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CFTC commitment of traders: GBP shorts trimmed modestly. JPY longs increased.

  
Analysis, Forex
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Forex futures positioning data among noncommercial traders for the week ending August 13, 2019

  • EUR short 47K vs 44K short last week. Shorts increased by 3K
  • GBP short 96K vs 102K short last week. Shorts decreased by 6K
  • JPY long 25K vs 11K short last week. Longs increased by 14K
  • CHF short 13k vs 16k short last week. Shorts trimmed by 3K
  • AUD short 63k vs 55k short last week. Shorts increased by 8K
  • NZD short 13K vs 12K short last week. Shorts increased by 1K
  • CAD long 14K vs 24K long last week.  Longs trimmed by 10K

Highlights:

  • JPY and CAD remain long, while the other major currencies maintain short position
  • The JPY longs increased by 14K. That is the largest long position since November 2016 (see chart below).
  • CAD longs were trimmed by 10K.
  • GBP shorts were trimmed modestly in the current week to 96K but the position remains the largest speculative position. The GBP moved modestly higher in the week.

JPY longs are the largest since November 2016

Jamie Dimon and Warren Buffett can’t get it right

  
  Analysis
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Jamie Dimon and Warren Buffett can’t get it right

15 months ago Jamie Dimon and Warren Buffett were warning people not to buy bonds. At the time, US 10-year yields were at 3.0%. Today they’re at 1.48%. 30-year yields are now below 2%.
Here’s a look at 30-year futures since:
Jamie Dimon and Warren Buffett can't get it right
They’re up 16% while the S&P 500 and Berkshire Hathaway shares are both flat.
He wasn’t alone. On the same weekend last year, JPMorgan CEO Jamie Dimon was warning about the 10-year rising to 4%.
Dimon
The point here isn’t to point out incorrect calls. I’ve had plenty myself.
It’s a reminder that no one knows the future. Jamie Dimon is going to continue to be the greatest bank CEO of his era while Buffett will remain the greatest investor of all time.
Sometimes you’re wrong. Roll with the punches.

Asset Managers With $74 Trillion on Brink of Historic Shakeout

  
  Analysis
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This is quite amazing via Bloomberg:

“The industry that gave rise to investing titans Peter Lynch, Bill Miller and Bill Gross is facing an existential crisis.

For years, mom-and-pop investors frustrated by high fees and subpar returns from big-name money managers have been shifting their savings into ultra-cheap funds that simply mimic the returns generated by benchmark stock and bond indexes. Passive investing, as it is known, was in. Active was out.

At first, few noticed the trickle of money out of funds run by star money managers into cheaper index products. But now, no one can ignore the flood. The exodus from active funds has sent fees inexorably lower, led to the loss of thousands of jobs and forced large-scale consolidation among firms. That’s pushing the industry, with $74 trillion in assets as measured by Boston Consulting Group, towards a shakeout where only the strongest will survive.”

 

The graphic tells the story:

Major US stock indices close with (go on, have a guess!) …. big declines

  
Analysis, US Market
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Ladies and gentlemen, as a special for today only, the four stock codes to watch are

  • U
  • G
  • L
  • and Y
Closing numbers for the big 3 are showing:
  • S&P index down 87.99 points, which is -3.00% at 2,844.06
  • NASDAQ index down 279.54 points or -3.49% at 7,724.53
  • Dow down 772.89 points or -2.92% at 25,712.12
Off lows but not a good day. All three with their biggest daily losses for this year.
The context of the moves today:
  • global growth weaker and weakeneing
  • global trade getting rocked by trade wars
  • The Federal Reserve recently cut and is likely to do so again (a bit of tail and dog, chicken and egg here …. shoose whichever you like)
  • Stock valuations are …. well … high. Some ludicrously so, but they have been for years …
  • what have I missed?

Surging household debt clouds Asia’s growth outlook

  
Analysis, Economy
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The rapid expansion of household debt in emerging Asian countries, particularly China, has become a risk to the global economy.

In Thailand and Malaysia, debt has ballooned due to booms in the auto and housing markets, and the growing repayment burden has dampened consumer sentiment. In China, household debt as a percentage of nominal GDP is now over 50%. Countries such as Thailand have begun curbing their consumption in response to rising debt levels.

The U.S. Federal Reserve is expected to cut interest rates at the end of this month. Emerging economies also have room for interest rate cuts, which would boost growth in the short run but could deepen the scars from indebtedness over the long term.

Somprawin Manprasert, chief economist at Bank of Ayudhya, pointed out that household debts have ballooned as a result of incentives for the purchase of cars and other items introduced by the Thai government in 2011. This is a structural factor that will weigh on future consumption, Somprawin said.

