Archives of “October 2019” month

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What happens now that Boris Johnson has managed to strike a Brexit deal?

  
  Analysis
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We have been down this road before

Johnson

A Brexit deal is only as good as its chances to pass a vote in parliament. Just ask Theresa May how that worked out for her.

For all the optimism we’re seeing in the pound over the past week, all of that now hinges on whether or not Boris Johnson can get this deal through a parliamentary vote.
So, what are the key signs to watch for that?
The most obvious telltale sign is to watch for the stance adopted by the DUP. Just be reminded that Johnson doesn’t have a working majority in parliament so he will need all the support he can get at this point in time.
As it stands, the DUP isn’t quite on board yet so that means there is still a high chance of the deal failing to get through a vote in parliament.
What would that mean if we see such a scenario? Again, it just puts us back to a similar position when Theresa May was trying to get her Brexit deal through a vote – where she failed three times by the way.
Another possibility is if Johnson decides to couple his deal with a referendum vote in order to sway Labour lawmakers to get on his side. But that is likely a long shot and one he is almost certainly not going to pursue.
Otherwise, I still reckon it is a tall order for this Brexit deal to pass a vote in parliament at this juncture. But if the DUP and ERG gets on board, I think the pound has the potential to first head towards 1.33 before looking towards 1.35 next.

Cable hits five-month highs as pound jumps after UK and EU reach Brexit agreement

  
Analysis, Forex

Cable looks towards the 1.30 handle next

GBP/USD D1 17-10

The pound is posting solid gains on the day as Boris Johnson manages to strike a deal with European leaders, although now the big question remains, is the DUP on board and can Johnson get this through a parliamentary vote?
There is plenty of optimism so far but it has to be put into context. Theresa May also had a Brexit deal but could not get hers through parliament at the end of the day. Will it be different for Johnson?
Update: A couple of news sources are reporting that the DUP isn’t quite on board just yet and that is seeing the pound pare some of its gains. Cable back down to 1.2920 from a high of 1.2990 earlier.

China commerce ministry: The goal is to stop the trade war, remove all tariffs

  
Analysis, Economy

Is that a hint on the stance that they are about to take moving forward?

US-China
  • Hopes that China can make progress with the US in removing tariffs
  • Currently working on text with the US
  • Wishes both sides can reach an agreement as early as possible and make progress on cancelling tariffs
Just in case you forgot about this “little” report here from earlier in the week.
It could be a subtle hint about what will be discussed in the next round of talks but I may be reading too much between the lines here.
I mean that’s quite a bit of mention about removing/cancelling tariffs, no? ¯\_(ツ)_/¯

UK Times says Corbyn preparing to support a 2nd referendum on possible new Brexit deal

  
  Analysis
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UK Labour Party leader Corbyn

  • Said to be getting set to put any deal deal to a second referendum
  • is understood to support backing an amendment to a new vote on a withdrawal agreement that the prime minister hopes to put before parliament on Saturday
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UK house of Commons is set to sit on Saturday in the hope of getting a deal approved
  • if that vote passes, the prime minister will still need to pass legislation to implement the agreement through both houses of parliament by the October 31 deadli

US SEC charges 18 traders in a manipulation scheme … profits over $31 million

  
  Analysis
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The US Securities and Exchange Commission has obtained an asset freeze against the 18 traders

  • scheme to manipulate more than 3,000 U.S.-listed securities
  • for over $31 million in illegal profits
The SEC alleges that the traders, who are primarily based in China, manipulated the prices of thousands of thinly traded securities by creating the false appearance of trading interest and activity in those stocks, thereby enabling them to reap illicit profits by artificially boosting or depressing stock prices. 
For example, according to the SEC’s complaint, the traders used multiple accounts to place several small sell orders to drive down a stock’s price before using a different set of accounts to buy larger amounts of the stock at the artificially low prices. After accumulating their position, the traders then flipped the script and placed several small buy orders to push up prices so they could then sell their stock at artificially high prices.

Bitcoin : Sometimes the reaction is the tell

  
Analysis, BITCOIN

Bitcoin technical analysis chart

The classic expression is that: “The bigger they are, the harder they fall”.
For markets, it might be “the harder they fight, the weaker they are.”
I’ve written about markets for more than a decade and often the articles that generate the most-surprisingly lively reactions are the when a market is weak and you say it’s going lower. Or write something negative about something that’s already beaten up.
It’s true that the most-ardent defenders of something are those who have suffered the most pain.
Bitcoin has been falling for a week and it’s down almost 25% in the past month and 41% since the June spike. The bulls are licking their wounds.
Today’s decline is probably just a continuation for the building bearish sentiment after the failure to break the 38.2% retracement of the Sept fall. Bitcoin is the most-technical market I know of; probably because there is a dearth of fundamental news.
Bitcoin
However I wrote about a tangential fundamental story today as US authorities used Bitcoin to bust 338 people who used it to pay for child porn on a South Korean website that was one of the largest of its kind. It highlights that people who were using Bitcoin thought they had some level of anonymity.
Was the news responsible for today’s 3% fall in Bitcoin and a similar decline in the larger crypto space? No one knows. It’s the same in every market. You can’t get into the head of every seller.
What was different? The post generated a surprising amount of anger. The bulls tell me that everyone knows Bitcoin isn’t anonymous. Well the 338 people who are in jail now certainly didn’t know. In addition, there are still many ways to make Bitcoin anonymous and crypto is used in illicit activities (so is the dollar, I know).
Without getting deeper into the argument, I think the takeaway is the reaction. it’s the kind of reaction you often see in a market that’s weak.
I’m going to take all the anger directed at me as a sign of growing FUD. I’m not writing anything that hasn’t been said before. The vitriol is probably a barometer of the jitters in the market, and weakness.
Watch out for a break of $7700.

Fed’s Beige Book: Economy expanded at slight-to-modest pace

  
  Analysis
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Highlights of the Fed’s anecdotal economic summary:

That’s a downgrade from modest previously.
Highlights:
  • Businesses see expansion continuing, many have cut outlook
  • Business activity varied across the country
  • Districts in south and west were more upbeat that midwest and great plains
  • Spending was solid on balance, housing market conditions changed little
  • Some districts suggested persistent trade tensions and slower global growth weighed on activity; early impact of GM strike was limited
  • Most expect economic expansion to continue; however many lowered their outlooks for growth in coming 6-12 months
  • A number of manufacturers reduced headcount because orders were soft, some cut hours rather than reduce staff
  • Wages rose moderately in most districts, with upwards pressure noted for lower-skill workers
  • Employers continued to use bonuses and benefits to attract and retain talent
  • Most districts characterized the recent pace of prices increases as modest
  • Retailers and manufacturers noted rising input costs
  • Shipping rates remained lower than they were earlier in the year because of excess capacity

Americas largest underground coal miner is headed for bankruptcy

  
  Analysis
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Murray Energy didn’t make interest payments due yesterday

Murray Energy didn't make interest payments due yesterday
Coal isn’t back.
Murray Energy was granted extensions to renegotiate debt deals but they appear to have come up empty. Bloomberg reports that the company failed to make an interest payment due yesterday.
The failure of this company highlights the limited power of even the President of the United States in battling against economic forces. Many coal companies have already filed for bankruptcy, although none as big as Murray. The company employs nearly 7000 people and the largest underground coal miner in the United States.
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