fxmatters

Articles from various sources of background relevance to forex markets, listed by month of publication:

Apr-10

* Earnings of S&P500 companies are running ahead of expectations up to 17-Apr but the 1-day price reaction is on average negative, suggesting a ‘buy-the-rumour, sell-the-fact’ mood Seeking Alpha

Mar-10

* Earnings of S&P500 companies are expected to increase quickly in 2010 and 2011 (S&P estimate operating earnings per share to rise from $51.15 in 2009 to $72.20 in 2011) but these gains are not out of line with history, while the prospective PE ratios of 12-15 are still modest investorguide and zacks

* Higher implied S&P500 volatility in May/June according to VIX dailyreckoning

* German constitution limits potential bail-out of Greece Telegraph

* 37 US bank failures this year, on top of 140 in 2009 yahoo

Feb-10

* Estimation of bi-lateral PPP exchange rates, working from effective exchange rates – puts NZD/USD at 60c and NZD/AUD at 80c as at Jan-10 p10 of DanskeBank Weekly Focus

* The current Australian mining boom could last, based on previous experiences, another 10 years but (hopefully) the typical inflationary impact will be dampened by a firm AUD this time RBA

Nov-09

* Value assessment suggests US share market declines sharply within next few months Jeremy Grantham

* Chinese banks under some pressure to temper loan growth and raise equity NYTimes

* S&P500 earnings surprise ratio at high but this may create expectations that are difficult to beat HussmanFunds

* Reasons for/against a stronger Chinese yuan Economist

* US Fed keeping close watch on banks’ models, exposure and capital Bloomberg

* St. Louis Federal Reserve Bank President James Bullard suggests that Fed quantitative tightening will come first, that interest rates will be raised earlier than the recent 1.5-3 year lag and that Fed policy will not respond to any perceived Asian asset bubble.

* US mortgages face a second reset wave going into 2010 HussmanFunds

* IMF recommend “allowing the Chinese currency, the yuan or renminbi, to strengthen” in a recent visit to China. IMF

Oct-09

* Themes from the World Business Forum SteveTodd

* US S&P earnings continue to be revised (net) upward Bespoke

* Spanish unemployment may reach 25% – unemployment benefit drops to 420 EUR/month after 18 months from 50-60% of previous wage Telegraph

* Irish to vote on ratification of EU’s Lisbon Treaty MarketWatch

Sep-09

* The Case for Water Equity Investing 2010

* G20 Leaders’ Pittsburgh Statement, and comments Australian | Reuters | Bloomberg

* US Fed buys almost 50% of net Treasury issuance in the June quarter ZeroHedge

* Based on Aug 28’s close of 1029, the S&P 500 was priced at an implied sales growth of 5% for the next 5 years – an optimistic projection Value Expectations

* The case for having reached a temporary peak within a bear US share market, as also implied by Prechter’s Elliott Wave interpretation, although other technical analysis points to an even more sensitive point for the S&P 500 around 1125.

* Selling to book losses for tax purposes ahead of a Sep/Oct end of year by mutual funds is one reason offered for September having a record of S&P 500 declines (mutual funds used to hold around 75% of US equities, probably less today given the growth of hedge funds).

Aug-09

* Cash for clunker deals in the US ($4500 voucher for old car).

* Bill Luby reviews the current situation with US Treasury debt, and provides an introduction to US Treasury auctions. Chris Martenson points to a system whereby foreign central banks can effectively swap Agency debt for Treasury debt (and in the process fund net new debt with new money).

* A composite graph formed from 19 bear markets, courtesy of Morgan Stanley

* Chinese holdings of US debt rising rapidly SeekingAlpha

* The recent US recession starting 2007Q4 plotted against those that started 1973Q4, 1980Q1, 1981Q3, 1990Q3 and 2001Q1 – longer but not necessarily deeper Barrons

* The recovery has started. Sustaining it will require delicate rebalancing acts, both within and across countries IMF

* As well as June quarter growth in Germany and France there is Hong Kong, Japan and Singapore (20% saar!) but not Russia (-11% saar) and Latvia TheEconomist

Jul-09

* US Baby-boomers crimp spending BusinessWeek

* Oil fundamentals appear at odds with strong oil price … market regulators to investigate MarketWatch

* Global policy exit strategy likely to be globally coordinated and slow, according to Morgan Stanley, hence raising the risk of inflation over the medium-term.

* The Economist puts the implied Big Mac PPP for NZD/USD at 73c, implying the NZD/USD is 12% under-valued. More traditional estimates of the PPP would be closer to the current exchange rate. The Big Mac PPP for the EUR/USD is $1.09, implying the EUR is over-valued. More traditional PPP estimates e.g. Morgan Stanley at $1.18, also imply the USD is under-valued against the EUR.

* China is investing into Canada but the Australian-China relationship has been soured by the Rio Tinto rejection of Chinalco’s offer to buy US$19.5b in favour of a rights issue to all shareholders, and the subsequent Chinese arrest of Rio Tinto staff for bribery (Bloomberg overview). Another reminder that things are different in China was the recent Xinjiang riots.

