1. The Swiss National Bank increased its ownership of US equities
by about $350 mln in Q3 to $38.95 bln. The SNB has a stake in some
2500 listed US companies. The Russell 2000 was marginally lower in the
quarter. The SNB indicated that it increased its Apple stake to 10.3 mln
shares from 9.4 mln in June. It increased is exposure to Exxon by roughly
the same percentage (~10%) and increased its Microsoft stake by a little less
(~9%). Overall the SNB, often regarded as a conservative central bank,
has about 18% of its assets (~$546 bln) in equities.
2. China is poised to surpass Canada this year as the US largest
trading partner. It would be the first time since 1985 when such data
is available. In the first nine months of the year, goods trade between
the US and China was $441 bln compared with $438.1 bln with Canada. The
key factor is the drop in energy prices. US goods trade with Canada is off
11.6% this year while it is up 3.7% with China. It is about
prices. In September, for example, the US imported 101.3 mln barrels of
oil from Canada, the most this year, the second highest since 2010. That
oil cost $3.9 bln, the second lowest bill since 2010.
3. Mexico auto exports in October were 4.7% below year ago levels.
The main culprits are not the usual suspected. Exports to Europe were up
15%. They were up 38% to Latin America. Mexico's auto exports to
Africa were up 400%. However, the industry's exports to the US were off
4.4% (despite the banner year of US auto sales) and off 4.2% to Asia.
They were off 25% to Canada. In terms of production, Volkswagen
output fell by a fifth. This was linked to a model changeover and not the
emissions scandal. Toyota's output jumped 81%. Total Mexican
production in October was 1% below a year ago though domestic sales were up
nearly 19%.
4. China has excess capacity in many industries, and the domestic
slowdown and economic transition is exacerbating the surplus. This is
spurring some industries to try to step up their exports, which in turn pushes
prices down and heightens trade tensions. US Commerce Department heard
the first of three cases filed by US corrosive-resistant steel producers
against foreign producers from China, Taiwan, India, South Korea and
Italy. In the preliminary findings, Commerce found subsidies for some
Chinese producers are around 235%. Italian subsidies are estimated at a
little more than 38%. Indian subsidies are a little below 8%. South
Korean subsidies are estimated at 1.4%, and Taiwanese subsides are even
less. There has been a surge
of imports of this corrosive-resistant steel (84% over the past year) and has
idled nearly a third of US capacity for this specialty steel.
The US is threatening to impose retroactive tariffs, which is understood as a
particularly forceful response.
5. A sharp rise in foreign exchange deposits in Russia's banking
system is giving corporates an alternative to issuing foreign currency bonds.
Foreign currency deposits at Sberbank, Russia's largest lender that accounts
for almost half of the country's retail deposits, are up by a third this year
to around $90 bln, according to reports. It is loaning some of those
foreign currency deposits out to corporations at a more competitive rate than
could be secured through the eurobond market, for those who still have access
to it. Russian corporates dollar bond issuance has fallen by a
little more than 2/3 this year according to Bloomberg data.
6. While many observers are skeptical of China's GDP figures, they
seem more willing to accept at face value other data such as inflation, trade,
and reserves. The market may be unduly harsh on China. On one
hand, a San Fran Fed Letter from March 2013 looked at a range of indicators and
concluded that China's growth was probably not significantly different from the
government estimated. On the other hand, calculating GDP is more
difficult than generally appreciated. Take the US as an example.
The quarterly GDP estimate is revised over several year, and it becomes less
relevant the more time that passes. Look at Q1 14 GDP. The initial
estimate was 0.1%. The first revision put it at -1.0%. The second
revision put it at -2.9%. The latest revision appears to have put
it at -0.9%. The Bureau of Economic Analysis reviewed US GDP 2012-2014
and shaved $70 bln off US output, more than Luxembourg's annual GDP. A
recent study of the 1994-2013 period found that while other countries tend to
under-estimate their growth, the US typically over-estimated its. US
revisions, though,m were larger than Canada and Spain, for example, but less
than Finland, Japan, and Norway.
7. The magnitude of US GDP revisions has increased lately.
The first to the third revision of the quarterly GDP estimate averaged 0.6
percentage points between 1993 and 2013. Since the start of 2014, the
average revision has been 1.3 percentage points. The economy itself
appears to have become more volatile. Over the past seven quarters, three
quarters have seen growth 3.9% or higher and two quarters below
1%. Japan's GDP has also been volatile. Its first Q3
estimate will be reported at the end of the week. Over the past six
quarters, it has contracted three times and in two quarters expanded by more 4.5%
at an annualized rate. In contrast, eurozone growth has been remarkably
stable even if not particularly inspiring. The first estimate of its Q3
GDP also will be reported at the end of the week. Assuming it expands by
0.4% as the consensus expects, it would be the third out of four quarters with
at that pace and is the average over the past five quarters.
Disclaimer
Seven Developments that Caught My Eye as I Looked for Something Else
Reviewed by Marc Chandler
on
November 10, 2015
Rating:
Reviewed by Marc Chandler
on
November 10, 2015
Rating:
