Archives of “Economy” tag

rss

ECB leaves key rates unchanged in July monetary policy meeting

  
  Analysis
#  #  #  #  #  #  #

European Central Bank monetary policy decision – 25 July 2019

  • Prior decision
  • Main refinancing rate 0.00%
  • Marginal lending facility 0.25%
  • Deposit facility -0.40%
  • Sees rates at present or lower levels at least through 1H 2020
  • Central bank stands ready to adjust all of its instruments, as appropriate, to ensure that inflation moves towards aim in a sustained manner
  • Says will examine options for tiering, potential QE
  • Orders review of options including tiered system for rates
  • Says needs highly accommodative policy for a prolonged time
  • Determined to act if inflation outlook falls short of its aim
Despite the central bank not acting here, the adjustment to the forward guidance and mentioning of further easing measures is just about as dovish as they can get. The part on examining options for rate tiering and QE highlights that and the former will at least be a relief for banks as cuts are set to come in September.
Of note, there’s a subtle tweak to the forward guidance with the ECB allowing for rate cuts now shifting from “rates at present levels at least through 1H 2020” to “rates at present or lower levels at least through 1H 2020″.
EUR/USD nudged higher initially on the rate decision to 1.1161 but after digesting the details, the pair has fallen to a low of 1.1119 before lingering around there now. Expect a more dovish Draghi to potentially send the pair below the year’s low of 1.1107 later on.

Nissan to post 90% profit drop and cut thousands more jobs

  
  Analysis
#  #  #  #

— Nissan Motor is expected to report a more than 90% plunge in first-quarter operating profit on Thursday, Nikkei has learned, and will cut up to 7% of its global workforce as it braces for one of the worst years in a decade.

Operating profit in the April to June period will come in at less than 10 billion yen, down from 109.1 billion yen ($1 billion) for the same period a year earlier.

The Japanese automaker issued a statement saying that it expects the result “to be close to the figure reported” in the Nikkei article, which it described as “speculative.”

Sales in the U.S., one of Nissan’s biggest markets, continue to fall, while the costs of developing electric vehicles and autonomous driving technologies are weighing heavily on profits.

The company is now scrambling to reduce production capacity and intends to increase the planned 4,800 job cuts announced in May to more than 10,000 out of a 139,000-strong workforce.

Data from QUICK FactSet shows the automaker’s operating profit also fell below 10 billion yen for January to March. The last time Nissan’s operating performance dropped so sharply was in January-March 2009, when the company recorded a loss of 200 billion yen.

Nissan is scheduled formally to announce the first-quarter results on Thursday afternoon. (more…)

US-China trade war could become a currency war – Fitch

  
  Analysis
#  #  #  #  #

I reckon it already has…

Dollar yuan

According to Fitch Ratings’ global head of sovereigns, James McCormack, the trade war between US and China could possibly turn into a currency war moving forward:

“I do not want to suggest that the trade war is going to become a currency war – but it could. There’s an increased amount of discussion on how the US could influence the value of the dollar.”

On trade discussions itself, McCormack argues that China may slow down negotiations as they aren’t in a hurry whereas Trump wants to get things done before the election next year.
As for my own thoughts, we already have the makings of a currency war but it’s just that we’re not seeing an explicit or full-fledged one just yet.
The Fed may be the one implementing exchange rate policy in the US but ultimately, any decision stems from the Treasury and Mnuchin is the one dictating that side of things. Yesterday, he said that there isn’t any change to the dollar policy for now.
However, the fact that we’re seeing so much talk about from the Trump administration about wanting a weaker dollar is in itself a shift in stance in my books. That cannot be a clearer signal that the dispute goes beyond trade issues.

Deutsche Bank have raised their probability for a ‘no-deal’ Brexit to near 50%

  
Analysis, Forex
#  #  #  #  #  #  #

The bank says sterling is not cheap and that GBP can go much lower

DB have raised the probability for a ‘no-deal’ Brexit to 45%.
The bank acknowledges that on long term valuation models (citing PPP and FEER models) GBP is close to fair value, but say political risk is skedded asymmetrically downwards. Short GBP/JPY “remains an excellent expression ” (adding that yen is ranking far cheaper across our suite of trade-based models )
—
Weekly chart below:
The bank says sterling is not cheap and that GBP can go much lower

US Treas Sec Mnuchin warns that debt ceiling could be hit in September

  
  Analysis
#  #  #  #  #  #  #  #  #

The debt ceiling drums are being beat again, US Treasury Secretary Mnuchin warned that it’d be hit in September.

  • “We model various scenarios for cash projections. Based on updated projections, there is a scenario in which we run out of cash in early September, before Congress reconvenes,” “it is impossible to identify precisely how long extraordinary measures [to avoid default] will last.”
The administration wants to borrow more, increase debt in the US. The usual.
House Speaker Pelosi and Senate Majority Leader McConnell want to rasiet eh ceiling as per Mnuchin’s request, but want it as part of a broader, two-year budget agreement.
Discussions on the timetable will continue this week.
The debt ceiling drums are being beat again, US Treasury Secretary Mnuchin warned that it'd be hit in September.

