Recap 2014-10-30

Commentary:

None

Notable:

  • US Jobless Claims was stable as exp
  • US 3Q GDP rose 3.5% QoQ vs 3.0% exp, as government spending jumped, adding 0.8% to the headline figure
  • UK House Prices rose 9.0% YoY vs 8.5% exp and 9.4% prev
  • German Unemployment declined -22k vs +4k exp
  • German CPI dropped to 0.7% vs 0.9% exp and 0.8% prev
  • AU New Home Sales were flat MoM

Upcoming:

  • Thu: NZ Building Permits, Japan Employment, CPI, UK Cons Confidence
  • Fri: Month End, Japan Housing Starts, EU Unemployment, CPI, Canada GDP, US Personal income, PCE Deflator, Chicago PMI, China PMI
  • Weekend: AustraliaMfg PMI, Australia Building Approvals, China Non-Mfg PMI,
  • Mon: EU PMI, CanadaPMI, US ISM, Australia Trade Balance, Retails Sales, RBA, Japan PMI

Recap 2014-10-29

Commentary:

None

Notable:

  • FOMC: QE ended, ‘considerable period’ language was kept. Vote was 9-1 for, with Kochlerkota dissenting dovishly. However, the Fed no longer said that the labor market was ‘significantly’ underutilized. It also removed language on fiscal policy restraining economic growth. It also did not acknowledge the drop in inflation break evens. Instead, it ‘judges that the likelihood of inflation running persistently below 2 percent has diminished somewhat.” Rather than act on the drop in inflation and inflation breakevens, the FOMC statement actually upgraded its inflation outlook – and in multiple ways. This was a surprise to the market, and bonds reacted accordingly, with a bear flattening lead by the belly, and driven by the real yield component.
  • RBNZ dropped the reference to further policy tightening.
  • ECB: According to the October bank lending survey (BLS), credit standards for all loan categories eased in the third quarter of 2014. For the second time in a row, a small net percentage of euro area banks (2%, after 3% in the previous quarter) reported an easing of credit standards on loans to enterprises. One interesting bit – cost of funds and balance sheet constraints (blue) has not been a problem with respect to credit standards since Q4 2012, even for Italy! This suggests that the end of AQR may not be as supportive for lending as optimists hope. (Some folks, myself included, had thought that the stress tests had impeded banks’ appetite for lending due to the banks’ desire to have a clean balance sheet for the tests. The chart below suggests that balance sheets really haven’t been a factor even before the test period)

  • Iran – slumping oil prices are squeezing Iran’s economy even further and may help push Tehran to strike a nuclear deal by the Nov 24 deadline. NYT.

Upcoming:

  • Wed: AU New Home Sales
  • Thu: UK House Prices, German Unemployment, CPI, US Jobless Claims, 3Q GDP, NZ Building Permits, Japan Employment, CPI, UK Cons Confidence
  • Fri: Month End, Japan Housing Starts, EU Unemployment, CPI, Canada GDP, US Personal income, PCE Deflator, Chicago PMI, China PMI
  • Weekend: AustraliaMfg PMI, Australia Building Approvals, China Non-Mfg PMI,
  • Mon: EU PMI, CanadaPMI, US ISM, Australia Trade Balance, Retails Sales, RBA, Japan PMI

Recap 2014-10-28

Commentary:

FOMC is the headline event tomorrow. Obviously we’ve seen a lot of market movement since the last one, so one question is whether expectations have shifted as much as the market. And the answer there clearly seems to be no. Despite the move in treasury yields, and despite the drop in oil prices and inflation expectations, the consensus for the path of Fed hikes remains little changed. Below is the historical consensus forecast for the Fed Funds Target rate for Q3 2015, for example:

This suggests the possibility of a dovish surprise. Rule of thumb: when there is a divergence in views between the market and pundits… go with the market.

Separately, per paststat, there is a strong seasonal bias for the S&P over the next 2 weeks.

Finally, interesting observations from the Fed’s 2013 Survey of Consumer Finances:

The top 3 percent has been getting most of the gains:

Median and Average Household net worth has not grown from 2010 to 2013:

GS: In light of our commodities team’s recently reduced oil price forecasts, we explore one frequently discussed offset to the otherwise positive growth effects of cheaper oil, namely the effect of a potential reduction in oil and gas-related fixed investment. Our conclusion is that the decline in oil and gas-related investment should reduce real GDP growth by no more than -0.1pp, because spending growth in this segment has already slowed considerably since it peaked in 2010 and the decline in oil-related capital spending is expected to be fairly shallow. This suggests that while the benefits of cheaper oil to US growth will be smaller than they have been previously, the positive effect on consumer income will still outweigh the negative effect of lower production activity.

