Category: Markets
Chart of the Day: Market Year in Review
Wow! Who would of thunk it. The Dow the only major global equity index positive for the year. U.S. Treasuries up 15-20 percent, the dollar index (Dixe) positive; Brazil and Chinese equities down 20 percent and India down almost 25 percent. Copper was on everybody’s buy list at the beginning year, finished down over 20 percent; and foodstuffs had nowhere to go but north, finishing flat after spiking earlier in the year and taking most of the political leaders in North Africa with them
Video: Gold Bubble Seen by Soros on Brink of Bear Market
Gold is poised to complete its 11th consecutive annual gain, the longest winning streak in at least nine decades, on the brink of a bear market. George Soros, the billionaire who two years ago called it the “ultimate asset bubble,” cut 99 percent of his holdings in the first quarter, Securities and Exchange Commission data show. Betty Liu reports on Bloomberg Television’s “In the Loop.” (Source: Bloomberg Television)
Dollar Finishing Year Mixed, Second Annual Gain Against Euro
The main price action to note is that the euro fell through the JPY100 level for the first time since mid-2001. For the most part, the dollar is confined to yesterday’s ranges against the major currencies. The day’s economic highlights include: HSBC’s Chinese PMI, Hungary’scontroversial law that further erodes the central bank’s independence, South Korea’s CPI and the new PBoC currency fix of
Euro Slump Extended, Mediocre Italian Bond Auction, Poor Hungarian Debt Sale
The euro extended yesterday’s losses in Asia, falling to $1.2866, the lowest level since the start of the year. The euro’s losses against the yen were also extended with new 10-year lows recorded just above JPY100.30. Italy wrapped up a difficult year by selling about 7 bln euros of a 5-8 bln target range. Yields were around 50-120 bp lower than the last auctions with similar bid-cover. The results did not help the Italian bond market stabilize and the 10-year yield continues to flirt with 7%
Euro Swan Dive Splashes Santa
This morning’s swan dive in the euro stopped the Santa rally right in its tracks. We have two questions: 1) Has the ECB shot its wad as the lender of last resort providing massive liquidity to the banking system and leaving little ammunition for the distressed sovereigns; 2) Will money demand remain stable in the eurozone as the monetary base explodes? That is, will the Germans keep their money in Europe
Volatility Lurks
The S&P 500 volatility index – the VIX – is a measurement of volatility expectations. It has fallen 50% since the (latest) agreement to save the euro was announced. If the VIX falls to 18, call options are worth considering
Chart of the Day: The ECB Balance Sheet
Who says the ECB can’t keep up with the Fed. As the euro crisis has caused liquidity for euro zone banks to dry up, the ECB has taken on the intermediation role. In essence, they have taken on the dollar liquidity function that the US money markets used to provide via its bank liquidity operations and currency swaps with the Fed
On Liquidity: Watch What the ECB Does, Not What It Says
The key question remains what the banks will do with the newly acquired funds. We suspect that to the extent banks buy sovereign bonds, they will purchase their own sovereign’s bonds rather than their neighbor’s. More details of the nuances of the auction will likely be forthcoming over the next several days, but it is notable that several Italian banks, include the two largest Italian banks reportedly created bonds, which were guaranteed by the government, for apparently the sole purpose of creating collateral to borrow from the ECB today. Going forward, investors should pay more attention to what the ECB does than what it says. It says it will not backstop sovereigns, yet since it has renewed its bond purchases in August, its bond purchases have almost matched the new bond issuance of Italy and Spain. The ECB’s rhetoric seems somewhat harsher than its actions. To be sure the liquidity provisions are not and cannot be the “bazooka” that so many want. It does not cure what ails Europe, but it treats it and will have to continue to do so in the months ahead
Classic Buy Rumor Sell Fact after LTRO
The euro extended its rally to a six day high, just shy of $1.32 before the results of the ECB’s allotment. The results were at the upper end of expectations and the euro was returned to session lows. A classic buy the rumor of a strong demand and sell the fact. Expectations seemed to have crept higher. The larger short squeeze in the euro may not be over. The key seems to be $1.3050 area. It should now be support for this corrective advance to remain intact
Thoughts on Europe and the global synchronised slowdown
We are in a second synchronised global growth slowdown. Moreover, the policy response must be more muted this go round as the public sector is more indebted and has less policy space than in 2008 or 2009. Expect policy inaction followed by fits of volatility due to inaction. This points to a risk off a lot more than a risk on environment
Euro Squeezed Higher, Takes Others With It, Positive Newstream
Successful Spanish and Greek bill auctions and better than expected German IFO caught the market wrong-footed, if the record net speculative short at the IMM is anything to go by. The euro has shot up to almost $1.3090 and pulled up the other major currencies and emerging market currencies in its wake
Dollar Firmer As European News Stream Remains Negative
US dollar was firmer vs. majors Monday even as euro zone news stream remains negative; Moody’s cut Belgium two notches Friday to Aa3 and kept a negative outlook. Euro short positions at record high on IMM; euro zone Finance Ministers to hold conference call Monday; France auctions paper today. Reported death of North Korean leader Kim hurt KRW; EM FX mostly weaker as Brazil remains obsessed with