Posts Tagged ‘Stock Markets’
Carry Trade Withdrawal Gives China Safe Opportunity to ‘Talk’ Tightening
Tuesday, February 23rd, 2010
Chinese stocks, commodities, and global markets, for that matter, are not correcting due to the anticipation of reduced demand from China, as a result of its squawking about tightening. In fact, last year’s profitable trades are correcting because the U.S. dollar is climbing against the falling euro, and adding to that climb is short covering of the dollar as its carry trades of the last year are unwound.
With or without China’s ‘talk’ of tightening – i.e. reining in credit, suspending new loans, raising the value of the yuan, raising its interest rates, and past hikes in its Required Reserve Ratio – China’s stock markets would have corrected simply because carry trades tied to its market and commodities are being sold off.
What better opportunity, then, is there, than a technical global correction, to talk about the very thing, tightening, that is, which would bring about a correction in its own markets?
Pierre Daillie (AdvisorAnalyst.com), GlobeAdvisor.com, February 22, 2010.
http://www.globeadvisor.com/advisoranalyst/aa20100222.html
Tags: Anticipation, China, Chinese Stocks, Commodities, Dollar, Emerging Markets, Euro, February 22, Global Markets, Globeadvisor, interest rates, Loans, Opportunity, Profitable Trades, Reserve Ratio, Stock Markets, Yuan
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Stock Market Leadership Points to Risk Aversion
Wednesday, January 27th, 2010
As far as leadership since the start of the nascent US stock market correction on January 20 is concerned, it is interesting that cyclical sectors such as the Materials SPDR (XLB), Financial SPDR (XLF), Energy SPDR (XLE) and Technology SPDR (XLI) have been leading the market lower. Traditionally defensive sectors such as Consumer Staples SPDR (XLP), Utilities SPDR (XLU) and Health Care SPDR (XLV) also declined, but to a lesser extent than the S&P 500 Index as a whole (-5.1%) and the cyclical sectors.
This is the type of pattern one would expect typically to emerge during a correction phase.
Source: StockCharts.com
Turning to the broader market, Adam Hewison (INO.com) provides a short technical analysis and poses the question “Is the Dow in trouble?” Click here to access the presentation.
The final words go to David Fuller (Fullermoney) commenting as follows from across the pond: “Why might this be no more than another correction rather than the beginning of a new bear trend? Unless the modest global economic recovery is about to slide back into another slump, which I doubt, I do not see the catalysts for another stock market collapse. Instead, and despite the current uncertainty, I think this could still be an economic sweet spot for stock markets characterized by modest global GDP growth, reasonably accommodative monetary policy and generally low inflationary pressures.
“Yes, there has been some overheating in emerging Asia, especially China where the PRC’s monetary authorities have moved early and incrementally to contain this problem, as I have said before. In North America and Europe central banks are talking about ending quantitative easing but that is not the same as a monetary squeeze. Historically, the US stock market has usually continued to rise during the early stages of a cycle of higher short-term interest rates from the Fed, and this has yet to commence.”
Tags: Central Banks, China, Consumer Staples, Correction Phase, David Fuller, Emerging Asia, Emerging Markets, Energy Spdr, GDP Growth, Global Gdp, Inflationary Pressures, Leadership Points, Market Collapse, Market Leadership, Monetary Authorities, Stock Market Correction, Stock Markets, Us Stock Market, Xle, Xlp, Xlu, Xlv
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Preferreds and High Yield Bonds in Demand
Friday, January 15th, 2010
The charts below, courtesy of Bespoke, show that the preferred stock and high-yield bond markets have been surging since the beginning of December.
Bespoke said: “Since the Lehman Brothers’ collapse on September 15, 2008, PFF is actually up 12.91%, while HYG is down just 2.89%. With preferreds and high-yield bonds now at or near pre-Lehman levels, how long will it take for common stocks to get there as well? As shown below, the S&P 500 is still 8.7% below the 1,251 level it closed at on September 12, 2008.” Is it just a question of time?
Source: Bespoke, January 13, 2010.