Notable:

  • US Durable Goods Orders were weak, falling -1.3% vs +0.5% exp. The Core capital good orders measure was also weak, falling -1.7% vs +0.7% exp.
  • Consumer Confidence jumped to 94.5 vs 87 exp and 86 prev.
  • Sweden’s Riksbank unexpectedly cut rates from 0.25% to zero. They said they would not raise rates until mid-2016 delayed from the September forecast for the end of 2015.
  • France bows to the EU pressure. They will cut its budget deficit next year by an additional €3.6bn, a move that it hopes will be enough to avert a bruising fight with Brussels over its public finances. In a letter sent to the European Commission on Monday, the eurozone’s second-largest economy said that the additional cuts would boost the country’s structural adjustment efforts next year to above 0.5 per cent.
  • The BoJ’s Kuroda was speaking in Parliament saying that the 2-year time frame the bank has for meeting the 2% inflation target is not rigid and will act further if needed, also adding that the JPY weakness is positive for the economy.

Upcoming:

  • Tue: New Zealand Business Confidence
  • Wed: Oil Inventories, FOMC, RBNZ, AU New Home Sales
  • Thu: UK House Prices, German Unemployment, CPI, US Jobless Claims, 3Q GDP, NZ Building Permits, Japan Employment, CPI, UK Cons Confidence
  • Fri: Month End, Japan Housing Starts, EU Unemployment, CPI, Canada GDP, US Personal income, PCE Deflator, Chicago PMI, China PMI
  • Weekend: AustraliaMfg PMI, Australia Building Approvals, China Non-Mfg PMI,
  • Mon: EU PMI, CanadaPMI, US ISM, Australia Trade Balance, Retails Sales, RBA, Japan PMI

Recap 2014-10-27: ECB Stress Tests & EU growth, Oil Inventories

Commentary:

I’ve read so many reports & analysis on the ECB stress tests that my eyes are blurry. I’m not a bank analyst, but here are my take aways:

The main reason for these tests is to rebuild market confidence and allow the banks to lend. Indeed, substantive EU growth can’t occur without balance sheet expansion.

However, even though almost all the banks passed the tests, many of them seem to have only passed by a small amount. Italian banks performed especially poorly. In addition, there are additional capital requirements that will take effect in the future for which many EU banks’ balance sheets remain woefully inadequate.

  • RBS notes that nearly a quarter of banks passed the test only narrowly.
  • GS: Credibility of stress-test inputs is high. However, we expect the capitalization debate to continue for those banks that show a shortfall when “phase-in” hurdles are replaced by those demanded by the market: “fully-phased” B3 CET1 and T1 leverage ratios. Our analysis shows that, under those parameters, the number of failures, and hence capital shortfalls, increases meaningfully… In our view, current market benchmarks have moved towards a 10% fully-loaded CET1 ratio, and a 4% Tier 1 leverage. We recalibrate AQR/test results to a fully-phased CET1 hurdle, but current disclosure does not allow for a leverage overlay. AQR: fully-phased B3 CET1 hurdle: (i) at 8%, shortfall would rise to €11.6 bn, amongst 16 banks; (ii) at 10%: €63 bn, amongst 49 banks. Test: fully-loaded B3 CET1 of 5.5%, for the adverse scenario: a shortfall of €42.5 bn materializes, amongst 27 banks.

Another way to phrase this is that the tests were for solvency, when they were actually designed to allow economic profitability. As a result of these differing goals, it should not be a complete surprise that the tests will fall short of their ultimate goal.

The fact is that individual EU countries (including those in the core) were likely aggressively against a strict stress test that would’ve failed their banks. This is at least partially because the additional taxes needed for recaps may doom the current political leadership. Against this, the ECB did not have sufficient clout to push for more aggressive tests, which is at least partially because they depend on the national regulators for enforcement.