U.S. proposes barring big tech companies from offering financial services, digital currencies

  
  Analysis
#  #  #  #  #  #  #  #  #  #

A proposal to prevent big technology companies from functioning as financial institutions or issuing digital currencies has been circulated for discussion by the Democratic majority that leads the House Financial Services Committee, according to a copy of the draft legislation seen by Reuters.

In a sign of widening scrutiny after Facebook Inc’s (FB.O) proposed Libra digital coin aroused widespread objection, the bill proposes a fine of $1 million per day for violation of such rules.

Such a sweeping proposal would likely spark opposition from Republican members of the house who are keen on innovation, and would likely struggle to gather enough votes to pass the lower chamber.

Even if it were to pass the full house, it would still have to pass the senate which would also likely be an uphill struggle.

Nevertheless, the draft proposal sends a strong message to large tech firms increasingly eyeing the financial services space.

The draft legislation, “Keep Big Tech Out Of Finance Act”, describes a large technology firm as a company mainly offering an online platform service with at least $25 billion in annual revenue.

“A large platform utility may not establish, maintain, or operate a digital asset that is intended to be widely used as medium of exchange, unit of account, store of value, or any other similar function, as defined by the Board of Governors of the Federal Reserve System,” it proposes.

Facebook, which would qualify to be such an entity, said last month it would launch its global cryptocurrency in 2020.

US vs. German yield spread breaking down from a multi-year support line!

  
Analysis, Economy
#  #  #  #  #  #  #  #  #  #

Last two times coincided with the peak of the tech & housing bubble.

Fed policy turning uber dovish with stocks already at record valuations & late in the business cycle? Never ends well.

US Major indices all close at record highs (and close at the highs for the day)

  
Analysis, US Market
#  #  #  #  #  #  #  #

S&P index closes above the 3000 level for the 1st time ever

Its the Triple Crown. All three of the major US stock indices closed at session highs. For the S&P index, it is closing above the 3K level for the very first time after toying with moves above on Wednesday and Thursday only to fail.
The final numbers are showing:
  • The S&P index of 13.84 points or 0.46% at 3013.75
  • THE NASDAQ index of 48 points 102 points or 0.59% at 8244.14
  • The Dow is up 243.95 points or 0.90% at 27332.02
Below is a graphical look at the %low, %high and %close. The highs and the close % are basically the same thing today.
For the week, the major indices are ending higher with the Dow leading the way:

  • Dow, up 1.52%
  • Nasdaq, up 1.01%
  • S&P, up 0.78%
For the month of July, the major indices have tacked on decent gains (after a stellar 1H)
  • Dow up 2.75%
  • S&P, up 2.45%
  • Nasdaq up 2.97%.
Next week will begin earning announcements for the 2Q. Below are a snapshot of some of the major releases over the next two weeks, starting with Citigroup on Monday and JP Morgan on Tuesday. The market is going into earnings at all time record highs (I don’t know if that is good or bad).  The market seems extended but it is “hard to fight City Hall”
the earnings calendar for the next few weeks

The Powell prepared text headlines sent:

  
  Analysis
#  #  #  #  #  #
  • The dollar lower.
  • It reversed pre-market stocks from being down (S&P was down about 8-9 points) to up.
  • It sent yields on US treasuries lower with the short end leading the way (yield curve steepening). The 2 year was at 1.919% at the start of the NY session. It is down at 1.82% now.
  • Gold moved from negative to positive (gold is up over $20 near the end of the trading day)

Nasdaq closes at record highs. S&P trades above 3000 for first time, but backs off.

  
Analysis, US Market
#  #  #  #  #  #  #  #  #  #

Major indices all closing higher

The major indices in the US are closing higher with the Nasdaq closing at a new record high. The S&P index traded above the 3000 level for the first time ever, but backed off that level. It is still closing higher on the day. The Dow snapped a 3 day losing streak today.
The final numbers are showing:
  • The S&P index, +13.44 points or 0.45% at 2993.07. The high reached 3002.98. The low extended to 2984.61
  • The Nasdaq rose 60.80 points or 0.75% at 8202.53. The high reached 8228.598. The low extended to 8160.56
  • The Dow rose 76 points or 0.29% at 26860.20. The high reached 26983.45 The low extended to 26813.11.
Some winners today:
  • Tesla, +3.85%
  • Micron, +3.75%
  • Beyond Meat, +3.61%
  • General Mills, +2.27%
  • AMD, +1.93%
  • Facebook, +1.77%
  • Nvidia, +1.75%
  • Chevron, +1.69%
  • Pfizer,+1.57%
  • Intuit, +1.53%
  • Alphabet, +1.48%
  • Amazon, +1.46%
  • Exxon Mobil,+1.43%
  • Cisco, +1.40%
  • Disney, +1.34%
  • Microsoft, +1.02%
 Some losers today included:
  • QUALCOMM, -2.86%
  • Target, -2.22%
  • Daimler, -1.57%
  • Deere and Company, -1.56%
  • Charles Schwab, -1.56%
  • Wells Fargo, -1.44%
  • Slack, -1.28%
  • Caterpillar, -1.22%
  • Bank of America, -1.16%
  • Morgan Stanley, -1.10%
  • Goldman Sachs, – 0.87%
  • Citigroup, -0.61%
  • PNC financial, -0.58%
  • Home Depot, -0.58%
  • Twitter, -0.52%
Go to top