I have been trying hard to find some small niches that we could put trades on that are not so tightly linked to risk on/off. New Zealand and Nordic areas are sort of off the beaten path where their fundamentals could trump global sentiment at times. But given how thinly stretched we are pretty tough to do detailed analysis on niche places like that.
German economy seems to be doing well but I think people are getting too optimistic. Actual numbers are not that good and worse than US in many regards. Strict austerity measures are around the corner. I think Europe is a short – entry point is the main issue.
US consumers are in a bad shape. In addition to dismal job numbers I hear that retail numbers are trickling in very poorly. I think we should bet against US consumers. Perhaps long dow versus short consumer staples ETF in both Porc and IQ.
Oil market fundamentals look pretty bad to me. Build in refined products have been just massive and total inventory at a staggering level.
New Zealand continues to come out with weaker than expected economic data
• Statistics New Zealand said in its Household Labor Force Survey Thursday the seasonally-adjusted unemployment rate rose to 6.8% in the second quarter from 6.0% in the first quarter. The outcome was worse than the median 6.4% rate forecast in a Dow Jones Newswires poll of eight economists.
• NZD has been selling off sharply in the past few weeks and is by far the worst performing G10 currency in the past couple weeks. NZD sold off because lukewarm economic data is likely lead to halt in interest rate hikes.
• AUD and NZD are generally the carry currencies that speculators like to go long on.
• In this environment I think it is increasingly important to look at some of these “fringe” trades that are not so closely tied to risk on/risk off. I am thinking some of the non-G3 currencies and spreads/margins in commodities.
Philippines inflation comes in lower than expected at 3.9% yoy
• EM inflation had been a big concern leading many to wonder if central banks would hike aggressively. We are seeing some slowdown in inflation data lately from EM. Remains to be seen what effect recent rally in ags would have. But generally central banks look at CPI with foods excluded.
Scandinavian economy still pretty good
• The Nordic countries have managed to avert the crisis quite well. Stockholm index is up 13% this year – easily the best performing among the developed markets.
• Sweden unemployment level fell to 8.1% in June on a seasonally adjusted basis – Swedish unemployment spikes in summer because students on summer vacation register themselves unemployed if they don’t have summer jobs.
German manufacturing orders rise in June
• Not a big surprise given strong PMI numbers. Much of the boost once again is coming from foreign demand. There are some weaknesses showing in domestic orders. Might have to ask – what would happen now that Euro has regained strength (and would it continue to be strong)?
• No doubted aided by the euro reaching a four-year low in June, foreign orders jumped 5.7% on the month, while May's figure was revised up to show a modest increase from a previously reported decline. Domestic orders also improved, rising 0.3% since May.
Indonesia absolutely kicking you know what
• Q2 GDP at 2 year high. Thanks to healthy rise in consumer spending, business investments and exports.
• Year-on-year gross domestic product reached 6.2 per cent in the three-month period and was up a seasonally-adjusted 1.6 per cent from the previous quarter.
• Inflation has been at historic lows in recent years but a spike in food prices last month lifted it above 6 per cent. The key Bank Indonesia interest rate was nonetheless left unchanged on Wednesday at 6.5 per cent. But expect a hike at the next meeting.
• Private consumption, which drives about two-thirds of Indonesia’s economy and has carried it through much of the recent financial turbulence, increased 5 per cent in the second quarter, while investments jumped 8 per cent.
US job market – still DISMAL
• Initial jobless claims climbed by 19,000 to 479,000, labour department figures showed on Thursday. That exceeded the forecasts of Wall Street analysts and left the less volatile four-week average for claims at an elevated 458,500.
US crude and product stocks at the highest level since 1990
• Commercial crude stocks fell almost 2.8 million barrels last week, according to the Energy Information Administration (EIA), the statistical arm of the U.S. Department of Energy.
• But stocks of refined products surged by almost 8.9 million barrels, including an extra 729,000 barrels of gasoline, 2.2 million barrels of distillate fuels, 2.1 million barrels of propane/ propylene and a massive 3.6 million barrels of "other oils".
• Combined inventories of crude and products in commercial storage now total 1.125 billion barrels. They exceed even the level last summer, when the oil market
• was still flooded in the aftermath of the worst recession since World War Two. Not since September 1990 has the market been carrying this much inventory.
Wheat races ahead on black seas and Canadian crop concerns
• U.S. wheat futures climbed to a new 22-month peak, building on the strong gains seen in the previous session as renewed concerns over drought in the Black Sea region boosted the market.
• "We are seeing a remarkable run in prices, it's a market that continues to fire on concerns over wheat production out of the Black Sea region and also weather issues in Canada," said Garry Booth, a trader with MF Global Australia.
Corn to possibly benefit from wheat problems?
• Soaring wheat prices due to a severe drought in the Black Sea region should bolster U.S. corn exports as global buyers of livestock feed seek cheaper alternatives to wheat, traders and analysts said.
• U.S. corn exports in the 2010/11 marketing year, which begins on Sept. 1, could rise by 50-200 million bushels from the latest U.S. Agriculture Department forecast for 1.95 billion bushels, they said.
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