The Daily Shot - 9/9/14

From: "The Daily Shot" <thedailyshotletter@xxxxxxxxx>
To: <thedailyshot@xxxxxxxxxxxxx>
Date: Wed, 10 Sep 2014 01:29:43 -0400
Greetings,

 

China's property developers are looking for suckers and finding them in
droves among offshore lenders.

 

FT: - Offshore bond issuance from mainland property companies is on track
for a record year, with $18bn of debt sold year to date, according to
Dealogic - fast approaching the $19.5bn total for all of 2013. The year's
biggest deal came in July, when Sino-Ocean Land borrowed $1.2bn in the
dollar bond market.

 

The rise in offshore borrowing has coincided with tighter credit conditions
within China that have forced developers to look overseas for funding.

 

Not sure how you reconcile all this lending with rapidly falling demand for
construction-linked commodities.  Unless rebar is all of a sudden being
replaced by bamboo, someone is being taken for a ride. 

 

Jan-15 Steel Rebar futures in Shanghai:



Source: barchart

  _____  

 

Related to the situation above, the combination of rate hike fears in the US
and collapsing iron ore prices in China is putting pressure on the
Australian dollar:

 



  _____  

 

Today the yen hit the lowest level since 2008.  

 



 

 

And this trend is unlikely to reverse any time soon. Japan's CGPI (the PPI
equivalent) missed estimates today and it may take further yen weakness to
keep inflation elevated (per BOJ's plan). 

 



Source: Investing.com

  _____  

 

Are we about to see another round of "taper tantrum" in emerging markets
based on looming rate increases from the Fed? Some of the more vulnerable
emerging markets currencies have weakened in the past couple of days,
including the Turkish lira and the South African rand.

 

Chart shows US dollar appreciating against the South African rand:



  _____  

 

In the Eurozone the game of "hot potato" with excess reserves is on. As the
deposit rate on excess reserves went negative, banks have been trying to
unload as much liquidity on each other in the interbank market as they can.
Interbank volume is on the rise.

 

EONIA ON is the "average" overnight interbank rate (similar to Fed Funds in
the US):



Source: @auaurelija

  _____  

 

In the UK the Scotland independence issue is heating up. The polls now show
that the gap between the Yes and the No camps is basically gone.

 



Source: FT

 

 

We also see a major age divide: older people want to stay in, young people
want out. Someone has been watching too much Braveheart .

 



  _____  

 

Back in the US, signs continue to point to gradually improving labor
markets:

 

1.      The official nonfarm hires number reached another post-recession
high.

 



 

2.      And the Gallup's Job Creation Index, a near-real-time indication of
hiring, continues to support the labor market improvement theses.



Source: Gallup

  _____  

 

On the commodities front, the strengthening US dollar and to some extent
weaker demand expectations from China and the Eurozone have been putting
downward pressure on commodities. The GCC continuous commodities index is
near the lows for the year.

 



Source: barchart

 

 

Energy and grains have been hit the hardest.

 

October Brent contract:



Source: barchart

 

 

December US corn contract:



Source: barchart

  _____  

 

Now some food for thought. Reuters asks "Which president created the most
jobs?"  Presidents create jobs? I thought businesses do that. Maybe this
should be more about which administrations best support domestic businesses?

 

 



Source: Reuters

 

 

  _____  

 

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The Daily Shot - 9/9/14

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