- Raft of central bank speakers in focus on another very quiet day
for statistics, Carney & Fischer top agenda; digesting Japan monthly
Tankan, Oz House Prices, awaiting API Oil inventories, MSCI review
- Fed: Dudley sends clear signal on rate outlook, focus on Fischer;
doves concerns on inflation outlook looks to be minority view
- Argentina 100 yr bond: no better example of desperate investment
decisions due to financial repression
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** EVENTS PREVIEW **
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Once again, the day's statistical schedule appears unlikely to prompt any market reaction, outside perhaps of a wider than expected South African Q1 Current Account. That said, any ZAR reaction would probably be modest in comparison to yesterday's sharp sell-off on the suggestion that the Zuma government may try to change the wording of SARB's constitutional obligation, which would be difficult given a 2/3 majority requirement, though the Finance Ministry can change the SARB's policy mandate simply via writing a letter to the SARB. Be that as it may, the paucity of major data leaves the focus on central bank speakers, with pride of place perhaps going to BoE's Carney and Fed's Fischer, even though the latter's topic is macro-prudential policy, and there will be no press at the DNB conference. It is an overall busy week for Fed speak, though Dudley's message yesterday was very clear, he emphasized “If we were not to withdraw accommodation, the risk would be that the economy would crash to a very, very low unemployment rate, and generate inflation. “Then the risk would be that we would have to slam on the brakes and the next stop would be a recession.” He also dismissed the idea that a flatter yield curve signalled heightened recession risk, and added that “I’m actually very confident that even though the expansion is relatively long in the tooth, we still have quite a long way to go. This is actually a pretty good place to be.” To be sure the likes of Kaplan appear to be veering to the Bullard, Evans view that still low inflation should temper the Fed's pace of policy tightening, but this still appears to be a minority viewpoint, and the majority appear to be particularly focussed on Financial Conditions Indices. It being Tuesday, this evening will also bring the first tranche of weekly oil inventory statistics, and the day also brings MSCI's 2017 Annual Market Classification, with the focus on China and to a lesser extent Argentina. Talking of Argentina, if ever there was an example of how financial repression has driven investors to ever more desperate investment decisions to try and generate higher returns, then it is Argentina issuing 100 yr foreign currency debt. As a matter of record, Argentina has defaulted on its foreign currency debt seven times since independence 200 years ago, and five times on local debt, its longest stretch without default was ca. 50 years.... as they say somewhere 'you do the math'!
from Marc Ostwald
