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BOJ March monetary policy meeting minutes – full text

  
  Analysis
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Bank of Japan Minutes not shedding too much further light on policy deliberations

Headlines via Reuters:

 

  • members agreed YCC exerting intended policy effect
  • some members said review confirmed some fluctuations in bond yields won’t diminish impact of monetary easing
  • some members said must scrutinise financial system developments due to accumulating side-effects of easing on banking system
  • members agreed BOJ must respond flexibly, effectively without hesitation to changes in economic, price and financial developments
  • a few members said appropriate to stress anew that excessive falls in super-long bond yields could hurt economy in long run

 

 

The full text is here if you wish

 

Bank of Japan Minutes not shedding too much further light on policy deliberations

Brexit – UK says not afraid to walk away from talks. Less than 20% chance of a deal.

  
Analysis, Forex
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A couple of UK media items on Sunday with Brexit developments.

The UK’s chief Brexit negotiator David Frost spoke with the newspaper the Mail on Sunday
He said that the UK would leave the transition arrangement “come what may” in December. That is, deal or no deal the UK is out.
Meanwhile in the Sunday Times:
  • planning for no-deal has ramped up
  • senior figures in government have predicted that the chance of securing a Brexit trade agreement with Brussels is now less than 20%
Links for each (may be gated) if you’d like more
GBP is trading on wide spreads in early movement. Its just before:
  • 8 am in NZ
  • 6 am in Sydney
  • 5 am in Tokyo
  • and 4 am in Singapore & Hong Kong
If you are familiar with how forex market times work you’ll know that liquidity right now Is super thin. GBP swinging a little:
A couple of UK media items on Sunday with Brexit developments.

Sunday Times reports the UK “plans for a £30bn tax raid on the wealthy”

  
  Analysis
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Monday 31 August 2020 is a holiday in the UK, a good time for getting this sort of bad news dribbling out.

UK press with the report,
  • Chancellor Rishi Sunak has his Treasury officials drawing up plans for a £30bn tax raid on the wealthy, businesses, pensions and foreign aid
  • proposals would be part of the budget in November
  • planning to raise capital gains tax
  • and corporation tax (from 19% to 24%)

UK Times link is here (may be gated).

ps. Reuters report here is ungated

Monday 31 August 2020 is a holiday in the UK, a good time for getting this sort of bad news dribbling out.

Happy 90th birthday to Warren Buffett

  
Analysis, Education
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The Oracle of Omaha turns 90 today

Warren Buffett
Warren Buffet celebrates his 90th birthday today as the world’s sixth-richest man. At $82.1 billion, he’s done well for himself.
But what Jason Zweig notes in the WSJ is that the genesis of his genius was in playing the long game and starting as early as possible.
Around the age of 10, he read a book about how to make $1,000 and intuitively grasped the importance of time. In five years, $1,000 earning 10% would be worth more than $1,600; 10 years of 10% growth would turn it into nearly $2,600; in 25 years, it would amount to more than $10,800; in 50 years, it would compound to almost $117,400.
Today’s markets are as get-rich-quick as ever but the long game always wins.

Non-farm payrolls preview: Half the expected jobs gain in July are because of a quirk in seasonal adjustments

  
  Analysis
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Teaching jobs are a big quirk

The consensus for Friday’s non-farm payrolls report is for 1.5 million jobs gains in the month but that doesn’t tell the real story.
The ADP report this week got some attention because it showed private hiring at just 167,000 jobs. Normally, you would expect that to take a big bite out of expectations, but it hasn’t.
Why? A big reason is seasonal adjustments in the data.
Normally, one of the easiest and clearest seasonal adjustments is teachers. They’re laid off at the same time every year and hired at the same time every year. So you discount the lay offs in June/July and the hires in Aug/Sept. It all washes out.
This year though, teachers were laid off early — in April, May and June.
In the BLS model, most of those layoffs are supposed to happen in July. So what happens is they add nearly 1 million jobs to the total before they even start counting. The thing is, those layoffs haven’t happened this year.
teacher
Because of that effect, job losses were overestimated in April/May and now will be added back in July. They estimate the effect at +850K jobs.
Still, that number could be fluid and the assumptions and adjustments the BLS makes will be critical in how it turns out. The risk is that it shows a skewed picture.
Given that, the better spot to watch may be the unemployment rate, which is taken from the household survey. This has its own problems because many people laid off because of COVID-19 have been misclassified — a problem the BLS has been struggling to correct. The consensus there is an improvement to 11.2% from 12.3%. Private payrolls (consensus +1398K) could also offer a clearer look at the economy excluding teacher effects.
As for trading it, watch out for people pointing to the seasonal adjustment effect after the fact. But note that it should already be priced in.

