Archives of “July 2019” month

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Another sign of the madness in the bond market

  
  Analysis

Junk bonds trade with negative yields

More than a dozen junk bonds in Europe now trade with a negative yield, the WSJ reports.
Paying for the privilege of owning a junk bond is pure madness but it’s a sign of just how loose and stimulative central banks have grown — especially the ECB.
Even in the US, there have been some hard-to-fathom moves with the yield for BB-rated bonds in the ICE Bank of America Merrill Lynch euro high-yield index at 1.9% down from 3.6% in January.
If this is just the start of a cycle of cutting rates then it will mean far more companies will have negative yields. That will certainly help to underpin zero-yielding assets like gold.
Junk bonds trade with negative yields

US stocks edge up to new records as investors eye earnings season

  
Analysis, US Market
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Wall Street notched fresh record highs in cautious trading on Monday as investors awaited the first onslaught of quarterly earnings reports.

The S&P 500 bounced off session lows seen in afternoon trading to gain about half a point at 3,014.30. The Dow Jones Industrial Average ticked 0.1 per cent higher, and the Nasdaq Composite rose 0.2 per cent.

The modest rally extended a record run on Wall Street that was fuelled last week by expectations for looser monetary policy at the Federal Reserve. The benchmark S&P 500 secured its third closing high in as many sessions, while the Dow and tech-heavy Nasdaq set records for a second consecutive day.

Citigroup offered the opening salvo in a busy week of bank earnings. Goldman Sachs, JPMorgan Chase and Wells Fargo will file on Tuesday. Bank of America’s financials will arrive a day later.

Citi’s shares fell 0.1 per cent, paring a gain of 1.5 per cent made last week in the run-up to its numbers.

A number of further corporate reports due throughout the week will start to reveal if the US is on course for its first earnings recession since 2016, playing into investors’ perceptions of the outlook for the economy as the Trump administration’s trade dispute with Beijing continues.

Growth data from China published on Monday showed the country’s rate of quarterly expansion was its slowest in 27 years at 6.2 per cent, but there was relief that the tariff battle between the world’s two biggest economies had not taken a deeper toll on the data.

Early gains on Wall Street helped European bourses consolidate gains after an uncertain showing in the region. The international Stoxx 600 rose 0.2 per cent.

Frankfurt’s Xetra 30 was up 0.5 per cent. London’s FTSE 100 rose 0.2 per cent, with its gains underpinned by miners.

China reiterates that it will sanction US firms involved in Taiwan arms sales

  
  Analysis

Comments by China’s foreign ministry

There are only a handful of firms believed to be involved in this matter as pointed out here, but even so their relation to other Chinese firms are a bit of a mystery – though I reckon China themselves should have their own defense contractors so yeah.

But the gesture here is more of a symbolic one rather than one of magnitude as it comes amid the backdrop of trade talks between both countries sitting in limbo.

ICYMI – Trump takes yet another dig at the Fed

  
  Analysis
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Trump doesn’t appear to be relenting his stance ahead of the FOMC meeting

The tweet read:

“We are doing great Economically as a Country, Number One, despite the Fed’s antiquated policy on rates and tightening. Much room to grow!”

With markets already all but certain about a 25 bps rate cut at the end of this month and Powell reaffirming those expectations, it sure sounds like he wants more rate cuts to follow later in the year despite claims of the economy doing “great”.
The issue here is that Trump wants to pursue a currency war now and that is not what the Fed is looking to do. If the Fed is just throwing around rate cuts on the back of some slight worries in the economic data, they won’t have very much ammunition left to deal with a proper economic downturn when the time does come.

Why Technical Analysis Works

  
Analysis, Education
  • All through time, people have basically acted and re-acted the same way in the market as a result of: greed, fear, ignorance, and hope – that is why the numerical formations and patterns recur on a constant basis.
  • There is nothing new on Wall Street or in stock speculation. What has happened in the past will happen again, and again, and again. This is because human nature does not change, and it is human emotion, solidly built into human nature, that always gets in the way of human intelligence.
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