Archives of “financial risk” tagrss
Bloomberg report on Japanese investors, facing ongoing negative rates domestically, are buying dollars and risk assets
- “The presence of the Japanese as the main carry trade driver seems to be growing as they must turn to overseas investments”
- In April, Japan’s money managers bought the most U.S. corporate debt in eight years and the second-highest amount of equities in five years
- “Japanese investors use yen to fund purchases of Treasuries or U.S. corporate bonds, for instance, to seek credit spreads and these flows are continuing,” said Koichi Sugisaki, a strategist at Morgan Stanley MUFG Securities Co. in Tokyo.
Risk on the theme
The Bank of England is looking more urgently at options such as negative interest rates and buying riskier assets to prop up the country’s economy as it slides into a deep coronavirus slump, the BoE’s chief economist was quoted as saying.
The Telegraph newspaper said the economist, Andy Haldane, refused to rule out the possibility of taking interest rates below zero and buying lower-quality financial assets under the central bank’s bond-buying programme.
“The economy is weaker than a year ago and we are now at the effective lower bound, so in that sense it’s something we’ll need to look at – are looking at – with somewhat greater immediacy,” he said in an interview. “How could we not be?”
Top BoE officials have previously expressed objections to taking rates below zero – as the central banks of the euro zone and Japan have done – because it might hinder the ability of banks in Britain to lend and hurt rather than help the economy.
But with the BoE’s benchmark at an all-time low of 0.1% and Britain facing potentially its sharpest economic downturn in 300 years, talk of cutting rates to below zero has resurfaced.
Governor Andrew Bailey said on Thursday the BoE was not contemplating negative rates, but he declined to rule it out altogether.
From the US afternoon, when equities and risk currencies dropped away …. or more accurately, continued to drop away …
- accused China’s Communist Party of deception over the virus
- “I’m convinced China will never cooperate with a serious investigation unless they are made to do so.”
- requiring China provide “a full and complete accounting to any COVID-19 investigation led by the United States, its allies or UN affiliate such as the World Health Organization
- require certification that China had closed all wet markets
- bill would authorize the president to impose a range of sanctions
- outlooks for their respective main commodities, posing downside risks over the medium term
- Oil prices have plunged over the past year, partly due to excess supply, but also due to a dire economic outlook
- metals tend for follow (or co-move with) oil
- iron ore prices have help up … mainly due to supply bottlenecks .. Once those have been cleared, there’s potential for iron to more closely reflect the deterioration in demand. So too for coal
- multi-month, we hold a negative bias … targeting as low as 0.59.
Goldman Sachs’s chief equity strategist, David Kostin spoke Tuesday with CNBC
- “There’s a little bit of asymmetry in terms of the downside risk toward a level in the S&P 500 of around 2,000, which is down almost 25%, and upside of around 10% to a target at the end of the year of 3,000”
- important investors not get too keen to buy
- during the 2008 financial crisis the market took several months of violent moves up and down before ultimately putting in a lasting bottoming on March 9, 2009
- “I would just remind you that in 2008 in the fourth quarter there were many different rallies…but the market did not bottom until March of 2009”
They see some upside risks as trade risks cool
- Cuts 2019 to 2.4% from 2.6% (lowest since crisis)
- Cuts 2020 to 2.5% from 2.7%
- Cuts 2020 emerging markets forecast to 4.1% from 4.6%
- Forecasts 2020 trade growth at 1.9% vs 1.4% in 2019
- Says growth in less developed regions far below levels needed to meet poverty-reduction goals
In a deeper breakdown, they boosted the 2020 US growth forecast while cutting China and Europe. On the whole, this isn’t great news for the global economy but it’s nothing surprising.
It has been more than a year since the S&P 500 went down 10%. In the nearly 17 years since March 2003, there have been 19 declines of 10% or more. There have been 82 declines of 5% or more.
Drawdown Qty Trading days Days since last
5% 82 4234 64
10% 19 4234 298
20% 5 4234 259
25% 2 4234 2731
33% 1 4234 2831
Asian equities slump amid some caution in the risk mood
Japanese stocks are lower as tariffs continue to be a niggling issue in US-China trade talks. We had Trump threaten more tariffs – should talks not go well – in his speech before a WSJ report noted that both sides are still struggling to find common ground on the matter.