Tag: finance

While we thought Venezuelan President Maduro was doing well in the verbal combat sparring match of global diplomacy, and of course Russian President Vladimir Putin holds the lead in proclaimed “despotism”, it is the corruption-probe bedraggled Prime Minister of Turkey that is head-and-shoulders above the rest of the world’s leaders in his insults. As Zaman reports, not a day goes by when Erdogan does not spew forth some insult-infused speech to rally his cheering supporters and here are his Top 15…

 

1. Perverts. Last Monday, Erdo?an was speaking in Turkey’s eastern province of Mu?, and lashed out at the Gülen movement for “orchestrating a coup” against the government. “They are perverts. They are tape editors, twitterers, they are whatever that comes to your mind.”

2. Atheists, terrorists. On Feb. 28, Erdo?an criticized a group of students who protested newly-built road crossing through the Middle East Technical University (ODTÜ) in Ankara. “We opened a boulevard in Ankara despite these leftists, these atheists. They are atheists, they’re terrorists.” Oh by the way, they are students of the university, which is the only Turkish school that made it into the list of world’s best 100 universities.

3. Bloodsucking vampires. Erdo?an and the Kurdistan Workers’ Party (PKK) launched a peace process last year. During a year of ceasefire, the PKK bolstered its position in southeastern Turkey and deepened its military presence in the area. Those who criticize the way the peace process is handled (and I’m not talking about nationalists here) and the government’s mistakes in this regard, are frequently targeted by Erdo?an as “bloodsucking vampires.”

4. Journalists with dog collars. During heated debates around Uludere/Roboski massacre, Erdo?an slammed journalists who were criticizing the government for covering up the airstrike that killed 34 civilians. Erdo?an said these columnists were with “dog collars” and that “we freed you from these dog collars.” He was referring to a situation, in which many Turkish columnists had to write in line with the military’s narrative. Ironically, he said in the same speech that these columnists had “national collars” but now they have “international collars.”

5. Girl or woman? In 2011, speaking in Konya about protests in border town of Hopa, Erdo?an criticized a woman who climbed onto a police vehicle, but had her hips broken during the confrontation, saying that “I don’t know if she was a girl or a woman.” The remark caused a huge outrage among public.

6. Assassins. On Jan. 14, Erdo?an said during his parliamentary group meeting that those members of the judiciary, police and bureaucrats who staged the corruption operation are “insidious viruses” and likened them to infamous criminal gang called “Assassins.” He rarely used this word in his later speeches, but his supporters often employ this word to describe members of the Gülen movement.

7. Worse than Shia. During a televised interview earlier this week, Erdo?an said members of the Gülen movement are “worse than Shia” in “lies, slander and taqiyyah.” He didn’t only committed a crime with this hate speech before millions of people, but also insulted all Shia Muslims by claiming that they are good at always telling lies and slander.

8. Leech worms. Few weeks ago, Erdo?an found a new insult and started calling members of the Gülen movement as “leech worms.” He then edited himself, saying that likening leech worms to members of the Gülen movement would be an insult to the worms. “Lech worms are even better than them,” Erdo?an said. Salute to a prime minister who would not even insult a worm!

9. Tumor. To fight against the corruption allegations, Erdo?an launched a campaign to describe members of the police and judiciary who launched the graft operation as “tumor” that infiltrated the body of the state. For dummies: He is referring to members of the police and judiciary who are just doing their job.

10. Criminal gang. Erdo?an, his media and his supporters started to describe the Gülen movement as a “gang” or “örgüt” in Turkish. The word has become a euphemism to describe the PKK, known for its history of terror and violence. He constantly uses the word “gang” as part of his plan to justify a possible sweeping operation against the members of the Gülen movement after the local polls slated for March 30.

11. Childless. It is no secret that Erdo?an’s level of logic in his speeches dropped to a level of a teenager (99.9 percent teenagers excluded). One of the most outrageous one was a “blame” Erdo?an put on opposition Nationalist Movement Party (MHP) leader Devlet Bahçeli and Turkish Islamic scholar Fethullah Gülen for having “no kids.” He said they would not understand what it means of having children and family, because they “ain’t got one.” Both Gülen and Bahçeli have never married (which might be a crime in Erdo?an’s new Turkey).

