Archives of “July 17, 2020” day

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IMF cites important risks to the outlook for US economy

  
  Analysis
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IMF on the US.

The IMF is out with a series of headlines on the US economy as the coronavirus risks increase.  They say:

  • Cites important risks to outlook for US economy including resurgence in coronavirus cases, systematic increase in property
  • Significant increase in US debt levels creates vulnerabilities; sees risk of extended period of low or negative inflation
  • Repairing US economy will take prolonged period, further policy efforts needed to boost demand, support most vulnerable
  • US should reverse existing trade barriers, tariff increases that are undermining stability of global trade
  • US treatment of undervalued currencies as countervailable subsidy poses significant risk to global trading system
  • Sees areas where US financial oversight could be tightened to further mitigate systematic risks
  • US financial system has proven resilient, but crisis at early state and banks should continue to restrain capital distribution plans
The statements do not give a warm fuzzy feeling

John Kenneth Galbraith, an economist, says the financial markets are characterized by…

  
Analysis, Education
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“…extreme brevity of the financial memory.  In consequence, financial disaster is quickly forgotten.  In further consequence, when the same or closely similar circumstances occur again, SOMETIMES IN A FEW YEARS, they are hailed by a new, often youthful, and always extremely self-confident generation as a brilliantly innovative discovery in the financial and larger economic world.  There can be few fields of human endeavor in which history counts for so little as in the world of finance.” [emphasis mine].

European shares end the session mixed

  
Analysis, Global Indices
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France and Spain indices move lower

The European shares are ending the session with mixed results. France and Spain indices are lower. Germany, UK, Italy are trading higher.

The provisional closes are showing:
  • Germany Dax, +0.44%
  • France CAC, -0.36%
  • UK FTSE 100, +0.6%
  • Spain’s Ibex, -0.34%
  • Italy’s FTSE MIB, +0.2%
For the week, the indices closed higher:
  • German DAX, +2.3%
  • France’s CAC, +1.9%
  • UK’s FTSE 100, +3.15%
  • Spain’s Ibex, +1.8%
  • Italy’s FTSE MIB, +3.1%
In the European debt market, the benchmark 10 year yields are mostly and modestly higher. The exception is the Italian 10 year which is trading down -1.5 basis points.
European debt market
In other markets as European/London traders look toward the exits for the week:
  • spot gold is trading at $13.50 or 0.75% $1810.70. The high price extended to $1811.11 the low has reached $1795.96
  • WTI crude oil futures are trading down $0.27 or -0.66% of $40.48. The high for the August contract reached $40.90 while the low extended to $40.02. The September contract is currently trading down $0.27 or 0.66% at $40.66
In  the US equity market, the major indices are trading mixed. The Dow industrial average is down on the day while the S&P and NASDAQ index are currently trading in the black
  • S&P index is up 3.25 points or 0.10% at 3218.81
  • NASDAQ index is up 11.5 points or 0.11% at 10,485.25
  • Dow industrial average is trading down 43.12 points or -0.16% at 26691.40
In the US debt market the yields are trading near unchanged across the curve:
  • 2 year 0.143, -0.2 basis points
  • 5 year 0.278%, +0.3 basis points
  • 10 year 0.618%, +0.1 basis point
  • 30 year 1.314%, +0.6 basis points
A look at the strongest and weakest currencies at the close of the London session shows the CHF is the strongest and the GBP is the weakest.  The US dollar is mostly lower.

The Richest Man in Babylon Rules

  
Analysis, Education
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the richest man in babylonThe Richest Man in Babylon is a great little personal finance book set as an ancient fictional tale that explains the ‘The Seven Cures to a Lean Purse’ and ‘The Five Rules of Gold’.

The Seven Cures to a Lean Purse:

  1. Start thy purse to fattening. Pay yourself first. Save money before you pay any bills.
  2. Control thy expenditures. Don’t spend every penny you make or you will be broke no matter how high your income becomes.
  3. Make thy gold multiply. Invest capital in assets that go up in value.
  4. Guard thy treasures from loss. Your number one priority is to keep your investment capital safe from loss.
  5. Make of thy dwelling a profitable investment. Buy a home in the right location as a hedge against inflation and to create equity and ownership over the long term.
  6. Insure a future income. Convert your earned income into assets that can create future case flow.
  7. Increase thy ability to earn. Grow your earning power through education, building skills, gaining experience in a field, or promotions to higher levels of responsibility.

