TSS - Major Markets Report, January 2016

The recurring 8/9 year pattern of market crises – 1973/74, 1980/81, 1989/90,1997/98 and 2007/08 – threatens to repeat again in 2016. US liquidity is falling and pan-Asian liquidity remains weak. Only the Eurozone can boast strong liquidity conditions, and here the sizeable interventions of the ECB mean that the Euro will likely stay under downward pressure. Our three overriding concerns centre on: (1) the implications of still huge Chinese capital outflows (US$146 billion forDecember) for the Chinese markets and Asian economies; (2) the persistent weakening in US corporate cash flow with its negative implications for credit spreads, share buy-backs and economic activity, and(3) the further risks to general market liquidity associated with the Fed’s US rate hike and step-up in reverse repo activity (US$572 billion 6th January).