12. I suspect of their faith. Earlier this week, Erdo?an even questioned faith of members of the Gülen movement, saying that he even “suspects of their faith [in Islam].” In Islam, Muslims usually avoid questioning the faith of other Muslims because there is a danger that those who call others as a “non-believer” would become a non-Muslim if the description is groundless.

13. Insidious viruses and parasites. He first used this in January, but continued to publicly repeat this in almost everyday when he criticizes his opponents.

14. Burn in Hell. Last week, he highlighted how “dirty” his opponents are and claimed that “only Hell will purify them.” 101 Introduction to Islam class for Erdo?an: In Islam, we usually don’t say to each other “you will go to Hell” because it is banned for Muslims to “decide” who will go where after they die.

15. Piss off. On Friday, Erdo?an said during a public rally in eastern province of Batman that female activists may knock at your doors to say not to vote for his ruling party. “You tell them piss off!” Erdo?an said insulted.

Source: Zaman

Of course, not even Erodgan can compete with this… (Absolutely not suitable for work)…

via Zero Hedge http://ift.tt/1cO4Ppy Tyler Durden

As we explained in great detail recently, the abundance of so-called cash-on-the-sidelines is a fallacy, but even more critically the we showed the belief that these 'IOUs of past economic activity' would immediately translate into efforts to deploy them into future economic activity is also entirely false. Simply put,  there is no relationship between corporate cash and subsequent capital expenditure, nor is the level of capital expenditure even well-correlated with the level of real interest rates. At this point, as John Hussman explains, it should be clear that the mere existence of a mountain of IOUs related to past economic activity is not enough to provoke future economic activity. What matters instead is the same thing that always matters: Are the resources of the economy being directed toward productive uses that satisfy the needs of others?

 

The fallacy of cash piles on the balance sheet meaning strong balance sheets…

US companies are carrying far more net debt than in 2007

 

Another curiosity is this notion that US companies have substantially reduced their debt pile and are therefore cash rich. The latter is indeed true. Cash and equivalents are at historically high levels, but rarely do those who mention the mountains of corporate cash also discuss the massive increase in debt seen over the last couple of years.

 

In fact, debt levels have been growing to such an extent that net debt (i.e. excluding the massive cash pile) is 15% higher than it was prior to the financial crisis.

 

and Proposition 1: Corporate cash is high, and therefore, businesses should put that cash to work through capex.

Comments: This is the most obviously deceptive of the four propositions, hence Mark Spitznagel’s incredulous response when asked to address cash balances by Maria Bartiromo last week. As Spitznagel explained, it makes little sense to isolate the cash that sits on corporate balance sheets without netting the credit portions of both assets and liabilities. We last updated corporations’ net credit position here, showing that gradual increases in cash balances are dwarfed by rising debt.

A longer history further disproves the proposition; it shows that there’s no correlation between capex and corporate cash:

 

So how do we restore growth?

Via Hussman's Funds' Weekly Insight,

To the extent that such desirable activities exist – whether as consumption goods or as investment goods like machines, the act of bringing them forward not only engages existing resources (such as factory capacity and labor), but also creates new income that can be used to purchase yet other desirable products. This is what creates a virtuous circle of economic activity and growth. Not quantitative easing, not suppressed interest rates, not speculation. The resources of the economy must be channeled toward activities that are actually productive, desirable, and useful to others.

When this doesn’t occur – when companies produce output that isn’t wanted, when capital investments are made that aren’t productive, when housing is constructed at a pace that exceeds the sustainable demand and ability to finance it – the act of production and the resources of the economy are wasted. That is really the narrative of the past 14 years, and is largely the result of repeated bouts of Fed-induced speculation and misallocation. Robert Blumenthal recently wrote an excellent essay describing the economic costs of such “malinvestment.”

At the moment that a person uses their labor to produce something of value to others, that person’s own income is enhanced, and the ability to purchase the output of others is also created. As economist Jean-Baptiste Say wrote, “A product is no sooner created than it, from that instant, affords a market for other products to the full extent of its own value… Thus the mere circumstance of creation of one product immediately opens a vent for other products.”

