Tuesday June 21 Daily Market Primer
Stocks
rose yesterday as the global rally touched off by the easing of Brexit fears continued in the
US. The S&P closed up about .6%, and the NASDAQ was up .8%.
Stocks were even higher in the middle of the day, with the Dow up 271 at the
peak. Stocks were mostly up in Asia overnight and are positive in
Europe this morning. “Remain” is keeping its lead in UK polls that it
gained over the weekend. The CBOE Volatility index (VIX) has
fallen for the last few days on positive markets, US Treasury prices
rebounded this morning, and the US stock market opened slightly up.
17804.87
|
129.71
|
0.73%
|
||
4837.21
|
36.88
|
0.77%
|
||
2083.25
|
12.03
|
0.58%
|
||
1157.7
|
13
|
1.14%
|
||
2342.82
|
44.95
|
1.96%
|
||
15965.3
|
365.64
|
2.34%
|
||
337.67
|
11.89
|
3.65%
|
||
6204
|
182.91
|
3.04%
|
||
17.6
|
-0.77
|
-4.19%
|
||
5274.4
|
17.6
|
0.33%
|
||
2878.56
|
-10.25
|
-0.35%
|
||
20668.44
|
158.24
|
0.77%
|
||
26812.78
|
-54.14
|
-0.20%
|
||
16169.11
|
203.81
|
1.28%
|
||
2789.45
|
-11.42
|
-0.41%
|
||
4369.04
|
28.28
|
0.65%
|
||
10012.63
|
50.61
|
0.51%
|
||
17434.09
|
80.64
|
0.46%
|
||
8653.6
|
6.5
|
|
||
0.284
|
0/32
|
|||
0.742
|
0/32
|
|||
1.166
|
3/32
|
|||
1.667
|
7/32
|
|||
2.473
|
16/32
|
|||
48.46
|
-0.91
|
-1.84%
|
||
50.32
|
-0.97
|
-1.89%
|
||
2.791
|
-0.004
|
-0.14%
|
||
2078
|
3.75
|
0.18%
|
||
192.164
|
-2.242
|
-1.15%
|
||
377.05
|
-5.83
|
-1.52%
|
||
2078
|
3.75
|
0.18%
|
Janet
Yellen starts two days of congressional testimony this morning, which is sure to
keep Fed watchers around the world glued to their TVs. The WSJ ran a
story about the wildfires in the Western US (below), no surprise to those
of us in California and Arizona. Trump dumped his campaign manager,
triggering speculation that his campaign is in disarray. George Soros
grabbed headlines by saying that the pound will crash 15 – 20% if there is
a Brexit. The pound appreciated 2% against the dollar yesterday. PIMCO
issued a warning on US commercial real estate, but it wasn’t that dire,
predicting that prices could fall 5% or so over the next year.
Here’s
the news:
Yellen testimony
Federal Reserve Chair Janet Yellen begins her two-day testimony
to Senate and House lawmakers today. As this is an election year, she is likely
to face a grilling on the economy and the
Federal Reserve's policy responses. The dollar is falling this morning ahead of her appearance
in Washington.
Brexit latest
Markets seem to be making up their mind that the Brexit
referendum will result in a vote for the U.K. to remain in the European Union,
and bookmakers have it as close to a certainty. This morning the pound
climbed to the highest level since January 4 and was
trading at $1.4758 at 6:06 a.m. ET. If there is a surprise, and the U.K. does
vote to leave, here's a look at some investments that should do well.
Markets tread water
After yesterday's moves, markets are somewhat becalmed this
morning. The MSCI Asia Pacific Index advanced 0.8 percent overnight with shares
in Japan and the Philippines leading the gains. In Europe, where this morning
the German constitutional court ruled in favor of the ECB's OMT bond buying
program, the Stoxx 600 Index was 0.2 percent higher at 5:58 a.m. ET, while
London's FTSE 100 Index was 0.3 percent lower. S&P 500 futures were 0.4 percent higher.
Brazil bankruptcy and Venezuela warning
Phone company Oi SA filed for bankruptcy protection on
a Brazilian record of 65 billion reais ($19 billion) in debt after talks with creditors stalled on a
debt-for-equity swap that would have virtually wiped out shareholders. Staying
in South America, Moody’s Investors Service has warned that Venezuela is
"highly unlikely" to have enough
hard currency to meet debt payments due this year. Moody's said that
state-owned oil company Petroleos de Venezuela SA is likely to default
before the sovereign.
Trump trouble
Presumptive Republican presidential nominee Donald Trump removed Corey Lewandowski as his campaign
manager yesterday as his efforts to get his campaign back on track following the
recent slide in polling continue. Filings show that Trump has fallen far behind Democratic
presumptive nominee Hillary Clinton in fundraising in May, with his campaign
ending the month with $1.3 million on hand compared to her $42.5 million.
Remain
is surging the polls. The latest poll from The Telegraph shows that Remain has jumped
out to a 7-point lead. The poll, conducted by ORB International, shows Remain
ahead of Leave by 53% to 46%. The British pound is up 0.3% at 1.4736, its
highest level since January 4.George Soros says a Brexit would cause the pound to crash. Billionaire George Soros warned that a British exit from the European Union would lead the British pound to a bigger collapse than seen on Black Wednesday, the day the Bank of England took the pound off the European Exchange Rate Mechanism. According to Soros, a Brexit would cause a drop of at least 15% and possibly more than 20%. Soros is known as "the man who broke the Bank of England" by placing a massive bet against the currency ahead of Black Wednesday.
