|Wed, July 13, 16|
Overnight our descriptive model for global equities remains bracketed from prior session. Central Banks have led a coordinated effort of stimulus conversation in a frantic attempt to bid up global risk assets and commodities. Starting in the EU, where Merkel paints a rosy picture for Italian banks appreciating such assets firmly. GBPUSD trades in overhead resistance in the 1.32 handle, as well as EURUSD cannot break above 1.11 level. DE10/2Y yields print in negative territory as a market braces for Euro Financial uncertainty of their insolvent banks. Our largest concerns are the contagion of Italian banks, as well as Germany’s flagship DB. Perhaps, now we understand why central banks have added more liquidity to markets in preparation of an event. Over to the UK, where the GB2Y yield prints on the cusp of negative territory, Property funds start selling commercial properties as redemption run hot. Over to Asia, where China’s imports/exports data dropped substantially as global soft demand and abroad continue to plague the largest trading region. Stealth devaluation by the PBOC of the CNYUSD continues posting a 5th straight drop last week, and the longest losing streak this year. In Japan, all the rage is helicopter money as the BOJ has shown it’s in a rut. Forward pricing of markets of USDJPY tagging the high 104 handle, as well as Nikkei in the 16000 handle is the market expecting such fiscal stimulus. Our only concern, is the BOJ better not disappoint due to a market with high expectations. Over in the US, the earnings season has kicked off with the expectation of an earnings recession to continue, but a market irrational exuberant to price in future growth. JPM talks about UST yields, “On Friday stocks rallied b/c of low bond yields and this week they are extending those gains because yields are higher”. Bullard’s comments on yields curve reflects a flight to safety. On an interesting note, Private-sector hiring rate in JOLTS fell a tenth to 3.8%, the lowest level since Apr 2014 released prior session. Atlanta FED has revised 2Q lower again to 2.4 on July 6 as the overall trend from May is in a decaying fashion.