Wednesday August 10 Daily Market Primer

I might as well take the morning off from writing the Daily Market Primer since US stocks were flat yesterday, although the NASDAQ did bump up to another all time high.  Stocks were modestly down overseas Wednesday.  Oil, which has been bouncing around quite bit for the last few weeks, dropped on increased supply numbers.  The Pound fell below $1.30 yesterday before recovering, as negative economic news on the UK continues.  Remember it was about $1.50 before Brexit.   UK debt yields are falling to record lows as the BOE starts it quantitative easing program. The market is off to another very quiet start this morning, and the VIX is down to 11, which is pretty low.

	LAST	CHANGE	% CHG
Nasdaq	5225.48	12.34	0.24%
S&P 500	2181.74	0.85	0.04%
Russell 2000	1231.74	1.32	0.11%
Global Dow	2439.39	0.3	0.01%
Japan: Nikkei 225	16764.97	114.4	0.69%
Stoxx Europe 600	344.67	3.14	0.92%
UK: FTSE 100	6851.3	42.17	0.62%
CBOE Volatility	11.66	0.16	1.39%
Australia: S&P/ASX 200	5543.7	-8.8	-0.16%
China: Shanghai Composite	3018.75	-6.93	-0.23%
Hong Kong: Hang Seng	22492.43	26.82	0.12%
India: S&P BSE Sensex	27774.88	-310.28	-1.10%
Japan: Nikkei 225	16735.12	-29.85	-0.18%
Singapore: Straits Times	2875.57	4.79	0.17%
France: CAC 40	4461.07	-7	-0.16%
Germany: DAX	10663.32	-29.58	-0.28%
Italy: FTSE MIB	16819.37	23.23	0.14%
Spain: IBEX 35	8678.4	13	0.15%
U.S. 3 Month	0.305	0/32
U.S. 2 Year	0.694	1/32
U.S. 5 Year	1.083	4/32
U.S. 10 Year	1.525	7/32
U.S. 30 Year	2.24	17/32
Germany 2 Year	-0.624	0/32
Germany 10 Year	-0.103	9/32
Crude Oil	42.9	0.13	0.30%
Brent Crude	45.21	0.23	0.51%
Natural Gas	2.633	0.018	0.69%
E-mini S&P 500	2180.75	3.25	0.15%

The US is doing very well at the summer Olympics, but both US presidential candidates are stumbling.  Here’s the news:

Gilts rally

U.K. debt is rallying this morning with yields on 3-, 5-, 10- and 30-year bonds falling to record lows. Yesterday, the second day of purchases under the Bank of England's expanded QE program, saw the bank fail to purchase the targeted amount of longer-dated bonds as it could not find enough sellers. The bank this morning said that it would add the purchase shortfall to a later operation. The pound also rallied this morning, and was trading at $1.3055 at 5:44 a.m. ET. 

Oil falls

A barrel of West Texas Intermediate for September delivery fell to $42.28 by 5:37 a.m. ET, with a Brent dropping to $44.56, extending yesterday's declines. Data from the American Petroleum Institute on Tuesday showed inventories rose, with the agency also downgrading its price forecast for the rest of the year. Adding to the downward pressure is news that Saudi Arabia has told OPEC that it pumped a record 10.67 million barrels of oil a day in July, according to two people with knowledge of the data.

The Dollar doesn't believe in a Fed hike

The dollar fully erased the rally sparked by last week's bumper payrolls number, with the Bloomberg Dollar Spot Index trading 0.4 percent below last Friday's open this morning. Market-based expectations of another rate hike this year are at 45 percent. While the short-term movement in the dollar is lower, the longer view remains that the greenback is in an up-trend, with implications there for the price of gold over the medium term.

Markets slip

Global stocks markets are slipping a little this morning as the August lull continues. Overnight in Asia, the MSCI Asia Pacific Index added 0.2 percent, with Japan's Topix index dropping 0.2 percent in light trading. In Europe, the Stoxx 600 Index was 0.3 percent lower at 6:06 a.m. ET, with volumes traded about a third below the 30-day average. Germany's DAX Index, which entered a bull market yesterday, was down 0.5 percent. S&P 500 futures added 0.1 percent.

Less in a Day’s Work
The longest slide in worker productivity since the late 1970s is haunting the U.S. economy’s long-term prospects. The goods and services produced each hour by American workers decreased at a 0.5% seasonally adjusted annual rate in the second quarter as hours worked increased faster than output, the Labor Department said Tuesday. That was the third consecutive quarter of falling productivity, marking the longest streak since 1979. Such sluggish productivity could prompt the Federal Reserve to keep interest rates low for years to come. The metric is a key ingredient in determining future growth in wages, prices and overall economic output.

