Recap 2014-11-17


Interesting chart from JPM:


  • Japan GDP dropped -1.6% QoQ SAAR, vs +2.2% exp. The GDP Deflator ticked up to 2.1% vs 1.9% exp. Despite that, nominal GDP declined -0.8% QoQ, vs +0.4% exp and -0.2% prev. In other words, nominal GDP declined more than when the tax hike hit!
  • US Empire Mfg improved to 10.16 vs 12.0 exp and 6.17 prev
  • Canada Existing Home Sales rose 0.7% MoM vs -1.4% prev
  • UK House Prices declined -1.7% MoM vs +2.6% prev
  • Decade-long negotiations have been completed on a Free Trade Agreement between Australia and China. A Declaration of Intent was signed, and final docs will be signed in 2015. 85% of all Australian exports will enter China tariff-free initially, expanding to 93% within four years and 95% on full implementation. 95% of Chinese goods imported to Australia will be tariff free after four years.
  • G20 seems to have focused on downside risks to the global growth, capped by David Cameron’s comment that “red warning lights are flashing on the dashboard of the global economy.” The Bank of England Governor, Mark Carney, and chief economist, Andy Haldane, indicated they are focused on downside risks to inflation. In an interview with The Australian newspaper, given while attending the G20 meeting in Brisbane, Carney said “we’ve got huge disinflationary forces coming from our trade partners, particularly in Europe, and commodity prices have gone down quite sharply”. Meanwhile, Haldane said in a speech published on Sunday that he’s watching developments “like a dove”.
  • JPM on US HY and Oil: The rapid fall in oil prices is raising some risk in the US HY market. 18.5% of the US high yield market is energy, and we believe that if producers do not cut capex, a sustained $75/bbl price for WTI could lead to a cumulative default rate through 2017 of as much as 12%. Assuming capex is cut and assets are sold, that cumulative default rate would likely be closer to 8%. In a $65/bbl scenario, the cumulative default rate could reach 40%. Our oil analysts expect WTI to average $77/bbl in 2015, then moving higher to average $80/bbl over the longer term. Our HY energy analyst thinks this scenario is already amply in the price, given HY energy company yield curves have flattened and are now inverted in many cases, i.e. front end bonds yield more than long end bonds.


  • Mon: RBA Minutes
  • Tue: UK CPI, German ZEW, US PPI, NAHB Survey
  • Wed: BoE Minutes, US Housing Starts, Fed Minutes, Japan Trade Balance, PMI, China HSBC PMI
  • Thu: EU PMI, US CPI, Jobless Claims, Markit PMI, Philly Fed, Existing Home Sales, EU Consumer Confidence
  • Fri: Canada CPI