A Look At The Euro - Macro, Micro & Liquidity | Summary and Q&A

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February 8, 2019
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A Look At The Euro - Macro, Micro & Liquidity

TL;DR

Despite negative news from the euro area, the Italian government successfully issued 8 billion euros of ultra-long bonds, highlighting a reach for yield. Economic forecasts for the euro area, Germany, and Italy have been revised downward, indicating pessimism about global growth prospects. S&P 500's earning estimate for Q1 2019 has seen the worst downward revisions since 2016. The correlation between global money supply and risk assets suggests that liquidity has played a significant role in driving market rallies.

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Key Insights

  • 🪘 The successful issuance of ultra-long bonds in Italy demonstrates a reach for yield among investors in a challenging economic environment.
  • 🌐 Downward revisions in economic forecasts for the euro area, Germany, and Italy highlight the prevailing pessimism about global growth prospects.
  • 📉 The significant downward revisions in S&P 500's earning estimates for Q1 2019 suggest a shift in market sentiment.
  • 🤑 The correlation between global money supply and risk asset performance suggests that liquidity injections have been a driving force for market rallies.
  • 🙃 Ups and downs in global money supply impact yield spreads and asset performance.
  • 💳 Economic indicators and earning estimates challenge the initial optimism in equity and credit markets.
  • 📈 The role of liquidity in influencing market trends and investor sentiment should not be overlooked.

Transcript

hello mark Ostwald from ADM Investor Services international I'd like to share a few thoughts today on what I like would add I title macro micro and liquidity it's been an interesting week we've had a lot of bad news out of the euro area and yet the Italian government managed to issue 8 billion of ultra-long be TPS thirty-year be tepees remarkably f... Read More

Questions & Answers

Q: Why was the Italian government's issuance of ultra-long bonds significant?

The successful issuance of 8 billion euros of ultra-long bonds despite negative news highlights the strong demand for yield and investor confidence in Italy's ability to manage its debt.

Q: What were the downward revisions in economic forecasts for the euro area, Germany, and Italy?

The euro area saw a downward revision of 0.5%, Germany's forecast was revised downward by 0.6%, and Italy's GDP forecast experienced a substantial downward revision of 1% from 1.2% to 0.2%.

Q: How have S&P 500 earning estimates for Q1 2019 performed?

The S&P 500's earning estimate for Q1 2019 has seen the worst downward revisions since 2016, contradicting the initial optimism in equity and credit markets.

Q: What is the relationship between global money supply and risk assets?

The analysis suggests an inverse correlation between global money supply and risk assets. When global money supply contracted in the second half of 2018, yield spreads widened. However, liquidity injections by the Fed and the Chinese central bank led to a rally in risk assets.

Summary & Key Takeaways

  • The Italian government issued 8 billion euros of ultra-long bonds despite negative news from the euro area, indicating a strong demand for yield.

  • Economic forecasts for the euro area, Germany, and Italy have been revised downward, signaling pessimism about global growth prospects.

  • The S&P 500's earning estimate for Q1 2019 has seen significant downward revisions, challenging the initial optimism in equity and credit markets.

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