Posts filed under “Think Tank”
After getting some positive reaffirmation from the Japanese of their love for our debt, Russia’s Finance Minister at the G8 said there was “no alternative” to the US$ as a reserve currency and that the US$ was “in good shape”. Russia has the 3rd largest reserves and the comment comes on the heels of news last week that Russia was going to focus on buying IMF debt and less US debt. Geithner has his salesman cap on and is doing his best to ease foreign concern with the monetary and fiscal policies of the US. The US$ is also being helped out vs the Euro after a German official expressed concerns with businesses access to credit. The G8 also discussed European bank stress tests and central bank plans to exit their unconventional policies at the right time. Global stocks are selling off more on a case of acrophobia after huge runs rather than any big news event but stocks got tired Friday and didn’t respond to the drop in yields.
“Words from the Wise” this week comes to you in a shortened format as “day-job” responsibilities precludes me from doing a comprehensive commentary. However, a full dose of excerpts from interesting news items and quotes from market commentators is provided.
Signs of stability characterized trading on financial markets during the past week. As investors placed their bets on a global economic recovery, equities, base metals and crude oil made further headway, with long-term government bond yields remaining at elevated levels, but declining somewhat after a successful US 30-year bond auction and pro-US Treasury comments from Japan’s minister of finance.
Notwithstanding buyers returning to US long-term bonds, the greenback retreated on concerns of the huge issuance of government bonds, whereas commodity-linked and other high-yield currencies improved strongly.
Source: Jeff Stahler, June 9, 2009.
The British pound also advanced as the UK’s National Institute for Economics and Social Research said the recession had passed through its trough in March. Also, the Organization for Economic Co-operation and Development (OECD) reported on Monday (via the Financial Times) that most of the world’s big economies were close to emerging from recession and that data pointed to a possible recovery by the end of the year. “Twenty-two out of the 30 OECD countries saw a rise in forward-looking measures of activity,” said the report.
The week’s performance of the major asset classes is summarized by the chart below. Not shown, platinum (-2.1%) and silver (-2.9%) cooled off in tandem with gold bullion (-1.6%). As the precious metals consolidate, gold bull Richard Russell (Dow Theory Letters) said in frustration: “Gold, gold, you’re making me old.”
The surge in oil prices to an eight-month high of more than $72 a barrel (in the case of West Texas Intermediate Crude), raised concerns as this is equivalent to a two-percentage-point drag on real GDP growth, according to David Rosenberg (Gluskin Sheff & Associates). In order to provide guidance on the direction of crude oil, Adam Hewison of INO.com has prepared another of his popular technical analyses, arguing that the long-term trend is bullish, but that a short-term pullback appears likely. Click here to access the short presentation.
The MSCI World Index (+1.2%) and the MSCI Emerging Markets Index (+0.4%) last week again added to the rally’s gains to take the year-to-date returns to +8.1% and a massive +39.4% respectively. Both these indices have only had one down-week since the advance commenced in early March.
Although trading was relatively flat, the major US indices (with the exception of the Russell 2000 Index) nevertheless gained for a fourth consecutive week – and for the twelfth week out of the past 14 – as seen from the movements of the indices: S&P 500 Index (+0.7%, YTD +4.8%), Dow Jones Industrial Index (+0.4%, YTD +0.3%), Nasdaq Composite Index (+0.5%, YTD +17.9%) and Russell 2000 Index (-0.7%, YTD +5.5%).
The Dow on Friday became the last of the major indices to break into positive territory for the year to date, albeit by a meager 0.3%.
Click here or on the table below for a larger image.
As far as non-US markets are concerned, returns ranged from top performers Namibia (+8.5%), Vietnam (+6.5%), Mauritius (+5.4%), Palestine (+4.5%) and Thailand (+4.0%), to Ghana (-8.7%), Serbia (-5.2%), Sudan (-4.8%), Taiwan (-4.4%) and Bahrain (-2.4%), which experienced headwinds.
Among the major markets, the Japanese Nikkei 225 Average jumped by 3.8% to breach the 10,000 level for the first time since October on the back of recent data releases, indicating that the pace of Japan’s recession was moderating. (Click here to access a complete list of global stock market movements, as supplied by Emerginvest.)
With the upward momentum in bond yields reversing on the heels of yesterday’s strong 30 year bond auction, 10 yr swap spread spreads today are falling to the lowest level of the month as pressure eases up for those wanting to swap floating rate exposure for fixed. MBS are also bouncing for a 2nd day…Read More
The preliminary June U of Michigan confidence # was 69, .5 point below estimates but up a touch from May and its the highest since Sept. Interestingly, current economic conditions (measuring how people feel today as opposed to what they think about the future) saw a 6.8 point jump, rising to 74.5 and is just…Read More
> Verbal intervention via leak in time to help dealers loaded with US bonds – The WSJ: Fed to Keep Lid on Bond Buys; Big Boost in Purchases Is Unlikely; Divisions Emerge Over Handling Risk of Inflation We warned in missives this week that when bonds are tanking into an auction, dealers try to affect…Read More
Just as a kid needs some love from his parents after he or she gets into trouble and confirmation that they’ll still get their weekly allowance, Japan’s Finance Minister said “The US $’s position as the world’s reserve currency isn’t under threat…Our trust in US Treasuries is absolutely unshakable.” Hopefully the child grows up at…Read More
> Goldman CEO Lloyd Blankfein, speaking in Tel Aviv on Wednesday, said ‘chances are’ the US is not in a real recovery; the recession is likely to be long and protracted; and the recovery will be shallow. The Street quickly surmised that Goldie must be short the stock market. The Fed, via Jeff Lacker, engaged…Read More
REVISED: The Q1 flow of funds report from the Fed is out and the report card is in on the US consumer. Due to a rise in disposable income from Q4 (likely due to the large COLA adjustments and also tax refunds) and a drop in consumer credit (mortgage debt was flat), household debt (consumer…Read More
The Q1 flow of funds report from the Fed is out and the report card is in on the US consumer. Due to a rise in disposable income from Q4 (likely due to the sharp drop in gasoline prices and also tax refunds) and a drop in consumer credit (mortgage debt was flat), household debt…Read More
April Business Inventories fell 1.1%, about in line with expectations and March was revised down by .2% to a decline of 1.3%. It’s the 6th straight month of 1% or more drops and reflects the dramatic inventory correction that our economy has experienced. At the same time, it provides the backdrop for the bullish camp’s…Read More