This post was published at Reluctant Preppers
With just a few hours left until the close of the last US trading session of 2017, and most of Asia already in the books, S&P futures are trading just shy of a new all time high as the dollar continued its decline ahead of the New Year holidays.
Indeed, markets were set to end 2017 in a party mood on Friday after a year in which a concerted pick-up in global growth boosted corporate profits and commodity prices, while benign inflation kept central banks from snatching away the monetary punch bowl. As a result, the MSCI world equity index rose another 0.15% as six straight weeks and now 13 straight months of gains left it at yet another all time high.
In total, world stocks haven’t had a down month in 2017, with the index rising 22% in the year adding almost $9 trillion in market cap for the year.
Putting the year in context, emerging markets led the charge with gains of 34%. Hong Kong surged 36%, South Korea was up 22% and India and Poland both rose 27% in local currency terms. Japan’s Nikkei and the S&P 500 are both ahead by almost 20%, while the Dow has risen by a quarter. In Europe, the German DAX gained nearly 14% though the UK FTSE lagged a little with a rise of 7 percent.
Craig James, chief economist at fund manager CommSec, told Reuters that of the 73 bourses it tracks globally, all but nine have recorded gains in local currency terms this year.
‘For the outlook, the key issue is whether the low growth rates of prices and wages will continue, thus prompting central banks to remain on the monetary policy sidelines,’ said James. ‘Globalization and technological change have been influential in keeping inflation low. In short, consumers can buy goods whenever they want and wherever they are.’
This post was published at Zero Hedge on Fri, 12/29/2017 –.
While the establishment may breathe a sigh of relief looking back at political developments and events in Europe – which was spared some of the supposedly “worst-case scenarios” including a Marine le Pen presidency, a Merkel loss and a Geert Wilders victory – in 2017, any victory laps will have to be indefinitely postponed because as Goldman writes in its “Top of Mind” peek at 2018, Europe’s nationalist and populist tide was just resting, and as Pascal Lamy, the former Chief of Staff to the President of the European Commission admitted earlier this year, “Euroskeptic politicians are largely following the pulse of domestic sentiment. The fact is that the public is less enthusiastic about Europe than it once was.”
Echoing the sentiment by the europhile, Goldman’s Allison Nathan writes that while the Euro area’s most immediate political risks – i.e., populist or euroskeptic parties winning key elections this year – did not materialize, these movements have continued to gain traction.
In the Dutch elections in March, the far-right Party for Freedom performed worse than polls had once predicted, but still increased its share of the vote relative to the 2012 elections. It remains the second-largest party in parliament. In France, concerns about the prospect of Marine Le Pen winning the presidency gave way to optimism over Emmanuel Macron’s reform agenda; nonetheless, Le Pen posted the best-ever showing for her party in a presidential race. In Germany, Chancellor Angela Merkel’s CDU-CSU retained the largest number of seats in the Bundestag, but the far-right Alternative fr Deutschland (AfD) entered it for the first time with 13% of the vote. And elsewhere in Europe, populist parties on various parts of the political spectrum performed well enough to participate in government coalitions; indeed, an anti-establishment candidate in the Czech Republic recently became prime minister Some other observations and lessons from recent European events in the twilight days of 2017:
This post was published at Zero Hedge on Dec 26, 2017.
For the second day in a row, most Asian markets – at least the ones that are open – were dragged lower by tech stocks and Apple suppliers, with the MSCI Asia Pacific Index down 0.2% led by Samsung Electronics and Taiwan Semiconductor Manufacturing in response to the previously noted report that Apple will slash Q1 sales forecasts for iPhone X sales by 40% from 50 million to 30 million. Most Asian equity benchmarks fell except those in China. European stocks were mixed in a quiet session while U. S. equity futures are little changed as markets reopen after the Christmas holiday.
