Best of the Week
Most Popular
1. Stock Markets and the History Chart of the End of the World (With Presidential Cycles) - 28th Aug 20
2.Google, Apple, Amazon, Facebook... AI Tech Stocks Buying Levels and Valuations Q3 2020 - 31st Aug 20
3.The Inflation Mega-trend is Going Hyper! - 11th Sep 20
4.Is this the End of Capitalism? - 13th Sep 20
5.What's Driving Gold, Silver and What's Next? - 3rd Sep 20
6.QE4EVER! - 9th Sep 20
7.Gold Price Trend Forecast Analysis - Part1 - 7th Sep 20
8.The Fed May “Cause” The Next Stock Market Crash - 3rd Sep 20
9.Bitcoin Price Crash - You Will be Suprised What Happens Next - 7th Sep 20
10.NVIDIA Stock Price Soars on RTX 3000 Cornering the GPU Market for next 2 years! - 3rd Sep 20
Last 7 days
Online Elliott Wave Markets Trading Course Worth $129 for FREE! - 22nd Sep 20
Gold Price Overboughtness Risk - 22nd Sep 20
Central Banking Cartel Promises ZIRP Until at Least 2023 - 22nd Sep 20
Stock Market Correction Approaching Initial Objective - 22nd Sep 20
Silver Bulls Will Be Handsomely Rewarded - 21st Sep 20
Fed Will Not Hike Rates For Years. Gold Should Like It - 21st Sep 20
US Financial Market Forecasts and Elliott Wave Analysis Resources - 21st Sep 20
How to Avoid Currency Exchange Risk during COVID - 21st Sep 20
Crude Oil – A Slight Move Higher Has Not Reversed The Bearish Trend - 20th Sep 20
Do This Instead Of Trying To Find The “Next Amazon” - 20th Sep 20
5 Significant Benefits of the MT4 Trading Platform for Forex Traders - 20th Sep 20
A Warning of Economic Collapse - 20th Sep 20
The Connection Between Stocks and the Economy is not What Most Investors Think - 19th Sep 20
A Virus So Deadly, The Government Has to Test You to See If You Have It - 19th Sep 20
Will Lagarde and Mnuchin Push Gold Higher? - 19th Sep 20
RTX 3080 Mania, Ebay Scalpers Crazy Prices £62,000 Trollers Insane Bids for a £649 GPU! - 19th Sep 20
A Greater Economic Depression For The 21st Century - 19th Sep 20
The United Floor in Stocks - 19th Sep 20
Mobile Gaming Market Trends And The Expected Future Developments - 19th Sep 20
The S&P 500 appears ready to correct, and that is a good thing - 18th Sep 20
It’s Go Time for Gold Price! Next Stop $2,250 - 18th Sep 20
Forget AMD RDNA2 and Buy Nvidia RTX 3080 FE GPU's NOW Before Price - 18th Sep 20
Best Back to School / University Black Face Masks Quick and Easy from Amazon - 18th Sep 20
3 Types of Loans to Buy an Existing Business - 18th Sep 20
How to tell Budgie Gender, Male or Female Sex for Young and Mature Parakeets - 18th Sep 20
Fasten Your Seatbelts Stock Market Make Or Break – Big Trends Ahead - 17th Sep 20
Peak Financialism And Post-Capitalist Economics - 17th Sep 20
Challenges of Working from Home - 17th Sep 20
Sheffield Heading for Coronavirus Lockdown as Covid Deaths Pass 432 - 17th Sep 20
What Does this Valuable Gold Miners Indicator Say Now? - 16th Sep 20
President Trump and Crimes Against Humanity - 16th Sep 20
Slow Economic Recovery from CoronaVirus Unlikely to Impede Strong Demand for Metals - 16th Sep 20
Why the Knives Are Out for Trump’s Fed Critic Judy Shelton - 16th Sep 20
Operation Moonshot: Get Ready for Millions of New COVAIDS Positives in the UK! - 16th Sep 20
Stock Market Approaching Correction Objective - 15th Sep 20
Look at This Big Reminder of Stock Market Mania - 15th Sep 20
Three Key Principles for Successful Disruption Investors - 15th Sep 20
Billionaire Hedge Fund Manager Warns of 10% Inflation - 15th Sep 20
Gold Price Reaches $2,000 Amid Dollar Depreciation - 15th Sep 20
GLD, IAU Big Gold ETF Buying MIA - 14th Sep 20
Why Bill Gates Is Betting Millions on Synthetic Biology - 14th Sep 20
Stock Market SPY Expectations For The Rest Of September - 14th Sep 20
Gold Price Gann Angle Update - 14th Sep 20
Stock Market Recovery from the Sharp Correction Goes On - 14th Sep 20
Is this the End of Capitalism? - 13th Sep 20
The Silver Big Prize - 13th Sep 20
U.S. Shares Plunged. Is Gold Next? - 13th Sep 20
Why Are 7,500 Oil Barrels Floating on this London Lake? - 13th Sep 20
Sheffield 432 Covid-19 Deaths, Last City Centre Shop Before Next Lockdown - 13th Sep 20
Biden or Trump Will Keep The Money Spigots Open - 13th Sep 20
Gold And Silver Up, Down, Sideways, Up - 13th Sep 20

