14 Oct 2013
Flash: Four stories making the headlines over the weekend - Societe Generale
FXstreet.com (Barcelona) - On its weekly note to clients, Kit Juckes, Head of FX at Societe Generale, writes a recap of the stories making the headlines over the weekend, with especially four stories in the weekend press catching his attention.
Key Quotes
"First up were the Chinese trade data, with weak exports and resilient imports. Wei describes China's underlying trend in external demand as fairly lacklustre, while the temptation is certainly to see resilient imports as temporary, along with the revival in credit growth."
The second story was the NY Times piece on UK housing, basically talking about an exodus of Brits as London property becomes a global reserve currency. The significance is not in the story (a bit flaky in some of the detail) as much as in the fact that the London property revival is getting attention further and further away. This is going to be a factor resulting in UK rates rising before US and Euro Area ones, and in the pound, after the current period of calm, appreciating further."
"The third story is in the FT this evening, noting that Europe's financial institutions are more exposed to their domestic government bonds than at any time since the Eurozone crisis started. 'Consanguinity' is the lovely term we use for this, and since Jens Weidmann took the trouble to write an FT op-ed two weeks warning about how dangerous it is, I suspect he's not too pleased by this news."
"And the last story, of course, is the only one that matters. A week ago I wrote that the markets were being complacent in their assumption that a debt ceiling increase would be reached in time. By mid-week nerves were rayed. By Thursday the equity market was in full rally as the two sides appeared on the verge of agreeing a temporary debt ceiling increase. And this evening, negotiations are stalled."
Key Quotes
"First up were the Chinese trade data, with weak exports and resilient imports. Wei describes China's underlying trend in external demand as fairly lacklustre, while the temptation is certainly to see resilient imports as temporary, along with the revival in credit growth."
The second story was the NY Times piece on UK housing, basically talking about an exodus of Brits as London property becomes a global reserve currency. The significance is not in the story (a bit flaky in some of the detail) as much as in the fact that the London property revival is getting attention further and further away. This is going to be a factor resulting in UK rates rising before US and Euro Area ones, and in the pound, after the current period of calm, appreciating further."
"The third story is in the FT this evening, noting that Europe's financial institutions are more exposed to their domestic government bonds than at any time since the Eurozone crisis started. 'Consanguinity' is the lovely term we use for this, and since Jens Weidmann took the trouble to write an FT op-ed two weeks warning about how dangerous it is, I suspect he's not too pleased by this news."
"And the last story, of course, is the only one that matters. A week ago I wrote that the markets were being complacent in their assumption that a debt ceiling increase would be reached in time. By mid-week nerves were rayed. By Thursday the equity market was in full rally as the two sides appeared on the verge of agreeing a temporary debt ceiling increase. And this evening, negotiations are stalled."