Another quiet one

It’s again another quiet, summer morning outside of the focus on the virus count which is simply do to more people going outside and not wearing masks, something hopefully easily addressable but I know easier said than done.

If you missed it, it was refreshing to hear from Dallas Fed President Robert Kaplan yesterday express some humility on the powers of what central bankers can do. “There are limits to what monetary policy can achieve” and said he doesn’t want to go too far. He also is not a fan of negative interest rates. I say, we have worldly evidence of what extreme monetary policy looks like from the ECB and BoJ. Our Fed now has a choice, as they’ve gone on the same path but have not reached the same destination.  Continue on in the footsteps of the ECB and BoJ with all the collateral damage to their banking system and bond markets and which have an impossible task of ever reversing their policy stance, or put some limit on what they can do from here, and thus give themselves more flexibility in getting out when the time comes.

In the midst of the gradual reopening Singapore said its industrial production in May fell 16.5% m/o/m and 7.4% y/o/y worse than the estimate of down 5.6% m/o/m and 7.4% y/o/y. Pharma was the one bright spot and semis saw a slight gain but offset by weakness everywhere else.

Thanks to draws on credit lines in May, the ECB said bank lending to non financial companies rose 7.3% y/o/y vs a 6.6% increase in April. Lending to households though remain more subdued and held at a 3% y/o/y rate. Reflecting the rise in the ECB balance sheet, money supply growth spiked by 8.9% y/o/y from 8.2% in April and that was above the estimate of up 8.6%. There was no market response to this data as it isn’t a surprise with what the ECB has done and where a bunch of the lending went.