The Daily Shot And Data - March 15, 2016

Let's start with emerging markets where we want to cover a number of developments.

1. Egypt, running low on dollars, devalued its currency sending the Egyptian pound down some 14% (chart shows the number of pounds one dollar buys).

Source: Investing.com

2. India's CPI seems to have stabilized (below consensus). Given the weakness in the nation's industrial output (discussed yesterday), are we looking at more RBI rate cuts?

3. Brazil’s economic activity index came in below expectations as signs of recovery remain elusive.

Source: @andres__abadia

4. As Russia decided to pull out of Syria, the Russian ruble moves higher (chart shows the number of rubles one dollar buys - fewer rubles means the ruble is more expensive).

Source: CNN

Source: barchart

Also, Russia announced that Iran insists on oil output recovery before a possible freeze. Iran will therefore be "exempt" from the deal. This news sent crude oil prices lower, with Brent falling below $40 again.

5. Are portfolio managers under-allocated emerging markets? The rebalancing into developed markets hit new highs recently.

Source: Jefferies

6. Here is the breakdown of non-performing loan ratio by country - comparing emerging and developed economies.

Source: @OxfordEconomics

Continuing with emerging economies, here are a few updates on China.

1. Starwood Hotels received an unsolicited bid from a Chinese-led investor group. Shares jumped nearly 8% in response. It will be interesting to see if this becomes a political issue in the US.

Source: Google

In general, China's global M&A targets $102bn in 2016 with $39bn in the US. Right in time for the US election.

Source: @WSJ, @EMgist

2. Are China's reserves adequate in relation to the liabilities? Using the IMFs risk-weighted methodology, apparently the nation's reserves are just below the "adequate" cutoff.

Source: @Abad_EM @Deutschebank, h/t Jake

3. China's wealth management products (WMP) demand is driving corporate bond spread to multi-year lows. This a significant systemic risk for China.

Now on to the Eurozone, where corporate yields compressed further on expectations of ECB purchases.

Source: @fastFT

According to JPMorgan, the ECB has plenty of room to grow the Eurosystem's balance sheet - especially relative to the BoJ. Here is how the major central banks' balance sheets compare.

The next chart is the BOJ's tiered approach to negative rates. This is the type of program the market expected the ECB to implement. It didn't, opting to stop lowering rates instead.

Source: Goldman Sachs

Eurozone's industrial production rose double the amount that economists had been forecasting on a year-over-year basis. Ireland was the greatest driver of that improvement.

Switching to the UK for a moment, the 1yr GBP risk reversals (10- and 25-delta) are pricing in the risk of Brexit. The effect is more extreme than in 2008.

Back in the United States, we have several items to cover.

1. Capital Economics projects a fairly aggressive Fed tightening cycle, consistent with the dot plot. The group has the Fed Funds rate above 1% by year-end, accelerating in 2017. This is completely inconsistent with where the markets are pricing in the tightening pace and would result in another spike in volatility and tight financial conditions. It's unlikely the Fed would want to see that.

Source: @CapEconUS

2. The 2016 consensus US GDP growth keeps getting downgraded.

Source: ‏@Not_Jim_Cramer

3. The NY Fed survey found that those with a high-school degree now expect the same wage increase 1-year out as those with a college degree - for the first time in years.