Tags: Amp, Bond Markets, Collapse, Common Stocks, High Yield Bond, High Yield Bonds, Hyg, Lehman Brothers, Pff, Preferred Stock, Question Of Time, Stock Markets, Time Source
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Robin Griffiths: A technical perspective of stock markets, the dollar and Turkey
Thursday, January 14th, 2010
The dollar has turned a corner against the yen, according to Robin Griffiths, technical strategist of Cazenove Capital. He sees stock markets going “a little higher for a little longer” and Turkey being the “breakout” emerging market this year, as well as London Brent crude continuing to rise.
Source: CNBC, January 11, 2010.
Tags: Breakout, Capital Markets, Capital Stock, Cnbc, Dollar, Emerging Market, Emerging Markets, London Brent Crude, oil, Robin Griffiths, Stock Markets, Technical Perspective, Technical Strategist, Turkey, Yen
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The Key to Normalcy in World Markets?
Wednesday, January 13th, 2010
The yen must replace the dollar in carry trades to restore normalcy to the global economy and markets, including Canada’s.
For nine months we were trapped in the bizarre world of “bad news is good news.” To the puzzlement of investors, stock markets rallied despite deteriorating economic fundamentals, negative GDP growth, 10%-plus unemployment, and the erosion of the dollar’s value globally.
Here’s why…
Pierre Daillie (AdvisorAnalyst.com) GlobeAdvisor.com, January 13, 2009
Tags: Bad News, Bizarre World, Canada, Dollar Value, Economic Fundamentals, Erosion, GDP, GDP Growth, Global Economy, Globeadvisor, Investors, Nine Months, Normalcy, Puzzlement, Stock Markets, Trades, Unemployment, World Markets, World News, Yen Dollar
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Emerging Markets in 2010
Sunday, January 10th, 2010
This article is a guest contribution by Frank Holmes, CEO, US Global Investors (www.usfunds.com).
January 05, 2010
A recent story in The Economist summarizes the resilient opportunity in global emerging markets, which is part of the reason why we believe so strongly in the long-term potential of this sector.
2009 was expected to be a very rough year for emerging markets, due to the reliance on exports to developed markets. And while some countries and regions did take it on the chin, the overall outcome was not nearly as bad as anticipated. The disaster of 1997-98 did not repeat itself.
And this year, GDP in developing countries as a whole is forecast by the International Monetary Fund to grow about 5 percent (see chart) and developed countries at less than 2 percent.
A few of the key points from The Economist:
- Goldman Sachs estimates that the BRIC countries have been responsible for nearly half of global economic growth since 2007.
- In 2009 the stock markets in the largest emerging-market countries made up for all of their 2008 losses.
- The Institute for International Finance sees a doubling of capital inflows into emerging markets in 2010 to $672 billion.
- Belief in capitalism endured despite the weaker conditions. Nearly 90 percent of Chinese were “satisfied with national conditions” in 2009, compared to less than 40 percent of Americans, according to the Pew Global Attitude Project.
Here’s a link to the full story in The Economist.
Investments in natural resources, emerging markets and infrastructure are subject to distinct risks as described in the funds’ prospectus. All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate to every investor.
Tags: Belief, BRIC, Bric Countries, Capital Inflows, capitalism, Developed Countries, Developing Countries, Economist, Emerging Market Countries, Emerging Markets, Frank Holmes, GDP, Global Economic Growth, Gold, Goldman Sachs, International Finance, International Monetary Fund, Losses, Natural Resources, Pew Global Attitude, Prospectus, Reliance, Stock Markets, Us Global Investors
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Griffiths – almost halfway through dollar rally
Thursday, December 24th, 2009
“We are almost halfway through the dollar rally,” said Robin Griffiths from Cazenove Capital. His target for the US Dollar Index is 81 (currently 77.9). Griffiths also sees stock markets “topping” in March next year and suggests investors look at high yield sectors like oils, pharmas, telecoms and tobacco.
Source: CNBC, December 21, 2009.
Considering the short-term technical picture of the US Dollar Index, Adam Hewison (INO.com) also chipped in a few days ago with a short analysis of the outlook for the greenback, concluding that the rally may have more legs, but the primary trend was still down. Click here to access the presentation.