In a healthy economy, the productive activity of one sector opens a vent for the productive activity of other sectors of the economy. The useful allocation of resources in one area of the economy reinforces the useful allocation of resources in another. Economic growth continues as the efforts of each sector focus on the production of those things that will be of demand and use to others. Each productive act is not simply an event, but contributes momentum to a virtuous cycle.

The difficulty emerges when something is brought into production that is not desired – that fails to align with the actual demand for it. In that event, the value of the product itself may be less than the value of the resources committed to its production. Since it is not consumed, it simultaneously becomes “savings” and “unwanted inventory investment.” Long-term growth is harmed, because economic effort and resources are wasted and fail to open a vent for other production. If this occurs at a large scale, jobs are lost, inventories build, and the economy suffers the long-term effects of misallocated activity.

When we review the economic narrative of the past 14 years, this is exactly what we observe.

The first insult occurred during the excesses of the tech bubble and the severe misallocation of capital that resulted. Next, in response to the economic downturn in 2000-2002, the Federal Reserve held interest rates down in the hope of reviving interest-sensitive spending and investment. Instead, the suppressed interest rate environment triggered a “reach for yield” that found itself concentrated in enormous demand for mortgage securities. Wall Street was more than happy to provide the desired “product,” but could do so only by creating new mortgages by lending to anyone with a pulse.

The resulting housing bubble became a second episode of severe capital misallocation, and led to the economic collapse of 2008-2009. In response to that episode, the Federal Reserve has now produced and largely completed a third phase of speculative malinvestment, this time focused on the equity market. On historically reliable valuation measures, equity prices are now double the level at which they would be likely to provide historically normal returns.  As in 2000, three-quarters of the record new issuance of equities is now dominated by companies that have no earnings. The valuation of the median stock is now higher than it was at the 2000 peak. NYSE margin debt as a percent of GDP exceeds every point in history except the March 2000 peak. All of this will end badly for the equity market, but the real insult is what this constant malinvestment has done to the long-term prospects for U.S. economic growth and employment.

The so-called “dual mandate” of the Federal Reserve does not ask the Fed to manage short-run or even cyclical fluctuations in the economy. Instead – whether one believes that the goals of that mandate are achievable or not – it asks the Fed to “maintain long run growth of the monetary and credit aggregates commensurate with the economy's long run potential to increase production, so as to promote effectively the goals of maximum employment, stable prices and moderate long-term interest rates.”

What the Fed has done instead is to completely lose control of the growth of monetary aggregates, in an effort to offset short-run, cyclical fluctuations in the economy, so as to promote maximum speculative activity and repeated bouts of resource misallocation, and ultimately damage the economy’s long-run potential to increase production and promote employment.

In the face of our concerns about long-run consequences, some might immediately appeal to Keynes, who trivialized prudence and restraint, saying “In the long run, we are all dead.” But we are not talking about decades. The insults to the U.S. economy, to U.S. labor force participation, and to the long-term unemployed are the largely predictable result of policies that have been pursued in the past decade alone.

On the fiscal policy side, there are numerous initiatives that – when properly focused on productivity and labor force participation – could easily be self-financing for the economy in aggregate. Too much of our fiscal deficit has nothing to do with productivity or inducements that reward economic activity. Productive infrastructure (ideally projects that have large distributed effects, as opposed to notions like rural broadband), alternative energy, earned income tax credits, tying extended unemployment compensation to some sort of activity requirement (community, internship or otherwise), small business loans and tax credits tied to job creation and retention, investment and R&D credits, and other initiatives fall into this category. The objective is for the private markets to retain a vested interest and exposure to some amount of risk, so that losses and unproductive decisions remain costly, but also for fiscal initiatives to ease constraints that are binding on private decision-making.

