Recap 2015-02-18



BAML Fund Manager Survey Highlights:

So EU equities are kinda hot:

Cash not treated like trash; holdings remain elevated:


  • FOMC minutes highlights:
  • In connection with the risks associated with an early start to policy normalization, many participants observed that a premature increase in rates might damp the apparent solid recovery in real activity and labor market conditions, undermining progress
  • Some participants noted the communications challenges associated with the prospect of commencing policy tightening at a time when inflation could be running well below 2 percent
  • Many participants indicated that their assessment of the balance of risks associated with the timing of the beginning of policy normalization had inclined them toward keeping the federal funds rate at its effective lower bound for a longer time. Some observed that, even with these risks taken into consideration, the federal funds rate may have already been kept at its lower bound for a sufficient length of time, and that it might be appropriate to begin policy firming in the near term.
  • Many participants indicated that such economic conditions would help bolster their confidence in the likelihood of inflation moving toward the Committee’s 2 percent objective after the transitory effects of lower energy prices and other factors dissipate.
  • A number of participants emphasized that they would need to see either an increase in market-based measures of inflation compensation or evidence that continued low readings on these measures did not constitute grounds for concern.
  • Many participants regarded dropping the “patient” language in the statement, whenever that might occur, as risking a shift in market expectations for the beginning of policy firming toward an unduly narrow range of dates.
  • ECB approved 2-week extension of Greek banks’ ELA funding. Limit raised by €3.5bln to €68.3bln. Reuters quoted a senior Greek banker as saying that this increase would meet Greek banks’ liquidity needs for just another week if deposit outflows persist at the current pace. Today’s decision follows the €5bn increase in the limit for the ELA usage the GC decided last week Thursday, 12 February in an emergency meeting via telephone conference.
  • Barclays: According to our estimates, based on data contained in the Eurosystem’s Weekly Financial Statements, as of the end of last week, ELA for Greek banks should have amounted to around EUR 57bn. More specifically, about EUR 50bn reflects the shift from regular ECB’ s MRO to ELA after the ECB had declared Greek government debt ineligible for the use of ECB collateral on 4 February. The remaining EUR 7bn reflect the additional liquidity needs that have likely emerged as a consequence of deposit flight in recent weeks in response to elevated uncertainty about Greece’s future in the monetary union. However, we believe that the emergency borrowing by Greek banks has probably increased further over the past few days, close to the cap of €65bn on the continuation of deposit outflows as some media reports (eg. Kathemerini) have suggested. Today’s ECB decision should avoid a liquidity crunch for Greek banks in the next few days as negotiations between the Greek government and European political leaders continue. However, if the Greek authorities cannot agree to an extension of the current aid programme with the Eurogroup in the next few days, ELA will likely be shut down (a two-thirds majority is required at the ECB’s GC), on 5 March at the latest. This would likely trigger the need to set up external (capital controls) and domestic payment restrictions for Greek banks.
  • UK ILO Employment declined to 5.7% vs 5.8% exp and prev. Jobless Claims declined -38.6k vs -25k exp. The prior figure was revised down to -35.8k vs -29.7k prev
  • US Housing Starts declined -2.0% vs -1.7% exp
  • US Core PPI declined to 1.6% vs 2.0% exp and 2.1% prev


  • Thu: FranceCPI, US Jobless Claims, Philly Fed, Oil Inventories
  • Fri: Japan PMI, EU PMI, UK Retail Sales, Canada Retail Sales, MexicoGDP, US Markit PMI
  • Mon: German IFO, Chicago Fed National Activity Index, US Existing Home Sales
  • Tue: US Markit US Service PMI, Humphery-Hawkins, US Consumer Confidence, China HSBC Mfg PMI
  • Wed: France Consumer Confidence, US New home Sales, Oil Inventories, Draghi Testifies to EU Parliament