Market Oracle FREE Newsletter

How to Get Rich Investing in Stocks by Riding the Electron Wave

Stocks Suffer Again As Financials Take The Strain

Stock-Markets / Financial Markets 2009 Jun 17, 2009 - 03:32 AM GMT

By: PaddyPowerTrader


Best Financial Markets Analysis ArticleOn the day, the S&P lost 1.27% and now sits 4.6% below its recent high of 956. The rot set in with disappointing results from electronics retailer Best Buy but it was financials that bore the brunt of the selling pressure. All this on news that news that the Obama administration plans to create a quango called the Consumer Financial Protection Agency. This will in theory help protect consumers’ credit, savings and other banking transactions.

Transports fell 1% and financials fell 2%. Both indices failed to break their 200 day moving averages and Dow Theorists are now keenly focused on the transport’s inability to confirm the recent high from the Industrials. The market doesn’t go down in a straight line, but this can be viewed as a shot across the bow. The attempt at an end of day rally was also stopped cold in its tracks - something that we haven’t seen in nearly a month. In other news, the PPI data confirmed that the inflation that the bond sellers and stock buyers were calling for is practically non-existent and in the near-term is far overblown.

Today’s Market Moving Stories

  • Media reports indicate that the US Federal Reserve is weighing using next week’s FOMC statement to damp rate hike speculation. Following the Bank of Canada’s approach of voicing its intention not to hike before 2010 would be one option, Bloomberg reports referring to a “person familiar with the matter”.
  • The US ABC consumer comfort index deteriorated 2 points to -49 in the week through June 14th, putting it back to its worst since the middle of April. That was driven by a drop in the buying climate index to -50 from -46 and by the personal finances index to -14 from -10. The national economy index held steady at -84.
  • Almost two thirds of Germany’s top managers believe the country will not return to the high export levels that prevailed before the crisis, but to much lower long-term growth rates. This is according to a very interesting poll by Capital Magazine in Germany, as reported by FT Deutschland. The poll flatly contradicts the consensus among Germany’s economically illiterate political classes who believe that Germany’s only suffered so much this year because of its strong exports, while Germany will among the first countries to bounce back due to its high competitiveness. The article quotes Bart van Ark (I kid you not), one of Europe’s leading experts on productivity, who said that Germany’s success pre-crisis depended largely on cost-cutting, rather than innovation.

UK: Keeping Things in Context
The market currently expects the Bank of England’s MPC to begin hiking in the next 6 months. The MPC minutes are likely to acknowledge recent green shoots, and the Agents’ report will probably reflect improving economic conditions. However, given the other recent influences on the BoE inflation projection, we believe the market has got ahead of itself in pricing in interest rate hikes so soon. In particular, the recent appreciation in the GBP exchange rate implies a drag on the inflation projection – outweighing the likely upward revision to the bank’s growth projection.

US: Plunging Output Belies the Surveys
Industrial production has fallen 14.7% since its past peak making this the worst recession in manufacturing in the post WW II era. The huge drop in production caused utilization rates to fall to their lowest levels. Production in the auto industry has fallen 60.5% from its peak. The present suspension in auto production by the companies in bankruptcy perhaps explain the divergence between ISM surveys and actual output. Some regional purchasing managers surveys have started to regress after months of improvement. Assuming that the ISM index declines slightly in June and July it should cool some of the present optimism over economic recovery.

Will Mervyn Entertain at the Manison House?
This evening sees the UK’s Mansion House dinner, which includes key note speeches from both the governor of the Bank of England, Mervyn King, and the Chancellor of the Exchequer, Alistair Darling. The Treasury has already provided a signal on what the Chancellor will say, and it is likely to be received with stony silence from the Bank. Darling is expected to indicate there will not be any change to the UK’s tripartite regulatory regime. He will say that shifting the power between the Treasury, BoE and FSA will not prevent future crises. The BoE will disagree. It criticised the system in the wake of Northern Rock’s demise and has since suggested that a method of macro-prudential policy, which will allow it an element of supply side control as well as demand side on interest rates, would be beneficial.

