Today let’s start with the US where job openings rose above 5 million, the highest since January 2001.
With labor markets continuing to improve, some Fed officials are talking rate hikes again – in spite of falling inflation and the risks associated with a much stronger dollar.
This type of talk makes bond markets nervous – pushing the 10-year treasury yield back above 2%. The fed funds futures market still points to September as the most likely time for the first hike.
This quickly spilled over into emerging markets as some of the vulnerable currencies got hammered. “Taper tantrum” version 2 could get just as ugly.:
1. The Turkish lira is trading near record lows.
2. The Brazilian real – multi-year lows.
3. The Nigerian naira now trades at 200 per dollar – also a record low.
The standoff with Greece continues (more on this later). The euro implied volatility index (the CBOE EuroCurrency Volatility Index) remains elevated as a result.
Driven by weak demand and falling prices for industrial commodities such as iron ore, the cost of shipping continues to decline. The Baltic Dry index just hit a new low.
Here is the April-2015 iron ore futures contract (based on price index in China).
Speaking of China, local government debt continues to rise – now some 31.5% of the GDP. Given the declines in revenues from land sales for municipalities, this could quickly become Beijing’s problem. Municipal bailouts on the way?
Moreover, China’s overall debt as percent of GDP is at record levels and growing. This is why the PBoC is loathe to aggressively ease monetary conditions in spite of high real rates and slowing growth.
Switzerland is feeling the impact of stronger currency as the import price index falls by 3.6% in January. The nation’s CPI is now negative 0.5% with deflation setting in.
– It’s a big day forEurope The leaders of Germany, France, Ukraine and Russia meet to try and hammer out a peace agreementwhile eurozone finance ministers gather in hopes of hatching a new deal for Greece. (Bloomberg)Barack Obama warned Vladimir Putin last night that he must negotiate a diplomatic resolution to the conflict in Ukraine or risk the consequences. He had confirmed on Monday that he was considering supplying lethal weapons to Ukraine.(FT)
If you’re trying to keep track of what’s going on in Greece and wondering how it got to this stage, the Peterson Institute for International Economics explains the Greek tragedy in six charts. (PIIE video)
– Tesla Elon Musk presents fourth-quarter earnings and is reportedly preparing to fire overseas executives after weak sales of its electric cars in China. Tesla’s growth there has been tepid – it has exported around 3,500 cars to China,missing its goal for 5,000 or 30 per cent of its global target. (Reuters, NYT$)
– The former head of the International Monetary Fund said he rarely attended sex parties because he was “saving the world”. (FT) 😀
– Chinese hackers attack blue-chip groups via Forbes website – FT.com
– Greece’s ‘Bridge’ to Nowhere? – Real Time Brussels – WSJ
– Crude drop sours Nigeria’s credit rating – S&P
– Australian consumer confidence at highest in a year
– Aussie home lending continues apace in December
– European stocks reverse course on Greece hopes
– US stocks bounce on hopes for Greek deal
– Dovish BoC official sends Loonie lower
– Oil drop quickens on production gloom
– Greek optimism propels US stocks
– Markets underwhelm as Aussie miners fall (Business conditions remain weak and the likelihood of further rate cuts is growing, as inflation and growth fall and unemployment starts to rise.)
– Greek bank shares sink ahead of bailout showdown
– Small Businesses Are Still Confident—and Hiring
– News Coverage of Global Economy Turns Negative (My comment – Interesting Index)
– Job Openings at 14-Year High as Hiring Returns to Pre-Recession Levels
– As The Rupee Stands Tall, India Fears Losing the Devaluation Game