Archives of “April 2019” month

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European equity close: Stocks cap a great week with gains

  
Analysis, Global Indices

April is a great month for stocks and it’s had a great start

Closing changes for the main bourses:
  • UK FTSE 100 +0.8%
  • German DAX +0.2%
  • French CAC +0.4%
  • Spain IBEX -0.15%
  • Italy MIB +0.2%
On the week:
  • UK FTSE 100 +2.4%
  • German DAX +4.2%
  • French CAC +2.45%
  • Spain IBEX +3.1%
  • Italy MIB +2.3%

Imagine if Europe had a half-decent economy and the UK didn’t have Brexit?

The German DAX is up 6.5% since March 28 and has risen above the 200-day moving average:
April is a great month for stocks and it's had a great start

March non-farm payrolls +196K vs +177K expected

  
Analysis, Economy

Non-farm payrolls for March 2019

nonfarm payrolls chart
  • Prior was +20K (revised to +33K)
  • Estimates ranged from 145K to 277K
  • Two month net revision +14K
  • Unemployment rate 3.8% vs 3.8% expected
  • Participation rate 63.0 vs 63.2% prior
  • Avg hourly earnings +0.1% vs +0.3% exp
  • Avg hourly earnings +3.2% y/y vs +3.4% exp
  • Private payrolls +182K vs +177K exp
  • Manufacturing -6K vs +10K exp (first decline since Oct 2016)
  • U6 underemployment 7.3% vs 7.3% prior

The headline number will relieve a bit of angst after the poor February print but the earnings numbers are poor. For stock markets, this is a bit of a goldilocks number because you have a decent economy without the threat of hikes because of rising wages. However, it’s a negative for the dollar because it underscores that the Fed is done hiking for the cycle.

What does a 30 June Brexit extension mean?

  
  Analysis

In case you forgot, it’s the same extension period May requested two weeks ago

Brexit

The key thing in May’s letter requesting a Brexit extension is that she lays out two things. The first being that the UK will aim to ratify a deal before 23 May and the second being that if that fails, they will be holding European Parliament elections.
The latter is seen as a key point in the timeline because if the UK does participate in the European elections, then there’s really no petty reason why Brexit cannot be delayed to next year. As things stand, May is not really in a position to outright request for an extension to next year as it would be political suicide but the fact that she subtly hints at allowing the European Union to pursue that route means that we’re more than likely to end up with a Brexit delay of twelve months – as reported earlier.
All this of course will ultimately depend on the UK finding a solution to break the current Brexit deadlock and as it stands, it doesn’t look like we’ll get one any time soon.

Jesse Livermore :Trading Wisdom

  
Analysis, Education
  • It takes a man a long time to learn all the lessons of his mistakes. They say there are two sides to everything. But there is only one side to the stock market; and it is not the bull side or the bear side, but the right side.
  • I think it was a long step forward in my trading education when I realized at last that when old Mr. Partridge kept on telling the other customers, Well, you know this is a bull market! he really meant to tell them that the big money was not in the individual fluctuations but in the main movements that is, not in reading the tape, but in sizing up the entire market and its trend.
  • The reason is that a man may see straight and clearly and yet become impatient or doubtful when the market takes its time about doing as he figured it must do. That is why so many men in Wall Street, who are not at all in the sucker class, not even in the third grade, nevertheless lose money. The market does not beat them. They beat themselves, because though they have brains they cannot sit tight. Old Turkey was dead right in doing and saying what he did. He had not only the courage of his convictions but the intelligent patience to sit tight.
  • The average man doesn’t wish to be told that it is a bull or bear market. What he desires is to be told specifically which particular stock to buy or sell. He wants to get something for nothing. He does not wish to work. He doesn’t even wish to have to think. It is too much bother to have to count the money that he picks up from the ground. We love volatility and days like the one in which the stock market took a big plunge, for being on the right side of moving markets is what makes us money. A stagnant market in any commodity, such as grain has experienced recently, means there’s no opportunity for us to make money.
  • A man will risk half his fortune in the stock market with less reflection than he devotes to the selection of a medium-priced automobile.

Switzerland March foreign currency reserves CHF 756.0 billion vs CHF 740.6 billion expected

  
  Analysis

Latest data released by the SNB – 5 April 2019

Swiss reserves are ticking higher once again, reaching its largest level since April last year. Let’s see if they will keep this up in the coming months after the steep rise since 2014. For now, this is very much still in the plateau region of what we have seen since late 2017.

Nikkei 225 closes higher by 0.38% at 21,807.50

  
Analysis, Global Indices

Tokyo’s main index inches up towards its 200-day moving average

NKY 05-04
Asian equities were slightly more positive in trading today but all eyes are on the US jobs report release later today to decide how risk assets will ultimately perform to wrap up the week.
Japanese and Chinese stocks are looking more upbeat but the Hang Seng index is actually trading lower by 0.2% whereas the Shanghai Composite is up by 0.9% currently.
In any case, risk sentiment remains somewhat flat and muted as US equity futures are trading just 0.1% higher and I would expect European equities to reflect a similar sentiment later on in the day. That should offer little direction for yen pairs and as such, USD/JPY remains near unchanged levels at 111.68 currently.

Here’s more evidence that global recession fears are beginning to seep into markets

  
Analysis, Economy

Australia’s thermal coal prices plunged this week, set for its biggest weekly fall since the 2008/09 global financial crisis

Coal, LNG

While most markets remained steady this week, something awry is brewing in the commodities space as coal prices for prompt loading at Australia’s Newcastle port have lost almost 20% this week – falling to its lowest since May 2017 to under $80 per tonne now.
You can scratch this off as an isolated incident if it were just coal alone, but Asian spot LNG (liquefied natural gas) prices are also seeing a plunge of more than 60% from its peak towards the end of 2018. For some context, LNG is coal’s most direct competitor as a power generation fuel so there’s gotta be something amiss here.
There’s always the case that seasonal demand is waning because we have passed the winter months but traders are also noting that slowdown in industrial activity across the globe is contributing to the decline in prices here as demand has plunged rapidly.
Add to the fact that China is also cutting down on Australian coal imports, that isn’t good news for coal miners in Australia alongside reports that Chinese coal inventories have ballooned – and are not likely to drop any time soon as winter demand has passed.
When a global recession hits, there’s always red flags pointing towards the beginning of them. This may be a nothing but given the way economic conditions are developing as of late, I would say it’s too early to discount the fact that this is potentially mounting evidence that markets are fearing one is just over the horizon.

The BOJ is the Japanese stock market’s #1 bag holder ….

  
  Analysis

Figures released for the Japanese 2018 fiscal year, which ended March 30

Overseas investors sold off Japanese stocks by the largest margin since 1987 during the year
  • About 50bn USD, give or take
Who to? Well, the Bank of Japan’s asset purchases absorbed … all if it. The central bank bought slightly more worth of equity, through exchange-traded funds.
BOJ’s estimated aggregate ETF balance totaled 29 trillion yen as of Wednesday, around 5% of the market capitalization on the TSE’s first section.
Nikkei reports:
  • If the Nikkei average sinks below 18,000, the market value of the ETFs held by the bank will fall below book value, BOJ Deputy Gov. Masayoshi Amamiya warned in March. Though the index remains well above that threshold, a sudden downturn would damage the BOJ’s net worth and potentially shake confidence in Japan’s currency.
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