As a result, it is not clear if the much hoped for lending wave will materialize. That is a clear negative, IMO, and leaves EU in the no-man’s land of marginal solvency but nominal growth rates below debt costs. If the Goldman’s numbers above are true, in lieu of raising capital, EU banks will need to reduce risk weighted assets by another 770bn! (52.5 / 5.5%)

This view seems somewhat discounted by the market. The Eurostoxx bank index, for example, is currently trading at a price to book of 0.81, (bottom panel) which essentially means that the market continues to believe that further write downs and/or bank recapitalizations are necessary. For comparison, the S&P 500 bank index trades at a 5% premium over book, and has fairly consistently traded above book value since mid 2009.

image0071

image0071

The failure of the tests to appreciably improve the price to book ratio also points to a continued period of weak loan growth. The chart below shows the Eurostoxx Bank index price to book (orange) vs YoY loan growth to non-financial corporations. (white) The historical relationship suggests non-financial loan growth will remain close to zero in a year’s time:

image0084

image0084

Another interpretation of low price to book, however, is that market participants are expecting a long period of low growth and deleveraging, which will necessarily pressure loan margins and volume. In such an environment, there will be limited exit opportunities for loan portfolios unless priced at a substantial discount.

Draghi’s combative turn towards the Germans may have been a result of his realization that EU banks need much more capital before they are willing to lend, (which they will probably not get) and as such will continue to impair the ECB’s transmission mechanism.

 

The Goldman Commodities team cut their oil price targets with WTI at 75 vs 90 prev. They think that WTI prices need to decline to $75/bbl to slow shale production, and it will take 6 months of low prices to affect shale production, and thus forecast a low in oil prices in 2Q 2015. In addition, they forecast a rise in OECD inventories to the highest levels since 2009 next year:

 

They think the marginal WTI barrel is $80 and $90 for Brent. In addition, they see a potential ~10% cost deflation for production costs across the curve over time:

 

It’s all pretty interesting, even though their about face from their ‘oil will bounce’ note last week was a bit of flip-flopping. Another take away is that historically, per the 1st oil chart, after adjust for noise, oil inventory surpluses & deficits tend to persist for multiple quarters. The crossing into inventory building suggest that we may indeed be in a new paradigm.

 

Finally, Citi’s latest GPS report had some very interesting charts. (h/t FTA)

Any repricing of EU assets will require the participation of Insurance Companies and Pension Funds, both of which have shortening liabilities to match: (via Citi)

 

In the US,

 

Notable:

  • German IFO declined to 103.2 vs 104.5 exp and 104.7 prev
  • US Markit Services PMI declined to 57.3 vs 57.8 exp and 58.9 prev
  • Dilma Rousseff was re-elected with 51.6% of the valid votes and 48.4% for the opposition candidate Aecio Neves,
  • The Shanghai/Hong Kong trading link had been expected to launch by the end of Oct but it will miss that deadline and it isn’t clear when the initiative will actually go into effect.
  • WSJ: Single Firm Holds More Than 50% of Copper in LME Warehouses. At today’s prices, a 50% to 80% share of LME copper inventories would be worth anywhere from roughly $535 million to about $850 million. Although the exchange doesn’t identify the owners of metals, eight traders and brokers working for different firms active on the LME said they believe Red Kite Group, a London hedge-fund manager that focuses on metals trading, was the one buying. Red Kite Group manages $2.3 billion, according to its website.

Upcoming:

  • Tue: US Durable Goods Orders, Consumer Confidence, New Zealand Business Confidence
  • Wed: Oil Inventories, FOMC, RBNZ, AU New Home Sales
  • Thu: UK House Prices, German Unemployment, CPI, US Jobless Claims, 3Q GDP, NZ Building Permits, Japan Employment, CPI, UK Cons Confidence
  • Fri: Month End, Japan Housing Starts, EU Unemployment, CPI, Canada GDP, US Personal income, PCE Deflator, Chicago PMI, China PMI
  • Weekend: AustraliaMfg PMI, Australia Building Approvals, China Non-Mfg PMI,
  • Mon: EU PMI, CanadaPMI, US ISM, Australia Trade Balance, Retails Sales, RBA, Japan PMI

Recap 2014-10-24

Commentary:

Despite the recent move in equities, the options market suggests that the ‘wall of worry’ remains high. The Put Call ratio, for example, remains very high, at levels last seen in mid 2012, late 2011, and mid 2010. The tone has clearly also shifted – equities were higher today despite the Ebola headlines as well as lower oil prices. The S&P is actually less than half a percent away from being UP for the month.

Oil prices are quite interesting here. Despite the price action last week, there was a rise in open interest which is unusual. There is limited timely, public data on this market, so for a financial markets person like me, it is hard to get a clear read on the underlying fundamentals. What seems somewhat safe to say is that 1) oil prices are not far from marginal costs, 2) oil prices are near long term support resistance levels, 3) global oil inventories appears to have been building for most of the year, but oil prices have not fallen due to the geo political headlines. It appears that headline fatigue has set in, and prices are reacting to the inventory build. This all suggests that we may need to see spot prices near here for a while to work off the excess. The futures strip is pricing this in – front contracts have fallen further, and the curve is fairly flat.

