Macro Analytics

Rcube’s interpretation of market data or events that are relevant to macro investors.

China Rate Cut A Catalyst For Further Yuan DownsideNov 25 2014
China cut interest rates on Friday. Chinese and world equities have jumped following the news. As long as China’s main growth indicators remain so weak, we would take this rate cut with much more caution than investors’ consensus...
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Upside Risks to ExpectationsSep 02 2014
To estimate the likely direction and fair value of Fed Funds, we have in the past used 3 type of inputs: Employment, inflation, and the strength of the credit channel. If someone had spent the last 4 years on Mars, and was given information on these 3 variable blocks, it is likely that he would estimate the Fed Funds north of 2.5%...
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European Equities Aug 28 2014
European Inflation expectations have crashed this summer. French 3 yr breakevens have lost almost 100 bp since April. This has worried equity investors who punished European equities both on absolute and relative basis...
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A Review of our Main Investment ThemesAug 21 2014
In this publication, we would like to revisit our main investment themes. Some of them have been challenged over the last few weeks, with price action moving against us. We will try to highlight the main reasons keeping us exposed and how we are reacting to recent developments...
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GBP UpdateMar 28 2014
The pound is on the verge of another upward acceleration. Both consumer and CEO confidence are at historical highs...
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Equities - Frothy SentimentMar 18 2014
The MSCI World (developed markets) briefly tested its 2007 all‐time highs last week. The strength in US equities explains most of the rise since 2009, but more recently Europe also helped the advance. The remarkable thing about this is how quickly sentiment towards stocks has reached and in many indicators even surpassed previous peaks in euphoria...
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When is 'Good News' 'Bad News'Dec 10 2013
Since last May and the sudden addition of the word “tapering” to the financial lexicon, we have observed quite a few better‐than expected US economic releases resulting in short‐term market corrections, and vice versa...
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Global Financing Gaps and Credit AvailabilityJul 25 2013
The non‐financial sector financing needs explained with a lead bank lending behavior and thus corporate credit spreads
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Weakening Global Earnings MomentumJul 16 2013
Global earnings momentum is weakening. Earnings revision ratios are moving lower almost everywhere except Japan..
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Treasuries: Tactically AttractiveJun 28 2013
The relative deviation from their 100 days moving average between equities and 10 year yields is close to the historical highs....
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Japanese Equities: Attractive AgainJun 13 2013
Our USDJPY fair value model hints at further JPY weakness ahead. The current account dynamic has intensified.
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Shrinking US Budget Deficit: ConsequencesMay 28 2013
The CBO released its latest estimates two weeks ago, revealing an improving picture for the budget deficit.
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Large Bearishness on All Commodities related AssetsMay 21 2013
Expectations of a weaker growth in China, and the extension of the European recession have pushed global investors to capitulate on many growth‐sensitive assets.
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US Credit Channel StrengthMay 07 2013
The FED released yesterday evening its quarterly Senior Loan Officer Survey.
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Corporate Profit Margins and Equity ReturnsApr 24 2013
One of the most often quoted bearish arguments currently lies in the unsustainability of US corporate profits margins. Indeed, as a share of GDP, US corporate profits are close to all‐time highs...
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Leverage, Financial Conditions and Asset ValuesMar 14 2013
The FED’s flow of funds for the fourth quarter shows that the non‐financial corporate financing needs remain on a slow upward path. Capital spending was more or less stable in the fourth quarter, while shares buyback kept creeping higher. Capex have probably accelerated since then.
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Long‐Term Corporate Credit ReturnsFeb 04 2013
Equity is an infinite claim on the free cash flows generated by a company. Due to the inherent uncertainty of future cash flows, relying on a pure valuation framework to predict equity returns is often a disappointing experience, for both specific companies and equity as an asset class.
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Financial Conditions and Earnings Estimates in the Eurozone and the United StatesJan 14 2013
In the Eurozone, financial conditions have improved very substantially since last summer. The Bloomberg EU financial conditions index is at a 5‐year high.
