This week, markets were made clear that Syriza, the convincing winner of the Greek elections, means business. Syriza has taken a hard stance towards Europe, at least for now, which unsettled markets a bit. Of course, the consequences were best felt in Greece. The 3-year government bond yield almost doubled, reflecting a rising probability of an ‘accidental grexit.’
Going fast! Greek 3-year bond yield now well above 15%, up 5.5% since #Syriza win. http://t.co/gsTadVN78L
—
jeroen blokland (@jsblokland) January 28, 2015
But the real damage was done to Greek banks, which fell by almost 27% on Wednesday alone. And while European officials ‘confirmed’ that Greek banks should be able to survive, the increasing size of deposit outflows can’t be ignored, either.
In case you missed it. Greek banks lost almost 27% of their value today. http://t.co/z7YOEXuTcf
—
jeroen blokland (@jsblokland) January 28, 2015
Perhaps a little unfortunate in his timing, Robert Shiller stated, one day before the massive sell off, that the price of Greek stocks is ‘below anything I’ve seen in the U.S. and suggests a spectacular investment.’
Nobel Prize winner @RobertJShiller says now is a good time to buy Greek equities.via @business bloomberg.com/news/articles/… http://t.co/Nto36kYC33
—
jeroen blokland (@jsblokland) January 28, 2015
But, where Greece seems to falter, the Eurozone as a whole showed resilience. Spain being a good example. The country’s Q4 GDP growth equaled an impressive 0.7%. This translates to a YoY GDP growth of 2.0%, the highest since 2008!
VIVA ESPANA! #Spain's GDP (+0.7%) growth beats expectations. YoY +2.0%! http://t.co/zCO6QQnhLP
—
jeroen blokland (@jsblokland) January 30, 2015
Friday proved to be a cheerful day for the Eurozone. Next to the Spanish GDP number, Italian unemployment fell by the most in 8(!) years and French consumer spending came in way above expectations.
This morning in the #Eurozone in four graphs. Not all that bad! http://t.co/nFy4z8139R
—
jeroen blokland (@jsblokland) January 30, 2015
Earlier in the week, German consumer confidence reached the highest level on record. Who says Europe is not alive?
Breaking! German Gfk consumer #confidence rises to highest on record. http://t.co/kFU1u7yRan
—
jeroen blokland (@jsblokland) January 28, 2015
The other major risk for the Eurozone, deflation, has not faded, however. Reported inflation levels are below expectations across the board. This week Germany joined the countries with a negative inflation rate. It was the first time since 2009 that German consumer prices fell YoY.
Today we entered another phase of #deflation. German #inflation came in negative for the first time since 2009! http://t.co/Pke6kO2eLG
—
jeroen blokland (@jsblokland) January 29, 2015
Let’s move over to the U.S. In a rather boring FOMC statement, without a press conference, the Fed revised its inflation expectations downwards, but struck a more bullish tone on the economy. Paradoxically, both interest and stock markets fell.
Are investors not buying the #Fed, or do they doubt economic growth? US bond yields hit new lows yesterday. http://t.co/xpYkIC2LJh
—
jeroen blokland (@jsblokland) January 29, 2015
This raises the question if markets don’t believe the Fed or if they doubt the economic outlook. Meanwhile, inflation expectations are down to multi-year lows, which make it pretty complex for the Fed.
Will the #Fed withstand the markets on #inflation? 5y5y forward rate hitting new lows. (via @johnauthers) http://t.co/c7V4LDuZNE
—
jeroen blokland (@jsblokland) January 28, 2015
That last view might be given a bit more weight, as U.S. GDP growth for the final quarter of 2014 came in below expectations. While consumer spending looked very healthy, business and government spending disappointed somewhat.
Breaking! US GDP growth below expectations as business and government spending overshadow strong consumer spending. http://t.co/kg4n0zntZA
—
jeroen blokland (@jsblokland) January 30, 2015
In China, regulators are having another go at curbing margin lending. After the first attempt, when Chinese stocks initially plunged 7%, things were quickly reversed. It seems likely that the Chinese government will go for more thorough restrictions this time.
#China stock market heads for biggest decline in a year as regulators have another go at curbing margin lending. http://t.co/5SDeslCtvp
—
jeroen blokland (@jsblokland) January 30, 2015
Chinese profits aren’t looking that healthy, either. Earnings of industrial companies fell 8% compared to a year ago.
To keep in mind. In #China, profits of industrial companies are down 8%(!) from a year ago. http://t.co/b31CaMy8zf
—
jeroen blokland (@jsblokland) January 27, 2015
After a couple of weeks of relative calm, things got ugly again in the Ukraine as violence flared up. Also, after a short pause, oil prices have started to come down again, closely followed by the Russian ruble.
#ruble heads for new lows as #oil prices resume slide. http://t.co/7HUU6P7KKo
—
jeroen blokland (@jsblokland) January 29, 2015
With the ongoing pressure on the ruble it was quite a surprise to see the Russian central bank lower(!) the short-term interest rate. Is this a sign of strength or recklessness?
As sign of power or recklessness? #Russia's central bank lowers interest rate. #ruble http://t.co/026NrYO99p
—
jeroen blokland (@jsblokland) January 30, 2015
Meanwhile, Russian consumers are hurrying to get rid of their rubles. Real (after inflation) retail sales rose more than 5% from a year ago, the most in than two years. This would have been great news under normal circumstances, but now makes you wonder, instead.
#Russia's retail sales rise the most in more than two years as Russians hurry to get rid of their rubles. http://t.co/MT1iZqemxS
—
jeroen blokland (@jsblokland) January 28, 2015
I will end this week end blog with two impressive statistics. The first is, that despite the mediocre growth outlook, there’s still one tiny economy that will grow more than 10% this year. Congratulations Papua New Guinea!
This year only one tiny economy will manage to grow more than 10%. Nice chart via @RobertAlanWard http://t.co/52MStiWYhc
—
jeroen blokland (@jsblokland) January 29, 2015
Second, the market cap of Apple. After a mind-boggling quarter, Apple’s market cap almost matches that of the whole Spanish stock market, including companies like BBVA and Telefonica. The sheer size of Apple is just incredible.
It's all relative! #Apple's market cap is almost as big as that of #Spain. via @Financial_Orbit http://t.co/rFYoIExfAJ
—
jeroen blokland (@jsblokland) January 29, 2015
You have reached the end of this Week End Blog. Thanks for reading and enjoy your weekend!