Archives of “November 7, 2019” day

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European shares extend higher on global growth hopes

  
Analysis, Global Indices
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Euro Stoxx 600 it’s 4 year high. 5th straight day of gains

The European major stock indices are closed and extending higher on global growth hopes.
The Euro Stoxx 600 index is trading at 4-year highs and is up for the 5th straight day of gains.
The provisional closes for other indices are showing:
  • German DAX, +0.8%. The close is the highest level since February 2018
  • France’s CAC, +0.3%
  • UKs FTSE is ending the session flat
  • Spain’s Ibex, +0.4%
  • Italy’s FTSE MIB, +0.6%

Yields are also higher as traders in global debt markets are also hoping global economies will get a boost on more cooperative US China relations.

Euro Stoxx 600 it's 4 year high. 5th straight day of gains_

EURUSD tests 38.2% and swing area

  
Analysis, Forex

Up and down day for the EURUSD

The EURUSD has moved up and down today. The low extended to 1.1054 in the Asian session. Shot higher in the early European session but stalled just ahead of the high from yesterday at 1.10923 level (the high reached 1.1091 and reversed lower).
Up and down day for the EURUSD
The subsequent run back to the downside has taken the price back below the 38.2% retracement of the move up from the October 1 low. That retracement level comes in at 1.10642. Also near that area is swing highs from October 11 at 1.1062, swing lows from October 16/17 at 1.1065. Earlier lows from this week also came in near that level at 1.1063-65. There is a lot of congestion at that 38.2% retracement area.
Admittedly, today the price has been above and below that area. So there is a battle going on, and traders may be reluctant to push too much to the downside.  As a result traders will be paying close attention to the next momentum move.   If the pair starts to trade more comfortably below the 1.1062 area, we should see increased downward momentum, with traders eyeing the session lows and then the 200 bar moving average on the 4 hour chart at 1.10447.
Conversely, if the sellers can’t make the push below (and stay below) this cluster of support, the ups and downs could continue, with a move back above the 1.1073 being a relief for the dip buyers (and should attract buying from intraday sellers on the disappointment).

Carney press conference after BoE remains on hold

  
  Analysis
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Mark Carney

  • Recent Brexit deal creates a possibility of a pick up in UK growth
  • World risks slipping into low growth, low inflation but many of these dynamics occurred first in the UK
  • Both reduced Brexit uncertainty and stronger world economy assumed in BoE forecasts, but neither is assured
  • Now evidence that households are doing precautionary saving before Brexit
  • Brexit uncertainties are weighing particularly heavily on business investment
  • Reduced chance of a no -deal Brexit has pushed up sterling
  • Brexit agreement reduces risk of no deal significantly
  • pick up in UK growth likely to be limited by a lack of supply capacity in the economy
  • New BoE Brexit assumptions assume transition occurs over 3 years vs previous much longer transition.
GBPUSD pushing down towards 1.2800, but that level is holding for now

BOE leaves bank rate unchanged at 0.75%

  
  Analysis
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BoE rate decision

BoE rate decision
Vote hike: 0

Vote unchanged: 7
Vote cut: 2

  • Saunders and Haskell voted for cut.
  • Saunders and Haskell say stimulus needed now as data suggests labour market turning and sees downside risks from Global economy
  • UK economy likely to be 1% smaller by Q4 2022 than expected in August forecasts
  • Saunders and Haskell wanted to cut rates to 0.50% from 0.75%
  • Inflation in one years time seen at 1.51% (Aug 1.90%), two years time (2.03% Aug 2.23%) and three years time 2.25% (Aug 2.37%)
  • Market rates imply more BoE loosening than in Aug point to bank rate at 0.5% in 2022
  • BoE MP report shows unemployment rate at 3.8% in two years time (Aug 3.7%)
  • Risks to UK GDO growth skewed to the downside in 2nd and 3rd years of forecast horizon
  • BoE forecast sees inflation bottoming oil at 1.2% in Q2 and Q3 2020 due to lower oil prices, regulatory caps on domestic electricity and water bills
  • Almost all UK firms surveyed by the BoE said that they are ‘fully ready’ or ‘as ready as they can be’ for Brexit
In an initial reaction to the two dissenters who voted for rate cuts the GBP has fallen. The slight dovish shift is not a huge surprise, but it is unexpected. Hence the fall in the GBP. Slowing growth, slowing inflation are common themes across the globe. I would expect the GBP to be pressured now for the rest of the session.

Full BoE rate text here

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US-China trade talks: A guilty silence leads to risk off tilt.

  
  Analysis

BOE metting at 12:00GMT

The mood of the market has gone from neutral/cautious to slightly negative/cautious as the US is taking too long to respond to China’s tariff rollback requests. The silence indicates something is wrong.
BOE metting at 12:00GMT
It’s like the silence you get in class when Bobby has hidden the teachers glasses and everyone knows , but no-one is going to tell the teacher. A guilty silence. That’s what we have now. Something seems to be up , so JPY crosses are getting bids and we are seeing risk off moves. AUD, NZD weakness and JPY, CHF strength

Currencies risk on

Think it’s too late? The world’s greatest fund manager didn’t make money until he was 52

  
Analysis, Education
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Jim Simons had modest wealth at 52; now he’s worth $23 billion

Jim Simons
Financial markets — and risk taking in general — are largely the domain of the young. Early adulthood is the time to swing for the fences while middle age is a time for prudence, perhaps risking a manageable part of the nest egg.
Yet that’s not always true. It’s particularly untrue of some of the world’s greatest investors.
Among them is Jim Simons, the king of quants. Yesterday Gregory Zuckerman published “The Man Who Solved the Market: How Jim Simons Launched the Quant Revolution.”
It details how a 40-year old math professor walked away from a job at Stony Brook University to try trading currencies. He had no idea what he was doing but raised $4 million with a few partners. He recruited renowned mathematicians to help him. It didn’t work and losses topped $1 million.
“If you make money, you feel like a genius,” he told a friend. “If you lose, you’re a dope.”
He gathered more data and persevered through the 1980s with a mixed record. In 1989 he lost 4%.
Finally, Simons along with recently recruited colleagues Henry Laufer and Elwyn Berlekamp, started to focus on short-term patterns — Monday’s price action often followed Friday’s, while Tuesday saw reversions to earlier trends.
It worked and the Medallion fund gained 55.9% in 1990. It hasn’t stopped. His fund as generated average returns of 66%, racking up gains of $100 billion. No other fund or manager is even close. A $10,000 investment 30 years ago excluding fees would be worth $40 billion today. Even after fees, it would be worth $195 million.
How the fund makes money is one of the world’s most-closely guarded secrets but it’s story isn’t. Simonds certainly had mathematical talents but he know almost nothing about markets when he started out at age 40 and managed to amass one of the world’s great fortunes.
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