Chinese PMI relieving markets and fundmanagers chasing the market again, but the FED model points towards lower equities.

* The Chinese PMI relieved markets. June starting with an equity rally.
The Chinese "wonder story" continues. However, it is interesting to notice that Chinas power consumption fell by 4% over the first five months of the year. So? Well, this variable has a high correlation with Chinas industrial output,,,,,

Chinese officials seem to have become more uncomfortable with the pace of which the Chinese banks have expanded their loan books this year. A statement was issued on Sunday demanding Chinese banks to "strengthen internal risk controls". It seems the Chinese are tightening their credit already. However , in this environment, the market choose to focus on the Chinese PMI numbers and the bullish aspect.


* Chinese PMI triggering relief rally
There were some concerns pre the Chinese PMI. However as they failed to materialise, equity markets jumped higher. Fundmanagers are seeing huge inflows of real money. Since they are only allowed to hold a certain level of cash, this generates problems for them. They have to buy stocks. Chasing the market.


* The FED model pointing towards lower equities.
The FED model compares Bondmarket PE with the Equity PE. The PE differential has moved into negative territory, suggesting higher yields will soon start weigh down on equities.


* New positions and position changes
- Bought Eur Call/Usd put
- Bought Gbp Call/Usd put



As always, good luck





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