- Egypt on the edge after Mursi rebuffs army ultimatum (Reuters)
- Inside China's Bank-Rate Missteps (WSJ)
- Obama Urges Morsi to Respond to Protesters' Concerns (WSJ)
- How Fed’s 7% Jobless Avoids Deterring Bondholders Is Mystery (BBG)
- Obama Joins With Political Foe Bush at End of Africa Trip (BBG)
- China may introduce deposit insurance by year-end (China Daily)
- China’s Slowdown Could Slam Hong Kong (BBG)
- Government 'to ask Rothschild to advise on RBS split' (Telegraph)
- Martin Feldstein: The Fed Should Start to 'Taper' Now (WSJ)
Think gold and silver were the worst performing financial asset in June? Think again: that dubious distinction falls to the Bovespa, the Shanghai Composite and the Greek stock market index, all of which tumbled more than the precious metal complex did in the past month. Yet what an odd month for hard assets - on one hand WTI, Corn and Brent were the best performing assets, while gold, silver, copper and wheat tumbled.
Near-term outlook for the major currencies discussed and a brief analysis of the short-coming of fair-value "discounting" models in understanding recent price action.
With the nation's short-term funding markets in crisis mode - no matter how much they are jawboned about temporary seasonal factors - it seems yet another indicator of stress is flashing the red warning signal. China's sovereign CDS has spiked by the most since Lehman in the last 3 days - up 55% to 140bps. This is the highest spread (risk) in 18 months and looks eerily similar to the period around the US liquidity market freeze. Hedging individual Chinese bank counterparty risk is hard (given illiquidty) and so it would seem traders are proxying general risk of failure via the nation's sovereign risk (and stocks which also languish at post-Lehman lows). On a related note, Aussie banks have seen there credit risk rise 50% in the last month as they suffer domestically and from the China contagion.
The global capital markets are seeing large moves in response not only to the Federal Reserve, though clearly that is a key impetus, but also to developments elsewhere. Here is a dispassionate review.
Tryingto make sense of the price action in the foreign exchange market. The dollar was heavier than we anticipated and there is no compelling sign of a turnaround, but the key is the FOMC meeting.
The answer is no as higher rates on developed world debt would crush their economies. And it would hurt less indebted emerging markets too.
Gluskin Sheff's David Rosenberg has ten nagging concerns...
Another day, another sell off in Japan. The Nikkei index closed down 0.9%, just off its lows and less than 1% away from officially entering a bear market, but not before another vomit-inducing volatile session, which saw the high to low swing at nearly 400 points. Hopes that a USDJPY short-covering squeeze would push the Nikkei, and thus the S&P futures higher did not materialize. And while the weakness in Japan is well-known and tracked by all, what may come as a surprise is that the Chinese equities are down for the 6th consecutive session marking the longest declining run in a year. Elsewhere in macro land, the Aussie Dollar continues to get pounded on China derivative weakness, tumbling to multi-year lows of just above 94 as Druckenmiller, who called the AUDUSD short nearly a month ago at parity shows he still has it.
The store of wealth demand is not just from Chinese ‘aunties.’ There remains an under estimation of the demand coming from wealthy Chinese and high net worth and ultra high net worth individuals (HNWs and UHNWs).
This has not been commented upon or analysed but we have direct experience of wealthy Chinese people looking to store gold in Hong Kong and Switzerland, as have other storage providers.
- Whale of a Trade Revealed at Biggest U.S. Bank With Best Control (BBG)
- ECB backs away from use of ‘big bazooka’ to boost credit (FT)
- Turkish unions join fierce protests in which two have died (Reuters)
- Europe Floods Wreak Havoc (WSJ)
- Beheadings by Syrian Rebels Add to Atrocities, UN Says (BBG)
- RBA Sees Further Rate-Cut Scope as Aussie Remains High (BBG)
- China’s ‘great power’ call to the US could stir friction (FT)
- J.C. Penney Continuing Ron Johnson’s Vision on the Cheap (BBG)
Sell in May and go away will be on every investor’s mind after Friday’s week performance. It’s always been when you sell that’s been the measure for this maxim to be effective. If so the high for SPY would have been May 21st at $167.17. Then there’s the reappearance of the Hindenburg Omen but that’s for another day’s discussion.
In a masterclass of what is 'really' going on in the world (as opposed to what we are told/spoon-fed on a daily basis), Grant Williams (of Things That Make You Go Hhhmm infamy) provides a must-watch presentation. Starting from the premise (unusual in this day and age) that the laws of mathematics are inviolable ("if it makes no sense, it is nonsense"), the Aussie investment manager sets out his own set of philosophical 'problems' that the world of 'markets' seems incapable of grasping. In a chart-filled extravaganza, Williams ranges from "Problem 1: If the global economy is stalling, Europe is in recession, China is slowing and growth is seemingly impossible to generate, what are equity markets doing at all-time highs?" to "Problem 7: The Gold Price and The Price of Gold are mutually exclusive" leaving the participant questioning everything Bob Pisani would have us believe warning in conclusion that gold is critical and "beware suppressed volatility."
A look mostly at prices in the currency market and the outlook.
Overnight risk continues to ignore all newsflow (today the economic reporting finally picks up with advance retail sales due at 8:30 am as expectations for a second modest decline in a row of -0.3%) and is focused entirely on what the consensus decides to make of the Hilsenrath piece, even as the difficulty level was raised a notch following another late Sunday Hilsenrath piece, which puts more variable into the "tapering" equation, and whose focus is whether Bernanke will be replaced by Janet Yellen, Geithner or Summers, or anyone. With all three classified as permadoves, one does scratch their head how the market can be confused: worst case Fed tapers by $10/20 billion per month, market tumbles, then Bernanke's replacement or Ben himself ploughs on even more aggressively with QE. QED.