Donald Trump touched off another firestorm with an off-the-cuff remark that critics interpreted as inciting violence against his Democratic rival. Speaking at a rally in North Carolina about how he claims Hillary Clinton as president would undermine gun rights under the Second Amendment, Mr. Trump said, “If she gets to pick her judges, nothing you can do folks.” He then added: “Although the Second Amendment people—maybe there is, I don’t know.” The comment came a day after his economic-policy speech that many Republicans hoped would be the start of a disciplined reboot. Mrs. Clinton, meanwhile, faced fresh hurdles of her own after a conservative watchdog group released a batch of new emails from the former Secretary of State’s personal server. The documents offered fresh examples of how top Clinton Foundation officials sought access to the State Department during her tenure. For now, Mrs. Clinton is ahead of Mr. Trump in three battleground states, according to the latest WSJ/NBC News/Marist polls conducted Aug. 3-7. The Democrat opened an 11-point lead in Pennsylvania, while holding slimmer advantages in Ohio and Iowa.

Receding Tide
Procter & Gamble, the biggest advertising spender in the world, will move away from ads on Facebook that target specific consumers, concluding that the practice has limited effectiveness. Facebook has spent years developing its ability to zero in on consumers based on demographics, shopping habits and life milestones. While P&G initially jumped at the opportunity to market directly to subsets of shoppers, its chief marketing officer, Marc Pritchard, now says the company has realized it took the strategy too far. P&G’s shift highlights the limits of targeted marketing for big brands—one of the cornerstones of Facebook’s ad business—and could be a bellwether on how consumer goods companies and major brands use digital advertising.

Golden Records Day four of the Rio Olympics included big wins for the U.S., taking gold in gymnastics and swim events. In their red, white and blue leotards, the American women gymnasts smashed their astronomical expectations, winning the team gold medal by 8.209 points over their nearest competition—the highest margin of victory since 1960. At the aquatics stadium, Michael Phelps and Katie Ledecky put on a show, claiming gold in the men’s 200-meter butterfly and women’s 200-meter freestyle, respectively. At age 31, Phelps became the oldest male swimmer to win an individual event at the Olympics. Speaking of Olympic records, there is one that remains unanswered: Who was the youngest-ever Olympian? WSJ’s Joshua Robinson looks into the question that has perplexed historians for ages. British pound fell below $1.30 as traders braced for a series of reports next week that could give them a better picture of how much damage the Brexit vote is imposing on the UK economy. July data on employment and inflation will come on the heels of recent reports showing contraction in construction and service sector activity and a decline in consumer confidence. Bloomberg (09 Aug.),  China's banks pour capital into international M&A market Banks in China are rapidly increasing participation in the financing of global mergers and acquisitions. Encouraged by Premier Li Keqiang's "going out" policy, lenders have raised their share of global syndicated loans for mergers and acquisitions to 4.4% this year from 0.9% in 2015. Bloomberg (09 Aug.)  US banks plan cyberdefense partnership Eight large US banks are collaborating to share information about cyberthreats, plan responses to hacks and sharpen cyberdefense through war games. The group is part of a broader industry effort but focuses on threats specific to big organizations, sources say. The Wall Street Journal (tiered subscription model) (09 Aug.)  Biggest RIAs show little interest in robo-advice Among registered investment advisers with more than $250 million in assets under management, only 9% plan to roll out an automated platform, according to a study by InvestmentNews and BlackRock. "Smaller firms are four times more likely to be adding a robo-adviser than these elite RIAs," said Matthew Sirinides, senior research analyst at InvestmentNews. InvestmentNews (09 Aug.)

Japan's plunging jobless rate is all about aging, not Abenomics.

Rouhani support sinking across Iran.

A new trade route for natural gas opens in Panama.

Tesla's autopilot works better than you think.

Italian banks reel, but Monti has no regrets about avoiding bailout.

How I learned to stop blockchain obsessing and love the Barry Manilow.

Disney Makes Bet on Baseball Streaming

Appeals Court Upholds SEC’s In-House Court as Constitutional

Turkey’s Erdogan Patches Up Relations With Putin

Yemen Seeks IMF Help to Cut Off Rebels

TODAY'S VIDEO Decoding Teenagers New research suggests parents should take a more active role in the lives of teenagers as they navigate the stormiest years in their development. Once seen as a time for parents to step back, adolescence is increasingly viewed as an opportunity to stay tuned in and emotionally connected.

If you're looking for some reading material on a low-volatility August day, I highly recommend the blog of Elaine Ou, an expert on money, tech and digital currencies. I've been going back and reading post after post, including this history of the word "yuan" and this brilliant piece about the evolution of the private loan agreement, which goes from 2900 BC through to the modern-day smart contract. Most recently she wrote a brilliant piece about why shady online pharmacies give generous discounts to people who purchase pills in Bitcoin. The answer is not that they're trying to be nice to Bitcoin users, or anything like that. It's that Bitcoin purchases can't be reversed, and if you're dealing in a sketchy area like selling pills over the internet, then chargeback is a major business risk. Given the risks of non-settlement, people who buy at a "discount" in Bitcoin are actually more profitable customers, because their purchases are a done deal. A key insight here is that for this same reason, a place like Starbucks isn't in any rush to accept Bitcoin because selling coffee doesn't entail the same kind of hazard. Anyway, read that post and you'll probably get pulled into the rest of her writing on the nature of money.

Source: Bloomberg, WSJ, CFAI Fin. Newsbrief, Investment News