Greetings,

"All is well" again in the global markets, with risk appetite returning as quickly as it dissipated late last year.

VIX is now at the lows we haven't seen since the summer.

Source: barchart

Here is the Morgan Stanley's Risk Demand Index.

Source: Morgan Stanley

Inflation expectations turned higher as the dollar rally stalled. Below we see TIPS (inflation-linked treasuries) outperforming regular treasuries since the FOMC announcement last week.

Source: Ycharts.com

Higher inflation expectations in theory result in easier monetary conditions by lowering real rates. The next chart shows the 5yr TIPS yield (effectively the 5-year real rate) moving lower.

A weaker trade-weighted US dollar correlates well (recently) with higher inflation expectations.

However, Morgan Stanley suggests that the easier financial conditions in the US are not likely to last and the dollar will soon resume its rally.

Source: Morgan Stanley

Here is how the risk appetite party could end.

Source: Reuters (3/21)

Let's switch to the Eurozone where we have a few observations to cover.

1. Corporate debt sales in the area spike to record levels as demand for ECB-eligible paper rises.

Source: @fastFT

2. Rising Eurosystem balance sheet is likely to expand the so-called "Target2 imbalances" in which periphery national central banks owe money to the Eurosystem. On a consolidated basis, these cancel out because one of the largest assets on Bundesbank's balance sheet is the loan to the Eurosystem. More on this later.

Source: ‏‏@Fmirw 

3. The German refugee crisis is proving expensive as the government works to absorb a couple of million people.

Source: @vexmark, @business

4. Speaking of government expenditures, here is the cost of pensions by country,

Source: ‏@jsblokland, @business

5. There are signs that the Eurozone economic growth has been improving. Industrial production has risen (first chart below) and the Eurozone GDP tracker shows higher growth in Q1 (second chart below) .

Source: @Fmirw 

Source: @ANZ_Research

In Switzerland, we see the SNB's FX holdings (mostly €) now roughly the size of the nation's GDP. Just to put this into perspective, this would be the equivalent of the Fed holding $17 trillion of some other nation's currency (which is obviously impossible).

And all the money printing (monetary base shown below) has not pulled Switzerland out of deflation. The Swiss franc strength is the key reason. 

Also as the SNB's balance sheet blows up, gold holdings decline. This is really bothering many in Switzerland  - which is why we had the "gold referendum" recently.

Source: ‏@auaurelija

Switching to Japan, here is the flash Markit manufacturing PMI. Not very encouraging, is it?

Source:Markit

The longer-dated JGB yield continues to fall. Here is the 40yr JGB. Is this bond rally overdone?

Source: Investing.com

Now on to China for a couple of recent trends.

1. Accounts receivables collection periods in China rise to multi-year highs. Softer economic activity is creating some cash flow issues.

Source: @JavierBlas2, @business

China's Tier-1 housing market is hot again - in spite of the inventory overhang in smaller cities.

Source: ING, h/t Alex 

That's partially why we see steel prices in China firming further. The fiscal stimulus is helping as well.

Source: barchart

In other emerging markets, Russia's consumer demand has been under pressure. That's why inflation has fallen quickly and that's why the Bank of Russia should be cutting rates. For some reason, the central bank decided to pause at 11% however.

Source: Barclays, h/t Josh

In Saudi Arabia the 1-month interbank rate remains elevated in spite of stronger crude prices. This is not a good sign and could indicate some liquidity pressures.

Source: @SoberLook

This note from JPMorgan is a bit dated (about 6 weeks), but it explains the situation well.

Source: JPMorgan,  @notgunnamatta 

We now take a look at a few items in the energy markets.

1. Cruse oil continues to rise. Is this too fast?

Source: barchart

2. US gasoline demand could hit a record this summer.

Source: ‏@JKempEnergy​

3. As crude oil approaches $50/bbl, profitable shale supply will rise. This is a cap on crude prices.  It's important to keep in mind that some two-thirds of US wells have a breakeven of around $40/bbl. 

Source: BAML

4. There is quite a bit of liquefied natural gas (LNG) capacity coming online. Too much?

Source: @BloombergBrief

Here is the latest on the United States.

1. Existing home sales missed expectations.

Part of the reason for weaker sales is the tight supply, especially in the more modest houses.

Source:  ‏@NickTimiraos

The tighter US housing supply, weaker US dollar (vs. CAD), and the China demand - all sent lumber prices sharply higher.

Source: barchart

2. Employment-to-population ratio has been improving markedly when adjusted for US demographic changes.

Source: @greg_ip

3. The FOMC dot-plot seems to suggest that the FOMC expects the nascent rebound in inflation to begin declining again. The Fed has little faith in inflation stabilization right now.

Source: @PantheonMacro 

Turning to credit/equity markets, ...

1. The Dow Jones High Yield Select 10 Index (representing the highest dividend shares) unexpectedly spiked.

Source: Ycharts.com

2. HY issuance remains quite weak, rivaled only by the 08/09 period.

Source: @Dealogic

3. Trading volumes in capital markets, especially debt markets, have fallen off dramatically since the financial crisis.

Source: Deutsche Bank, h/t Josh

Source: Deutsche Bank, h/t Josh

In the global commodity markets rally, one really stands out: sugar. More on this later.

Source: barchart

Finally, why do institutional investors like co-investment opportunities (co-investing side-by-side with the funds they invested with)?

Source:  ‏@Preqin  

Turning to Food for Thought, we have 5 items this morning:

1. PCs retain the number-one slot as the preferred gaming platform.

Source: @StatistaCharts, h/t Jake

2. There seems to be a solid relationship between income inequality and social mobility.

Source: @paul1kirby, h/t Jake

3. Americans no longer support nuclear power. Would cheap fossil fuel have anything to do with this?

Source: @chris1reuters, @Gallup

4. What's up with Connecticut's colleges and assaults on campus?

Source: @WSJ, h/t Jake

5. How are the UK taxes spent?

Source: @StatistaCharts, h/t Jake