Away from Asia, stocks remained closed across the large European markets, as well as in parts of Asia including Australia, Hong Kong, Indonesia, the Philippines and New Zealand. Japanese benchmarks slipped from the highest levels since the early 1990s, helping to pull the MSCI Asia Pacific Index down, while shares in Dubai, Qatar and Russia were among the big losers in emerging markets. S&P 500 futures were flat as those for the Dow Jones slipped. The euro edged lower with the pound – although there were no reverberations from Monday’s odd EURUSD flash crash which was only observed on Bloomberg feeds, while Reuters ignored it even if the FT did note it…
This post was published at Zero Hedge on Dec 26, 2017.
Spanish stocks and the euro fell, while Spanish government bond yields hit their highest levels in over a month after Catalan secessionists delivered an unexpected blow to the government of Spanish PM Rajoy by winning the Catalan regional election. Meanwhile across the Atlantic, U. S. equity futures and the dollar rose on the last trading session before the Christmas holiday. The MSCI index of world stocks was flat.
Europe’s Stoxx 600 Index traded sideways as Spain’s Ibex 35 underperformed, dropping as much as 1.6%. Spanish stocks dominated Europe’s biggest fallers, confirming analyst expectations that any shake-out from the Catalonia vote would be mostly confined to Spain. Spain’s bonds also fell along with peripheral European government debt, though bunds were little changed after a selloff this week drove yields to five-week highs. For those who missed it, Catalan separatist parties triumphed in regional elections, outperforming some polls and reigniting Spain’s political trauma. While the Euro has stabilized since, it suffered a mini flash crash in the illiquid aftermath of the Catalan election news, momentarily dipping to $1.1817 before trimming losses to last stand at $1.1853, down 0.2 percent.
This post was published at Zero Hedge on Dec 22, 2017.
It might be the last full week before Christmas – with both newsflow and trading volumes set to slide substantially – but there’s still a few interesting events and data releases to look forward to next week. Among the relatively sparse data releases schedule, we get US GDP, core PCE, housing and durable goods orders in the US, as well as CPI and GDP across Euro area and UK PMI. After last week’s central bank deluge, there are a handful of leftover DM central bank meetings include the BOJ and Riksbank, with rates expected to remain on hold for both. In Emerging markets, there will be monetary policy meetings in Czech Republic, Hungary, Thailand, Taiwan and Hong Kong.
Perhaps the most significant will be in China when on Monday the three-day Central Economic Work Conference kicks off. This event will see Party leaders discuss economic policies for the next year and the market will probably be most interested in the GDP growth target. Deutsche Bank economists have noted that it will be interesting to see if the government will change the tone on its growth target by lowering it explicitly from 6.5% to 6% or fine-tuning the wording to reflect more tolerance for slower growth.
Away from this, tax reform in the US will once again be a topic for markets to keep an eye on with final votes on the Republican legislation in the Senate (possibly Monday or Tuesday) and House (possibly Tuesday or Wednesday) tentatively scheduled. Also worth flagging in the US is Friday’s release of the November personal income and spending reports and the Fed’s preferred inflation measure – the core PCE print. Current market expectations are for a modest +0.1% mom rise in the core PCE which translates into a one-tenth uptick in the YoY rate to +1.5%.
This post was published at Zero Hedge on Dec 18, 2017.
Did Senators Lee and Rubio (and Hatch) just go full “Leeroy Jenkins”?
A surprise China rate hike (and disappointing retail sales) sparked weakness in Chinese stocks…
Mario Draghi managed to talk the Euro and Bund yields lower (despite attemptting to raise inflation forecasts)…
Since the FOMC meeting, Bonds and Bullion are well bid as stocks and the dollar sink…
This post was published at Zero Hedge on Dec 14, 2017.
One day after the Fed hiked rates by 25 bps as part of Janet Yellen’s final news conference, it is central bank bonanza day, with rate decisions coming from the rest of the world’s most important central banks, including the ECB, BOE, SNB, Norges Bank, HKMA, Turkey and others.
