Bernard Hickey details the key news overnight in 90 seconds at 9 am in association with Bank of New Zealand, including news the Dow Jones Industrial Average closed up 418 points or 3.9% and the S&P 500 ended up 4.6% after US jobless claims figures were better than expected.
See more here at Bloomberg on the market's stunning late rally.
US unemployment claims last week fell unexpectedly to a four month low, Bloomberg reported.
European and British stocks rallied sharply in late trade on rumours Italy and France may ban short selling of stocks, where funds are able to lend their stocks to traders who then sell those shares with the hope of buying them later at a lower price. See more here at Citywire.
Short selling is widely seen as increasing the volatility of markets.
Australia's stock market temporarily banned short selling of financial stocks during the crisis of late 2008 and early 2009.
However, the FT.com reported after the Dow closed that European authorities are divided on the issue of a short selling ban. France announced a 15 day ban on short selling of financial stocks late on Thursday European time. See more here at Reuters.
The New Zealand dollar spurted over 83 USc. It often rallies when stock markets jump globally as investors buy assets seen as riskier such as the New Zealand and Australian dollars.
Meanwhile Chinese authorities have let the yuan/renminbi strengthen beyond 6.4 yuan per dollar for the first time in 17 years. This is signficant because it signals China's willingness to let its currency do some of the work of slowing its export sector and reducing inflation.
In the past China has fixed or pegged its currency to the US dollar and built up foreign reserves through big export and current account surpluses. It now has a crawling peg and signs it is letting its currency rise vs the US dollar will be welcomed by many worried about the imbalances in the global trading and capital system caused by an undervalued Chinese yuan. See more here at Businessweek.
The Swiss franc weakened against the US dollar and Euro after the Swiss National Bank President said the central bank was considering imposing a peg for the currrency against the Euro.
Switzerland is desperate to avoid its safe haven status driving up its currency and destroying its export sector. See more here at Bloomberg.
US bond markets fell for the first time in days. The 30 year Treasury bond yield rose 27 basis points to 3.79%. See more here on US Treasuries.
No chart with that title exists.
(Updated with chart, detail, links)
36 Comments
http://blogs.telegraph.co.uk/finance/ambroseevans-pritchard/100011471/i…
Dieter Wemmer, CFO of Zurich Financial Services, said his group had slashed its holdings of Italian government bonds by €2bn since June 30, cutting its exposure to €6bn.
It also had €5bn of Spanish debt and €18bn of Greek debt.
Much of the capital flight from Italy is crossing into Switzerland, so the Swiss have a good insight into the behaviour of the Italian financial elites.They know what Italy’s insiders are doing.
The ZFS announcement follows a revelation by Deutsche Bank that it had cut its exposure to Italy from €8bn to €1bn by hedging (ie, buying insurance) through the CDS market.
These are not hedge funds. They are real money accounts, and they give us a glimpse into what is happening.
US first time claims came in @ 395K vs estimate 401K. I very much doubt that had anything to do with it Bernard.
In contrast the US trade data was abysmal - exports tumbled, the trade gap widened massively, both of which will substract from GDP in the relevant quarter
http://www.marketwatch.com/story/second-quarter-gdp-view-cut-after-trad…
Terrible data, seemingly ignored?
Really its best sometimes not to even try and provide reasons for the movement of the Dow etc.
Short sales ban? Maybe, but terribly desperate if true......
Chart watchers will be noting that the S+P500 50 day moving average is pretty much at the point of crossing the 200day on the downside.......
Maybe plunge protection team at work?
http://en.wikipedia.org/wiki/Working_Group_on_Financial_Markets
This is also worth a squiz:
They appear to be embarking on a new economic experiment in the United States – confronting an economic slowdown with fiscal austerity.!...which is very interesting as it could portend trouble or salvation..
The mosaic of elevated earnings volatility and the uncertainties of “what happens next” in the global economy suggests that the S&P 500 could trade below estimated fair value range for a while. Just as a prolonged period of low volatility translated into above average P/E multiples in the 1960s and 1990s,I believe high volatility and heightened uncertainty will likely translate into below-average P/E multiples in the next five years.
Youth unemployment – where are the NZjobs ?
Bernard and team this issue deserves attention or we go the same way then Greece, Spain, USA, UK and some other countries - riots in the streets – burring cities.
