Economic data was all around pretty positive everywhere, so it’s quite curious to see risk assets going nowhere today.
China’s strength is driving EM stocks as well as copper and energy. Everything else – developed market stocks, bonds, currencies, other commodities – are more or less flat.
I reckon most people are staying the heck out with US election and Fed meeting right around the corner.
I still like risk assets for the remainder of the year as well as a smallish long bet on USD to build up to a substantial position over time. BUT with investor sentiments being pretty one-sided already we really need to keep eyes on our positions.
Tomorrow morning we will see final Oct manufacturing data out of Europe which can drive European stocks. We should see continuation of strong core and weak peripheral theme. There should not be a big surprise here because prelim numbers were already released a week ago.
Korea – inflation accelerates to 4.1% from 3.6%
• This will pressure rate hike and strengthening in KRW.
China – manufacturing very strong in Oct
• As expected, China has stabilized and now on a rebound path.
• Signs of inflation is becoming more noticeable in input costs. It is likely that China will continue to tighten. While this will give the market periodic jolts this is not something we need to worry in short to medium term.
UK manufacturing shows a surprise upturn in Oct
• The latest Markit/Chartered Institute of Purchasing and Supply survey, published by Reuters, showed the headline October activity index rising to 54.9 from 53.5 in September, confounding analysts' forecast for a slowdown, with the median prediction for a 53.0 outturn.
• This was the first monthly rise in the index since May. These latest data will underscore most analysts' belief the Bank of England Monetary Policy Committee will not relaunch Quantitative Easing at this month's meeting.
US Sep - income drops but spending rises
• How can that happen? People are borrowing again.
• Personal incomes in the U.S. fell in September and spending increased, leading to a drop in household savings rate to its lowest level in more than a year.
• What this tells you is that any consumption growth has been on an extremely shaky footing.
• Meanwhile, the annual growth rate of the core PCE (personal consumption expenditure) deflator fell from 1.3% in August to 1.2% in September. This is another measure of inflation (kind of like the official CPI) the Fed watches closely and the gradual decline highlights why more quantitative easing will be announced on Wednesday.
US Oct manufacturing - expanded at the fastest pace in five months
• New Orders sub-index, generally considered to be one of the best leading indicator of manufacturing activities – rose which is a very good news.
• This ISM reading eases fear we’re sliding into any kind of recession in near future.
Monday, November 1, 2010
Friday, October 29, 2010
2010 10 29
I am feeling nervous.
US GDP was basically in-line with trend : so-so. Not great but not bad enough to warrant a sell-off. I believe the path of least resistance is still up for risk assets based purely on fundamentals.
Next week will be HUGE.
Monday is a flood of manufacturing data for Oct from around the world.
Tues-Wed is Fed meeting where the market is eagerly awaiting on details for QE2.
Curiously Japan moved up its BoJ meeting from Nov14 to Nov 4, presumably to respond to US Fed loosening which can push up yen even higher. I am guessing a massive stimulus package from Japan which could push down Yen and push up Nikkei – in the short term. I would use this opportunity to short Nikkei.
In general though I think we are coming close to end of this rally that began in early Sep. I don’t see any great economic upside surprise coming from anywhere in the world. Central banks would have more or less exhausted their bullets after next week (I think BoE and ECB will loosen too but that would impact mostly currency and bonds and not have a system wide impact like US Fed). AND investor sentiment is already extremely high.
We must tread with extreme caution here.
Japan data continues to get pounded by bad data
• Industrial production for Sep comes in way short of expectation
• On top of very weak retail sales data from yesterday.
Korea – weaker industrial production for Sep
A rare bad news for Germany – retail sales dip in Sep first time since March 2008
• German retail sales posted their biggest monthly drop in 2-1/2 years in September, clashing with recent figures that had painted a rosier picture of consumer demand in Europe's largest economy.
• "This is a very weak result. It dampens the expectations that private consumption is taking off like a rocket," said Ralph Solveen from Commerzbank. "However, one should not forget that retail sales data often fluctuate heavily and are revised frequently."
• A survey by market research group GfK on Tuesday showed consumer morale remains at its highest level since May 2008 going into November on expectations of a continuing recovery, bolstering hopes that improved domestic demand will take up much of the slack if export growth runs out of steam.
US GDP – Not Good, Not Bad, just OK
• The theme continues. It’s not as bad as recession. But pretty poor and future does not look very good.