And while US equity futures are once again in record territory, stocks in Europe dropped amid a weaker dollar as investors awaited the outcome of the last ECB meeting of the year: the Stoxx 600 falls 0.4% as market shows signs of caution before the Bank of England and the European Central Bank are due to make monetary policy decisions as technology, industrial goods and chemicals among biggest sector decliners, while miners outperform, heading for a 5th consecutive day of gains. ‘The Federal Reserve raised interest rates last night, but they weren’t overly hawkish in their outlook. This has led to traders being subdued this morning,’ CMC Markets analyst David Madden writes in note.
The stronger euro pressured exporters on Thursday although overnight the dollar halted a decline sparked by the Fed’s unchanged outlook for rate increases in 2018, suggesting “Yellen Isn’t Buying Trump’s Tax Cut Talk of an Economic Miracle.”
That said, it has been a very busy European session due to large amount of economic data and central bank meetings, with the NOK spiking higher after the Norges Bank lifted its rate path, while the EURCHF jumped to session highs after SNB comments on CHF depreciation over last few months. The AUD holds strong overnight performance after a monster jobs report which will almost certainly be confirmed to be a statistical error in the coming weeks, while the Turkish Lira plummets as the central bank delivers less tightening than expected. Meanwhile, the USD attempts a slow grind away from post-FOMC lows.
This post was published at Zero Hedge on Dec 14, 2017.
The ‘spillover effects.’ By Don Quijones, Spain, UK, & Mexico, editor at WOLF STREET. Just how much more stress Europe’s banking system can bear will be one of the big questions of 2018. This year was already a pretty stressful year, what with two major Italian banks being put out of their misery while, another, Monte dei Paschi di Siena, was brought back from the dead. In Spain, 300,000 shareholders and subordinate bondholders mourned the passing of the country’s sixth biggest bank, Banco Popular, which was acquired by Santander for the measly price of one euro.
Now, a whole new problem awaits. A report published by Spain’s second largest lender, BBVA, has warned about the potential impact on the sector’s profitability of new rules on provisions due to come into effect in early 2018.
Until now, banks only had to report losses when loans began deteriorating – i.e. when the defaults began. But the introduction in January of a new accounting rule, known as IFRS 9, will force banks in Europe to provision for souring loans much sooner than at present. One direct result will be that banks will have to hold more capital on their books, and that will have a detrimental impact on their profits.
This post was published at Wolf Street on Dec 12, 2017.
U. S. equity index futures pointed to early gains and fresh record highs, following Asian markets higher, as European shares were mixed and oil was little changed, although it is unclear if anyone noticed with bitcoin stealing the spotlight, after futures of the cryptocurrency began trading on Cboe Global Markets.
In early trading, European stocks struggled for traction, failing to capitalize on gains for their Asian counterparts after another record close in the U. S. on Friday. On Friday, the S&P 500 index gained 0.6% to a new record after the U. S. added more jobs than forecast in November and the unemployment rate held at an almost 17-year low. In Asia, the Nikkei 225 reclaimed a 26-year high as stocks in Tokyo closed higher although amid tepid volumes. Equities also gained in Hong Kong and China. Most European bonds rose and the euro climbed. Sterling slipped as some of the promises made to clinch a breakthrough Brexit deal last week started to fray.
‘Strong jobs U. S. data is giving investors reason to buy equities,’ said Jonathan Ravelas, chief market strategist at BDO Unibank Inc. ‘The better-than-expected jobs number supports the outlook that there is a synchronized global economic upturn led by the U. S.”
The dollar drifted and Treasuries steadied as investor focus turned from US jobs to this week’s central bank meetings. Europe’s Stoxx 600 Index pared early gains as losses for telecom and utilities shares offset gains for miners and banks. Tech stocks were again pressured, with Dialog Semiconductor -4.1%, AMS -1.9%, and Temenos -1.7% all sliding. Volume on the Stoxx 600 was about 17% lower than 30-day average at this time of day, with trading especially thin in Germany and France.
