Global View December 2015: Summarising the 2016 Picture - Weak Liquidity, Worsening Credit Outlook, Further Currency Wars and More Deflation

by Michael J. Howell23. December 2015 14:19

US private sector and Chinese PBoC liquidity plus cross-border flows to EM are critical factors.


Global View December 2015: Was the Fed's New Monetary Policy A Success?

by Michael J. Howell18. December 2015 15:03

To the extent that the Fed raised rates smoothly by 25bp without any serious dislocations, apart from a small jump in the US dollar and a further widening in credit spreads, the answer is yes. However, set into a wider context of credit market control, the truth is that it will take weeks or months to fully understand. But the real story, for us, is that the US markets are tightening faster than the Fed! A flatter US Treasury curve may be the logical result.


Emerging Markets Latest GLI, December 2015

by Michael J. Howell16. December 2015 08:11

Latest Emerging Market Liquidity readings confirm another set of poor numbers for end-November 2015. The Emerging Market component of our broader GLI™ series (Global Liquidity Index) remains soft at a sub-par index level of 34.2 (‘normalised’ range 0-100).


Global View December 2015: China's 'New' New Exchange Rate Regime

by Michael J. Howell14. December 2015 14:05

The PBoC [China’s People's Bank] has just announced a new exchange rate index. The Market is jumping to the conclusion they will target this. The exchange rate basket comprises approximately one-third US$ and related currencies; 27% European units; 14% commodity-related currencies and 27% other Asian units.


Global Liquidity Latest, December 2015

by Michael J. Howell11. December 2015 18:11

The November 2015 GLI™ (Global Liquidity Index) fell back to a reading of 44.5 (‘normal’ range 0-100) from a revised up 47.6 index for end-October. The GLI™ has been consistently below the neutral 50-index level since December 2014. GLI™ readings of between 40-50 indicate ‘tight liquidity’ and sluggish growth, but values below 30 are typically associated with economic recessions and bear markets in risk assets. The Global Liquidity picture is not supportive for risk assets and warns investors to remain wary


Global View December 2015: Emerging Markets in 2016…Yes But No

by Michael J. Howell2. December 2015 18:40

After more than five years of underperformance, it must be Buggin’s turn for Emerging Markets to excel in 2016? We agree that the positives are slowly coming together, but based on liquidity data we may still be a few months away from returning to EM assets. One reliable indicator is the excess of EM over DM liquidity and this is still in negative territory. Another is the risk positioning of investors in EM assets: despite the large sell-off over the past 12 months, it would appear from the data that investors’ risk appetite still looks high, on average.


Global Liquidity Conditions (Risk) Emerging Markets, November 2015

by Michael J. Howell30. November 2015 15:57

Asian markets head the risk rankings 

The October bounce in equity markets and associated jump in the Exposure Risk Index to 38.0 were more than offset by the pick-up in liquidity. Financing Risk fell to 70.7: better than the year’s high of 79.4 recorded in September but still too high. Asia is the problem.


Global View November 2015: How Will The 'New' Fed Tighten?

by Michael J. Howell30. November 2015 15:54

It is virtually certain that US interest rates will rise by 25bp in December 2015, but the World has changed hugely since the US Federal Reserve last hiked. The wholesale markets and the market in off-shore US dollar borrowings are much more important than they were in 2008. We ask in this report what the Fed will likely do to in order to enforce higher rates and what are the risks?


Global View November 2015: A Maverick View of Bond Markets in 2016

by Michael J. Howell27. November 2015 16:01

The World is coming down against bonds. Unfairly. It is not that bad. Bond markets are driven by three things – short-term rate expectations, medium-term inflation risks and movements in the real term premium. Most investors are currently worried by the first factor (rising short-term rates) and some are becoming exercised by the second (rising inflation risks). Consequently, many pundits are calling for the end of the long bond bull market. But this call may be premature because it ignores the third factor (real term premia) which lately has been the most important for bond performance. Liquidity, in turn, is overwhelmingly the major influence driving these bond risk premia and determining curve reshaping.


Global Liquidity Conditions (Liquidity) Emerging Markets, November 2015

by Michael J. Howell25. November 2015 14:39

The October 2015 Emerging Market sub-component (EMLI™) of our GLI™ (Global Liquidity Index) rose to a reading of 27.7 (‘normal’ range 0-100) from an index of 19.6 for end-September. The GLI™ measures the growth of credit and cash savings relative to trend and it currently tells us that the pace of these leading money flows into EM risk asset markets is sub-par.


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