Friday June 10 Daily Market Primer

Stocks fell slightly in the US yesterday as sovereign bond yields continued to fall around the world, but are down sharply in Asia and Europe on Friday.  The VIX spiked 8% this morning, and US yields are under pressure with the 10 year at 1.65%.  As I mentioned yesterday, yields in the UK, Germany, and Switzerland hit record lows this week, with the German 10 year bund touching .025% yesterday.   Investors seem nervous, and I’ve checked Bloomberg, the WSJ, FT, and Reuters and haven’t seen a good explanation for the downdraft.  Here is Bloomberg’s lead story, which basically says investors are nervous after recent run-ups in the stock markets: http://bit.ly/StocksRetreat.  The S&P is down about .8% 20 minutes into the trading day.   Oil prices rolled over with WTI back below $50 on a stronger dollar.

	Last	Chg	%Chg
DJIA	17985.19	-19.86	-0.11%
Nasdaq	4958.62	-16.03	-0.32%
S&P 500	2115.48	-3.64	-0.17%
Russell 2000	1181.2	-7.75	-0.65%
CBOE Volatility	15.84	1.2	8.20%
Global Dow	2349.73	-22.56	-0.95%
Japan: Nikkei 225	16601.36	-67.05	-0.40%
Stoxx Europe 600	333.46	-7.79	-2.28%
UK: FTSE 100	6102.04	-129.85	-2.08%
Australia: S&P/ASX 200	5312.6	-49.3	-0.92%
China: Shanghai Composite	2927.16	-8.89	-0.30%
Hong Kong: Hang Seng	21042.64	-255.24	-1.20%
India: S&P BSE Sensex	26635.75	-127.71	-0.48%
Japan: Nikkei 225	16601.36	-67.05	-0.40%
Singapore: Straits Times	2822.97	-20.83	-0.73%
France: CAC 40	4313.55	-92.06	-2.09%
Germany: DAX	9837.82	-251.05	-2.49%
Italy: FTSE MIB	17263.94	-499.94	-2.81%
Spain: IBEX 35	8536.4	-233.1	-2.65%
U.S. 2 Year	0.755	1/32
U.S. 5 Year	1.187	6/32
U.S. 10 Year	1.653	10/32
U.S. 30 Year	2.452	23/32
Crude Oil	49.71	-0.85	-1.68%
Brent Crude	51.14	-0.81	-1.56%
Natural Gas	2.592	-0.025	-0.96%

UK Pound volatility is very high ahead of the June 23 Brexit vote, and Deutsche Bank is in more trouble over mortgage trading.  President Obama endorsed Hillary Clinton just as more bad news came out concerning the ongoing email issues that have dogged her campaign.  Here’s the news:

Record low sovereign yields

Bonds around the world continue to rally. Japanese and Swiss securities are pushing to new record low yields, this time in negative territory, while 10-year bund yields are also setting records a gnat's whisker above zero. Former bond king Bill Gross has warned that the push into negative rates is a "supernova that will explode someday," while his previous employer, Pacific Investment Management Co., is adding to the Treasury holdings in its Total Return Fund.

Markets are slumping

There is red across the board today. The MSCI Asia Pacific Index sank 1 percent overnight, with Japan's Topix index dropping 0.5 percent. In Europe, the Stoxx 600 Index fell for the third day in a row and was 2 percent lower at 6:02 a.m. ET. Financial stocks are being hit the hardest, followed by utilities and telecoms.  S&P 500 futures were 0.6 percent lower. 

European bank woes

The seemingly never-ending problems at European banks continue not to end. Deutsche Bank AG is currently under investigation by the U.S. Securities and Exchange Commission for the bank's post-crisis mortgage-trading business. People familiar with the matter say the SEC's inquiries are being aided by a whistle-blower who alleges the bank inflated the value of mortgage bonds on its books to mask losses around 2013. Italian lender UniCredit SpA's board meets today to discuss finding a successor to outgoing Chief Executive Officer Federico Ghizzoni, a search that may take weeks as shareholder disagreements on the way forward for the bank continue. The head of investment banking at Norway’s biggest lender, DNB ASA, has warned that large European banks are losing the investment banking race to U.S. competitors.