Germany's highest court backed the ECB's OMTs. The German Constitutional Court tossed out five lawsuits challenging the validity of the European Central Bank's Outright Monetary Transactions program, which was the centerpiece of Mario Draghi's promise to do "whatever it takes" to save the euro. Bloomberg reports the judges ruled that "Germany's government institutions, including the Bundesbank, must monitor the implementation and review whether the OMT program keeps these limits once it is put in action." The OMT program has never been used.
Germany's ZEW sentiment surged past estimates. The ZEW Indicator of Economic Sentiment for Germany rose to 19.2 in June. The number was up from May's reading of 6.4 and well ahead of the 5.1 that economists were expecting. "The improvement of economic sentiment indicates that the financial market experts have confidence in the resilience of the German economy," ZEW president Achim Wambach said. "However, general economic conditions remain challenging. Apart from the weak global economic dynamics, it is mainly the EU referendum in Great Britain which causes uncertainty."
Dell is selling its software business. Three people familiar with the matter told Reuters that Francisco Partners and the private-equity arm of the activist hedge fund Elliott Management were teaming up to buy Dell's software unit for more than $2 billion. The sale comes as Dell looks to get rid of all of its software assets as it tries to shore up its balance sheet after its $67 billion purchase of EMC back in October.
There might be a buyer of some Sports Authority stores. The New York City-based Modell's Sporting Goods and the Britain-based Sports Direct are considering a joint bid for as many as 200 stores of the bankruptcy retailer Sports Authority, Reuters reports, citing The Wall Street Journal. Bidding for Sports Authority's leases concludes on Tuesday, the report says.
Sterling Performance
Stocks, bonds and currencies from Sydney to Toronto reacted strongly on Monday after polls tilted toward a U.K. vote to remain in the EU, swings that portend further volatility in the days before Thursday’s vote. The British pound leapt more than 2% against the dollar to $1.47, among its strongest performances in years, while the Stoxx Europe 600 jumped 3.6%, its best day since August. As the betting odds of an exit fell, safe government bonds and gold retreated. But amid the speculation, little attention has been paid to the core assumptions investors are making as they brush aside the possibility of a sterling crisis, writes our columnist James Mackintosh. Meanwhile, polls released late Monday night were mixed, with one survey giving a lead of two points to Leave, at 44% to 42%, while another poll gave the pro-EU camp a two-point lead at 49%. European stocks were steady today, while Asian shares played catch-up.
War Rules
The U.S. is no longer at war with the Taliban, so Special Forces remaining in Afghanistan have to weigh every situation to decide whether striking them is justified. We chronicle how U.S. commanders and military lawyers make seat-of-the-pants calls every day about using force against the Taliban, trying simultaneously to respect the rules, avoid killing civilians and spare their allies casualties that a quick airstrike might prevent. President Obama ruled this month that U.S. troops and aircraft, until now limited to assisting Afghan commandos and other special units, will be allowed to provide the same aid to Afghan conventional forces, who in several places have been reeling from Taliban warm-weather attacks. But those expanded powers mean U.S. commanders and their lawyers will have to decide even more frequently whether they can justify the use of force against Taliban fighters.
The prices buyers pay for commercial
real estate in the US could fall as much as 5% over the next 12 months, Pacific
Investment Management said in a report. The value of commercial properties will
be under pressure from asset sales by publicly traded owners, tightening
regulations and approaching maturing debt, according to the report. Bloomberg (20 Jun.)
Heat Wave
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|
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Wildfires have forced hundreds to evacuate in Southern
California, Arizona and New Mexico over the last few days as a
heat wave and high winds threaten to strengthen the fires.
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Earnings reports trickle out. CarMax and Lennar will report ahead of the opening bell while Adobe Systems, FedEx, and KB Home release their quarterly results after markets close.
Even Cheap Meals Influence Doctors’ Drug Prescriptions, Study Suggests
China Smartphone Makers Snap Up Patents in Fight for Market Dominance
Bitcoin Rival Ethereum Gains Traction
Why China’s Developers Can’t Stop Overpaying for Property
Data remains absent. It picks back up again
Wednesday with the release of the FHFA Housing Price Index and existing-home
sales.
A quick trip to the oil patch shows energy-related
losses rising.
China's hacking decline signals a new era, or just a shift in tactics.
It's 1995 again for dollar traders bracing for
trade war trouble.
Russian company helps your boss monitor your mobile calls.
The decline in U.S. male labor force participation
- what not to blame.
In 1954, nearly 98 percent of prime age men (those between 25
to 54 years old) in the U.S. were in the labor force. As of May 2016, that
number had dropped to around 88 percent. The Labor Force Participation
Rate (LPFR) among prime age males in the U.S. has been in a steady state of
decline for six decades and economists can't quite figure out why.
Yesterday, The White House's Council of Economic Advisors published a report on exactly this topic.
Not only does it confirm the dramatic fall in U.S. male prime age LFPR, but
it also shows that the rate is low relative to other wealthy OECD countries.
Some factors contributing to the decline include poor wages, high levels of
incarceration (which makes subsequent employment hard), skills-biased
technological change, and competition from global labor. But none of these factors
fully explains what's going on, especially in the context of poor global
comparisons. Given the damage of not working - unemployment tends to come
with higher rates of suicide, smoking, obesity, etc. - there's an urgency to
figuring out what's going on and turning this trend around. When you have
time, definitely check out the report here.
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Source:
Bloomberg, BI, WSJ, CFAI Fin. Newsbrief
Labels: Brexit, DailyMarketPrimer, Investments, Markets
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