Get Markets Right

Nikkei 225 (10.0889) Dax (5.250) FTSE 100 (4.571) Dow Jones (9.104) S&P 500 (980)

After hitting a bottom at 82,2 in March the German IFO index has gone steadily up since to reach 87,3 at the latest reading in July. Are the people at the German companies cheered by the investor optimism or are things simply improving ? Honestly, I also feel at bit more comfortable and would rate the world less bad than for six months ago. The people I speak with at different companies have the same feeling, but in Germany are companies also getting a few more orders than in March / April. As mentioned in the China article, some selected Japanese and German companies will benefit…

23rd July China’s President Hu Jintao confirmed that the Communist Party wants to keep using the proactive fiscal policy and push domestic demand. The whole world regards more Chinese demand as the rescue for all of us, so it’s certainly worth to watch his comments.
President Hu claims that the jump in the yearly GDP growth from 6,1% in Q1 this year to 7,9% in the second quarter is caused by the Chinese stimulus package. He is actually right, because fixed-asset investments jumped a stunningly 33,5% – the main reason behind the higher GDP reading in the second quarter.

What should the investor use of Hu’s speech ?
Like any other country with a stimulus plan the aim is to maximise…

EUR/USD (1,4240)
My target remains 1,4500, where a clear break of 1,4250 is a crucial step towards the target. Still it’s no new trend, but more that it feels more natural to trade within the range 1,40 – 1,45. One good argument for a higher EUR/USD is that the market is not prepared for a surge.
Like during several months do we need to watch the equity market to explain the currency moves. But as mentioned last time, I argue that fundamental economic data is growing in importance when it comes to the greenback. The market is talking about global economic improvement, but so far it is just expectations. When it comes to real data it’s hard to see any true…

Nikkei 225 (9.648) Dax (4.644) FTSE 100 (3.989) Dow Jones (8.325) S&P 500 (898)

I agree with the upbeat market participants, that unemployment is the last number to peak, and also are different expectation indices showing clear improvements. But does it justify the V shape recovery that is priced in the equity market right now? I apologise, it would be most pleasant to say buy! Reality is as usual tougher.

Demand, unemployment and production capacity

Let’s start with the good one first. Demand is there, but it has changed. No secret that in the so-called rich countries demand has changed from “nice to have” to “need to have”. This has created the consumption drop together with a consumption stop due to…

China – The domestic credit dragon.
Hang Seng (17.979)  Shanghai B (199,00)  USD/CNY (6,8315)

I have spend some time researching the rising Chinese commodity import as it has been discussed during the last 2 months. Naturally very interesting in respect of the commodity prices, but the conclusions affect all asset classes in China, including equities.
Many have heard that imports of physical commodities are so huge that they can’t be transported away from the ports. Some of the stories are true, but as always regarding China, we will never find the final answer. Based on different information sources, then around 1/3 of all commodities imported to China are bought and kept for speculative reasons.
The speculative commodity buying continues.

The higher…

EUR/USD (1,4000): Last I argued for a move to 1,4500 followed by a retreat towards 1,4000. The high was around 1,4325 and not 1,4500 but afterwards sold off to reach 1,4000. The trading pattern suggests that the air above 1,4250 is thin, but I feel, and will still argue, that the momentum points towards 1,4500.

EUR/USD still very much tracks the equity market but equities have lost upside momentum and EUR/USD hasn’t. It points towards less correlation between equities and EUR/USD for the coming period.

The growing risk appetite in Far East creates EUR inflow and should be observed, so keep a close eye on EUR/JPY and investor news from Japan.

I expect fundamentals to gain importance in the currency market,…