Archives of “June 11, 2020” day

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European indices close lower once again

  
Analysis, Global Indices

Major indices down for the 4th consecutive day

The European indices are closing lower once again with today’s declines accelerating the fall. The indices have been down each day this week after peaking on Monday but failing to extend higher. The provisional closes are showing:

  • German DAX, -4.0%
  • France’s CAC, -4.3%
  • UK’s FTSE 100, -3.7%
  • Spain’s Ibex, -5.2%
  • Italy’s FTSE MIB, -4.3%
In the benchmark 10 year yields investors have been buyers across all countries today. The German 10 year note is down -8.5 basis points and is seen the most buying interest.
European yields are lower

Pres. Trump blames the Fed? At the least, he is mentioning them.

  
  Analysis

Stocks are down so the blame game may be on (again)

It is the president back on the Fed’s case. He just came out with the tweet starting with “The Federal Reserve is wrong so often”.
I guess he came up a little short of blaming the Fed for the declines today, but you can only imagine what he may be thinking.

Stocks are down so the blame game may be on (again)
Anxiety about the upcoming election seems be hinging on the performance of the stock market. The S&P index erased all that’s declines for the year on Monday, but has moved down about -4.66% since the peak to the low today. It is currently down -4.43% YTD.. The NASDAQ index is still outperforming with a year to a gain of 9.10%. The Dow is back down -9% YTD after the fall over the last 3 trading days.

Regret is Worse Than Fear or Anger

  
Analysis, Education
  • Fear doesn’t feel good nor does anger, but that feeling that you made a mistake — sometimes a very serious one — and there isn’t anything you can do about it, is worse. You are powerless to change the past, and feeling powerless leads to feeling depressed.
  • Getting over regret is harder than recovering from other feelings. It tends to nag at us.. “if, only if”. You dream of being in the alternative situation and have to relive the reversion back to reality.
  • Missing entries blasts the fear of regret-o-meter.

Powell delivered everything the market could have hoped for, but it wasn’t enough

  
  Analysis

Have we reached the limit?

Equity bulls couldn’t have scripted the FOMC any better yesterday. The pace of QE was higher than expected and this may have been the most-dovish phrase uttered in the history of central banking:
“We’re not thinking about raising rates, we’re not even thinking about thinking about raising rates.”
Couple that with a promise to act forcefully, aggressively and proactively and it’s never been more clear that the Fed put is in play.
Yet as the dust settles, S&P 500 futures are 2.6% lower.
The message may be that we’ve hit the limit of what monetary policy can do for risk assets. In a sense, that’s a relief because the market can go back to focusing on reality instead of cheap money. A narrative about a second wave is starting to take hold.
There’s an argument that Powell didn’t do enough, or that he was too sombre but I don’t buy that. Yield curve control wasn’t on the table for this meeting and numerous Fed members made that extraordinarily clear. Anything more optimistic would have been misinterpreted as a hint about taking away the punch bowl.
So now we watch and see how it all shakes out. This is an emotion-driven market; the only thing that’s working is technical analysis and risk management. The market could fall 7% today and it wouldn’t surprise me, nor would an epic buy-the-dip.
I think the name of the game today is to try to read the sentiment of the market. For weeks all we heard was skepticism and the market ate it up. Is there a lot of negativity now? I don’t see it. he first headline I saw this morning was this:
Powell
I mean, wouldn’t it be poetic if the COVID-bounce died in rush by Robinhood traders to buy bankrupt companies?
Does anyone really believe in this economy? Starbucks yesterday was sobering. Even in China where 99% of stores are open and COVID cases are nil, sales were down 14% in the final week of May.
That kind of news has been steamrolled by the market for 10 weeks but between that an Trump’s epic victory lap after the Friday jobs report, maybe we’ve hit the limit.

China says that it is not easy for Chinese, US economies to decouple

  
  Analysis

Comments by China’s Cabinet adviser

  • Says China, US should resume timely communication on trade, other issues
One wonders if this is a message to the US or for prospective companies looking to invest into the Chinese market. Either way, both sides don’t appear to be on the best of terms right now but they are happy to let the illusion of the trade deal appease markets at least.