On the monetary policy side, it’s simply time to change course to a far less "elastic," rules-based policy. With $2.5 trillion in excess reserves within the banking system, even one more dollar of quantitative easing is harmful because it perpetuates financial distortion and speculative activity while doing nothing to ease any constraint in the economy that is actually binding. Fortunately, it actually appears that the FOMC increasingly recognizes this, as attention has gradually focused on questions about policy effectiveness and financial risk, and away from the weak hope for positive effects. We will have to see how long this insight persists, but statements from FOMC officials increasingly reflect the intention to “wind down” QE, and emphasize the “high bar” that would be required to move away from that stance.

The cyclical risk for the U.S. equity market is already baked in the cake, and we view downside potential as substantial. The economy would allocate capital better, and to greater long-term benefit, if interest rates were at levels that rewarded savings and discouraged untethered growth in fiscal deficits. The economy would also allocate capital better if equity valuations were closer to historical norms (unfortunately about half of present levels given the extent of present distortions). While the capital markets are likely to undergo a great deal of adjustment in the coming years, we don’t anticipate systemic economic risks similar to the 2007-2009 period. We do observe a buildup of inventories in recent quarters that, combined with disruptions abroad, seem likely to contribute to economic weakness, but there are numerous episodes in history when stock market losses were not associated with steep economic losses.

The largest economic risks are particularly likely to emerge in Asia, where “big bazooka” central bank policies and speculative overinvestment have also produced large and persistent misallocation. China and Japan are of principal concern, though many smaller developing countries outside of Asia also appear at risk. Policy makers should certainly focus on areas where exposure to foreign obligations, equity leverage, and credit default swaps would produce sizeable disruptions. In any event, I believe it is urgent for investors to recognize the current position of the U.S. equity market in the context of a complete market cycle. As I noted in the face of similar conditions in 2007, my expectation is that any “put option” still provided by the Federal Reserve has a strike price that is way out-of-the-money.

via Zero Hedge http://ift.tt/OlLLnQ Tyler Durden

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via Zero Hedge http://ift.tt/1eIbugk williambanzai7

With US manufacturing jobs down almost 40% from their 1980s peak, proclaiming the last few years marginal increase a “manufacturing renaissance” is more statistical noise, smoke, and mirrors than fact. That is a problem for an administration (and entire genre of Keynesian dreamers) that rely on this sector to prove how effective they have been with stimulus (and not just pulling demand so colossally forward that the future is bleak). How to fix this apparent dilemma between policy talking points and factual data? Easy – as WSJ reports, change the definition of “manufacturing.”

 

Behold the Renaissance…

 

So how do we fix this uncomfortable truthiness to fit with talking points that everyone can understand is unquestionably bullish…

Via Wall Street Journal,

U.S. Agencies Consider Redefining Manufacturing

Should a company be called a manufacturer if it doesn’t make what it sells? The answer isn’t as obvious as it seems.

…

Some refer to companies like these as “factoryless goods producers”—firms that handle every part of making their products except the actual fabrication. As industries have gone global, this model has proliferated from furniture making to electronics: Think of Apple Inc. and its iPhones. Now, there is a move afoot among U.S. government agencies to count these companies as manufacturers, which is a surprisingly fraught issue.

The upshot would be an overnight increase in the apparent size of the U.S. industrial sector without adding a single assembly line. It would also change its geography, as places like Silicon Valley would suddenly look much more like a manufacturing hot spot. Backers of the change say this would give a truer picture of the nation’s productive capability, because these firms still do most other functions of manufacturing, from designing goods to overseeing their production and distribution.

…

But critics like Miles Free, director of industry research and technology at the Precision Machined Products Association, a trade group for small U.S. producers, say the change in wording would gloss over the erosion of domestic manufacturing. “We think it would be bad for policy makers to say, ‘Look at these numbers, we have great manufacturing,’ ” he said, when the production in many cases is actually taking place on the other side of the world.

…

“I’m not sure if this is a good idea or not,” says Andrew Bernard, one of the authors, “but if we don’t understand what’s going on, we might implement bad policy.”