Tags: Advertisement, Cnbc, Few Days, Greenback, Investors, Legs, oil, Outlook, Rally, Robin Griffiths, Sectors, Stock Markets, Target, Telecoms, Tobacco Source, Us Dollar Index
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Gold: Investment or Speculation?
Thursday, December 17th, 2009
For decades, gold has been considered an asset one either speculated upon or invested in as textbook, defensive asset allocation. However, as a result of either complacency toward diversification or the view that it is speculative, the market is under-invested in gold. Despite the huge success of the largest of the gold bullion ETFs SPDR Gold Shares, (GLD), for example remains tiny in the grand scheme of stock investing. It is only worth 0.4% of the S&P 500’s market cap, and a smaller fraction still of the entire stock markets’ capitalization, as of the end of October.
Read the whole article here: Gold: Investment or Speculation?, GlobeAdvisor.com, December 17, 2009
Tags: Amp, Asset Allocation, Capitalization, Complacency, Decades, December 17, Diversification, Entire Stock, ETF, Fraction, Gold, Gold Bullion, Gold Investment, Gold Shares, Grand Scheme, Market Cap, S Market, Speculation, Stock Investing, Stock Markets, Textbook
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The investment world according to Ritholtz
Tuesday, December 1st, 2009
Barry Ritholtz, author of Bailout Nation and chief executive of investment manager Fusion IQ, delivered the keynote address at the Citywire Fund Selector Forum in Berlin a few days ago. The highlights from his speech are below.
Part one: How the actions of the Federal Reserve changed everything in 2002-2007
Part two: Eight months after Armageddon seemed upon us, the US economy shows signs of life.
Part three: Where next for stock markets?
Source: Barry Ritholtz, Citywire, November 30, 2009.
Tags: Advertisement, Armageddon, Bailout, Barry Ritholtz, Berlin, Chief Executive, Citywire, Economy, Eight Months, Federal Reserve, Few Days, Fund Selector, Fusion, Investment Manager, Investment World, Iq, Keynote Address, Signs Of Life, Stock Markets
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“Bull markets do not die of old age; they are assassinated – usually by central banks”
Thursday, November 12th, 2009
One of the most incisive thinkers in the investment field is David Fuller who runs the Fullermoney service from London and provides daily written and podcast commentary. I have been subscribing to the service for more than 20 years and consider it part of my staple investment diet, particularly also for its truly global approach. I am not an agent for David, but please visit by his site to get a feel for his excellent commentary.
The paragraphs below from Monday’s Fullermoney report are particularly topical at this juncture in stock markets.
Veteran subscribers will recall a remark often used on this site: Bull markets do not die of old age - to which I will add, or warnings by Roubiniesque economists. Instead, they are assassinated - usually by central banks.
“So how many rate bullets does it take to fell a bull?
“You may not be surprised to hear that there is no precise answer, because it depends mainly on sentiment and liquidity. We know when central banks start to reduce liquidity, or at least increase its price, but we do not know precisely when that will affect sentiment adversely.
“We know that a few central banks have commenced an incremental tightening of rates. However, we cannot know how aggressively they will act or when other central banks will follow their lead, because they do not know themselves.
“Recently, some big guns from the investment management and hedge fund industry concluded that stock markets were ripe for a correction. I was of a similar view. However, markets seldom dance to countertrend tunes for long, and with but a few exceptions we have seen little more than slightly larger reactions and more sideways ranging recently.
“The DJIA’s new recovery high today [Monday] is not exactly the stuff of corrections, unless it is instantly and dramatically reversed. Meanwhile, I would back the bull trend. After all, we have seen some mean reversion recently, narrowing overextensions relative to 200-day moving averages. There is also the not insignificant matter of the biggest monetary reflation in human history, and there is no hyperbole in that description.
“Stock market indices would have to break beneath their most recent reaction lows to question further the overall outlook for sideways to higher ranging.
“Meanwhile, note also the still widening spread between US 10-year yields over 2-year yields, otherwise known as the Yield Curve, on this historical chart. It is still rising, indicating to me that quantitative easing continues. The time to start thinking about closing long portfolios in anticipation of the next bear market, I suggest, will be when the Yield Curve next inverts by moving below zero. However the lead was so early last time (early 2006) that some of us became complacent about it.”
