Business

Following an early shaky start, which saw the Hang Seng tumble as much as 1.6% driven by weakness in financials and real estate names following the latest warning by PBOC governor Zhou about "sudden, complex, hidden, contagious, hazardous" risks In markets and a decline in local real estate prices, and pressure global risk, US equity futures have recouped all losses and are back to unchanged on monday morning, as President Trump continues on his first official trip to Asia.

Overnight, following the recent Saudi turmoil, prices in the crude complex jumped to the highest levels in over two years, amid speculation that Saudi Arabia is more likely to back output curbs following this weekend’s crackdown by Crown Prince Mohammed bin Salman. "It creates some hope that the current policy by the Saudis will be continued after March,” said ABN Amro senior energy economist Hans van Cleef. "We’re still in the longer-term upswing, the uptrend is still intact", and indeed Dec.

Alberto Gallo of Algebris Investments steps up to take his shot at the $64,000 (more like trillion) question in a report published this week “The Central Bank Bubble: How Will It Burst?”

Gallo manages the Algebris Macro Credit Fund described as “an unconstrained strategy investing across global bond and credit markets, and with lead responsibility for Macro Strategies” on the company’s website.

Gallo sets the scene as follows.

With a stock price surge of 13% after Amazon’s most recent quarterly filing, Wall Street analysts were reportedly “shocked” by the company’s rapid growth. The e-commerce juggernaut beat both quarterly revenue and earnings forecasts, and continues to trailblaze with a 34% revenue growth rate.

While the Fed may still be confused by the lack of inflation, if only in the "real economy", if not in financial assets, increasingly more analysts have realized that what the Fed has done is tantamount to blowing an roaring inflationary bubble, if largely confined to the realm of asset prices. And while we used a Goldman chart to demonstrate this divergence a little over a month ago...

... now it's JPMorgan's turn to undergo the proverbial epiphany.