Bad policy indeed… but who cares about that as long as the ruling elite have a talking point to sell to the people to show that more of the same will solve the world’s problems…

Of course, this “change” already has precedent with the unbelievable addition of goodwill and R&D into the GDP figures to boost their appearance…

via Zero Hedge http://ift.tt/1maHUrP Tyler Durden

 

SOROS PROJECTS LOUD AND CLEAR THAT GERMANY WILL BE WHIPPED INTO LINE

 

via Zero Hedge http://ift.tt/1grgJkh ilene

Sometimes a picture paints a thousand words… but on occasion, it takes three to get the full perspective…

How Russians see Putin…

 

 

How Americans see Obama…

 

How the rest of the world sees Obama…

 

Source: Jim Quinn’s Sunday Funnies (via Cagle)

via Zero Hedge http://ift.tt/1odwzFX Tyler Durden

Markets are showing increased signs of investor anxiety, warns BofA's Macneil Curry. The Friday breakout in the VIX Index says that this anxiety will likely persist into next week. Indeed, Curry adds, the VIX has based from its highest levels in over a year suggesting that investors are more susceptible to bad news and defensive behavior than at any time in the past 12 months. Several markets look particularly susceptible to this change in sentiment.

From an equity perspective, the Nikkei stands out. Its breakdown from 5 week Flag support says its medium term downtrend has resumed, targeting last summer’s range lows between 12,400/13,400.

In FX, the Japanese ¥ is particularly well placed to benefit. The bearish weekly reversal in $/¥ and close through 101.40 says it is resuming its medium term downtrend for 99.06 and eventually the 92/94 area. Finally, regardless of the larger outlook for risk assets stay bearish CNH.

Via BofAML's Macneil Curry,

Chart of the week: VIX BASE POINTS TO SENTIMENT SHIFT

The VIX broke sharply higher on Friday, completing a month long base/Double Bottom. This formation targets the 20 area and says that investor anxiety will persist in the week ahead. More troubling is that this base developed from above the 14m range lows at 12/13. It warns that sentiment is undergoing a regime shift to higher levels of uncertainty and that the range highs at 21/22 are vulnerable. BEWARE.

The Nikkei seems set to suffer

In an environment of heightened investor anxiety, the Nikkei is particularly vulnerable. The breakdown through 5wk Bear Flag support (14,657) says its medium term bear trend has resumed. Target the Summer’13 lows of 13,388/12,415 before renewed basing.

$/¥ resumes its downtrend

The bearish weekly reversal and close below 101.40 says that $/¥ has resumed its medium term downtrend. The initial target is 99.06 (measured move), but eventually we target 93.79/92.57 (Jun & Apr’13 lows) before greater signs of basing emerge.

$/CNH is in a long term uptrend.

Regardless of the risk environment, evidence says that one most stay bullish $/CNH. The impulsive gains from the Jan-14 low and break of 20m trendline resistance says the long term trend has turned. While momentum warns of a near term pullback, CNH strength should not exceed the pivotal 200d (now 6.0945). Bigger picture, we target 6.2692/6.2510 and potentially beyond.

via Zero Hedge http://ift.tt/1marm2W Tyler Durden

With a voter turnout (79.09%) that exceeded every US Presidential election since 1900, the people of Crimea have spoken:

• *CRIMEA JOINING RUSSIA BACKED BY 93% OF VOTERS: EXIT POLL

Ukraine’s leaders have called up 20,000 men for a newly-created National Guard as despite the so-called “truce” Russian APCs and Tanks are rolling. Pro-Russian supporters are burning books in Donetsk after storming anti-Russian buildings.

• Exit poll by Crimea-based Republican Institute for Political and Sociological Studies released by Kryminform news service.
• 93% of voters back joining Russia: exit poll

 

Exit poll: ????? 93% ??????? ????? ????????????? ?? ????????????? ? ??

— ??? ??????? (@riabreakingnews) March 16, 2014

 

 

Despite the so-called truce, Russian APC and Tanks are moving…

 

Pro-Russian supporters are burning books in Donetsk

 

Now it’s up to Putin…

via Zero Hedge http://ift.tt/1fNHF2d Tyler Durden

Crimean Deputy Prime Minister Rustam Temirgaliev has told RIANovosti that the region will abandon Ukraine’s Hyrvnia:

• *CRIMEA TO SWITCH TO RUSSIAN RUBLE APRIL 1: RIA NOVOSTI

This is not a total surprise as Reuters reported the Crimean Deputy PM stating “we are ready to introduce a ruble zone,” a week ago.