On the bases of a massive NZaccount deficit, high NZunemployment, especially among NZyouths and the fact that billions of NZtaxpayers money is spend on infrastructure in sectors like transport, telecommunication and energy to foreign companies (Asia) providing their workforce with skilful jobs, why is there no outcry of the public and the media ?
Why do NZmedia not demand from the government to review and change policies in order to allocate such contracts to NZcompanies the NZworkforce, providing them with skilful jobs ?
Especially now in difficult times, full and skilful employment of the general NZpopulation, so they have a decent income, must have first priority.
The NZMEA presented on this blog by Les and John never entered a debate, dealing with the situation - also quite amazing.
http://www.stuff.co.nz/business/money/4515185/Youth-jobless-rate-soars-to-19-4
………..ready to explode !!!!!!
http://www.youtube.com/watch?v=8Os-8fbhPoY&feature=related
……….a debate.
Come on , there are some smart people here who must be just about ready to start joining some dots.
Who owns most of Nz media outlets ? Globally who owns most the media ? Do you see any evidence abroad of the hard questions being asked of governments, no! Nothing in the Uk, thats for sure. All MSM is complicit.
We are aware of what needs to be done , but continually it isn't & it won't be. Have an early prediction of Rick Perry getting the GOP nomination for next year. The full weight of the machine is about to be thrown right behind him. Why is this so relevant, I'll spell it out if the Perry prediction runs it's pre ordained course
Let's see how it all plays out , because it's looking pretty fuggen ugly over here.
Come on Nz media time to get serious, the people are not going to do anything for themselves , they don't know how.
BBC interview of Darcus Howe on the riots. The interviewer seemed to have a fairly strong position on the matter already... funny that. Haven't seen a single thing from the media exploring why the riots might be occuring. No analysis of the causes of this situation what so ever. Maybe PM told Rupert Murdoch to make him look good and they might just brush that whole embarassing police phone tapping thing under the rug.
Correct & if the media ever do decide they want to take a credible position i will eat my hat. Cameron should have resigned over the phone tapping , not that it makes any difference & that Milliband twit asking why are so many are so angry when it's his bloody government that spent 10 years creating these yobs with corrupt policy who have nothing to lose. Yes I know the Tories started it all back in the 80's just like Muldoon started it all in Nz. The theatre that is witnesses between media, politics & economics is beyond a joke so far now , anyone who quotes from it in a serious capacity needs to go have a lie down !
A 20-year bear market? - http://www.businessday.com.au/business/return-to-peak-may-take-decades-…
This article is an interesting perspective on the short ban.
but general studies of short-selling have found that bans on that activity can lead to more volatility in the market and lower trading volume, according to Andrew W. Lo, a professor at the Massachusetts Institute of Technology. Mr. Lo said banning short-selling also removed important information about what investors think about the financial health of companies, and suggested that the bans served mainly political purposes. “It’s a bit like suggesting we take heart patients in the emergency room off of the heart monitor because you don’t want to make doctors and nurses anxious about the patient,” he said.And this via ZH:
A brief excerpt from Bailout Nation:
“In September 2008, with the crisis in full flower, [SEC Chief Christopher] Cox made shorting financial stocks illegal. Apparently, he was unaware that fierce market sell-offs often end with short sellers covering their positions, locking in profits on their bearish bets. With short sellers out of the market, the downturn became even fiercer. From the market highs of October 2007, the S&P 500 and the Dow Jones Industrial Average were cut in half in 12 months. Much of the damage came after the no-shorting rule went into effect.”
Hmmm , so the Dow Jones " crashed up " overnight , rather than down . No recession imminent in the US of A ...... got it wrong again , didn't you , Bernard !
No recession . Ummm , I guess that implies your " depression " scenario is also out the window .
Bugger ! .. it's tough to be a forecaster , particularly about future events .
Volatility works out great for the engineers of the system though eh. All those lovely trade commissions rolling in on the tide of uncertainty. AAA ratings to their sponsors toxic products which allowed the same engineers to rake in untold cash while sinking the global economy , now downgrades the USA which allows the same sponsors of the ratings agency to rake in untold cash on the volatile markets! Strike me handsome eh !
Not so good for forecasters as you point out.
Aww don't be like that Wolly. Actually I hate to think back to some of antics I got up to when I was younger, many already have:) Oops too much information.
Anyway I am heading out to Rangitoto island until Tuesday, so you will find me at Islington Bay. No power, no phone, no computer, no radio or TV. Ahhhh looking forward to it.
The Gummster is not into charting & technical analysis . So where is the bottom of this market retracement ...... no fricking idea !
