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A Short History of Ukraine and Crimea

February 28, 2014
(from my colleague Dr. Win Thin)

A little history lesson about Ukraine and Crimea may help put recent developments into better perspective.  What emerges is a very clear understanding of why both Russia and Ukraine feel that they each have historical precedent to support their positions:  Russia believes Ukraine is part of Russia, while Ukraine (o…
A Short History of Ukraine and Crimea A Short History of Ukraine and Crimea Reviewed by Marc Chandler on February 28, 2014 Rating: 5
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Great Graphic: More Thoughts on Inequality

February 28, 2014
This Great Graphic was tweeted by Jose Manuel Roche, who got it from the OECD.  It shows the Gini coefficient, a widely used measure of income inequality,  for five high wage economies in the 1985-2012 period. 
The US is the red line, and except for a brief moment around 1990, its Gini coefficient is the highest.  The blue line is an unweighted av…
Great Graphic: More Thoughts on Inequality Great Graphic: More Thoughts on Inequality Reviewed by Marc Chandler on February 28, 2014 Rating: 5
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RMB Weakness Accelerates and Steady EMU Inflation Drive Markets at Month End

February 28, 2014
There has been much economic data reported today, and there are month-end considerations, but the two main drivers of the capital markets today have been the biggest one day loss in the Chinese yuan and new that the preliminary February CPI did not tick down as many expected.  The headline rate was unchanged at 0.8%, though the core measure did ri…
RMB Weakness Accelerates and Steady EMU Inflation Drive Markets at Month End RMB Weakness Accelerates and Steady EMU Inflation Drive Markets at Month End Reviewed by Marc Chandler on February 28, 2014 Rating: 5
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Detroit and Rome: A Tale of Two Cities

February 27, 2014
Detroit was allowed to declare bankruptcy last year.  This began a protracted process by which the municipality renegotiated with its creditors, including government worker pensions. 
This illustrates several characteristics about the American "system".  First, it has de-stigmatized bankruptcies, as we saw with GM and Chrysler.  Second, …
Detroit and Rome: A Tale of Two Cities Detroit and Rome: A Tale of Two Cities Reviewed by Marc Chandler on February 27, 2014 Rating: 5
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Emerging Markets: What has Changed

February 27, 2014
(from my colleagues Dr. Win Thin and Ilan Solot)

1) The Israeli central bank surprised markets with a 25 bp rate cut 2) Ukrainian President Yanukovych has been ousted and a new government appears to be in place, but uncertainty and tensions continue; hryvnia peg was eliminated 3) Recent yuan weakness is notable, and has investors wondering if a r…
Emerging Markets: What has Changed Emerging Markets: What has Changed Reviewed by Marc Chandler on February 27, 2014 Rating: 5
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Great Graphic: Are Europe's Inflation Expectations Anchored ?

February 27, 2014
ECB officials repeatedly have said that inflation expectations are anchored, which is part of their argument that plays down the threat of deflation.  The difficult thing about inflation expectations when it comes to measuring them, they can be elusive.  
Generally speaking, there are two ways. The first is surveys: simply ask people.  There are a…
Great Graphic: Are Europe's Inflation Expectations Anchored ? Great Graphic: Are Europe's Inflation Expectations Anchored ? Reviewed by Marc Chandler on February 27, 2014 Rating: 5
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Mounting Tensions Lift Dollar and Yen

February 27, 2014
Many observers had thought the island disputes in the South and East China Seas posed the biggest threat to peace, with some official and media drawing parallels between 1914 and 2014.  Yet if even if a Pacific Century has begun, Europe's geopolitical challenges persist.  
Reports suggest an estimated 120 armed group of people have taken over t…
Mounting Tensions Lift Dollar and Yen Mounting Tensions Lift Dollar and Yen Reviewed by Marc Chandler on February 27, 2014 Rating: 5
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Great Graphic: Disparity in Wealth and Income, Less so Consumption Patterns

February 26, 2014
The growing concentration of income and wealth in the US has been well documented.  Its significance and appropriate, in any, policy response is the subject matter of the key political dialogue that is likely to persist through the 2016 presidential election.

