Holiday over, the Week End Blog returns. In a somewhat desperate attempt not to let Greece dominate this blog, I start with the latest IMF growth forecasts. Again, most forecasts were lowered, emphasizing the fragile character of the global recovery. Especially the massive swing in the growth forecast for Brazil does not bode well. On a more positive note: the GDP forecast for the Eurozone was revised up, a rare move in recent years.
#IMF lowers global growth forecast again. via @IanTalley http://t.co/o1byeVEkoy
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jeroen blokland (@jsblokland) June 11, 2015
Back to Greece then. The country is seriously running out of time as the economy has clearly reversed. The anticipated budget surplus has evaporated and recent macro numbers are looking grim. Greek unemployment rose unexpectedly and now stands at 26.6%. Out of that percentage more than 70% is unemployed for over a year. The economy will not save Greece, that’s for sure.
#Greece's tragedy continues. Unemployment unexpectedly rises to 26.6% in Q1. 72% of that is unemployed > 1 year! http://t.co/ifdV7NRlns
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jeroen blokland (@jsblokland) June 11, 2015
And so negotiations with creditors continue. In recent days comments from both sides have become less friendly. And although it was ‘only’ the technical team from the IMF that left Brussel, it would be pretty naive to assume things are going in the right way. Some kind of agreement, just before Greece falls into the abyss is still possible, of course, but other, more messy, scenarios are getting more likely. Meanwhile, Greek banks are falling, again…
Greek banks stocks: down 95% since March 2009, the start of one of the biggest global equity rallies, ever. #Greece http://t.co/HE6BjPlZqi
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jeroen blokland (@jsblokland) June 10, 2015
Somehow, Eurozone Central Bankers are under the impression that they have to comment on bond market volatility. First, there was Draghi, who ‘honestly’ answered a question at the ECB press conference. This week Bundesbank President Mr. Weidmann also felt obliged to add some words as well. I don’t really know what his intentions were, but if he wanted volatility he got it. German government bonds are all over the place, with the 30-year yield hitting almost 1.80% at one point this week.
Here we go again! German 30-year bond #yield tops 1.65% http://t.co/UMczYa6qB3
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jeroen blokland (@jsblokland) June 09, 2015
Volatility on the 30-year German bond future doubled in just a couple of weeks. Of late, these bonds have become significantly more risky than equities.
In case you missed it! German bond market #volatility has doubled in a matter of weeks. #ECB #QE http://t.co/GirUaMIV61
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jeroen blokland (@jsblokland) June 11, 2015
Other Eurozone government bonds aren’t doing that well, either. Spreads on peripheral bonds have increased and the graph below shows that, at least for now, bond prices have turned south after a massive multi-year rally. Again, I don’t know what Draghi and his colleagues were thinking when they designed the QE program, but it seems unlikely that this was part of the concept.
Peripheral bond returns. The end of an era? http://t.co/LBPmuLIbHW
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jeroen blokland (@jsblokland) June 10, 2015
This week’s most important macro data came out of the US. Retail Sales rebounded, and it was about time that happened. Bloomberg, perhaps a little over-exited by the better than expected retail sales number, cited that ‘the growth rebound is propelled by the consumer.’ Well, at least the YoY growth in headline retail sales got of its lows. That’s a start.
Bloomberg: 'US consumers propel growth rebound' Retail sales jump in May. YoY growth back to 2.7%. http://t.co/Xeo99qndLb
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jeroen blokland (@jsblokland) June 11, 2015
My last chart of this Week End Blog is on China, where the equity rally vigorously continues. If we take a look at the Shanghai Composite Index over a longer period of time, it becomes clear we have seen this kind of rally before. And that was in 2007. Perhaps, this time will be different.
This time is different? #China's current stock market rally resembles the one of 2007. http://t.co/QE0Lxlqgh9
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jeroen blokland (@jsblokland) June 12, 2015
Thanks for reading the Week End Blog. Enjoy your weekend!