• 2% is nothing to cheer about as US needs about 2.5%-3% just to maintain the same employment. Although it was better than 1.7% in Q2.
• Consumption growth was solid enough, increasing by 2.6%, up from 2.2% in the second quarter. But households had to dip into their savings to afford even that modest increase.
US GDP was basically in-line with trend : so-so. Not great but not bad enough to warrant a sell-off. I believe the path of least resistance is still up for risk assets based purely on fundamentals.
Next week will be HUGE.
Monday is a flood of manufacturing data for Oct from around the world.
Tues-Wed is Fed meeting where the market is eagerly awaiting on details for QE2.
Curiously Japan moved up its BoJ meeting from Nov14 to Nov 4, presumably to respond to US Fed loosening which can push up yen even higher. I am guessing a massive stimulus package from Japan which could push down Yen and push up Nikkei – in the short term. I would use this opportunity to short Nikkei.
In general though I think we are coming close to end of this rally that began in early Sep. I don’t see any great economic upside surprise coming from anywhere in the world. Central banks would have more or less exhausted their bullets after next week (I think BoE and ECB will loosen too but that would impact mostly currency and bonds and not have a system wide impact like US Fed). AND investor sentiment is already extremely high.
We must tread with extreme caution here.
Japan data continues to get pounded by bad data
• Industrial production for Sep comes in way short of expectation
• On top of very weak retail sales data from yesterday.
Korea – weaker industrial production for Sep
A rare bad news for Germany – retail sales dip in Sep first time since March 2008
• German retail sales posted their biggest monthly drop in 2-1/2 years in September, clashing with recent figures that had painted a rosier picture of consumer demand in Europe's largest economy.
• "This is a very weak result. It dampens the expectations that private consumption is taking off like a rocket," said Ralph Solveen from Commerzbank. "However, one should not forget that retail sales data often fluctuate heavily and are revised frequently."
• A survey by market research group GfK on Tuesday showed consumer morale remains at its highest level since May 2008 going into November on expectations of a continuing recovery, bolstering hopes that improved domestic demand will take up much of the slack if export growth runs out of steam.
US GDP – Not Good, Not Bad, just OK
• The theme continues. It’s not as bad as recession. But pretty poor and future does not look very good.
• 2% is nothing to cheer about as US needs about 2.5%-3% just to maintain the same employment. Although it was better than 1.7% in Q2.
• Consumption growth was solid enough, increasing by 2.6%, up from 2.2% in the second quarter. But households had to dip into their savings to afford even that modest increase.
Thursday, October 28, 2010
2010 10 28
Quiet day in stocks and commodities (except gold which was up big) while USD weakened quite a bit and bonds rose on swinging macro sentiments.
Japan looks bad in almost every metric, but it seems likely the government would announce an aggressive stimulus maybe on Nov 4 or 5 as BOJ rescheduled its policy meeting (from Nov 15 and 16). BOJ might want to promptly fight off any further yen strength following FOMC announcement.
Europe data continues to impress but most of it is due to Germany.
US data continues to be – just OK. But that’s probably good enough for the markets to continue to run.
Tomorrow is a fairly busy day : Korea/Japan industrial production, Japan CPI, UK banking and credit market reports, Eurozone inflation estimate, EU unemployment rate, Swiss KOF leading indicator
But the two biggest pieces of data are US Q3 GDP and October Chicago PMI. Usually GDP is not a big deal as it is an old news, but in these days of macro uncertainty it seems to have an outsized impact. It would probably come in low-mid 2% range which is not good but good enough for the time being. If Chicago PMI comes in weak that could be grounds for a real concern as manufacturing has been the only source of strength in US. Sentiment is frazzled there after a very weak durable goods orders.
The chances are market is in holding pattern until the Fed QE2 announcement until next week.
I want to re-highlight my email from earlier today on investor sentiment:
So as I said I feel optimistic on the stocks near term. However, after seeing this chart it makes me pause because apparently everyone else is also optimistic.
Below is weekly chart of American Association of Individual Investors Survey on bullish sentiment. The most recent data just came out today.
As you see the current reading is at an extremely high level. More importantly, the last couple times when sentiment reached this high – early Jan and mid April, we saw some big sell offs follow soon after. With lukewarm fundamentals and with investor sentiment this bullish already, it makes me doubt if being long risk is a good trade at this point. I think we need to put in stop limits.
Japanese stock market continues to underperform by a wide margin.
