Archives of “May 2020” month

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Trump makes it clear that if there is a second wave of coronavirus in the US he will not shutdown the country

  
  Analysis

US President Trump says he will not close down the US if 2nd wave of COVID-19 hits.

If that is the case it would likely make addressing any health/death issues (of a 2nd wave) more difficult and could pose a risk to risk assets. Something to be aware of.
The US is still in the midst of dealing with the first wave.
US President Trump says he will not close down the US if 2nd wave of COVID-19 hits. 

China’s annual parliament session is underway – economic growth target to be revealed today

  
  Analysis

The opening session of the Chinese People’s Political Consultative Conference (CPPCC) was held yesterday.

The National People’s Congress (NPC) gets underway today. Both had been delayed due to the COVID-19 outbreak.
Premier Li Keqiang will hand the government work report to the NPC today, this usually includes economic targets for the year. The target is a keen focus for markets given the  impact of the virus. China reported the GDP last year was 6.1%, within the 6 to 6.5% target range set. In addition to the target watch for comments on relations with the US from the Premier. ICYMI these have deteriorated lately!
The opening session of the Chinese People's Political Consultative Conference (CPPCC) was held yesterday.
If time permits later I’ll get an online session of ‘Where’s Waldo?’ running.

Ray Dalio recaps the declines of empires

  
  Analysis

The latest from Bridgewater’s Ray Dalio

The latest from Bridgewater's Ray DalioOne of the greatest living macro investors continues on his long, plodding journey to lay out his thesis on the decline of America.
His latest chapter details the rise-and-declines of the British and Dutch empires and how there were repeated phases that are mirrored in China today.
It’s a compelling vision and the timeline stretches towards a perilous decade ahead for the US dollar and Americas position in the world. He will get to that at some future point but first, there’s the histor. Read it here.

US Indices end the day with declines. Fall for the 2nd time in 3 days

  
Analysis, US Market

But yesterday they were up 4 of the last 5

The US stocks are ending the day with that declines across the board. The stock falls are the 2nd time in 3 days (of course yesterday the stocks were up 4 of the 5 days).
The final numbers are showing:
  • S&P index -23.10 points or -0.78% at 2948.51
  • NASDAQ index -90.893 points or -0.97% and 9284.88
  • Dow industrial average -101.78 points or -0.41% at 24474.12
Some of the winners today included
  • Boeing, +4.25%
  • Raytheon technologies, +3.96%
  • Travelers, +3.74%
  • United Airlines, +3.365%
  • Ford Motor’s, +2.74%
  • Northrop Grumman, +2.44%
  • Delta Air Lines, +1.98%
  • Chewy, +1.94%
  • Lockheed Martin, +1.74%
  • Southwest Airlines +1.54%
  • Tesla, +1.49%
Some losers today included:
  • Qualcomm, -3.27%
  • Stryker, -3.15%
  • AMD, -3.09%
  • micron, -3.07%
  • Tencent, -2.65%
  • Netflix, -2.57%
  • Nvidia, -2.17%
  • Deutsche Bank, -2.0%
  • Amazon, -1.98%

Central banks are now shadow central banks too

  
  Analysis

The role of central banks has been perverted

The role of central banks has been perverted
Central banks were designed as the lender-of-last-resort for banks. If people wanted cash and a bank didn’t have liquid assets to quickly sell, it could turn to central banks for loans.
Yet over time, central banks have become the lender-of-last-resort (and sometimes first resort) to the entire financial system.
It’s especially notable because the coronavirus financial crisis wasn’t centered in banks. Stronger capital rules after the financial crisis left banks in generally good shape as the panic hit.
Instead it was the shadow banking system that collapsed. Alternative mortgage lenders needed to be saved; junk bonds were bailed out; commercial paper, repos and munis were saved. Swap lines were set up to protect the dollar-lending market.
Fed balance sheet

(more…)

European shares end the session lower

  
Analysis, Global Indices
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But off lowest levels for the day

The major European indices are ending the session lower, but off the lowest levels of the day. The provisional closes are showing:
  • German DAX, -1.4%
  • France CAC, -1.2%
  • UK’s FTSE, -0.8%
  • Spain’s Ibex, unchanged
  • Italy’s FTSE MIB, -0.8%
In the debt market, the benchmark 10 year yields are ending the session lower. With the UK yield down -5.5 basis points.
But off lowest levels for the day_

Reminder: The BOJ will be holding an emergency policy meeting tomorrow

  
  Analysis
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The meeting will begin at 0000 GMT

BOJ
  • BOJ calls for unscheduled monetary policy meeting on 22 May
The central bank is likely to announce a new scheme to facilitate funding for banks to extend to small businesses that have been hit by the fallout from the coronavirus outbreak.
In short, it is yet another measure to bolster liquidity conditions in the financial system, in order to ease corporate funding strains.
I don’t believe that the Kuroda & co. will offer any surprises beyond that, so expect other monetary policy tools to remain unchanged. They will likely just use the meeting to communicate the details of the new scheme if anything else.
As for the impact on the yen, I would argue that this should not play too significant of a role as the central bank has played it down and Kuroda has made mention to this in the past.
For USD/JPY, continue to keep an eye on the elusive 108.00 handle in any case.
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