 

For the last few years the UAH/RUB exchange rate has oscillated around 38 in an ‘almost’ peg anyway…

 

But this move would isolate Crimeans from the potentially large devaluation that capital flows would create should a default occur (which looks increasingly likely)

 

From Reuters last week:

The Ukrainian region of Crimea could adopt the Russian ruble as its currency and “nationalize” state property as part of plans to join the Russian Federation, a regional official was quoted as saying on Thursday.

 

Interfax news agency cited Rustam Temurgaliyev, Crimea’s vice premier, as saying: “All Ukrainian state enterprises will be nationalized and become the property of the Crimean autonomy.”

 

Hoping Moscow would let Crimea become part of Russia, he said: “We are ready to introduce the ruble zone.”

Of course, this may lead to the emergence of an even more broad ‘black market’ for dollars or rubles in Ukraine as we are sure the Ukraine government would fight back with capital controls of some sort.

via Zero Hedge http://ift.tt/PG09YW Tyler Durden

Weekend developments will dominate the first part of the week ahead. Two developments stand out.

 

First, China announced a doubling of the permissible band from 1.0% to 2.0% around the daily fix. There had been some speculation that Chinese officials were moving in this direction. PBOC officials indicated that this was their intention some time this year.  Although past moves to widen the band (May 2007 and April 2012) were not preceded by an increase in volatility, some observers did see the doubling of volatility (3-month implied volatility) to about 2.5% in the past month as a signal of the move.

 

The PBOC deliberately and preemptively facilitated the narrowing of onshore and offshore yuan interest rates to avoid a new influx of capital that might have been spurred by the widening of the trading band. The increased volatility and the small depreciation of the yuan over the past several weeks likely had a different motivation. It was arguably more about the one-way bet that was drawing excessive speculative and leveraged attention as well as presenting moral hazard issues.

 

Major currencies rarely move by 2% in a single day. Yet, China’s announcement does not mean that the yuan is for all practical purposes floating. The PBOC still will play a critical role. The yuan had rarely explored the full 1% band.

 

We note that the 3-month implied volatility averaged a little more than 3% from the time the band was widened from the time the band was widened from 0.3% to 0.5% (June 2007 through March 2012). It has been nearly halved (averaging about 1.65%) since the band was widened to 1.0% (May 2012 through February 2014).

 

That said; the widening of the band should be understood within the broad financial reform commitment outlined by last year’s Third Plenary session. These reforms will likely include acceptance of more defaults and business failures as the ubiquitous moral hazards are addressed.

 

There are two elements to watch to monitor the effectiveness of China’s efforts. Many of the structured speculative vehicles that embody the moral hazard are thought to be particular sensitive to yuan weakness that extends to the CNY6.35 against the dollar. It finished last week near CNY6.15 where the pressure on those structured positions just begins in earnest, according to reports. Is the PBOC willing to continue this path?

 

In addition, a measure of the extent that China is willing to let market forces play a greater role is the extent of its reserve accumulation. China’s currency reserves rose by more than $325 bln in the H2 13. They had grown by $185 bln in H1 13. Does China’s reserve growth slow dramatically?

 

The second development over the weekend was the Crimean referendum. The precise outcome is not known at this hour but in some way they do not matter. The key was always what happens next.  The US and Europe will announce sanctions and, likely, a framework for their escalation.

 

Russian forces reportedly made an incursion into east Ukraine and seized a natural gas terminal. Some argue that because of clear reluctance of the US and Europe to show a more forceful response to the grabbing of Crimea, Putin is now going to press on into the eastern part of Ukraine.

 

However, the immediate evidence suggests otherwise, and this seizure was meant to secure Russia’s position in Crimea and prevent Ukraine from trying to isolate Crimea in terms of cutting off its energy supply. In addition, it appears that the foreign ministers of Ukraine and Russia reached some tentative agreement that involves constitutional changes in Kiev. The details are not clear, but it may involve accepting a fait accompli Crimea. There also seems to be an agreement that prevents Russian forces more directly confronting the Ukrainian forces trapped in Crimea for a week or so, ostensibly allowing some space of diplomacy.