* CBA estimate China GDP up 2.9% in the JunQ, up from 2.4% in MarQ and a mere 0.8% in DecQ … puts annual growth rate at 7.9%, above expectations. Goldman Sachs estimate the JunQ jump to have been even faster.

* Dr Bollard sees “prudential policy potentially playing a greater role in the future” RBNZ

* Only 13% of US fiscal stimulus package has been dispensed so far Bloomberg

* Chinese officials are mulling two ways out of the “dollar trap”: persuading the world to adopt a new global currency and encouraging the international use of the yuan Economist

Jun-09

* USD liquidity is still tight, suggestive of a stronger USD ahead according to hedge fund FX Concepts Reuters

* No time for exit strategy yet MarketWatch

* Australian non-residential construction forecast to be down 16% in 2009/10 CFC

* Bottom-up estimates of S&P500 2010 operating earnings per share ($74) are well above top-down forecasts ($47), and both continue to exceed the expected actual eps ($38) that will include ‘one-off’ expenses Commstock and S&P spreadsheets

* “The last part of the rally in a lot of risk assets [including the S&P500]… was exaggerated” according to PIMCO Reuters

* Currency funds returned an average 0.6% in May according to the Parker survey of 58 funds (assets US$29 billion) … although YTD returns remain modest (discretionary funds) or negative (systems funds) Bloomberg

* The global investment and inventory cutback appears to be passing to a stage where output growth will be more closely matched to demand growth … but demand growth will likely be subdued given the extreme financial shock RBA

* But with global inventories now reported to be low, there is the potential for a strong production rebound even in the face of only moderate new demand Danske

May-09

* There are problems with other currency alternatives to the USD such as the EUR and SDR Forbes

* Current policy-induced liquidity cycle has “no early end in sight” according to Morgan Stanley

* S&P confirm its AA+ credit rating for NZ sovereign foreign-currency long-term debt and remove the “negative” outlook following Budget 2009 NZH

* US S&P500 June quarter EPS expected to be 34.7% below JunQ 2008 seekingalpha … quarterly historical earnings-by-sector table

* Moody’s 18-May Japanese downgrade from Aaa to Aa2 (where public debt will approach 200% of GDP next year) and Standard and Poor’s subsequent outlook change for their UK credit rating have brought conversation about an eventual US credit rating downgrade to the fore, in turn pressuring the USD Bloomberg

* Standard and Poor’s lowered its medium-term outlook on the AAA rating for the UK’s sovereign debt to “negative” from “stable” for the first time since the credit ratings agency started analysing the country’s public finances in 1978 and since outlooks were introduced in the 1980s … debt to approach 100% of GDP Reuters

* Australian 2009/10 underlying budget deficit projected to be A$58b or 4.9% of GDP … including A$30b impact of spending decisions since Oct and A$31b worsening due to economy … debt to rise to 14% of GDP by 2013 Australian

* Of 461 of S&P500 companies March quarter reports at 15-May, earnings down 35.6% on March 2008 quarter but 65% have reported above expectations MarketWatch

* March quarter Eurozone GDP -2.5%, worse than had been thought … Germany (with less exports) -3.8%, and almost -7% since start of recession, is faring even worse than Spain (with less construction) although both pale beside car-making Slovakia -11.2% Economist

* Global leading indicators continued to improve in April … synchronous recovery with improvement in leading indicators in all regions … lean inventories in combination with demand being lifted by substantial stimulus paves the way for increases in production … and upside risk to Q3 global growth DanskeBank

* US-originated financial system losses to reach US$2.7 trillion or 9% of total assets, of which US$0.8 trillion written off in 2007 and 2008 … Morgan Stanley warn that “the adverse feedback loop is not dead, and that investors should mind the risks” … losses of this magnitude can be expected to reduce GDP by 2% p.a. over 2008, 2009 and 2010 MorganStanley

* ECB to buy an expected EUR60 billion covered bonds as “enhanced credit support” (not quantitative easing) … covered bonds are backed by property or public-sector loans AND a pledge to pay (unlike mortgage-backed securities) … almost 75% of European company finance from banks SMH

* BOE to buy STG50 billion more assets as quantitative easing SMH

* TD Securities puts the USD 10% to 13% overvalued relative to several major foreign currencies, including the CAD Canwest

* UK house price has crashed by more than 25% in real terms … Japanese nominal house price still 60% below 1991 peak MarketOracle

* The Fed, BOC and Swedish Riksbank – and also RBNZ – commitment to keep the policy rate low is likely to be one help to dampening the rise in fixed rates when it comes time to unwind recent easing (traditional and quantitative) MorganStanley

Apr-09

* RBA Governor Stevens talks of recession “on average about once every seven or eight years, but not regularly enough to predict with accuracy” RBA

* IMF to issue $250 billion new SDRs Economist

Mar-09

* 2009 S&P500 earnings (EPS) forcasts around $40-45 … implies S&P500 low of around 600 using PE of 12-13 … Lewitt suggests single-digit PE appropriate … 2010 S&P500 earnings (EPS) forcasts around $55-65 MarketOracle