The Five Laws of Gold:

  1. Gold cometh gladly and in increasing quantity to any man who will put by not less than one-tenth of his earnings to create an estate for his future and that of his family. Save 10% of your income each time you are paid and convert it to investment capital.
  2. Gold laboreth diligently and contentedly for the wise owner who finds for it profitable employment, multiplying even as the flocks of the field. Invest your capital for growth and compounding.
  3. Gold clingeth to the protection of the cautious owner who invests it under the advice of men wise in its handling. Find a successful model or system to copy for investing your money.
  4. Gold slippeth away from the man who invests it in businesses or purposes with which he is not familiar or which are not approved by those skilled in its keep. Never put money in something you don’t fully understand.
  5. Gold flees the man who would force it to impossible earnings or who followeth the alluring advice of tricksters and schemers or who trusts it to his own inexperience and romantic desires in investment. This fastest way to go broke is to try to get rich quick.

Eurozone May construction output +27.9% vs -14.6% m/m prior

  
Analysis, Economy

Latest data released by Eurostat – 17 July 2020

  • Prior -14.6%; revised to -18.3%
  • Construction output -11.9% y/y
  • Prior -28.4%; revised to -31.0%
Construction activity rebounded in May amid the easing of lockdown restrictions in the region but are still largely subdued as compared to conditions seen a year ago. The revised readings also saw the April drop being much steeper than initially reported last month.

Economists see Eurozone GDP contracting by 8.3% this year – ECB survey

  
Analysis, Economy

ECB releases the results of its latest survey of professional forecasters

ECB
  • 2020 GDP growth forecast -8.3% (previously -5.5%)
  • 2021 GDP growth forecast +5.7% (previously +4.3%)
  • 2022 GDP growth forecast +2.4% (previously +1.7%)
  • 2020 inflation forecast +0.4% (unchanged)
  • 2021 inflation forecast +1.0% (previously +1.2%)
  • 2022 inflation forecast +1.3% (previously +1.4%)
The previous survey in May can be found here. The revised economic contraction of 8.3% is slightly less deep than the ECB’s own projection of a 8.7% drop in the euro area economy this year, with a stronger rebound expected for 2021 and 2022.
But again, when it comes to forecasts and projections, take things with a pinch of salt. The virus situation is constantly developing and as such, views towards the global economy will also change depending on how things progress in the coming months.

Nikkei 225 closes lower by 0.32% at 22,696.42

  
Analysis, Global Indices

Asian equities keep more mixed towards the end of the week

Nikkei 17-07

The spike in coronavirus cases in Japan isn’t quite helping with sentiment among Japanese stocks but the overall mood today is a tough one to read anything from.

The Hang Seng is up by 0.2% but the Shanghai Composite is down by 0.5% after a modest advance in the early stages today. Elsewhere, US futures are mildly higher but not really hinting at any firm direction in risk sentiment at the moment.
As such, major currencies also have little to work with to start European trading with dollar pairs mostly keeping in narrow ranges still. EUR/USD is at 1.1380, stuck within a 16 pips range as we look to get things underway in the session ahead.

Economic data coming up in the European session

  
  Analysis
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US equities snapped back to losses yesterday, though they finished off the lows at least. Futures are keeping mildly higher today but the overall mood remains more tepid as we start to move towards European morning trade.

The dollar is a touch softer but nothing significant, as major currencies are still keeping in rather narrow ranges for the most part today.
It is still going to be all about risk sentiment ahead of the weekend, so expect virus headlines to dominate once again to see if we can get more meaningful price action rather than the choppy back and forth we have been seeing since last week.
0900 GMT – Eurozone May construction output data
Prior release can be found here. Construction activity is expected to bounce back after bottoming out in April, but overall conditions should remain highly subdued still.
0900 GMT – Eurozone June final CPI figures
The preliminary report can be found here. As this is the final release, it shouldn’t have much – if any – impact to markets.
Also, at 0800 GMT we will be getting the latest ECB survey of professional of forecasters but it isn’t really much of a notable release.
That’s all for the session ahead. I wish you all the best of days to come and good luck with your trading! Stay safe out there.
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