.. But ( and this but is bigger than the 90 kg madamoiselle's ) ... this is not a repeat of 2008 . That was a full scale credit freeze , a global economic crisis , complete capitulation in the markets .
Now we have a scare over the debt levels of some grossly mismanaged European socialist republics .
... for what it's worth , there's a heaping lot of good buying on the markets ! ... Well run companies , record profits , and succulent fat dividends .
Will the market rise or fall ? ... don't know , don't care . .. I got me cashflow rolling in , and that is all that matters ..
[..... ummm , you got any photos of the big lady in those soon to be banned shorts ? ..]
I’m inclined to agree with you gummy. Although it is early days, this seems to me to have more of a feel of a market correction (even possibly an overreaction) than a market crash. The markets have actually down reasonably well since the steep falls following the GFC, so a correction is due. Add to that the persistent economic weakness in the United States and it’s flirting with a double dip recession, the Europeans screwing it up for themselves and everybody else yet again, there’s no real driver of market growth. Money is being safely stashed on the sidelines pending a return to greater certainty.
I’m expecting greater volatility in the international markets than we have seen in recent times as it seesaws between responding to good economic news, bad economic news and rumour. But unless some truly awful economic stats come out of America or there is a default by one of the Europeans, I don’t see the market actually crashing. I’m expecting flat to bearish over the next 6-9 months notwithstanding individual companies being exceptions to the rule. Keeping an eye on and updating ones overall investment spread and paying attention to the risks vs. the rewards will get you through.
Like you I took advantage of the lower prices this week to top up some of my holdings in companies that I like and that can withstand the current economic headwinds and occasional squall and turn a nice little profit. I’m pleased to report that the price of those companies has recovered quite nicely.
By the way, I’m picking the US won’t go into recession. What about you? And as for charting, it's never made any sense to me. If it's so good, why didn't it predict this weeks fall in share prices?
DB : Recessions come and go with regularity . It is sensationalists such as Bernard who keep screeching about the horrors of an impending recession in the USA . And it still hasn't occurred . Neither has the depression that he harps on about .
...... I cannot see the US dipping into a new recession anytime soon . The funds rate is being kept at the 0 - 0.25 % range until 2013 at least .
But big hairy deal , a recession comes , and it eventually goes . Tough luck , Bernard , but bad times don't last forever .
... the spirit of man causes us to pick ourselves up , fix what we can , innovate a little , and muddle on as we always have .
But in the meanwhile , back up the truck & load on all those fat dividend paying stocks that some 'fraidy cat investors are unloading . ..... 10 % fully franked yields ? ... Pig out on that !
[ .... some folk hang onto Allied Farmers scrip for dear life , but biff out cashflow positive stocks willy-nilly ....... a-fecking-mazing ! .. ]
France bans shorters
France has been under particular pressure after rumours swirled that one of its leading banks, Société Générale, was in crisis. The bank was forced to deny it was in trouble after its shares tumbled 20pc.
http://www.telegraph.co.uk/finance/markets/8696624/France-bans-shorters…Yeah you better run :P Surely you know that French women don't get fat...
Here is a link to an article in one of the main French papers questioning whether France still has a chance to avoid Greece's fate http://www.lemonde.fr/idees/article/2011/08/11/la-france-peut-elle-encore-echapper-a-un-scenario-grec_1558488_3232.html#ens_id=1216746 (can be translated using Google Translate, some funny stuff but understandable).
Ok, we'll leave that one.
;]
Thanks for the link....I had to translate it....my french wasnt hot 30 years ago....
I agree with the piece's comment on there is and why there is a problem. Its solution is yet more austerity and we can see its not working else where. Though the first thought after that I think is where was this paper in raising the alarm bell? If it did its fairly unique.
I think Jeremy Grantham? said it very well, I wouldnt try and start it from here...
Its can kicking pure and simple and all the Pollies are doing it and all the voters are allowing it to happen and have for decades. It has to be paid for, I dont think any more can kicking is possible, certainly past 5 years and maybe not 5 months....iit rests with us.
I know if I was in power (oh my god) I'd be stripping the previous pollies of all their fancy Lordy titles and considering locking a few up.....
I dont think France will be the source of the collapse, it is one of the deck fo cards though.....The trigger might have been the recet US debt play and S&Ps downgrade....or we might recover and it will be Greece, or Italy or Spain....too many possibilities IMHO....
regards
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