Wednesday May18 Daily Market Primer
Stocks
fell about 1% in the US yesterday, which is 19 S&P points or 181 Dow
points. Its was a good news/bad news day, where relatively positive
economic data brought fears that the Fed will be able to raise interest rates
sooner, which was reinforced by comments from San Francisco Fed President
John Williams and Atlanta Fed President Dennis Lockhart. Crude oil
rose over 1% yesterday but crept down slightly overnight, and Brent Crude,
the European benchmark, is over $49/barrel. The dollar is strong this
morning.
|
LAST
|
CHANGE
|
% CHG
|
|
|
17529.98
|
-180.73
|
-1.02%
|
|
|
4715.73
|
-59.73
|
-1.25%
|
|
|
2047.21
|
-19.45
|
-0.94%
|
|
|
1097.68
|
-18.54
|
-1.66%
|
|
|
2293.93
|
-6.03
|
-0.26%
|
|
|
16644.69
|
-8.11
|
-0.05%
|
|
|
334.97
|
0.25
|
0.07%
|
|
|
6141.95
|
-25.82
|
-0.42%
|
|
|
15.56
|
-0.01
|
-0.06%
|
|
|
2294.01
|
-5.95
|
-0.26%
|
|
|
2594.18
|
-16.34
|
-0.63%
|
|
|
5356.2
|
-39.7
|
-0.74%
|
|
|
2807.51
|
-36.17
|
-1.27%
|
|
|
19826.41
|
-292.39
|
-1.45%
|
|
|
25704.61
|
-69
|
-0.27%
|
|
|
16644.69
|
-8.11
|
-0.05%
|
|
|
2777.11
|
-4
|
-0.14%
|
|
|
4286.36
|
-11.21
|
-0.26%
|
|
|
9870.64
|
-19.55
|
-0.20%
|
|
|
17552.85
|
53.97
|
0.31%
|
|
|
8698.3
|
-0.4
|
0.00%
|
|
|
0.847
|
,-1/32
|
||
|
1.319
|
.-2/32
|
||
|
1.785
|
-4/32
|
||
|
2.602
|
-0/32
|
||
|
48.29
|
-0.02
|
-0.04%
|
|
|
49.07
|
-0.21
|
-0.43%
|
|
|
2.145
|
-0.04
|
-1.83%
|
|
|
185.856
|
1.272
|
0.69%
|
|
|
369.16
|
-1.61
|
-0.43%
|
|
|
2041.75
|
-1.75
|
-0.09%
|
Bernie
won in Oregon and Hillary barely won in Kentucky, as Senator Sander’s
tenacity continues to vex the Democratic party insiders. The Fed will
release minutes from the April meeting today. The Senate is calling
Saudi Arabia’s bluff on legislation to allow Sept. 11 victims families to sue
other countries, as the Saudi’s have previously threatened to sell $750
worth of dollar-denominated asset if the law passes. There are
more wildfires in Alberta, disrupting oil production there, another strong
earthquake in Ecuador, the IMF is in favor of Greek debt relief, and the
blockchain may be about to go mainstream (second to last story).
Here’s
the news:
Fed minutes
At 2:00 p.m. ET today the Federal Reserve will release the minutes of its April 26-27 meeting
with investors watching for discussion on the balance of risks to the
central bank's outlook. Two (non-voting) regional Fed bank presidents said
yesterday that at least two interest-rate increases may be
warranted this year. Jan Hatzius, the chief economist at Goldman Sachs
Group Inc., is also warning that the market may have underpriced willingness
to raise rates this year, as the spread between two- and 10-year U.S.
Treasuries narrows to 92 basis points. The market-implied chances of a
rate hike by the July meeting have increased from 15 percent to 28 percent in
the last week alone.
Dollar rises, commodities hit
The U.S. dollar is climbing ahead of the Fed minutes, with a
gauge of the currency hitting a seven-week high this morning. As the
greenback rises, so commodities fall, with copper and other industrial metals declining.
Gold for immediate delivery dropped 0.6 percent to $1,271.93 an ounce by
5:20 a.m. ET. Oil was unchanged at $48.32 a barrel.
Sanders wins Oregon
Bernie Sanders won yesterday's Democratic presidential primary in Oregon, a
victory that is likely to do little more than slow Hillary Clinton's march
towards the Democratic nomination. With the Republican nomination effectively clinched by Donald Trump,
Clinton is facing a 'war on two fronts' as she is attacked
by both Sanders and a Trump free of his own in-party fight.
