – Getting to Know Mario Draghi & Analysis of the ECB Monetary Policy Press Conference
The global equity markets have been held hostage by fears of a crisis since the summer. Taking another step back; crisis fears, macro, and policy responses have really been driving all financial markets since the summer of 2008. To be clear, the economy always has a meaningful impact on the investing environment, but the recent…
Read MoreECB Cuts Rates 25 basis points – Dovish Comments From Draghi
The ECB cut interest rates by 25 bps down to 1.25%. This was somewhat of a surprise cut as many expected Draghi to start his tenor by demonstrating some hawkish resolve – consistent with the views of departing ECB President Jean-Claude Trichet. Draghi presents a viewpoint that inflation is expected to fall further while highlighting…
Read MoreWelcome to the ECB Mario Draghi!
Who is Mario Draghi? Today is day #1 of a new job for Mr. Draghi, the President of the ECB, which right now is the world’s most powerful position in finance. Under normal circumstances, that position would be the Chairman of the Federal Reserve Board but at the present moment, the ECB President will have…
Read MorePersonal Savings Rate – Lowest Since 2007!
The personal savings rate is an item of contention and debate as the profligacy of the US Consumer has been in focus throughout the 2000s decade. During the height of the housing market boom, the savings rate got down to zero and at times was even negative. US Consumers in the aggregate were thought to…
Read MoreEurozone PMI – Continues to Slow as Europe Bickers
Economies don’t function well in a “crisis steady state”. In Europe, the business environment has been surprisingly good during the third quarter despite what seems like a concerted effort to induce a collapse. A number of consumer and industrial companies pointed out that growth hasn’t fallen off a cliff and if Europe can simply instill…
Read MoreSanta Will Come! – Strong Back-To-School Sales an Indicator for Holiday Season
The back to school season was surprisingly resilient in August and September. We now have the full set of retail sales data available from company same store sales, the Johnson Redbook Survey, and Census retail sales. The back-to-school season varies by region and by state as school start dates aren’t uniform. Further complicating analysis is…
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