The move in the US rates market has also been quite interesting. In particular the curve has steepened on the week, with the 2y point actually roughly unchanged. This is actually all driven by the inflation expectations component. US 2y real yields, for example are actually only 5bps from their highs, and 5y real yields just 18bps from their highs. In other words, the market is pricing in delayed Fed hikes as a result of a fall in inflation:

Time will tell whether this winds up being correct or not – the Fed has historically looked through commodities driven price effects, but given that we’re at the zero bound, there is certainly a good chance that the Fed is more sensitive about that.

Notable:

  • A second person in NYC has been isolated due to Ebola symptoms
  • US New Home Sales rose 0.2% MoM, but the prior month was revised lower
  • UK 3Q GDP rose 0.7% QoQ as exp
  • German GfK Consumer Confidence 8.5 vs 8.0 exp
  • 25 EU banks reported failed the stress test. Negotiations continue with about 10 banks shown to have net shortfall after 2014 capital measures. Full results are released on Sunday – Bloomberg
  • EU Commission demands more details on French budget. President Hollande confirmed yesterday that France received an official letter from the EU Commission asking for additional information on the French budget.

Upcoming:

  • Mon: German IFOUS Markit Service PMI
  • Tue: US Durable Goods Orders, Consumer Confidence, New Zealand Business Confidence
  • Wed: Oil Inventories, FOMC, RBNZ, AU New Home Sales
  • Thu: UK House Prices, German Unemployment, CPI, US Jobless Claims, 3Q GDP, NZ Building Permits, Japan Employment, CPI, UK Cons Confidence

Recap 2014-10-23

Commentary:

The most interesting news out of Europe in a long time, via Reuters:

…tension is most obvious in the relationship between Draghi and Bundesbank President Jens Weidmann, which according to numerous officials who spoke to Reuters on the understanding they would not be identified, has almost broken down. But it goes further than that. According to German officials, Merkel felt betrayed by Draghi’s speech at a central banking conference in Jackson Hole, Wyoming in August in which he pressed Berlin for looser fiscal policy to stimulate the economy.

"Until now the ECB was confident, despite all the criticism in the German media, that it could count on Schaeuble and Merkel," said Marcel Fratzscher, the former head of international policy analysis at the ECB and now president of the DIW economic institute in Berlin. "But the recent criticism has been a real wake up call. There are questions about whether they have the full support of Berlin. The German criticism is a big concern for the ECB."

Weidmann has also not shied away from criticising the ECB chief’s decisions since then. But in the past months, mutual suspicions have grown, according to officials who know both men. A week after Coeure’s visit to Berlin, Draghi and Weidmann’s communications chief gave separate briefings on the same day to small groups of German reporters at an International Monetary Fund (IMF) meeting in Washington. Draghi listed all the ECB measures Weidmann had opposed since taking the helm of the Bundesbank. The Weidmann aide complained that the ECB president was keeping national central banks in the dark and not taking time to build consensus in the 24-member Governing Council, according to people who attended the briefings. Days later, at a Governing Council meeting in Frankfurt, the long-simmering row boiled over, with the two central bankers accusing each other of active sabotage through the media, according to one official familiar with the exchange. That evening, at the ECB’s annual cultural evening, held at the grand Alte Oper concert house in Frankfurt, the tension around them was palpable. "The relationship is totally rotten, it’s beyond repair," said a second official who knows them both. "It has become personal," a third official from the ECB said. "Whenever Draghi and Weidmann are somewhere at the same event, there are bets about whether their paths are going to cross. Weidmann avoids Draghi like the plague."

But even senior Bundesbank officials have begun to express concerns about the deteriorating relations between the two institutions. ECB Council members admit to being worried about hardening attitudes towards the bank in Germany, where supportive voices like Fratzscher have been drowned out by sceptics such as influential economist Hans-Werner Sinn and Holger Steltzner, the hard-line commentator for the Frankfurter Allgemeine newspaper, who dismiss the ECB as a "bad bank". "We will have to fight" to keep the Germans on board, said one member of the council.

