Article / 12 June 2015 at 10:00 GMT

Daily Shot: Trying Europe's patience

TradingFloor.com Team / Saxo Bank
Denmark
  • Bund yields tumble as IMF exits Greek negotiations
  • Deflationary pressures on the wane in Europe
  • Consensus expects a September rate hike from the Fed

By Walter Kurtz

It is remarkable that the talks between Greece and its creditors have gone on for as long as they have with so little progress. The lenders, however, are beginning to run out of patience as the International Monetary Fund recalls its negotiating team.  

IMF
 
The 10-year bund yield, which had crossed above 1% earlier, fell sharply on the news (chart below). Treasuries rallied as well. Some are asking whether it's time for the Eurogroup to walk away. 

Bunds
 
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In other Eurozone developments, deflationary pressures seem to be abating. Here are the latest CPI charts for Portugal and France. This is part of the reason bond yields remain higher and many market participants are betting that the European Central Bank will slow the pace of quantitative easing sooner than originally expected. This will also providing support for the euro. 

Portugal

France
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Now, a quick update on China's stock markets. All major A-shares (from the CSI300 index) are now trading above their 200-day moving average. Amazing. 

Chinese equities
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In the United States we continue to see stronger economic data as retail sales surprised to the upside. The BofA credit card activity data discussed earlier this week turned out to be a good predictor.  

US Retail Sales
 
The Atlanta Fed GDP tracker has turned higher and is beginning to converge with some of the sell-side economists' forecasts for Q2. 

GDP
 
The economists' consensus for the first Federal Reserve rate hike has converged on September. With the euro stable and the Bank of Japan trying to keep the yen from falling lower, the Fed now has the cover it needs to raise rates without moving the US dollar sharply higher. 

Interest rates
 
Futures still expect a hike in Q4, but I suspect it will be drifting closer to September next month. 

Futures
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Now some food for thought:

A comparison of average annual hours worked.  

Hours worked
 
— Edited by Michael McKenna

* Walter Kurtz is an alias

** This is an abridged version of the Daily Shot. To subscribe to the full version, link to the Daily Shot and select the appropriate command. E-mail addresses are never shared with anyone. 

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