You can think whatever you want, but you have to admit that ECB president Maria Draghi is pretty successful. Even without having spent any QE money (the kick off is set at March 09) Draghi managed to talk down the euro in his policy press conference last Thursday. The euro is at the lowest level since 2003.
Talking down the #euro. #Draghi http://t.co/lR1WZccTE5
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jeroen blokland (@jsblokland) March 05, 2015
In addition, European bond yields and spreads also reached new lows. Yields on Italian, Spanish and even Portuguese bonds are now comfortable below those in the US. The Draghi Style QE is very effective so far.
#Draghi-style #QE. Peripheral bonds yields at records lows, negative spreads compared to US, and nothing bought yet. http://t.co/4nUTHlquO8
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jeroen blokland (@jsblokland) March 06, 2015
And so the mother of all bond bubbles continues. For example, you would have made a 113% return if you bought a basket of Portuguese bonds at the start of 2012. Yes, 113%!
113%(!). Your return on Portuguese government bonds since the start of 2012. #QE #Draghi http://t.co/mWaWpKJfHs
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jeroen blokland (@jsblokland) March 06, 2015
It looks like Draghi’s reach even goes beyond bond and currency markets. Eurozone retail sales rose 3.7% in January. The fastest since 2005, but also faster than retail sales growth in the United States. That doesn’t happen too often.
#eurozone retail sales beat retail sales in the US. Not very common! http://t.co/bcf1cVL6XX
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jeroen blokland (@jsblokland) March 04, 2015
The retail sales numbers were the latest strong data coming from the Eurozone. It has been more than three years since macro data was so much better than in the U.S. The surprise index is also a very powerful tool to explain the recent outperformance of European stock markets.
It has been over three years since we have seen macro numbers so much better in the #Eurozone than in the US! http://t.co/oBE703608E
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jeroen blokland (@jsblokland) March 04, 2015
The strong macro data in recent weeks has resulted in an upward adjustment of GDP growth expectations this year and next. Europe may be struggling, but it’s still very much alive.
#Eurozone GDP forecasts have moved up a little in recent weeks. http://t.co/SCyu31rkMx
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jeroen blokland (@jsblokland) March 03, 2015
The reason for the strong divergence in the European and U.S. surprise indices also has to do with the U.S. The ISM index is back to a level last seen in January 2014. That said, at 52.9, the index still points at healthy GDP growth going forward.
#ISM Manufacturing index fell to the lowest since Jan 2014. http://t.co/saS9AFMsfU
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jeroen blokland (@jsblokland) March 02, 2015
Besides, the American job market shows no signs of slowing whatsoever. The number of jobs added again beat estimates as the unemployment rate fell to a low of 5.5%. Wages were slightly below expectations and grew 2.0% for the year.
#nonfarmpayrolls 295K beat once again. On average almost 300K jobs were added each months during the last six months. http://t.co/AHHJBbzr4g
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jeroen blokland (@jsblokland) March 06, 2015
A first rate hike by the Fed in the second or third quarter is now very likely. Also because inflation expectations are recovering. Hence, where rates are hitting new lows almost everyday in Europe, US bond yields are at their highs of this year.
US Treasury #yield near highest level of this year as #inflation expectations rebound. http://t.co/YXIgOViqab
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jeroen blokland (@jsblokland) March 04, 2015
In China the new GDP growth target for the economy was released at the opening of the National People’s Congress. 7.0% is now the new magic number. The statement contained some other interesting numbers like the goal to create 10 million new jobs. Anyway, China faces the formidable task to transform itself to a consumer-led economy.
#China's 'formidable' task. A consumer-led economy & 10 million jobs. Story by @lindayueh bbc.com/news/business-… http://t.co/SB1P3fcTug
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jeroen blokland (@jsblokland) March 05, 2015
Before the start of the new National People’s Congress, China lowered interest rates for a second time. Officially, this reflects not a change to monetary policy since low inflation levels pushed up real rates, but still. Focus on the Chinese renminbi is also increasing as every other country in the world seems to have joined the currency war.
#China's currency continues to depreciate as People's Bank of China lowers interest rate for the second time. #yuan http://t.co/PwRyy8l2e9
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jeroen blokland (@jsblokland) March 02, 2015
That China finds itself on a rocky road proves the chart below. China’s speculative housing market is under severe pressure. An insightful chart by Reuters reveals that Chinese house prices are actually falling at a faster pace than house prices did in the US in the years leading up to the Great Recession.
House prices in #China are falling faster than house prices in the US in the run up to the Great Recession. http://t.co/CZqeiysEwp
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jeroen blokland (@jsblokland) March 03, 2015
Thank you for reading the Week End Blog. Enjoy your weekend. Monday the ECB will be in the markets together with you 😉