• Bank of Japan Governor Masaaki Shirakawa said Thursday that the central bank may expand its asset purchase from the current level if the economic situation deteriorates.
• “The BOJ will examine effects and side effects of these measures and if we think find the economic situation changing significantly, we may expand the fund,” Shirakawa told reporters in Tokyo.
• BOJ might be emboldened to take even larger intervention if US’s QE announcement next week has a big impact.
German unemployment – not quite as good as expected but still very good
• Unemployment in Germany fell below 3m in October for the first time in 18 years, according to unadjusted figures released by the federal labour office.
Eurozone bank lending survey shows demand loans is robust
• The European Central Bank said net demand for loans in Europe was positive for the first time in more than two years, driven by financing needs for inventory and working capital.
• Borrowing by households also improved as more banks approved loans, signalling increased optimism about the economic situation and housing markets.
• This is in stark contrast versus US where loan demand is still weak because there is just no demand to consume or invest. Despite what all the businesses complain about lack of stimulus and Obama and whatnot the real problem is that there is no demand and there are no productive assets to invest in US.
Eurozone economic sentiment rises yet again
• The European Commission’s monthly economic sentiment indicator rose 0.9 points to 104.1 in October, a 34-month high. Analysts had forecast a smaller increase following several months of rapid growth.
• The eurozone figure concealed wide differences between the so-called “core” economies such as France and Germany, which rose, and the weaker “peripheral” group including Spain and Portugal, struggling with deep fiscal problems.
• “The eurozone growth divergence is certainly not disappearing,” said Peter Vanden Houte, economist at ING, referring to indicators in the past year that have pointed to a divergent recovery in Europe.
• The strong showing was partly down to improved expectations in the labour market, raising policymakers’ hopes that bullishness will now boost domestic demand – the weak link in the economic recovery.
US initial jobless claims – better than it has been but once again LUKEWARM
Japan looks bad in almost every metric, but it seems likely the government would announce an aggressive stimulus maybe on Nov 4 or 5 as BOJ rescheduled its policy meeting (from Nov 15 and 16). BOJ might want to promptly fight off any further yen strength following FOMC announcement.
Europe data continues to impress but most of it is due to Germany.
US data continues to be – just OK. But that’s probably good enough for the markets to continue to run.
Tomorrow is a fairly busy day : Korea/Japan industrial production, Japan CPI, UK banking and credit market reports, Eurozone inflation estimate, EU unemployment rate, Swiss KOF leading indicator
But the two biggest pieces of data are US Q3 GDP and October Chicago PMI. Usually GDP is not a big deal as it is an old news, but in these days of macro uncertainty it seems to have an outsized impact. It would probably come in low-mid 2% range which is not good but good enough for the time being. If Chicago PMI comes in weak that could be grounds for a real concern as manufacturing has been the only source of strength in US. Sentiment is frazzled there after a very weak durable goods orders.
The chances are market is in holding pattern until the Fed QE2 announcement until next week.
I want to re-highlight my email from earlier today on investor sentiment:
So as I said I feel optimistic on the stocks near term. However, after seeing this chart it makes me pause because apparently everyone else is also optimistic.
Below is weekly chart of American Association of Individual Investors Survey on bullish sentiment. The most recent data just came out today.
As you see the current reading is at an extremely high level. More importantly, the last couple times when sentiment reached this high – early Jan and mid April, we saw some big sell offs follow soon after. With lukewarm fundamentals and with investor sentiment this bullish already, it makes me doubt if being long risk is a good trade at this point. I think we need to put in stop limits.
Japanese stock market continues to underperform by a wide margin.
• Bank of Japan Governor Masaaki Shirakawa said Thursday that the central bank may expand its asset purchase from the current level if the economic situation deteriorates.
• “The BOJ will examine effects and side effects of these measures and if we think find the economic situation changing significantly, we may expand the fund,” Shirakawa told reporters in Tokyo.
• BOJ might be emboldened to take even larger intervention if US’s QE announcement next week has a big impact.
German unemployment – not quite as good as expected but still very good
• Unemployment in Germany fell below 3m in October for the first time in 18 years, according to unadjusted figures released by the federal labour office.
Eurozone bank lending survey shows demand loans is robust
• The European Central Bank said net demand for loans in Europe was positive for the first time in more than two years, driven by financing needs for inventory and working capital.
• Borrowing by households also improved as more banks approved loans, signalling increased optimism about the economic situation and housing markets.