One problem, officials says, is that since the departures of board member Joerg Asmussen and Draghi’s top adviser Christian Thimann last year, the ECB president has not had a German ally in Frankfurt who can spread his message in Berlin. Asmussen was replaced by Sabine Lautenschlaeger, an expert in financial regulation with no political experience, and Thimann’s post was taken by Frank Smets, a Belgian. This is why it fell to Coeure, who took over responsibility for government relations when Asmussen left, to make the trip to the Chancellery earlier this month. Frustrations have been exacerbated by Draghi’s leadership style, officials say. The Italian prefers to operate with a small group of confidants, led by Coeure and Peter Praet, the bank’s Belgian chief economist, rather than sounding out a broad range of views on the ECB Council, as Trichet often did.

Before his speech in Jackson Hole, Draghi sought advice from U.S. Federal Reserve Vice Chairman Stanley Fischer, his professor at the Massachusetts Institute of Technology in the 1970s, while leaving some ECB Council members out of the loop. According to one ECB source, Draghi has also clamped down on circulating policy papers to national central banks because they were often leaked. This close-to-the-chest approach has irritated others besides the Germans.

When the vast majority of countries in a union wants – nay, NEEDS something, and a single one of them says NEIN, the fairest thing to do for the greater good is to ignore it. It is unlikely that Draghi decided to go down this path without a plan. The lines are getting drawn – and the Germans will appreciate in fuller measure the ‘independent’ aspect of the ECB’s mandate. At this point, arguably the EU’s situation is so dire that most of the possible outcomes are favorable for EU ex-Germany over the long run. Either the Germans eventually decides to leave the EMU, and/or they don’t and the ECB eases further.

Notable:

  • PMIs:
  1. EU Mfg PMI improved to 50.7 vs 49.9 exp and 50.3 prev. German strength offset French weakness
  2. EU Services PMI was stable at 52.4 vs 52.0 exp and 52.4 prev
  3. US Markit Mfg PMI
  4. Japan PMI improved to 52.8 vs 51.7 exp and prev
  5. China PMI was stable at 50.4 vs 50.2 exp and prev

EU Consumer Confidence

UK Retail Sales ex Autos declined -0.3% MoM vs 0.0% exp and 0.2% prev

US Jobless Claims rose to 283k vs 281k exp and 264k prev

FHFA House Price Index rose 0.5% MoM vs 0.3% exp and 0.1% prev

New Zealand CPI declined to 1.0% vs 1.2% exp and 1.6% prev

Saudi Arabia said to cut oil supply to market in Sept by 328k b/d – Reuters

Japan sold 3 month TBills at a negative yield for the first time.

Upcoming:

  • Fri: German GfK Consumer Confidence, UK 3Q GDP, US New Home Sales
  • Mon: German IFOUS Markit Service PMI
  • Tue: US Durable Goods Orders, Consumer Confidence, New Zealand Business Confidence
  • Wed: Oil Inventories, FOMC, RBNZ, AU New Home Sales
  • Thu: UK House Prices, German Unemployment, CPI, US Jobless Claims, 3Q GDP, NZ Building Permits, Japan Employment, CPI, UK Cons Confidence

Recap 2014-10-22: A Perspective on Yields & Vol

Commentary:

I think long term US yields are close to fair value here. 3.0% has been my bogey for 30y yields since 1Q. That view is now seems to be supported by positioning data, which has reverted from very short readings and is now showing readings about 1 standard deviation above neutral, according to JPM:

It is interesting that people were focused on the CPI print today, especially since the market talk last week was ‘growth fears.’ (growth leads inflation – so if there is uncertainty about near term growth, why should it matter what last month’s inflation was?) That hasn’t happened in a very long time. The focus may be related to the fact that despite the move in equity markets, long term US inflation break evens remain at levels not seen since 2011. We can spend a very, very long time discussing why that may be, but for simplicity I will just note that a decline in inflation uncertainty – i.e. coming as a result of higher structural oil supply – will itself decrease inflation expectations, given where they are relative to zero. I’ll reiterate that 1) I don’t think the move is a fluke and 2) declines in inflation expectations are quite bullish for the present value of financial assets.

Like yields, rates volatility is very low relative to history. Harley Bassman, now at Pimco, published a great piece on it recently, and in particular noted the divergence between the steepness of the curve and rates vol. The consensus view is that with the end of QE and the Fed in play, Vol should be higher across all asset classes. And quite certainly, rates vol will rise over the cycle. But that is quite different from the contention that it should be higher now, or in the near future. That is a point that Bassman likely knows well, since he made the same point a year ago. The advent of forward guidance & increased transparency means that the Fed is less likely to pull Volcker like surprises. And given the lower level of terminal rates, arguably the long term average will be lower than that of the past as well. (i.e. if the Fed will stop hiking at 4% rather than 8%, long term rates volatility should fall to reflect the narrowing of the probability distribution) A fundamental model of the MOVE index (rates volatility) suggests that current levels are quite rich, even though they are depressed relative to history. Model outputs for equity volatility are similar.

