The RBA, unexpectedly, kept interest rates on hold at 4.25%. The decision was even more surprising, given the accompanying statement – namely a weaker Europe, slowing China etc, etc, though (in defence of their decision) they highlighted the better US economic data and high commodity prices. Personally, I believe this is merely a pause before further easing, quite possibly as early as next month. The surprise decision resulted in Australian equity markets declining, though the A$ rose above US$1.08. Still believe its crazy. Fortunately, I did not act on my view to short the A$, but it’s getting to be one of my top prospective plays in the near future – hopefully the A$ will rise to closer to US$1.10;
Japan’s Coincident Composite Index (which reflects current conditions) rose by +2.9 points to 93.2 in December (forecast was for a rise of +2.4 points). The CCI dropped by -1.1 points in November. The leading Composite Index (reflecting expectations 3 months ahead) rose by +0.6 points to 94.3 MoM. Better numbers and Japanese authorities are talking of a turnaround. Hmmmm;
The Chinese Ministry of Industry reports that industrial output is expected to decline this Q. Output is expected to rise by +11.0% this year, below last years +13.9%.
Whilst analysts still write about China’s financial strength, the IMF warns that China has already pushed debt levels (which have increased by 200% in 5 years – a larger rise than in the US during the sub prime crisis) above safe levels. The IMF is proposing that the Chinese authorities introduce stimulus measures.
Just 1 piece of anecdotal evidence – some 3 years ago, when I first started to question the validity of the Chinese “economic miracle”, I received numerous comments from Chinese “experts” telling me that I was NUTS. At present, I get few, if any, such comments. Just saying;
The Indian Government has reduced its forecast for the year to March this year to +6.9%, sharply down from the +8.4% recorded last year – the lowest growth since 2009. The RBI is expected to reduce interest rates further, though inflation at +7.47% in December remains high;
Russian inflation declined to +4.2% last month, well below December’s +6.1%, reports the Federal Statistical Service (“FSS”) – by the way, the FSS is controlled by the Russian Ministry of Economy. Presidential elections are due in a few months.
A very clued up friend of mine, based in Moscow, advises me that I should treat comments by Mr Gideon Rachman’s of the FT re Russia with a pinch of salt – apparently Mr Rachman’s views does not reflect the actual situation in Russia. Let me say, my friend is particularly well plugged in and, as a result, I take his views seriously;
The British retail consortium reported that UK January retail sales (for shops open for at least 1 year) declined by -0.3%. Times are tough, but other recent economic data has been positive;
EPFR reports that inflows into EM has risen significantly since the start of the year – by +US$3.5bn for the week ended 1st February and a total of US$11.5bn since the beginning of the year. Fund flows into EM bonds rose by US$1.2bn last week, the highest since March last year. EM’s have been the star performers in 2012 – too much, too soon in my humble opinion – still believe they may well be a shorting opportunity shortly;
Euro seems to have picked up on hopes of a resolution re Greece – currently US$1.3145. Well, I suppose the Euro will recover if the Greek’s agree to the Euro Zone demands, but I for one, am not buying into it – indeed, look to raise my short (against the US$).
Glencore is paying a 15% premium to buy out the rest of Xstrata – does not seem to be too generous. Call me a cynic, but I’ve always believed you invest in the company where the main guy(s) own shares – wow, that’s Glencore – up nearly 2.0%, though Xstrata is down over 2.0%. I would guess that Xstrata shareholders are likely to object to the proposed terms.
European markets flat – I must admit, I’d thought that they would be higher. US futures indicate a flat open, but way, way too early. Brent still around US$115.50.
Was preparing this for tomorrow, but too much alredy so I thought I’d send it out.
Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.