Trading with point and figure

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Will it bounce..?

 

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supp held

 

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Good Morning: The Long & the Short of it and The Bigger Picture - 12 March 2020 - ADM ISI

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Ostwald, Marc

08:46 (5 minutes ago)

to Marc

- Coronavirus spread and countermeasures still front and centre, ECB moves
into spotlight; data rather moot - UK RICS House Balance, Sweden CPI to
digest of India CPI/Production and US PPI & Initial jobless claims

- ECB: QE & bond purchase rules increase, targeted shorter-term LTRO,
easing bank capital buffers a la BoE all on the menu; BUT need to
learn lessons of post-GFC unconventional policy era

- Audio preview:
https://www.mixcloud.com/MOstwaldADM/adm-isi-morning-call-12-march-2020/

- Charts: US HY Energy Avg OAS spread vs USTs; VIX, V2X, MOVE & CVIX
volatility indices; USD FRA-OIS spread

..........................................................................

********************
** EVENTS PREVIEW **
********************

There remains no escaping the newsflow on the spread of the Coronavirus and its economic impact globally, and in that vein today belongs to the ECB and what sort of 'package' it can engineer to mitigate the impact, while also placing even greater emphasis than any other G-10 central bank on the need for govts to take fiscal action. The data schedule is once again a case of being 'for the historical record', and otherwise being nothing other than statistical roadkill. It is in any case far from onerous with the Swedish CPI perhaps most sensitive given the Riksbank's attempts to resist reversing its move back to zero rates. Other than that there are the RICS House Price Balance, Indian CPI and Industrial Production and US PPI and weekly jobless claims, and there are also rate decisions in Ukraine, where a further 100 bps rate cut is expected, while rates are seen on hold in Peru, and a busier day for govt bond sales sees auctions in Italy, Ireland and USA. In market terms, it is velocity and volatility which are the watch words (see attached charts), with the near vertical quantum leap in US HY Energy Credit spreads suggesting a wave of sector defaults is now pretty much unavoidable, the question is only how many?

** Eurozone - ECB council meeting **
- Following on from the UK's co-ordinated monetary and fiscal policy onslaught yesterday, the focus turns to the ECB, with not a small amount of irony that Madame Lagarde finds herself in charge of a monetary policy institution, just when the call is on fiscal to "step up to the proverbial plate". While there might be some looking for a symbolic rate cut, this would be so gratuitous as to be self-harming. The ECB has options, most obviously upping the pace of QE purchases to say EUR 40 to 50 Bln per month, even if this would inevitably bump up against purchasing limits on individual issues quite swiftly, notwithstanding the likelihood that Germany's net issuance will doubtless have to rise as it is dragged kicking and screaming towards running a budget deficit. A targeted shorter-term LTRO (say 1 to 2 years) is also an option, perhaps with a rate set marginally below the Depo Rate. Following the BoE in easing banks capital buffers should also be front and centre in whatever the ECB decides to do. However, the simple point here is one that applies more broadly to DM central bank policies post-GFC, above all the ECB, and that is the question of what we have learnt about 'trickle-down economics / monetary policy', whose only conduit is the banking system and credit markets.... basically it does not work, it merely blows bubbles in asset prices, and to the extent that there is any modest trickle down, it works very, very, very slowly. What is needed now to combat the economic threat presented by the Coronavirus are measures that are fast acting, and deliver relief to the most adversely affected sectors - those measures are in the provenance of governments via fiscal and other legislative actions. Indeed targeting monetary measures at those sectors whose lifelines are a case of maintaining high levels of short-term cash flows, and which are most vulnerable to even very short-term economic disruptions, and whose credit lines are expensive even in good times, is to be quite frank nothing less than feckless. This is not a case of MMT, but just a plain old fashioned common sense, which you do not need an economics degree or an MBA to understand. Mr Micawber will suffice: "Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery."

 

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yes sir

 

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Mornin folks 😄😄😄😍😍😍🥰🥰🤩🤩🤩🤣🤣🤣🤣😁😁😁😁😎😎🤓🤓

 

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