Senate defies Saudis
The U.S. Senate passed legislation yesterday that will
allow Sept. 11 victims and their families to sue other countries for their role in the attacks.
The move comes a day after the Treasury Department disclosed the size of Saudi
Arabia's holdings of U.S. debt. The oil-rich Gulf
kingdom has previously threatened to sell $750 billion of dollar-denominated
assets should the bill become law, and while it has passed the senate, it is
still strongly opposed by President Obama.
Markets await Fed minutes
The MSCI Asia Pacific Index slid 0.7 percent overnight, despite
better-than-expected Japanese GDP data, which showed the economy expanded by an annualized 1.7 percent in the first
quarter. In Europe, the Stoxx 600 Index was unchanged at 6:11 a.m. ET with little
to move prices in the session so far. S&P 500 futures were unchanged.
Curve Ball
Bond-market interest rates are sending strange and conflicting signals about the direction of the U.S. economy. Strengthening economic data at home are raising the possibility of an early hike in Federal Reserve rates but plummeting interest rates overseas are pushing in the opposite direction. A hail of positive reports yesterday showed consumer prices and industrial production rising, bolstering expectations that the central bank may consider a rate increase at its next meeting in June, a move that until recently had been considered all but off the table. Investors sold short-term government notes, sending yields higher, while many offshore investors have been buying longer-term bonds, driving those rates lower. The swings narrowed the gap between short-term and long-term rates, known as the yield curve, sending it to its flattest reading since December 2007. If the yield flattens or even inverts, it often signals recession. But this time analysts believe its moves are being warped by the aggressive monetary policy in Europe and Japan.
Bond-market interest rates are sending strange and conflicting signals about the direction of the U.S. economy. Strengthening economic data at home are raising the possibility of an early hike in Federal Reserve rates but plummeting interest rates overseas are pushing in the opposite direction. A hail of positive reports yesterday showed consumer prices and industrial production rising, bolstering expectations that the central bank may consider a rate increase at its next meeting in June, a move that until recently had been considered all but off the table. Investors sold short-term government notes, sending yields higher, while many offshore investors have been buying longer-term bonds, driving those rates lower. The swings narrowed the gap between short-term and long-term rates, known as the yield curve, sending it to its flattest reading since December 2007. If the yield flattens or even inverts, it often signals recession. But this time analysts believe its moves are being warped by the aggressive monetary policy in Europe and Japan.
On It Goes
Sen. Bernie Sanders won the Democratic primary in Oregon yesterday, where Donald Trump was the victor for the GOP, but the Kentucky race remains narrow. With 99% of precincts reporting, Hillary Clinton led her Democratic rival by less than 1 percentage point. While she has amassed a nearly insurmountable lead in gathering the 2,383 delegates needed to clinch the party’s nomination, Mrs. Clinton has been lumbering toward the finish line while fending off attacks from Messrs. Sanders and Trump. The only way Mr. Sanders could catch her would be to amass a large number of superdelegates, a challenge likely more difficult now after his supporters, angry over the handling of delegate allocation at a Nevada convention on Saturday, issued death threats to the state’s party chairwoman. Meanwhile, a financial-disclosure form revealed yesterday that Mrs. Clinton and her husband have earned $6.7 million from paid speeches since the beginning of 2015.
Sen. Bernie Sanders won the Democratic primary in Oregon yesterday, where Donald Trump was the victor for the GOP, but the Kentucky race remains narrow. With 99% of precincts reporting, Hillary Clinton led her Democratic rival by less than 1 percentage point. While she has amassed a nearly insurmountable lead in gathering the 2,383 delegates needed to clinch the party’s nomination, Mrs. Clinton has been lumbering toward the finish line while fending off attacks from Messrs. Sanders and Trump. The only way Mr. Sanders could catch her would be to amass a large number of superdelegates, a challenge likely more difficult now after his supporters, angry over the handling of delegate allocation at a Nevada convention on Saturday, issued death threats to the state’s party chairwoman. Meanwhile, a financial-disclosure form revealed yesterday that Mrs. Clinton and her husband have earned $6.7 million from paid speeches since the beginning of 2015.