Nikkei 225 closes lower by 2.82% at 22,472.91

  
Analysis, Global Indices

Asian stocks tumble amid the risk-off mood today

Nikkei 11-06

Risk is on the defensive following the Fed decision yesterday, with US futures down by over 1.8% currently and that is dragging the overall mood in the market today.

The Hang Seng is down by 1.7% while the Shanghai Composite is down by 0.6%, with the Kospi and STI also seeing losses of over 2% and 3% respectively on the session.
Meanwhile, bonds are rallying with 10-year Treasury yields dragged all the way down to 0.71% and the dollar is holding firmer across the board alongside the yen.
AUD/USD is seen down by over 1% to 0.6927 currently, retracing lower after resistance around 0.7000 and the December high at 0.7032 continues to hold.
There’s chatter of the Fed serving a dire outlook to markets and fears of a second wave of infections in the US weighing on the risk mood here, but I’d argue it is more to do with the Fed not really goosing the market further despite not removing the punch bowl.

A second wave of coronavirus infections brewing in the US?

  
  Analysis

This comes as John Hopkins University reports that confirmed cases in the country surpasses the 2 million mark

Virus

A couple of red flags are being raised this week in the US, notably:

  • Texas reports its highest one-day count of new coronavirus cases i.e. 2,504 cases
  • Florida reports 8,553 new cases on the week – highest 7-day period total
  • California’s hospitalisations are at their highest since 13 May
Amid the ongoing protests in the country, the virus story is fading into the background – also the same for markets – but it is still something to be wary about.
I’ve mentioned before that the key thing for markets is how governments react to it and it is highly unlikely to expect a return to lockdown measures again.
In that sense, the “worst” is over but there are still more damaging parts that can’t really be quantified if the virus continues to be widespread among communities.
That will influence consumer behaviour/confidence and also impact the general workforce if there are going to be thousands of people sidelined every week because of this.
Despite the rise in the figures above, health experts are saying it is not clear if they are linked to the reopening of economies and the protests over the past two weeks.
But we’ll see how things go I guess. If there’s anything we’ve learnt from the initial outbreak is that complacency is the real killer.

Fed’s Powell press conference – the one thing that was missed in it

  
  Analysis

A point I have not seen discussed re the FOMC on Wednesday and specifically Chair Powell’s comments were just how downbeat he seemed.

And I want to add my thoughts on what appeared to me to be almost expressions of surrender from the Chair. He was very downbeat on prospects for the economy, probably rightly so. Yes, he was dovish, and the Bank will remain stuck dovish for a oping time to come. But, even with such loose policy settings Powell seems very dour indeed about the outlook ahead.
I suggest that fits with the market response, limited though it is, specifically
gold up (policy looser for much, much longer)
  • S&P slipping on the day and AUD not taking much positive from the day – US, and thus global growth overall, to remain very, very subdued ahead.
Oh, on the AUD, add in the threats from China for Australia too:

Japan Quarterly Business Sentiment Index survey (Q2): large Japanese companies worst in 11 years

  
  Analysis
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Business Sentiment Index (BSI) survey conducted by the Ministry of Finance and the Economic and Social Research Institute (a part of Japan’s Cabinet office) is conducted quarterly.

Business sentiment among large Japanese companies minus 47.6 (from -10.1 in Q1)
  • worst result in 11 years
  • 3rd quarter in a row in negative territory
For medium-sized companies, negative 54.1
  • and for mid- to small-companies minus 61.1
  • each also at their worst ever
Data out a little earlier.
—

Quarterly Business Sentiment Index (BSI) survey, conducted May 15

  • This survey analyses business leaders’ assessments of and forecasts for the economy
  • Its purpose is to get information for tracking economic trends
  • It covers about 15,000 companies that have established their headquarters or principal offices in Japan and have capital stock of 10 million yen or more

Deutsche Bank forecast EUR/USD to 1.20

  
Analysis, Forex

DB looking for a ‘2nd stage’ USD decline

  • focus will once again turn to specific growth outcomes across countries
  • US management of virus crisi has been “suboptimal”, and there are large fiscal cliffs ahead
  • could push EUR/USD to $1.20
DB “would frame dollar weakness around two stages Stage 1: the removal of the dollar risk premium, EUR/USD to 1.15. This has been the most important driver of the dollar so far”
  • “Stage 2: the end of dollar exceptionalism”
Via Bloomberg
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