Thailand’s household debt ratio is close to 70%. That is higher than in Japan and other advanced economies, which have ratios of about 58%, and well above that of the eurozone. The main reason is auto loans. To support the car industry, the Thai government introduced tax incentives to encourage purchases, which took off in 2012. As a result of the higher debt load, personal consumption has been sluggish and inflation has been weak.

(more…)

CFTC Commitment of Traders: Positions are marginally changed

  
Analysis, Forex
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Forex futures positioning data among noncommercial traders for the week ending July 23, 2019

  • EUR short 39K vs 31K short last week. Shorts increased by 8K
  • GBP short 79K vs 76K short last week. Shorts increased by 3K
  • JPY short 9K vs 11K short last week. Short trimmed by 2K
  • CHF short 13k vs 12k short last week. Shorts increased by 1K
  • AUD short 48 k vs 53k short last week. Shorts trimmed by 5K
  • NZD short 12K vs 17K short last week. Shorts trimmed by 5K
  • CAD long 31K vs 21K long last week.  Longs increased by 10K
  • Prior week

Highlights:

  • GBP shorts remain as the largest position. The GBPUSD moved to new 27 month lows today rewarding those traders.
  • AUD shorts are the 2nd largest position and the AUD moved to new month lows today retracing the run higher from the June 10 low
  • The EUR shorts increased by 8K. The EURUSD moved modestly lower this week. The EUR short has been cut from over -100K short to 31K (the fall in short positions seems to have slowed over the last month.
  • Speculators remain long the CAD. It is the only major foreign-currency long position versus the US dollar

Forex futures positioning data among noncommercial traders for the week ending July 23, 2019

ECB leaves key rates unchanged in July monetary policy meeting

  
  Analysis
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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.

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

  
  Analysis
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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
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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.

Week ahead: US earnings, South Africa rates, EC president vote

  
  Analysis
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No summer hours here. Investors are bracing for a busy week as earnings season gets under way in America, in Europe parliament votes for a new president for the European Commission and on both sides of the Atlantic, investors face a deluge of economic data. Here’s what to watch in the coming days. US earnings Banks unofficially kick off second-quarter earnings season on Monday and investors will be tuning in to see whether corporate America is headed for its first earnings recession since 2016. Citigroup starts the earnings party on Monday and JPMorgan Chase, Goldman Sachs and Wells Fargo follow suit on Tuesday. Prospects of rate cuts by the Federal Reserve are unnerving investors that are watching to see if this could squeeze banks’ profit margins. My colleague Rob Armstrong has more in his excellent bank earnings curtain raiser. I

in all, nearly 60 companies in the S&P 500 are expected to report results including the big banks, Netflix, Microsoft, Schlumberger and Johnson & Johnson. US data Markets have largely pencilled in a cut by the Fed at its monetary policy meeting this month, though investors continue to debate how many cuts the central bank may push through this year and how deep the cuts will be. To get a better picture of the US economy and clues to Fed policymakers’ thinking, investors will closely parse a string of economic data for updates on consumer and industrial health. Americans are expected to have tightened their purse strings a little last month with headline retail sales expected to rise 0.2 per cent month-on-month, following a stronger 0.5 per cent increase in May. Control sales, which strip out volatile items like food, energy and building materials, are expected to rise 0.3 per cent. Investors will also tune into consumer sentiment data later in the week. Updates on the industrial sector come via regional manufacturing surveys as well as industrial production data, which is expected to show factory output cooled. The economic calendar also includes updates on the housing market. UK data

The economic calendar across the pond also promises to be busy with jobs data, inflation and retail sales on the docket. As markets consider the possibility of a rate cut by the Bank of England, “next week’s raft of UK data are likely to give ammunition to both sides of the argument,” noted economists at ING. While wages are expected to tick back up, they said “the high street isn’t feeling the benefit of this modest improvement in real wage growth”. However, they added: “With Brexit noise only likely to increase over the coming months, and a risk that trade tensions could worsen, we think the Bank of England will keep rates on hold for the rest of the year.”

EU Commission president On Tuesday the European Parliament votes on the next EU Commission president. Ursula von der Leyen has promised parliament a bigger say in Brussels’ decision-making as she seeks MEPs for the top post in Brussels for the next five years. “A successful vote will be largely ignored by markets, but a failure to garner enough support (which is still a possibility) could blow up the entire deal that the Council reached earlier this month, though we do think that Ms [Christine] Lagarde’s ECB nomination will be safe either way,” said strategists at TD Securities. South Africa rates On Thursday attention shifts to South Africa, where the reserve bank is widely expected to announce a 25 basis point cut to the repo rate, putting it at 6.5 per cent. Since the last SARB meeting in May, the monetary policy committee has undergone a massive transition. Strategists at TD Securities “think the message will be moderately dovish, suggesting potentially more easing,” and expect “slightly positive” reaction in the rand as they argue markets have “priced for more easing than we expect”.

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