These Great Graphics were posted in The Atlantic by Derek Thompson.  The data comes from …
Great Graphic: Disparity in Wealth and Income, Less so Consumption Patterns Great Graphic: Disparity in Wealth and Income, Less so Consumption Patterns Reviewed by Marc Chandler on February 26, 2014 Rating: 5
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Trans-Pacific Partnership Talks Going Nowhere Quickly

February 26, 2014
The latest effort to revive the stalled  Trans-Pacific Partnership talks failed at the start of the week and no date has been set to try again.  Negotiations began in 2010, but reluctantly, Japan joined last year.  This arguably made negotiations more difficult, but of greater significance.   However, without a clearer path for US President Obama …
Trans-Pacific Partnership Talks Going Nowhere Quickly Trans-Pacific Partnership Talks Going Nowhere Quickly Reviewed by Marc Chandler on February 26, 2014 Rating: 5
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Tight Ranges, Loose Lips

February 26, 2014
The US dollar has been confined to narrow ranges against the major currencies.  The euro, yen, and sterling have traded well within yesterday's ranges.  The dollar-bloc was a bit heavier, but Canadian dollar has fully recovery and the Aussie, nearly so, after disappointing, but dated, Q4 construction figures (-1.0% vs +0.7% consensus). 
One of…
Tight Ranges, Loose Lips Tight Ranges, Loose Lips Reviewed by Marc Chandler on February 26, 2014 Rating: 5
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No Near-Term Currency Regime Change in China

February 25, 2014
 (from my colleagues Dr. Win Thin and Ilan Solot)
Spot USD/CNY closed above the fix today for the first time since September 2012. We saw a prolonged period of this in Q2 and Q3 2012, right after the last band widening. But to keep things in perspective, spot is still closer to the center of the +/- 1 percentage point trading band around the fix …
No Near-Term Currency Regime Change in China No Near-Term Currency Regime Change in China Reviewed by Marc Chandler on February 25, 2014 Rating: 5
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Great Graphic: Capital Gets Organized, But Not Labor

February 25, 2014
It should have been a lay-up.   United Auto Workers were trying to unionize a Volkswagen plant in Chattanooga, Tennessee and they did not face management hostility.  Far from it.  Volkswagen wanted the union to facilitate worker councils that are used throughout the company's factories to ostensibly help productivity and morale.  Volkswagen ev…
Great Graphic: Capital Gets Organized, But Not Labor Great Graphic: Capital Gets Organized, But Not Labor Reviewed by Marc Chandler on February 25, 2014 Rating: 5
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Market Takes Yuan Drop in Stride, Majors Continue to Consolidate

February 25, 2014
The Chinese yuan extended its sharp drop for the sixth consecutive session.  Today's 0.4% drop is the largest is the largest in almost two years and accounts for nearly half of the six-day decline.  The fact that the spot rate ended weaker than the central bank's reference rate for the first time since September 2012 has raised eyebrows, b…
Market Takes Yuan Drop in Stride, Majors Continue to Consolidate Market Takes Yuan Drop in Stride, Majors Continue to Consolidate Reviewed by Marc Chandler on February 25, 2014 Rating: 5
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The Fed, Foreign Banks and the Dollar

February 24, 2014
Last week, the Federal Reserve announced new standards for foreign banks operating in the US.  The new standards were opposed by many foreign banks and the EU, and the Fed did make two concessions.
First, it initially wanted to make all foreign banks with more than $10 bln of assets in the US subject to the new rules.  It has raised it to $50 bln,…
The Fed, Foreign Banks and the Dollar The Fed, Foreign Banks and the Dollar Reviewed by Marc Chandler on February 24, 2014 Rating: 5
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Emerging Markets Preview: The Week Ahead

February 24, 2014
(from my colleagues Dr. Win Thin and Ilan Solot)

Israel central bank meets Monday and is expected keep rates steady at 1.0%.  CPI inflation eased to 1.4% y/y in January, the lowest since September.  The economy remains sluggish, with growth expected to slow to 3.3% this year from 3.8% in 2013.  With inflation near the bottom of the 1-3% target rang…
Emerging Markets Preview: The Week Ahead Emerging Markets Preview: The Week Ahead Reviewed by Marc Chandler on February 24, 2014 Rating: 5
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Choppy FX Price Action at Start of Week

February 24, 2014
There have been three developments to note to start the week.  First, the removal of Yanukovych in Ukraine has seen a continued relief rally with 10-year yields dropping a little more than 100 bp to around 8.9%.  
The 5-year CDS has also fallen 185 bp to about 940.  Both are now back to late-January levels.  The equity market extended the gains s…
Choppy FX Price Action at Start of Week Choppy FX Price Action at Start of Week Reviewed by Marc Chandler on February 24, 2014 Rating: 5
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Setting the Stage for March: The Week Ahead

February 23, 2014
The week ahead is a transitional week.  It is important in terms of price action, as the euro and sterling are threatening to break out to the upside, while the Canadian dollar is threatening a downside break.  We caution that ahead of the key events in early March, which includes the ECB meeting and US employment data, breakouts, if they do mater…
Setting the Stage for March: The Week Ahead Setting the Stage for March: The Week Ahead Reviewed by Marc Chandler on February 23, 2014 Rating: 5
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