What a week of utter craziness! After last week's inexhaustible flurry, we thought we'd see some respite. But no, the events just ratcheted one notch higher; with volatility in the financial markets at year-to-date highs and global developments on geopolitical, financial and economic fronts, we can barely keep up the the trance that is raving. So rather than using narrative to summarize what has been a very busy week, we thought of using charts to highlight the key talking points of the past 7 days or so.
This edition of the Daily Grail will be the first ever to feature a compendium of graphics and charts but we might indeed start to adopt a similar format in future editions for time constraints. We have tried to broaden the subjects covered under each piece while ensure each note remains relevant to our readers.
Jitters Over China
We start off with the world's second largest economy. This past week saw some data coming out of China that either stirred the ire of investors or served to affirm preexisting fault lines in the raging dragon's economic and social construct.
Markets Loosing Faith In Japan & BoJ
The world is no stranger to Japan. Having fallen into its 4th technical recession in the last 5 years, and perhaps having the world's most aggressive and brazen central bank (possibly in the history of the developed world), the land of the setting sun continues to meet the markets' expectations... of further deterioration.
This week, the BoJ rattled the markets when it announced on Thursday that it felt additional asset purchases (on top of its already expanded LSAP program) would be counter productive at this juncture. The Yen saw significant strength in what was otherwise a muted week for the battered currency.
Madness in Europe
For lack of a better description, and the fact that we aren't David Attenborough commenting on a gazelle in the Saharan plains, it was plain old pandemonium in the European continent this week... and we suspect it will be for the coming few.
First of all there was the Ukraine vs. Russia game of chess; leaders agreed in Minsk on a truce effective midnight on Saturday, but last time we checked there was intense fighting in the regions where the ceasefire was supposed to bear down on. A couple more Ukrainian service personnel were killed this week, civilians in the eastern part of the country continue to suffer without electricity, water, and heating amidst the cold of winter. We should add that the previous truce (which was too signed in Minsk almost a year ago in early 2014) held for about 3 days before fighting rendered it moot. We totally see the same repeating; we're not going into the details here but we have our basis for that claim. Truce or no truce, the pro-Russian fighters will fight on.
Second of all, Greece continues to toy with not only the markets' heartstrings but also the patience of European leaders - those whose interest in the Eurosystem are held hostage. More importantly, the fussy beggar-nation is running against the clock either till it runs out of cash to fund its state operations, or until its current rescue package expires end February. Markets have sanguine for most of this week despite the impasse and unwillingness for compromise and seems to be pricing in an orderly resolution. We have no comment.
America, perhaps a little over-egged
Macro data has missed almost across the board in the US. We are adamant that current asset prices can continue trending upwards in a sustainable manner without some sort of external push, either from central banks of a positive surprise in macro data, and in a big way.
Around the World: Trade and other shenanigans
Trade is dying. How does this spell well for the global economy? Our inquiring minds are curious. Besides falling oil prices, deflation will seep in via cheaper commodity prices as we have warned perilously. Meanwhile, the Baltic Dry Index doesn't seem to be able to find a floor...