Time For Some Signal

Wednesday, April 08, 2009

Enough of the noise, it's time for some signal.

Earnings season kicked off last night, and the results were less than compelling for the "risk on" crowd. Sure, Bed Bath and Beyond beat the consensus, but you can only go so far on a recovery fronted by smelly candles and Epsom salts. More tangently for global activity, Alcoa disappointed...sending Spoos lower overnight.

This came a day after equities were sent lower by a Morgan Stanley report going underweight European equities. Macro Man despairs that markets continue to adjust prices on the basis of research reports, but there you go. In any event, the fact that the MS report had a reasonable impact on stocks certainly begs the question of whether the bull run has had its day, at least for the time being.

To be sure, economic recovery bulls are still highlighting the "green shoots" with a magnifying glass: yesterday's story du jour was a rumour that Chinese loan growth in March would reach Dr. Evil-esque proportions.

Of course, many of the China bulls were trumpteting the Baltic Index a month or two ago, yet have fallen strangely silent. Perhaps thats's because the index has once again turned around and is heading lower?
In fairness, Macro Man pooh-poohed the significance of the BDIY on the way up, and to be honest he's not particularly enthused about the significance of the relapse. But one thing he is fairly sure of, however, is that he trusts the data of people who sell to China more than he trusts Chinese data itself. And in that regard, the news is slightly less rosy.

Korea recently released trade data for March, wherein exports to China fell to a new low after a modest post-New Year's bounce in February. If Chinese growth really is gearing up, it must be very selective indeed.
And so Macro Man is not particularly surprised to see some of the recent corrections in Asia turn tail. USD/MYR, after falling sharply last week, has bounced equally sharply and has broken a resistance line.
So, too, has USD/TWD; the CBC must be so proud, given that they blithely ignored the G20 and have continued to buy USD to curtail TWD strength.
If only they'd have a word with the SNB, perhaps one of Macro Man's most painful flamingos would take flight....

Posted by Macro Man at 8:26 AM  

8 comments:

Yes, one has to be very careful about reports of "activity" out of China. The folks at the CCP can sometimes have motivations a tad different from your average industrial mogul. For example I was intriqued to read recently that copper prices were necessarily strengthening because China was stockpiling copper ore. Why did they need all this ore? To fulfill burgeoning order books? No, said the report, to reduce unemployment.

PureGuesswork said...
11:22 AM  

Epsom salts and candles? You clearly have never been actually inside a BBBY. Not that that's a bad thing.

Matt Busigin said...
1:20 PM  

Guilty as charged. I thought BBBY was the place in the mall where you buy, well, smelly candles and 'gourmet' bath salts...but I must have it confused with some other crappy retailer.

Macro Man said...
1:39 PM  

MM - While Korean exports to China are continuing to deteriorate, the FT has a story about TAIWANESE exports into China showing some improvement.

I wonder if there is a way to get any more granular to see which countries or sectors export things to China for re-export versus which are exporting more for Chinese domestically consumption. Perhaps the taiwanese exports are characterized by the later?

Anonymous said...
1:40 PM  

Sadly there is no official data for Taiwanese exports to China, for obvious reasons. So it will be interesting to see how data from the rest of Asia portrays exports to China.

Macro Man said...
2:20 PM  

To think the BBBY results could be explained with expansion in consumer credit...well, might not be far off. I actually know a person who maxed their credit cards and bought gift cards from BBBY and other popular retailers...they are going to settle on the cards in a couple months (bkrtcy). I know its shady, and this is completely anecdotal, but I can only imagine what's happening behind the scenes.

Corey said...
4:07 PM  

MM, it is beginning to look likely that your drawer of calls in WTI will start to become tangible. If we have a bullish close today amid poor numbers from DOE, you should have lots of fun in those sooner than you think. Few quick thoughts here. Good luck though.
http://sfot-otb.blogspot.com/2009/04/market-has-spoken-perhaps-its-time-for.html

SFOT said...
5:12 PM  

Good article from you about this.

Meridian real estate

AMIT said...
10:21 AM  

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