• This is in stark contrast versus US where loan demand is still weak because there is just no demand to consume or invest. Despite what all the businesses complain about lack of stimulus and Obama and whatnot the real problem is that there is no demand and there are no productive assets to invest in US.
Eurozone economic sentiment rises yet again
• The European Commission’s monthly economic sentiment indicator rose 0.9 points to 104.1 in October, a 34-month high. Analysts had forecast a smaller increase following several months of rapid growth.
• The eurozone figure concealed wide differences between the so-called “core” economies such as France and Germany, which rose, and the weaker “peripheral” group including Spain and Portugal, struggling with deep fiscal problems.
• “The eurozone growth divergence is certainly not disappearing,” said Peter Vanden Houte, economist at ING, referring to indicators in the past year that have pointed to a divergent recovery in Europe.
• The strong showing was partly down to improved expectations in the labour market, raising policymakers’ hopes that bullishness will now boost domestic demand – the weak link in the economic recovery.
US initial jobless claims – better than it has been but once again LUKEWARM
Wednesday, October 27, 2010
2010 10 27
The markets were looking ugly by lunch time in NYC, but then staged a good sized come back undoing much of the morning action.
Seems like the WSJ report of the Fed going soft into QE2 had scared a lot of the investors initially – and it could very well have impacted the bond market which sold off steadily throughout the day. USD was stronger versus every G10 currency but not by a big margin except in Australia where weak inflation is likely to slow rate hike cycle.
Looking at fundamental data the theme is clear – things are CLEARLY SLOWING DOWN everywhere in the world. But I do not believe in double dip or anything near that for 2010. For the final two months I am still optimistic on equities and like USD. In the bonds space the yields have risen rather sharply in the last two weeks making me doubt if risk/reward is still attractive to short bonds at this point. Fundamentally current yield levels are totally justifiable, and over longer term we would go lower in yields as 2011 unfolds.
Korea GDP slows down drastically
• South Korea's GDP growth slowed in the third quarter to 0.7 percent from 1.4 percent in the previous quarter, as exports fell drastically in the wake of cooling global growth.
• The exports sector gained just 1.9 percent in the third quarter, led mainly by increased exports of petrochemical products, semiconductor and automobiles. This was sharply lower than the 7 percent growth recorded in the previous quarter.
• A marked reduction of exports to China in September to an 11-month low weighed on third-quarter growth figures. China accounts for as much as a quarter of shipments from South Korea. Analysts say a further slowing of Chinese domestic demand resulting from a recent rate hike by the Chinese central bank will further erode confidence in the Korean exports sector.
Australia – benign inflation data means RBA likely to take time on rate hikes
France – consumer spending in Sep surprises to the upside
• Basically offsets fall in Aug. (1.5% rise in Sep after 1.6% fall in Aug) and surely an encouraging sign.
• However, French private sector activity growth slowed in October to its lowest level in more than a year, according to Markit Economics. Purchasing Managers' survey signaled a downshift in growth at the start of the fourth quarter as production and new order growth weakened.
US – durable goods orders were not good if you subtract airplanes
• Orders for durable goods—manufactured items meant to last at least three years, such as copper coil and cars—rose 3.3% in September from August, the Commerce Department said Wednesday. That increase owed entirely to orders for nondefense aircraft and parts, which more than doubled. Indeed, Boeing Co. reported that it received orders for 117 planes in September, up from 10 in August. Stripping out aircraft, orders fell 0.1%.
• Aircrafts are hugely pricey and tend to come in lumps, so economists usually exclude them in durable goods data analysis – similar to why foods and energy are excluded from CPI (price volatility)
• That suggests that the rebound in capital spending that began in the second half of last year—as companies made purchases they had deferred during the downturn—may be coming to an end.
Seems like the WSJ report of the Fed going soft into QE2 had scared a lot of the investors initially – and it could very well have impacted the bond market which sold off steadily throughout the day. USD was stronger versus every G10 currency but not by a big margin except in Australia where weak inflation is likely to slow rate hike cycle.
Looking at fundamental data the theme is clear – things are CLEARLY SLOWING DOWN everywhere in the world. But I do not believe in double dip or anything near that for 2010. For the final two months I am still optimistic on equities and like USD. In the bonds space the yields have risen rather sharply in the last two weeks making me doubt if risk/reward is still attractive to short bonds at this point. Fundamentally current yield levels are totally justifiable, and over longer term we would go lower in yields as 2011 unfolds.