My point is simply that despite consensus views to the contrary, it is not obvious to me that both yields and volatility should be higher in the near term. IMO, the decline in both are driven by fundamental underpinnings, and we are unlikely see the same averages as the past. This suggests some interesting option plays in rates space, as Bassman noted.

That segues to the dollar. The dollar move has closed tracked rate differentials over the past few months. However, rate differentials have since turned, but EURUSD has not.

In addition, many macro tourists are touting long USD trade ideas now. After a 15 big figure move in 5 months. And Paul Tudor Jones says the move may be over! I espoused the USD structural bull market view a couple months ago, so I sympathize with the tourists. But now does not seem like the best time to be pushing that bet – despite the retracement, it seems like no one is bearish the USD anymore.

Notable:

  • BoE Minutes: The unemployment rate had fallen by a little more than expected in the most recent data. Despite this, the labour force participation rate had also fallen and it was now estimated to be a little further below its potential level than previously thought. Analysis by Bank staff suggested that the output gap, while continuing to fall, was estimated to be slightly larger in the second half of the year than had been previously expected.
  • BoC kept policy unchanged as exp, but Poloz hinted that they may be lowering their estimate of potential GDP
  1. most of the sectors expected to lead the non-energy export recovery still have some excess capacity. Our Business Outlook Survey (BOS) interviews indicate that while companies plan to invest in new machinery and equipment, few are planning to expand their capacity, at least so far.
  2. Each October, we do a full analysis of the determinants of potential output, and its future trend. We have done so in this MPR, but in future we will do this in every MPR.
  3. The reason this is important is that in such longer business cycles, the restructuring or closure of firms reduces potential output while creating permanent job losses. This means that the output gap can appear smaller than the labour market gap, which is our current situation. This difference persists until the rebuilding phase of the recovery I discussed earlier, after which the excess capacity measures eventually converge.
  4. The neutral rate, too, is uncertain. We estimate that it now lies between 3 and 4 per cent
  5. After weighing these considerations, it is our judgment at this time that the risks around achieving our inflation objective over a reasonable time frame are roughly balanced. Accordingly, we believe that the current level of monetary stimulus remains appropriate.
  6. Some interesting charts from the MPR:

Canada Retail Sales declined -0.3% vs 0.0% exp. The ex auto measure also fell -0.3% vs +0.2% exp

US CPI was stable at 1.7% vs 1.6% exp. The Core measure was stable at 1.7% as exp

DoE Oil Inventory Report showed a large rise of 7111k vs 3000k exp and 8923k prev. Gasoline and especially Distillate Inventory builds were also higher than expected

Australia CPI declined to 2.3% YoY in 3Q as exp vs 3.0% prev. The Trimmed Mean measure declined to 2.5% vs 2.7% exp and 2.9% prev, but the weighted Median measure was broadly stable at 2.6% as exp.

according to Spanish news agency Efe at least 11 banks from 6 European countries are set to fail the stress test (note that 130 banks are being subject to the tests). Reuters

ECB governing council member Luc Coen said there are no concrete plans to buy corporate bonds but he acknowledged that this could be an option. "If we limit ourselves to buying covered bonds and asset backed securities there is a risk that we would pay too high a price. We can prevent that by also buying corporate bonds” – Reuters

the drive to standardize tax policies across Europe has already ensnarled Ireland and now Luxembourg is on the firing line. The WSJ discusses how some Luxembourg tax structures are coming under attack from Eurozone officials. “Regulators say no European country has been as aggressive as Luxembourg over the years in using tax breaks and confidentiality to lure international businesses”. WSJ

Upcoming:

  • Wed: New Zealand CPI, Japan PMI, China PMI
  • Thu: EU PMI, UK Retail Sales, Jobless Claims, FHFA House Price Index, US Markit Mfg PMI, EU Consumer Confidence
  • Fri: German GfK Consumer Confidence, UK 3Q GDP, US New Home Sales
  • Mon: German IFOUS Markit Service PMI
  • Tue: US Durable Goods Orders, Consumer Confidence, New Zealand Business Confidence