Muted Market Reaction to Job Data Disappointment

The US employment data was disappointing. The short-term market had been leaning the wrong way. The recent data had fanned hopes that the labor market was accelerating, but today’s data suggest the pace of improvement has not changed.  It is the sixth month that net new job creation was in excess of 200k, but private payrolls […]

Fed Watch: On That ECI Number

The employment cost index is bearing the blame for the market’s July 31 sell-off. Sam Ro at Business Insider reports: …traders agree that today’s sell-off is probably due to one stat: the 0.7% jump in the employment cost index (ECI) in the second quarter. This number, which crossed at 8:30 a.m. ET, was a bit higher […]

Argentina Defaults: The Day After

Argentina has defaulted. The long-running court drama that ran for over ten years and pitted Argentina against a small group of holdout creditors was decided decisively in favor of the holdouts in June, and Argentina subsequently refused to make payments as required by the courts. As a result, neither the holdouts nor the holders of […]

‘Should’ Turkish Monetary Policy

In my latest Hurriyet Daily News (HDN) column, I discuss what the Central Bank of Turkey should do at Thursday’s rate-setting meeting- versus what it will actually do. You can read the whole thing at the HDN website, and I have a few additional points to make. First of all, I was planning to write […]

The Yen Continues to Surprise

There have arguably been two significant surprises in the capital markets this year, the strength of the yen and US Treasuries.  The two are related. The dollar-yen rate appears particularly sensitive to US interest rates.    The yen (not dollar) moves in the opposite direction of US 10-year Treasury yield two-thirds of the time of the past […]

Sorting Out Market Volatility’s Lessons

Asset price volatility is a critical variable for the various flavors of dynamic asset allocation and related strategies. As a core input for developing risk management models, ignoring volatility is like trying to drive with your eyes closed. As a first approximation for dealing with uncertainty in finance, volatility’s an obvious resource. But volatility can […]

China, Not Piketty, Explains ‘Confused Signals’ in U.S. Asset Prices

The FT’s Ed Luce recently took on the “confused signals” being sent by U.S. stock and bond prices moving in sync (upward). Which is it, he asks?  Are economic prospects good, as stock prices suggest, or bleak, as bond prices suggest? Both and neither, he offers.  High-end retailers like LMVH and Tiffany are doing great, he says, […]

What a Drag: The Burden of Nonperforming Loans on Credit in the Euro Area

By Will Kerry, Jean Portier, Luigi Ruggerone and Constant Verkoren: High and rising levels of nonperforming loans in the euro area have burdened bank balance sheets and acted as a drag on bank profits. Banks, striving to maintain provisions to cover bad loans, have had fewer earnings to build-up their capital buffers. This combination of weak profits and a decline […]

Fed Watch: Inflation Hysteria

It appears that a case of inflation hysteria is gripping Wall Street. Joe Weisenthal at Business Insidersums up the current state of play: Here’s what’s on Wall Street’s mind right now: Inflation is finally happening, and the Fed will end up being behind the curve. …there were two big moments this week. 1) There was the […]

The Investment Climate and Geopolitics

The high frequency macroeconomic data due out in the days ahead simply do not have the heft to alter investors’ perceptions of the macro-economic and financial condition of the investment climate. That climate can be summed up as such: Growth in the US has picked up markedly after the major disappointment in Q1. The Japanese economy […]