TSS - Emerging Markets Report, October 2015

by Michael J. Howell23. October 2015 10:27

Emerging Market liquidity remains fragile, again because of the weak Chinese economy and further signs that the People’s Bank is tightening, and not easing, policy. EM Liquidity (31.2 Index ‘normal range’ 0-100) is rising but at a slow rate across the EM universe, paced by equally weak liquidity in the oil-dependent Frontier Markets (27.9).


TSS - Major Markets Report, October 2015

by Michael J. Howell20. October 2015 15:41

The course of the US dollar over coming weeks remains, for us, the major uncertainty. Our models are poised between predicting a bit more strength, based on shortages of US dollar funding in cross-border markets, and growing fears of a fast-approaching 2016 US recession. These concerns likely outweigh other key issues, namely the path of the Chinese economy and whether or not the US Fed tightens this December? The latter anyway may be derivative.


Global View October 2015 - 2016: The First Recession Involving Falling Not Rising Interest Rates

by Michael J. Howell16. October 2015 10:32

Deteriorating US corporate finances are already curtailing new orders and depressing industrial activity. Negative economic surprises are building. Near-zero short-term interest rates and even falling long-term rates seemingly have little punch. In fact, could this be the first recession heralded by a fanfare of falling, not rising, interest rates? This seems a puzzle, but it may not be. The issue for markets is always weak funding, not high interest rates.


Emerging Markets Latest GLI, October 2015

by Michael J. Howell13. October 2015 12:03

Latest Emerging Market Liquidity readings confirm persistently poor numbers for end-September 2015. The Emerging Market component of our broader GLI™ series (Global Liquidity Index) remained soft, testing a sub-par index level of 31.2 (‘normalised’ range 0-100). EM Liquidity conditions have now been depressed for approaching four years.


Global View October 2015: The Collapse of Global Liquidity and the Eclipse of Central Banking

by Michael J. Howell12. October 2015 10:52

In a darkening replay of 2007/08, there is an escalating lack of ‘liquidity’ across global markets. The echo of the Lehman Crisis can be heard in Figure 1, since Eurodollar balances are similarly being pulled back to US banks. Does this warn of funding problems? Bond investors’ most-talked-of fear is a lack of  ‘price and size’. Perhaps, because they sit at the front of the feeding-chain, bond markets are more sensitive to a bigger problem concerning the drying up of the World’s flows of money and credit?


Global Liquidity Latest, October 2015

by Michael J. Howell12. October 2015 10:50

Liquidity risks remain elevated. Our Global Liquidity Index (GLI) for September 2015 is stuck at low levels of 39.0 (‘normal’ range 0-100) or close to the low August reading. Such poor liquidity underscores a ‘Risk Off’ investment environment characterised by high volatility and by the likelihood that economic activity levels will weaken noticeably over the next 6-12 months. We have already warned that low and falling US liquidity levels already point to a modest economic recession by early 2016.


Global Liquidity Conditions Major Markets, September 2015

by Michael J. Howell24. September 2015 17:55

Global Liquidity remains sub-par. End-August 2015 saw our monthly GLI™ (Global Liquidity Index) touch 39.2 (‘normal’ range 0-100). This was a small rise from July and occurred only because that reading was revised down.


Global Liquidity Conditions (Liquidity) Emerging Markets, September 2015

by Michael J. Howell24. September 2015 17:53

China continues to weigh down heavily on EM.The big message we get from our latest data is that China will have to devalue the RMB further. We still predict a 10% drop for 2015.


Global Liquidity Conditions (Risk) Emerging Markets, September 2015

by Michael J. Howell24. September 2015 17:52

The Emerging Market component of our Global Risk Index dropped to 69.2 in August, compared to 77.8  in July and the recent peak of 90.4 in January.


Global View September 2015: Where Are US Bonds Heading?

by Michael J. Howell15. September 2015 17:33

Two burning questions are: (a) will a pending US Fed Funds rate hike and (b) continued selling of US dollars and Treasuries by China cause US bond yields to spike higher? Our answer is ‘no’ largely because the safe haven attractions of US Treasuries will keep yields low. A 25 bp rate hike could add 15 bp to 10-year Treasury yields. But another couple of months of capital flight from China could push them down by 50 bp because of lower term premia.


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