Monday, September 25th, 2017 Contributors: J.Price, C.Basinger, D.Benedet, C.Kerlow, D.Mak, S. Obata TODAY The week is starting on very light volume overseas, with results turning in mixed in both the equity and bond markets. North America is where it’s at for currencies, with both the US$ and CAD$ showing a bit of strength in early trading. The big dollar index is holding above 92 for the time being – it has spent about half of September below that 92 handle, and it now on its 3rd attempt to rally off it.
Aussie dollars are continuing to struggle, at least compared to its brother-in-arms Loonie. With Iron Ore prices falling fast and oil prices doing the opposite, the advantage is clearly for the C$. The red metal is the biggest among the country’s $200 billion in annual export, and its prices are off by more than 20% since this time last month. Also, while Canada and the US are pricing in probabilities of further rate hikes, Australia is forecast flat. Still among the juicier yielding government bonds with a 2 year at 1.95%, Canada and Treasuries are on their heels at 1.60% and 1.43% respectively. An interesting outside look at Canada comes from the Macro Tourist, who points out the “yikes” in terms of Canadians’ collective concentration of wealth in Real Estate, but also the “phew” in showing that it is generally less leveraged than the US when taking into account household health spending. You mean to say that 20% revenue CAGR can’t last forever? Quartz makes the case for “Peak Apple” after seeing a lack of lines at the stores for the new watch and iPhone 8. Not to anyone’s surprise, German Chancellor Angela Merkel was re-elected to a fourth term. She will; continue on as head of the Europe's biggest economy. The coalition conditions have changes somewhat, as there was an increased shift to the right among voters. (Bloomberg) While we’re on the topic of elections, Japan’s Prime Minister Shinzo went ahead and called a snap election for October 22nd. The timing comes just as his approval ratings have been on the rise following the tensions with North Korea. Voters like his tough stance towards North Korea, as well as his moves to rebalance the social security system. The Nikkei is up by half a percent this morning. (Reuters) The Humble Student wonders how much interest rates can rise, now that Janet Yellen has made it clear that come hell or high water, she will normalize monetary policy. In today’s Chart of the Day we plotted the CESI Index over U.S. 10 years. Typically during times of improving economic conditions we see yields rising as well. Given the strong uptick in the CESI recently, we’d opine that upside risks remain for bond yields. Diversion: First private submarines, now have your own private floating Habitat, Kokomo Ailand. FIXED INCOME AND ECONOMICS For those LaunchPad readers who giddy up with joy on trading days with Fed speeches and press conferences (don’t deny it, we know you are out there!), this week will be akin to Christmas coming early for you. No less than eleven members from the voting and non-voting policy committee will be on tap to discuss various aspects of the economy, inflation and global macro events. Last week’s unanimous rate decision is and $4.5 trillion balance sheet unwinding is still fresh in their minds, so expect everyone to talk up the likelihood of another tightening move possibly in December. Chair Janet Yellen is the main event tomorrow with luncheon in Ohio titled “Prospects For Growth: Reassessing The Fundamentals” and she’ll be preceded by eminent dove Lael Brainard (speaking on both Tuesday and Wednesday) and followed by Vice-Chair Fischer on Thursday. Up first though will be New York Fed President Dudley, Minnesota’s Kashkari, and Chicago’s Evans, all of whom will be hosting talks today. Foreign central bankers will also be on the agenda this week with ECB boss Draghi speaking at 9AM EST in his third Monetary Dialogue this year, and the BoC’s Poloz in St. John’s on Wednesday (in his first publics address since the surprise hike earlier this month). CHART OF THE DAY QUOTE OF THE DAY | Procrastination is the art of keeping up with yesterday.
- Don Marquis | |
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