Korea GDP slows down drastically
• South Korea's GDP growth slowed in the third quarter to 0.7 percent from 1.4 percent in the previous quarter, as exports fell drastically in the wake of cooling global growth.
• The exports sector gained just 1.9 percent in the third quarter, led mainly by increased exports of petrochemical products, semiconductor and automobiles. This was sharply lower than the 7 percent growth recorded in the previous quarter.
• A marked reduction of exports to China in September to an 11-month low weighed on third-quarter growth figures. China accounts for as much as a quarter of shipments from South Korea. Analysts say a further slowing of Chinese domestic demand resulting from a recent rate hike by the Chinese central bank will further erode confidence in the Korean exports sector.
Australia – benign inflation data means RBA likely to take time on rate hikes
France – consumer spending in Sep surprises to the upside
• Basically offsets fall in Aug. (1.5% rise in Sep after 1.6% fall in Aug) and surely an encouraging sign.
• However, French private sector activity growth slowed in October to its lowest level in more than a year, according to Markit Economics. Purchasing Managers' survey signaled a downshift in growth at the start of the fourth quarter as production and new order growth weakened.
US – durable goods orders were not good if you subtract airplanes
• Orders for durable goods—manufactured items meant to last at least three years, such as copper coil and cars—rose 3.3% in September from August, the Commerce Department said Wednesday. That increase owed entirely to orders for nondefense aircraft and parts, which more than doubled. Indeed, Boeing Co. reported that it received orders for 117 planes in September, up from 10 in August. Stripping out aircraft, orders fell 0.1%.
• Aircrafts are hugely pricey and tend to come in lumps, so economists usually exclude them in durable goods data analysis – similar to why foods and energy are excluded from CPI (price volatility)
• That suggests that the rebound in capital spending that began in the second half of last year—as companies made purchases they had deferred during the downturn—may be coming to an end.
Tuesday, October 26, 2010
2010 10 26
Basically nothing happened today with commodities and stocks flat.
Bonds fell today. Seems like all of a sudden we are hearing more chatters of inflation fear – especially with the TIPS auction with negative yield. The question is : is this rising fear of inflation just a blip or a turning point? I will have to do some more research here. Frankly I don’t have an opinion yet. Economic data seems weak enough and Fed dovish enough that I think QE would be quite substantial.
USD was broadly strong with exception of GBP where Q3 GDP came in better than expected. But keep in mind this is 1-4 months old data. UK data has been surprisingly good for a while – deterioration has been seen in October and could worsen rapidly as austerity measures get implemented. This rise would probably lose out over the next day or two.
Tomorrow’s big data release is US durable goods order.
Bonds fell today. Seems like all of a sudden we are hearing more chatters of inflation fear – especially with the TIPS auction with negative yield. The question is : is this rising fear of inflation just a blip or a turning point? I will have to do some more research here. Frankly I don’t have an opinion yet. Economic data seems weak enough and Fed dovish enough that I think QE would be quite substantial.
USD was broadly strong with exception of GBP where Q3 GDP came in better than expected. But keep in mind this is 1-4 months old data. UK data has been surprisingly good for a while – deterioration has been seen in October and could worsen rapidly as austerity measures get implemented. This rise would probably lose out over the next day or two.
Tomorrow’s big data release is US durable goods order.
Monday, October 25, 2010
2010 10 25
Slow day in terms of news but a pretty eventful day in markets. Basically the same story this month : dollar down everything else up
Further poor sentiment toward the dollar was probably fueled by further G20 statements over the weekend – basically there seems to be no real agreement or actionable plans being devised.
This week will be the peak of earnings reporting. So far this quarter has not been as good as the previous few, but still it has been VERY GOOD and will provide tailwind for the stock market.
This promises to be a fairly busy week with economic data. In US : GDP, consumer confidence, durable goods orders, Chicago PMI
In Europe : consumer and business confidence, German unemployment and UK GDP
Tomorrow’s big data are UK GDP and US consumer confidence
I think trend will be that US econ data holds up – at a low level but certainly faring better than recession. Europe data I think would stay strong enough with Germany (and everyone looking the other way on peripheral Europe). This presents a favorable backdrop to risky assets – stocks and commodities. Although while I am hesitant to stay long (and probably even add length) with SP500 up more than 10% in last two months it’s hard to see what would reverse the trend in the near term.
I do recommend either getting rid of Eurostoxx short or switching that with Nikkei and TSX combo.