 

The week’s main economic event is the Federal Reserve meeting, the first that Yellen will chair. There are four components that do not seem particularly controversial.

 

First, is the FOMC statement. It is likely to recognize that weather and other temporary factors slowed the economy. Growth is expected to pick up in the coming months and quarters.

 

Second, the Fed will announce another $10 bln reduction in its asset purchases. Many officials have acknowledged that the bar to altering the path that Bernanke put it on is high.

 

Third, the FOMC will provide new economic forecasts. It is likely to pare slightly this year’s GDP forecast of 2.8-3.2%, which would simply recognize weaker Q1 activity, without changing its medium term view. The unemployment forecast may also be tweaked lower. We would not expect the core PCE forecasts to change.

 

Fourth, and this is what most of the focus will be on, is the adjustment to forward guidance that has been hinted by several officials and required, as the 6.5% unemployment threshold has been approached. There is general agreement that the numerical threshold approach will be morphed into a qualitative approach.

 

This more qualitative approach means looking at a wider range of economic indicators. We suspect that this will be the main subject of Yellen’s press conference after the FOMC meeting concludes.

 

The key is that the forward guidance is strategy to reassure households, businesses and investors that interest rates will not go up for some time, even as the Fed slows its asset purchases. The shift from the threshold approach to the qualitative approach will be presented in such a way to reaffirm this. The measure of Yellens’ success will be if expectations of the first rate hike remains late Q3 15 or Q4, depending on the instrument and interpolation.

 

In the UK, the employment report and budget are the highlights. The market expects another 25k drop in the claimant count, which is about average over the past 12 months (-27k). The unemployment rate is expected to hold steady at 7.2%, just above the BOE’s 7.0% threshold, for which it too has moved to a more qualitative stance approach. Earnings may tick up.

 

The Chancellor of the Exchequer Osborne will present the new budget at midweek. Upward revisions to growth forecasts could point to a smaller deficit and better debt trajectory. However, there is some thought that this budget will help shape the economy ahead of next year’s election, that some of the potential fiscal improvement will be used to increase some targeted spending, such as the Help-to-Buy program that assists in the purchase of houses.

 

On Monday, the euro area will finalize its estimate of February’s CPI. Initially, it was estimated at 0.8%. Owing to new data and the effect of rounding, the original estimate may be shaved to 0.7%. This, coupled with Draghi’s (and other ECB officials’) comments last week, will renew speculation that the ECB, which did not move a couple of weeks ago, will take further accommodative steps at the meeting in early April.

 

Japan is likely to report a marked improvement in its February trade balance. The January trade shortfall was JPY2.79 trillion. It was likely distorted by seasonal factors and the lunar new year. The consensus for the February deficit is near JPY602 bln. This probably understates the real size of the Japanese monthly trade deficit. The 12-month average is near JPY820 bln. At the same time, a seasonal improvement in investment income suggests a trade deficit this size may not fuel a current account deficit. The streak of four consecutive monthly current account deficits may come to an end when the February balance is reported in early April.

 

Canada reports January retail sales and February CPI at the end of the week. Retail sales are expected to rebound from the -1.8% slide in December. The consensus expects a 0.7% increase. However, the focus will be on the CPI as that is what the Bank of Canada officials have been emphasizing in recent months. Headline CPI is expected to have slowed to 1.0% from 1.5%, and the more (policy) important core measure is expected to slow to 1.1% from 1.4%. Even though the Bank of Canada is still not prepared to cut interest rates in response, the Canadian dollar may suffer.

 

Lastly, we note that Australia’s governing Liberal Party won the state election in Tasmania over the weekend. The contest in South Australia was not yet clear at the time of this note. Regardless of the outcome, Prime Minister Abbott is likely to embrace the results, which gives his party control of all but one state, as a referendum on his policies. In particular, the push for privatization of state infrastructure projects will likely intensify.

via Zero Hedge http://ift.tt/1gqQWZA Marc To Market