GOP leaders said to meet at White House later today to discuss next coronavirus bill

  
  Analysis
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FOX News reporter, Chad Pergram, reaffirms the earlier story

Senate majority leader, Mitch McConnell, and House GOP leader, Kevin McCarthy, will be headed to the White House later to discuss the next stimulus bill with Trump and Mnuchin. This adds to the story from earlier in the day here.

 

US
The end of the month is going to be an interesting time, as the US approaches a fiscal cliff with stimulus money set to run out in the coming weeks/months.
Amid a surge in virus cases and the likelihood of the economy facing more dire consequences – not to mention election uncertainty, it will be interesting to see if the market can hold up in the way that it has over the past few months. A neat summary by Bloomberg:
US virus

Moderna, S&P: Vaccine hopes

  
  Analysis
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A look at vaccine developments and its impact on the stock market

Moderna

FBSSource: Bloomberg

Yes, we’ve heard it already – both statements. Of course, from a humane point of view, it’s good to hear there is progress with the vaccine development. But it increasingly looks like by the time it is ready, most people indeed will already have immunity to the virus. In the meantime, Moderna is enjoying spikes of investor attention.

FBS 2
The latest update is that it got one step closer to the vaccine pushed its stock from the rage of $60 to $75. Needless to say, if the reports informed us tomorrow that another testing stage is cleared, we would see this stock already somewhere at its recently made all-time high above $85. Trajectory zone 2 would be the channel of movement in this case.

In fact, Moderna’s stock may well get to those highs anyways: fundamentally, the interest for anti-virus business will keep its momentum months or even years ahead, even if tomorrow is no virus at all. So Moderna will see its rise, just it will be a slow case scenario – the one that corresponds to trajectory zone 1.

S&P 500

For the stock market, the vaccine hope seems to be the only “joy” that keeps the optimism on the stage. With the S&P, currently, we are almost exactly at the previous high of 3 320, and in an obvious consolidation. Meaning, the market is not really sure what to look at more: still spreading infections in the US of the vaccine hopes. Today, it seems the latter is taking the upper hand. What the next step is going to be?

An optimistic scenario suggests we will see Trajectory 1 giving the green light to bulls and repeating the pattern of the previous upward wave the S&P followed in May. How probable is that? Quite probable, given that the reports about vaccine developments keep coming more often.

A pessimistic scenario as per Trajectory 3 suggests that we are actually at the tip of another “inside wave” which will bounce down from the resistance of 3 230. How probable is that one? Also very probable: clearing testing processes is good, but we don’t have the vaccine yet. It may take months before we finally see it.

A moderate scenario presumes that the market will overlook the absence of the vaccine and take on a more positive mood. That will be Trajectory 2.

The thing is that, indeed, it may be not until the very end of 2020 when the vaccine eventually gets done. Everyone knows that. If the S&P was only waiting for the vaccine to finally get developed, then it would be going sideways between 2 980 and 3 230 for months from now. Is that likely? No. Regardless of the vaccine process, the more we move into the future, the more the market becomes insensitive to the reality of infections and, therefore, independent from the vaccine hopes. Why? Because with the vaccine or without it, life goes on. And even the virus is now on the rise in the US – again – it will slow down pretty soon. So the question is not “if” but “when”. And the market is bored waiting.

FBS 3

This post is written and submitted by FBS Markets for informational purposes only. In no way shall it be interpreted or construed to create any warranties of any kind, including an offer to buy or sell any currencies or other instruments. 

The views and ideas shared in this article are deemed reliable and based on the most up-to-date and trustworthy sources. However, the company does not take any responsibility for accuracy and completeness of the information, and the views expressed in the article may be subject to change without prior notice.

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