The dollar dipped 0.1 percent to 93.801 against a basket of major currencies, pulling away from a two-week high hit on Friday.
This post was published at Zero Hedge on Dec 11, 2017.
Most people do not understand that there is the Eurogroup, which is an informal body of finance ministers from the Eurozone member states that are intended to discuss matters relating to their countries’ common responsibilities related to the Euro. They do not keep any minutes so nothing emerges with respect to policy. There is now a clash building between this Eurogroup and that of the European Commission. The Eurogroup will most likely oppose the EU Commission’s plans for an EU finance minister. This, of course, is one more step toward federalizing Europe. The view in Brussels is that their dream project is collapsing. The answer is not more freedom, but to centralize power to prevent the collapse of the Euro.
The Commission wants to impose its own finance minister over the Eurogroup and in turn, the Eurogroup will insist on having its own presidency. There is a rising belief within the Eurogroup that it should delineate the role of the Eurogroup from the role of the Commission. They see the Commission as attempting to grab more power unto itself.
This post was published at Armstrong Economics on Dec 11, 2017.
The mood has shifted.
By Don Quijones, Spain, UK, & Mexico, editor at WOLF STREET. Europeans are finally learning to love the euro, it seems, at least according tothe latest edition of the Eurobarometer, which is published twice yearly by the European Commission: 64% of the respondents, representing 16 out of 19 Eurozone economies, believe that having the euro is ‘a good thing for their country,’ the highest proportion since 2002, and up from 56% in 2016. Only 26% of respondents thought it was a bad thing.
A further 74% of respondents said that the euro is a good thing for the EU as a whole, the highest proportion in the 2010-2017 series. This is somewhat ironic given that even the ECB conceded this week that the main idea behind the euro as a driving force for regional economic convergence has produced, let’s say, mixed results, having essentially failed where it mattered the most, in Southern European economies:
‘It is striking, however, that little convergence has occurred among the early euro adopters, despite their differences in GDP per capita. In contrast to some initial expectations that the establishment of the euro would act as a catalyser of faster real convergence, little convergence, if any, has taken place for the whole period 1999-2016’
Nonetheless, the results of the survey point to a marked improvement in Europe’s love affair with the single currency, as growth in the Eurozone has reached its highest level (a forecast 2.6% for 2017) since the financial crisis began 10 years ago.
This post was published at Wolf Street on Dec 8, 2017.
A selloff which started in Asia, driven by renewed liquidation of Chinese and Hong Kong tech stocks and accelerated by weaker metal prices which pushed the Shanghai Composite below a key support and to 4 month lows…
… which sent the Nikkei to its worst day since March and the second worst day of the year, while the overall Asia Pac equity index slumped for the 8th day – the longest streak for two years, spread to Europe adn the rest of the world, pushing the MSCI world index lower by 0.3% as investors continued to lock in year-end gains among the best performing assets amid a broad risk-off mood. In FX, the dollar stabilized as emerging-market currency weakness meets yen gains while Treasuries and euro-area bonds gain as focus now turns to efforts to avert a U. S. government shutdown on Saturday. Euro and sterling trade heavy in average volumes while the loonie consolidates before BOC decision.
This post was published at Zero Hedge on Dec 6, 2017.
The top story in Britain is the collapse of BREXIT negotiations thanks to the stupidity of Northern Ireland. If Northern Ireland wants to remain inside the EU, we already have Scotland saying they would want the same deal and the Mayor of London adds his two-pence to the issue think he will save the City of London financial system. Of course, none one of these people understands the first thing about economics no less they are surrendering power to Brussels. The Brits have always come in dead last in everything inside the EU. BREXIT was the only thing that would save Britain of it too will be dragged under by the failure of the Euro.
This post was published at Armstrong Economics on Dec 5, 2017.
The first full week of December is shaping up as rather busy, with such Tier 1 data in the US as the payrolls report, durable goods orders and trade balance. We also get UK PMI data and GDP, retail sales across the Euro Area, as well as central bank meetings including Australia RBA and BoC monetary policy meeting.