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US Equities’ Long‐Term Real ReturnsDec 05 2012
Our research generally focuses on tactical investment horizons (3‐6 months). In this paper, however, we consider long‐term real returns for US equities, for which we have reliable data since 1871.1
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The Euro: Europe’s Third “Snake in the Tunnel”Oct 31 2012
During the past few weeks, the global markets’ spotlight has moved from Europe back to its usual US focus, concentrating on US companies’ results and on the effects of the coming “fiscal cliff”.
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Emerging Markets: Improving NewsflowOct 15 2012
The Emerging Market newsflow is now clearly improving.
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US Flow of Funds Asset Allocation Consequences: Out of Credit into EquitiesSep 25 2012
The FED released the Flow of Funds data for Q2 2012. US Non‐financial businesses are slowly but surely re‐leveraging.
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An Update on the Bulgarian LevSep 19 2012
On the 21st of May, back when the ‘Grexit’ was on everyone’s mind, we implemented a short 2yr forward position on the Bulgarian Lev against the Euro as a tail risk hedge against our otherwise long risk positioning
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US Housing TailwindsJul 30 2012
Can US housing surprise on the upside during the next few months? We believe so.
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ECB Lending SurveyJul 25 2012
The ECB has just released its quarterly lending survey.
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US Treasuries and Japan EquitiesJul 24 2012
One of the longest and strongest cross‐asset correlation is the one linking the US Treasury's 10 year yield with Japanese equities since the bubble burst in 1989.
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EM vs. DM Relative debt fundamentalsJul 23 2012
Emerging markets sovereign debt is slowly but surely being positively rerated. The idea that EM sovereign debt is risky and that developed market bonds are safe is being severely tested.
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Why a Euro Breakup Could Eventually Lead to Deeply Negative German Short‐term RatesMay 30 2012
Whenever nominal interest rates become slightly negative, commentators use the “under the mattress” argument and claim that this situation is just a temporary market inefficiency that should soon be arbitraged away.
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Strategists’ CapitulationMay 17 2012
Can Wall Street strategists be trusted? History clearly suggests that they bring negative value in terms of asset allocation forecasting.
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Eurozone Scenario UpdateApr 23 2012
As the positive impact of both the LTRO and the ESM on Eurozone sovereign spreads seems to be fading, we think that it is time to revisit our main scenario for the Eurozone.
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EM Lending ConditionsApr 10 2012
The IIF (Institute of International Finance) has just released its quarterly Emerging Markets Bank Lending Conditions Survey for Q1.
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France: The Next Weak LinkApr 03 2012
“The Economist’s” front cover this week was titled “France in denial”.We believe that investors are currently as much in denial as the French political class....
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BOE Credit Conditions SurveyMar 30 2012
The Bank of England has just released its latest quarterly Credit Conditions Survey. As always, the BOE survey is the first to be published.
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IFO UpdateMar 26 2012
The IFO for the month of March is out. While headlines read it positively, we have a different look at the indicator.
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European Equity VolatilityMar 19 2012
Just like in the US, front‐end equity implied volatility has recently crashed in Europe. Since late November we have been highlighting how mispriced equity volatility was.
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VIX model updateFeb 21 2012
Most of our VIX model inputs are now reversing direction, implying that the model fair value will start to rise slowly in coming weeks. This is a big shift from the last 3 years, where fair value was most of the time far below market value.
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French Corporate Treasurers SurveyFeb 16 2012
The French Association of Treasurers has just released its monthly survey on corporate treasurers.
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Further Signs of Economic Momentum ReversalFeb 13 2012
The recent batch of Chinese data confirms our belief that the credit channel is weakening in most emerging markets. Chinese Real M2 growth, which is to us the best leading indicator on forward EM equity returns, was weak.
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The Likelihood of a Euro BreakupJan 18 2012
Since late November, the 2 year yields of both too-big-to-fail PIIGS have crashed (by 350bp for Italy and 320bp for Spain).
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