Source: Fullermoney.com, November 10, 2009.
Tags: Big Guns, Bull Markets, Bullets, Central Banks, David Fuller, DJIA, Economists, Fullermoney, Global Approach, Hedge Fund, Investment Field, Investment Management, Juncture, liquidity, Mean Reversion, Paragraphs, Precise Answer, Sentiment, Stock Markets, Thinkers
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David Rosenberg: Canada and Australia in the China Context
Tuesday, November 3rd, 2009
In today’s ‘Breakfast with Dave’ newsletter, David Rosenberg shares some interesting facts about key differences between Canada and Australia in the context of China’s growth, as well as an update on commodities and markets.
After yesterday’s wild ride in the U.S. equity market (and inability to hang on to the immediate post-ISM surge), investors are continuing to lock in profits today. Stock markets are down practically everywhere - by -1.6% in Asia (though Japan was closed for a holiday) and -2.0% currently in Europe. U.S. futures, at the time of this writing, are down sharply.
Commodities are off as well although gold has managed to hold onto most of its gain posted after the news came out that India’s central bank purchased 200 metric tons of the yellow metal from the IMF. The dollar has broken out this morning - to the upside - and the DXY index has actually firmed above its 50-day moving average. French officials came out today, by the way, and suggested that the recession in fact may not be over.
… the Reserve Bank of Australia hiked rates 25bps yet again, to 3.5% (this time it was expected by 18 of the 22 economists who follow Australia and the other four were thinking 50bps). The fact that the Aussie dollar has pared its gains after the rate hike is akin to the U.S. stock market doing likewise yesterday after the ISM came out. It is called the “sell the fact” syndrome, which is different than buy “green shoot hope” from March to September.
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While every country cut rates in tandem during the crisis, central banks will be marching to the tune of their own drum when it comes to tightening and so it would likely be a huge mistake to compare Australia to anyone else - especially given the massive fiscal stimulus there and the enormous link (especially compared to Canada) the country has to the accelerating growth being posted in China right now. Remember - only 3% of Canadian exports go to China; 75% head for the U.S.A. By way of comparison, 24% of Australian outbound shipments are destined for the hot Chinese economy while only 6% go to the U.S.A. In other words, relative to Canada, Australia enjoys 8x the Chinese exposure and has only 1/12th of the orientation to the much softer U.S. consumer market.
Tags: Aussie Dollar, Bank Of Australia, Canada, Canadian Exports, Central Banks, China, Commodities, David Rosenberg, Dxy Index, Emerging Markets, Fiscal Stimulus, French Officials, Gold, Imf, India, Interesting Facts, Ism, Metric Tons, Rate Hike, Recession, Reserve Bank Of Australia, S Central, Stock Markets, U S Stock Market, Wild Ride
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Technical Talk: Fatigue sets in on stock markets
Thursday, October 29th, 2009
The comments regarding the Dow Jones Transportation Average were provided by Kevin Lane of Fusion IQ.
“As seen below, the Dow Jones Transportation Average (TRAN) has stalled and turned down from resistance at the 4,075 level (red lines) twice in the past few months. This inability of the transports to get above this level suggests at the very minimum the economy’s recovery path is being called into question.
“Technically the index is currently testing the lower end of its upward sloping channel (green line). While in the short run the index may find a shallow bounce from this level, the failure twice now at a key resistance level is the greater trump card.
“The burden of proof now rests on the transport bulls and the index is an underweight sector that we expect to continue to underperform until it can work above resistance.”
Regarding the S&P 500 Index, Adam Hewison (INO.com) sounded a cautious note as explained in one of his popular technical analysis presentations. Click here to access the presentation.
Source: Kevin Lane, Fusion IQ, October 27, 2009.
Tags: Amp, Bounce, Bulls, Burden Of Proof, Cautious Note, Dow Jones, Dow Jones Transportation, Failure, Fatigue, Fusion, Ino, Iq, October 27, Presentation Source, Recovery Path, Resistance Level, Stock Markets, Transportation Average, Transports, Trump Card
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