Pound volatility close to 2009 levels

Expectations for price swings in the British pound climbed to a seven year high ahead of the Brexit vote on June 23. Estimates of the scale of fallout from a vote to leave still vary, with a study by risk-modeling firm Axioma Inc. suggesting European stocks could fall by 24 percent in the aftermath. The majority of forecasters see a downturn in the U.K. economy, in the event of Brexit, but do not see a recession.

Obama endorses Clinton President Barack Obama formally endorsed Hillary Clinton to succeed him while Vermont Senator Bernie Sanders, who remains in the race for the Democratic nomination, said he would do everything in his power to defeat Donald Trump. Democratic Senator Elizabeth Warren also endorsed Clinton saying she is "ready to get into this fight." Ex-GE CEO Jack Welch, who is backing Donald Trump, says the Republican nominee risks losing the election if he continues to focus on issues such as the ethnic background of the a judge handling a case against one of Trump's companies. She’s Got Mail At the center of the criminal probe into Hillary Clinton’s handling of classified information as secretary of state is a series of emails between American diplomats in Islamabad and their superiors in Washington about whether to oppose specific drone strikes in Pakistan. We report that the 2011 and 2012 emails were sent via the “low side’’—government slang for a computer system for unclassified matters—as part of a secret arrangement that gave the State Department more of a voice in whether a CIA drone strike went ahead. Some of the emails were then forwarded by Mrs. Clinton’s aides to her personal email account, which routed them to a server she kept at her home in suburban New York. The emails were written within the often-narrow time frame in which State Department officials had to decide whether or not to object to drone strikes before the CIA pulled the trigger. Safe Haven The global hunger for U.S. government debt is intensifying as investors seek better returns from the negative yields and record-low rates found in Japan and Europe. On Thursday, an auction of 30-year Treasury debt attracted some of the highest demand ever from overseas buyers, at a yield of 2.475%, the lowest for the 30-year bond since January 2015. The European Central Bank’s bond-buying program and a negative-rate environment in Japan are keeping U.S. yields down even as riskier assets like stocks and oil have risen. These forces also show how global flows of money are making it difficult for the Federal Reserve to control the path of U.S. interest rates, and the frenzy of buying has sparked warnings about the potential of large losses if interest rates rise. Government-bond yields in Germany, Japan and the U.K. fell to fresh all-time lows this morning as political and economic uncertainties continued to take a toll on sentiment. Why Brexit doesn't necessarily mean a UK recession. Here's how George Soros's latest predictions have played out. Mystery bidders boosted demand at blowout Treasury two-year auction. How a 143-year-old Swiss bank took a quick road to ruin in Asia. A power plant in Iceland has turned its CO2 into stone. Influx of Younger, Wealthier Residents Transforms U.S. Cities WSJ Survey: Economists Sharply Lower Estimates of Job Growth in the Next Year Tesla Offers Lower-Price Model S Sedan Saudi Aramco IPO: The Biggest Fee Event in Wall Street History PwC: Wealthy clients more tech-savvy than advisers Affluent investors use technology far more than their financial advisers do, according to PricewaterhouseCoopers. Among high-net-worth clients, 70% use online and mobile technology, while 25% of wealth managers have no digital connection to clients other than email. "Essentially, wealth management as a sector is the least tech literate of all financial services," said Michael Spellacy, global wealth-management leader at PwC. Financial-Planning.com Everyday on What'd You Miss, the TV show I co-host at 4 PM Wall Street time, we start with a "market minute," where we do a roundup of how all the major asset classes are doing on the day. It's my responsibility to go over how bonds have performed, and I'm noticing a bit of a pattern. It feels like literally every single day I'm talking about how sovereign bond yields somewhere are hitting a new record low, whether it's in Japan, Germany, or the U.K. Meanwhile, U.S. yields aren't quite at record lows but they're getting close to levels we haven't seen since 2012. Everybody knows that growth and inflation around the world are languid. And that central banks continue to chart new territory in terms of easing measures. Nonetheless the day-in, day-out nature of the bull market in such a gigantic asset class definitely feels like the key thing to be watching right now.

Source: Bloomberg, BI, WSJ, CFAI Fin. Newsbrief, Fiancial-Planning.com