Key events per RanSquawk
Monday: UK PM May To Meet EU’s Juncker & Barnier Tuesday: UK Services PMI (Nov), RBA MonPol Decision Wednesday: BoC MonPol Decision, Australian GDP (Q3) Friday: US Payrolls Report (Nov), Japan GDP (Q3, 2nd) The week’s main event takes place on Friday with the release of November’s US labour market report. Consensus looks for the headline nonfarm payrolls to show an addition of 188K jobs, slowing from October’s 261K. Average hourly earnings growth is expected to slow to 0.3% M/M from 0.5%, while the unemployment rate and average hours worked are expected to hold steady at 4.1% and 34.4 respectively. Hurricane induced volatility should be absent from the November release, and consensus points to a headline print much more in-keeping with trend rate.
Other key data releases next week include the remaining October services and composite PMIs on Tuesday in Asia, Europe and the US, ISM non-manufacturing in the US on Tuesday, ADP employment report on Wednesday and China trade data on Friday.
Focus will also fall on Wednesday’s Bank of Canada (BoC) interest rate decision, with the majority looking for the Bank to leave its key interest rate unchanged at 1.00%, although 3 of the 31 surveyed by Reuters are looking for a 25bps hike. Following the BoC’s back-to-back rate hikes in Q3, interest rate markets were pricing in a 40-50% chance of a hike at the upcoming decision, that has now pared back to 25% as the BoC has sounded more cautious in recent addresses, highlighting that it expected the economy to slow (GDP growth moderated to 1.7% in Q3 on a Q/Q annualised basis, from 4.3% in Q2) while stressing that it remains data dependant. RBC highlights that ‘the BoC has been focused on the consumer’s reaction to the earlier hikes and is content to wait-and-see for the moment. Wage growth – another key metric for the central bank – has improved in recent employment reports (reaching the highest level of growth since April 2016 in November’s report). Despite its softer tone, the BoC continues to stress that ‘less monetary stimulus will likely be required over time’ and as a result the statement will be scoured for any changes in tone. At the time of writing, markets are pricing a 57.2% chance of a 25bps hike in January, with such a move 91.0% priced by the end of March.
This post was published at Zero Hedge on Dec 4, 2017.
Eonia (Euro OverNight Index Average) is the 1-day interbank interest rate for the Euro zone. In other words, it is the rate at which banks provide loans to each other with a duration of 1 day (so Eonia can be considered as the 1 day Euribor rate). In other words, it is a measure of short-term liquidity. Eonia is an average of actual rates charged, so it is, in theory, a reflection of the market demand for short term liquidity. But Eonia is a tiny market, trading normally daily at around EUR7 billion or less. And in a tiny market, there can be a sudden shift in trading volumes. This is what happened on Wednesday and Thursday. Eonia rose from -0.36 basis points on Tuesday to -0.30 bps on Wednesday to -0.24 bps on Thursday.
This post was published at True Economics on Friday, December 1, 2017.
Apparently German government officials have finally woken up to the realization that it’s utterly ridiculous to use tax revenue generated primarily from middle and low-income households to fund subsidy payments to rich people buying $100,000 luxury sports cars. As Business Standard notes this morning, the German Federal Office for Economic Affairs and Export Controls announced that it will no longer subsidize the Tesla Model S as it can not be delivered in a configuration that meets the 60,000 euro price limit.
A German government agency has removed Tesla’s Model S from the list of electric cars eligible for subsidies because it is not available in a version that falls within a 60,000 euro ($71,448) price limit. Tesla customers could not order the Model S without extra features that pushed the price of the car above the limit, a spokesman for the German Federal Office for Economic Affairs and Export Controls (BAFA) said on Friday.
German magazine Auto Bild had reported that BAFA was looking into the issue and could take Tesla off the eligibility list.
This post was published at Zero Hedge on Dec 1, 2017.