Positive Outlook Ahead Says Merrill Lynch Survey
The latest Merrill Lynch global equity fund manager survey (conducted 5th – 11th June) reveals optimism over the global growth outlook which continues to build at a respectable pace. Optimism over the global growth outlook continues to build at a respectable pace, and asset allocations are shifting in a pro-risk direction. The survey suggests investors are back to overweight equity/underweight bond positions. Alongside historically significant overweight Emerging Markets equity positions and a stretched Emerging Markets foreign exchange position (i.e. overbought), this suggests that pressure on the USD related to a positioning adjustment to an early cycle environment has probably come to an end. The main risk to this view is that the overweight US equity/underweight Eurozone equity position is unwound as and when any global economic upswing is perceived to be broadening.

UK Retailers Deliver
Sainsbury has followed Tesco with reasonably solid Q1 results. Like for like sales grew 7.8% excluding fuel. Easter and clothing may have boosted these numbers. The company highlights value and quality as two key drivers in their revenue momentum. Like Tesco, Sainsbury continues to grow its store network as the larger players leverage the recession to grow market share. However the shares are off sharply on plans to raise £445m to buy property, stepping up their plans to add convenience store space during a recession

AIB Indulges In A Little Bond Play
AIB announced yesterday that the replacement bond in hybrid exchange program will have a coupon of 12.5%. This bond will be used as an exchange for six bonds which AIB announced it was repurchasing last week, providing a significant boost to core Tier 1 Capital at the bank. The bank also outlined the range of prices it was willing to pay for the instrument, moving from 50c to 67c. The weighed average price of the buy back works out at 55.4c, but the final blended average price will depend on the take up in each class of issuance. Bank of Ireland recently saw a take-up of 55% for its cash repurchase program. On a similar take up the capital benefit to AIB is c€688 million moving to €813 million at a 65% take up. The deadline for exchange is Friday.

Mining Digs Deeper
There is notable weakness in mining / commodity stocks this morning with all the big names (BHP Billiton, Anglo American, Xstrata & Rio Tinto) suffering again while steelmakers are also under selling pressure (note Sweden’s SSB is down 8% + after warning on “severe weakness” in demand) as the European retracement enters its 4th day.

Markets Can Be Ironic
For the longest time, equities were on the cusp of an upside break, now we are staring in the face of a breach of the S&P 200-day moving average to the downside. How ironic that fears of a slow retreat from Quantitative Easing are more inclined to hurt equities than hurt bonds. Not that the Fed story is that simple. The market expects less unconventional stimulus, but equally has been shaving back expectations for early 2010 rate hikes, a view we have backed vigorously since the market got ahead of itself after the last NFP numbers. Another source of irony is how equity volatility looks to be on the rise, while bond volatility has tapered off slightly, a reversal of recent events. Plainly there is a directional component here, with respective bond and equity “fear” rising the most on higher bond yields and lower equity prices, respectively.

Now not even Michael O’ Leary thought of this one.

Be very afraid: Jim Cramer says that US housing has bottomed out, AGAIN. Note, the best part of Cramer’s bottom call is that he credits yesterdays increase in housing starts as evidence. Yes Jim, an increase in supply is exactly what we need in the middle of a supply glut.

Data Ahead Today

  • UK average earnings and unemployment for April will be released at 09:30. Another large rise in unemployment alongside sluggish earnings growth is expected. Unemployment should rise from 7.1% to 7.3% and average earnings growth should remain very low at -0.2%, although the market consensus is +0.2%.
  • The Bank of England MPC minutes will also be out at 09:30. The minutes will be watched for how the debate on additional Quantitative Easing is progressing, although Tuesday’s sticky inflation data complicate the outlook.
  • Later at 13:30 in the US, we’ll see May’s CPI figure. CPI should rise by 0.3% on higher energy prices. The core CPI should be up 0.2% owing to gains in shelter and education.
  • Also at 13:30, the US current account balance should see the deficit shrink to around $85bn, which would be the smallest shortfall since 2003.

And Finally…
Thinking about home loans… think again… one bank shows you how it can be a pain…

Disclosures = None

By The Mole

The Mole is a man in the know. I don’t trade for a living, but instead work for a well-known Irish institution, heading a desk that regularly trades over €100 million a day. I aim to provide top quality, up-to-date and relevant market news and data, so that traders can make more informed decisions”.

© 2009 Copyright PaddyPowerTrader - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

PaddyPowerTrader Archive

© 2005-2019 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules