Last week I surrendered and dedicated most of my blog to Greece. Perhaps that was under the (unknowingly) naive assumption that Greece would have gone away by now. But, of course, it hasn’t. So, here we go again! The week started positively as all major players (even Mr. Wolfgang Schäuble) cited an agreement could be forged. The yield on the 2-year Greek government bond fell by 1000 basis points at some stage.
Greek 2-year government bond yield now almost down a 1000 basis points as optimism about debt deal grows. #Greece https://t.co/44gVJqrqfM
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jeroen blokland (@jsblokland) June 23, 2015
However, the optimism waned as soon as became clear that both parties are still miles apart on some issues. One of them being the overhaul of the Greek pension system, and another concerning VAT hikes. As I understand it, these issues are discussed in such detail (like if VAT hikes should apply to the remote Greek islands as well), that a quick solution was never a real possibility. At least this Greek tragedy can be told in less than 140 characters.
A Greek tragedy in less than 140 characters! #Greece twitter.com/sonykapoor/sta…
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jeroen blokland (@jsblokland) June 24, 2015
As negotiations continue, the ECB assisted Greek banks with more ELA. It has become increasingly clear, though, that this can’t go on forever, even if Greece is in some kind of ‘program’. Meanwhile deposits continue to flee the country.
#ELA equals #bankrun. #Greece via @Schuldensuehner https://t.co/OJWyy2fGcG
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jeroen blokland (@jsblokland) June 23, 2015
This week provided yet another angle on the Greek tragedy floated on Twitter. As it turns out, more and more Greek people ‘opt’ to live with their parents. In fact, over 50{01de1f41f0433b1b992b12aafb3b1fe281a5c9ee7cd5232385403e933e277ce6} of the Greek population within the 25-34 age bracket are living at home. That is a higher percentage than in Italy.
#Greece update! More than 50{01de1f41f0433b1b992b12aafb3b1fe281a5c9ee7cd5232385403e933e277ce6} of Greek people between 25-34 live with their parents. via @BrilliantMaps https://t.co/ZAE3xbMkNh
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jeroen blokland (@jsblokland) June 24, 2015
Investor anxiety has increased over the last couple of weeks. Yes, we got a 3{01de1f41f0433b1b992b12aafb3b1fe281a5c9ee7cd5232385403e933e277ce6}+ relieve rally at the beginning of the week when an agreement seemed imminent, but volatility remains elevated. The VDAX has come down a bit, but is still almost twice as high as the US VIX index.
German equity #volatility is double that of US equities! #VDAX #VIX https://t.co/9BoOhRaZMp
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jeroen blokland (@jsblokland) June 23, 2015
Time to leave Greece and Europe behind. Macro data from the US has been improving, recently. First quarter GDP was revised up and US housing activity is beating expectations. But more importantly, after a period of weak consumer spending things are looking brighter here as well. Personal spending rose 0.9{01de1f41f0433b1b992b12aafb3b1fe281a5c9ee7cd5232385403e933e277ce6} in May, 0.2{01de1f41f0433b1b992b12aafb3b1fe281a5c9ee7cd5232385403e933e277ce6} above the median forecast.
US personal #spending rose 0.9{01de1f41f0433b1b992b12aafb3b1fe281a5c9ee7cd5232385403e933e277ce6} in May, more than forecast. YoY growth now at 4.4{01de1f41f0433b1b992b12aafb3b1fe281a5c9ee7cd5232385403e933e277ce6}. https://t.co/vfln6S8Wtr
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jeroen blokland (@jsblokland) June 25, 2015
Japan had something to celebrate as well. The Nikkei Index closed at the highest level since 1996. It has been almost 20 years since we last saw these numbers.
#Nikkei closes at highest level since 1996! via @moved_average https://t.co/ByqjuzZahR
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jeroen blokland (@jsblokland) June 24, 2015
Some, or perhaps, a large part of the Japanese equity rally has been driven by the Bank of Japan. In a (desperate) attempt to structurally lift inflation the BoJ has bought practically every financial asset it could get its hands on. Hence the asset reflation part worked quite brilliantly. Consumer price inflation, on the other hand, is back to square one. Prices rose just 0.1{01de1f41f0433b1b992b12aafb3b1fe281a5c9ee7cd5232385403e933e277ce6} from a year ago. Now what?
Back to square one! Japanese #inflation near zero again. #Japan #QE https://t.co/Nlp2qatmz1
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jeroen blokland (@jsblokland) June 26, 2015
Let’s move over to another volatile part of the world: China. China’s Manufacturing PMI came in higher than expected. This was followed by multiple news flashes that stated that the Chinese economy is stabilizing. That may well be, but if you take Chinese macro data seriously at all, a PMI of 49.6 is not something to get overly excited about. No comment on the (lack of) relevancy for Chinese equities, by the way.
#China's #PMI rises more than forecast in June, but remains below 50 for the 4th consecutive month. https://t.co/LqCvM1GRIa
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jeroen blokland (@jsblokland) June 23, 2015
The Chinese equity market has turned against its investors. The Shanghai Composite Index lost almost 20{01de1f41f0433b1b992b12aafb3b1fe281a5c9ee7cd5232385403e933e277ce6} in a matter of days and intra day moves are just massive. On an annualized basis, realized volatility over the last 10 trading days equals 60{01de1f41f0433b1b992b12aafb3b1fe281a5c9ee7cd5232385403e933e277ce6}!
#China equities update. Just a 3{01de1f41f0433b1b992b12aafb3b1fe281a5c9ee7cd5232385403e933e277ce6} intraday move today. Stocks end up 2.5{01de1f41f0433b1b992b12aafb3b1fe281a5c9ee7cd5232385403e933e277ce6}. https://t.co/sxH4swCVgQ
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jeroen blokland (@jsblokland) June 24, 2015
The slump in Chinese stocks does not bode well for emerging markets either. Chinese equities represent roughly 20{01de1f41f0433b1b992b12aafb3b1fe281a5c9ee7cd5232385403e933e277ce6} of the index, although I should add that these are mostly H-shares listed in Hong Kong.
#China makes up roughly 20{01de1f41f0433b1b992b12aafb3b1fe281a5c9ee7cd5232385403e933e277ce6} of the MSCI Emerging Market Index… https://t.co/DVZd59T3x2
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jeroen blokland (@jsblokland) June 26, 2015
Greece gone, China gone, time for some entertaining graphs. Below is a very insightful chart that shows just how big the US economy really is. For example, the GDP of Texas equals that of Canada, while the economy of California compares to that of Brazil.
Comparing the GDP of US states with other countries! Great chart via @Newsweek https://t.co/I81AdzoYa2
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jeroen blokland (@jsblokland) June 22, 2015
More interesting data in this chart, sent by @BrilliantMaps, showing the somewhat frightening decrease in fertility rates over the last 40 years. And that’s not only true for the ‘western’ part of the world, by the way.
#fertility ratings now (2014) and then (1970). via @BrilliantMaps https://t.co/DWvorQVkDV
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jeroen blokland (@jsblokland) June 24, 2015
Here’s another shocker. Earth is getting really, really hot!
It's getting seriously hot on earth! #climatechange via @NinjaEconomics https://t.co/ARJryT81cE
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jeroen blokland (@jsblokland) June 21, 2015
Below is this week’s best chart, though. Steven Spielberg’s JAWS has ruined us forever. Shark attacks make the headlines on a regular basis, but where are all the headlines of ‘people-killing’ hippos? Never have I seen one news item that told the horrific story of ‘people-killing’ ants. And what about those cows?
Ants cause more deaths than sharks! Cows, deer and jellyfish do to! via @SonyKapoor https://t.co/tRh2lxzgoh
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jeroen blokland (@jsblokland) June 21, 2015
You have made it to the end of the Week End Blog. Thanks for reading and enjoy your weekend!
Filed under: FINANCIAL MARKETS, MACRO Tagged: Bank of Japan, China, Cows, CPI, ECB, ELA, Fertility rate, GDP per state, Greece, Nikkei, Shanghai stock market, Sharks, VDAX, VIX 
SOURCE: Jeroen Blokland Financial Markets Blog – Read entire story here.
