April 13. Dollar strength across the board; China’s trade data crushes Aussie
–China’s March exports were reported at a decline of 14.6%, causing a sharp drop in Aussie to near new lows just above 75 cents. Imports were down 12.3%. (Remember when the deteriorating US trade data associated with surging imports was considered ‘good’ because it reflected US demand?) The World Bank also cut 2015 growth forecasts for developing Asia and China. I recently read that Stanley Druckenmiller watches signs of central bank liquidity measures more than anything else when it comes to equities, and what is clearly negative economic news doesn’t seem to be holding down Chinese shares, with both Shanghai Comp and Hang Seng up over 2%.
–It’s not just Aussie testing new lows against the dollar, GBP is at a new low and EUR is also testing the lows made in mid March. The stronger dollar carries risks of an emerging market crisis but for now there seems to be little concern as implied vols continue to go lower in many asset classes. VIX closed Friday at a new low for the year 12.6. Ten year treasury futures vol is under 5% for May and just above for June, while FV vol hovers just above 3%.
–While Friday’s trade in rates was quiet, there was a bias for a flatter curve with red/gold euro$ pack spread settling down 2.25 bps at 116 (reds -1.375 and gold +0.875).
–I’ve tried this idea before, and it was a miserable failure, however, at these levels it’s worth another try. Short the Nikkei… Japan was the first to engage in massive QE to weaken the yen and boost exports to grow its economy. But now the ECB has employed the same strategy; the yen has strengthened against the euro and it seems reasonable to expected EZ products to win back share from Japan. Additionally, business leaders in Japan are openly questioning QE effectiveness, which may in fact cause a decline in accommodation. And finally there’s this: A little over four years ago, a week before the 2011 Tohoku earthquake and tsunami, 50 melon-headed whales were found beached in Ibaraki Prefecture, only about 100 kilometers (62 miles) from the earthquake’s epicenter.
Now the same omen of bad things to come has happened again. On April 9, about 150 melon-headed whales were found beached in Ibaraki Prefecture. As emergency teams race to save the whales, one thought is sitting in the back of their minds: is this foreshadowing another giant earthquake?
http://en.rocketnews24.com/2015/04/13/over-150-whales-found-beached-in-ibaraki-same-thing-happened-before-2011-tohoku-earthquake/