One thing for sure, by middle of next week we will have some MAJOR news come out : the fed would have announced much more details on QE by Nov 2-3 meeting, Q3 earnings being basically over, global PMI data and build up to G20 summit on Nov 20.
Next week can be a very different market than this week. This calm is really somewhat scary, but fundamentally – just looking at economic data I feel bullish. Basically I went from being bullish US and bearish Europe to being bullish both rest of the year. That and EM of course.
Further poor sentiment toward the dollar was probably fueled by further G20 statements over the weekend – basically there seems to be no real agreement or actionable plans being devised.
This week will be the peak of earnings reporting. So far this quarter has not been as good as the previous few, but still it has been VERY GOOD and will provide tailwind for the stock market.
This promises to be a fairly busy week with economic data. In US : GDP, consumer confidence, durable goods orders, Chicago PMI
In Europe : consumer and business confidence, German unemployment and UK GDP
Tomorrow’s big data are UK GDP and US consumer confidence
I think trend will be that US econ data holds up – at a low level but certainly faring better than recession. Europe data I think would stay strong enough with Germany (and everyone looking the other way on peripheral Europe). This presents a favorable backdrop to risky assets – stocks and commodities. Although while I am hesitant to stay long (and probably even add length) with SP500 up more than 10% in last two months it’s hard to see what would reverse the trend in the near term.
I do recommend either getting rid of Eurostoxx short or switching that with Nikkei and TSX combo.
One thing for sure, by middle of next week we will have some MAJOR news come out : the fed would have announced much more details on QE by Nov 2-3 meeting, Q3 earnings being basically over, global PMI data and build up to G20 summit on Nov 20.
Next week can be a very different market than this week. This calm is really somewhat scary, but fundamentally – just looking at economic data I feel bullish. Basically I went from being bullish US and bearish Europe to being bullish both rest of the year. That and EM of course.
Friday, October 22, 2010
2010 10 22
Another quiet day on minimal news.
Next week we should see some more action:
US durable goods orders (Wed) Q3 GDP (Fri)
Europe manufacturing new orders (Mon) inflation (Fri)
UK Nationwide house prices (Mon) Q3 GDP (Tue) consumer confidence (Thu)
Japan Industrial production (Fri)
Really the main driving theme lately has been QE2 – which has dominated over earnings news (very good once again this quarter). On Nov 3 we should hear more specific word on how QE2 would be implemented. So far it has been all speculation on how and when.
On the other hand, economic data continues to be pretty decent in US which is what we expected – that US will NOT fall into recession. However, the continuing strength in Europe – especially Germany – has surprised me. Therefore, I am formally stepping off my view on long US vs short Europe for now. This also means that I would rather not short Eurostoxx. I think we should consider as shorts Nikkei and TSX vs long DAX and Dow Jones. I think Nikkei will continue to suffer on strong Yen, and Canadian economic data has been on weak side as it gets dragged down by US. I still like Dow Jones because these are high quality cash rich international companies.
I also like Hang Seng on both China ties as well as USD peg (HKD is pegged to USD).
I see nothing but bad news on horizon for UK. I think we should increase short on GBP. Maybe ½ against USD and ½ against Euro.
I still hesitate to make a move in bond futures.
Next week we should see some more action:
US durable goods orders (Wed) Q3 GDP (Fri)
Europe manufacturing new orders (Mon) inflation (Fri)
UK Nationwide house prices (Mon) Q3 GDP (Tue) consumer confidence (Thu)
Japan Industrial production (Fri)
Really the main driving theme lately has been QE2 – which has dominated over earnings news (very good once again this quarter). On Nov 3 we should hear more specific word on how QE2 would be implemented. So far it has been all speculation on how and when.
On the other hand, economic data continues to be pretty decent in US which is what we expected – that US will NOT fall into recession. However, the continuing strength in Europe – especially Germany – has surprised me. Therefore, I am formally stepping off my view on long US vs short Europe for now. This also means that I would rather not short Eurostoxx. I think we should consider as shorts Nikkei and TSX vs long DAX and Dow Jones. I think Nikkei will continue to suffer on strong Yen, and Canadian economic data has been on weak side as it gets dragged down by US. I still like Dow Jones because these are high quality cash rich international companies.
I also like Hang Seng on both China ties as well as USD peg (HKD is pegged to USD).
I see nothing but bad news on horizon for UK. I think we should increase short on GBP. Maybe ½ against USD and ½ against Euro.
I still hesitate to make a move in bond futures.
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