Mind the
Gap
When it comes to the gender pay gap in the U.S., highly educated women fare worst of all compared with their male colleagues. Our examination of pay in 446 major occupations found that women in many elite jobs earn well below men, and the biggest gaps don’t easily lend themselves to legislative remedies. Our findings belie policy makers’ hope that the most-educated women would lead the way in shrinking the gap. Many white-collar jobs give substantially larger financial rewards to those logging the longest hours and who job-hop often, phenomena that limit white-collar women who pull back for child-rearing. Of the 10 major occupation groups where women’s earnings lagged behind most, five were in finance. Executives and policy makers are weighing ways to impose greater equality, with ideas such as limiting employers from asking about salary histories. View our interactive graphic of the gender pay gap by occupation and share your own experience.
When it comes to the gender pay gap in the U.S., highly educated women fare worst of all compared with their male colleagues. Our examination of pay in 446 major occupations found that women in many elite jobs earn well below men, and the biggest gaps don’t easily lend themselves to legislative remedies. Our findings belie policy makers’ hope that the most-educated women would lead the way in shrinking the gap. Many white-collar jobs give substantially larger financial rewards to those logging the longest hours and who job-hop often, phenomena that limit white-collar women who pull back for child-rearing. Of the 10 major occupation groups where women’s earnings lagged behind most, five were in finance. Executives and policy makers are weighing ways to impose greater equality, with ideas such as limiting employers from asking about salary histories. View our interactive graphic of the gender pay gap by occupation and share your own experience.
Wildfires are again sweeping through
Alberta, postponing the restart of production in oil sands. Oil companies have
delayed efforts to restore production of 1 million barrels a day. Suncor
Energy, Canada's biggest oil producer, evacuated workers from three sites where
it was trying to restart operations.
The International Monetary Fund is
intensifying its demand that international creditors go along with debt relief
for Greece on the heels of a key meeting of eurozone finance ministers. By
taking a more aggressive tone, the IMF may be headed into conflict with Germany
and several other eurozone countries. The situation is particularly complicated
for Germany, where many lawmakers insisted upon the IMF's participation in the
Greek bailout.
ANX International has launched a
service for an account to be established in minutes for blockchain-based
virtual-currency trading. The Hong Kong startup hopes the move will reduce the
cost of using blockchain. "Once you drive the price down to zero, then
you'll see a lot more uses for it," said CEO Ken Lo. "The biggest
problem now in blockchain is education and exposure."
Bloomberg (17 May.)
The commodity that no one knows
about but everybody wants to buy.
Good news for the economy is bad news for U.S. stock traders.
Germany is very, very tired.
This tiny Cayman island is holding $265 billion in Treasuries.
Yes, the robots are coming for our jobs, but just the boring ones.
ANX International has launched a
service for an account to be established in minutes for blockchain-based
virtual-currency trading. The Hong Kong startup hopes the move will reduce the
cost of using blockchain. "Once you drive the price down to zero, then
you'll see a lot more uses for it," said CEO Ken Lo. "The biggest
problem now in blockchain is education and exposure."
Bloomberg (17 May.)
Here's a movie recommendation for a Wednesday evening: William
Friedkin's "Sorcerer." In the 1977 film, four men who have made a
series of bad decisions, risk their lives to shift a delivery of
highly-explosive nitroglycerin across the jungle. It is sometimes cited as an
unrecognized masterpiece. It is also, according to Artemis Capital Management,
the greatest "short convexity" film of all time. Convexity is a
term that rarely gets much airing outside the realms of fixed income, where
it's used to describe the non-linear relationship between bond prices and
yields. A "short convexity" portfolio, per Artemis, involves
investors opting to eke out small gains "on the assumption of
stability" and "in exchange for the risk of substantial loss in the
event of change." With trillions of dollars worth of government debt
now yielding below zero and the recent
rush by investors to once again crowd into positions, it's worth revisiting
the concept of convexity and the risks that come with it; any sudden change
in expectations could lead to a self-reflexive spiral of explosive
proportions. So do yourself a cinematic favor this evening. Watch Sorcerer
and marvel at the short-termism of human nature - and the wider investment
industry.
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Source:
Bloomberg, BI, WSJ, CFAI Fin. Newsbrief
Labels: DailyMarketPrimer, Fed, Investments, Oil
posted by Rich Barnett @ 6:13 AM
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