Tag Archives: newsletter

US grew nearly 300k jobs in December.  The October and November jobs growth were revised up by 50k.  The unemployment rate was unchanged at 5.0%, even though the participation rate ticked up.   If there was  a disappointment it was that hourly earnings did not rise as much as expected.  The 2.5% year-over-year growth from 2.3% in November.  The market had expected a 2.7% pace.  Still it is the upper end of the cycle.  Some other details were constructive.  Manufacturing gained 8k jobs. ...

For the first time this week, the PBOC set higher central reference rate for the yuan and Chinese shares rallied, with the apparent assistance of officials, after the circuit breakers were abandoned.    This, coupled with somewhat firmer oil prices, is helping to facilitate some semblance of stability in the global capital markets.   Global equities are retracing part of yesterday's losses.   In the Asia-Pacific region, Japan and Australia were exceptions.  The Nikkei slipped 0.4%,...

Chinese equities continued their precipitous decline, interrupted by the new circuit breakers, which reportedly will be suspended.  Global equity markets are also in a dramatic decline.   However, do not be misled.  Knowing the direction of China's blue chips (CSI 300) does not really help predict the direction of the US equity market, even though it may have felt like that in recent days.    The correlation between China's CSI 300 and the S&P 500 may not be what you think.  Over the...

The dollar has broken down against the yen.    Although many talk about safe haven role for the yen, this seems to be a misconception.  Investors are not buying the yen to escape the turmoil of the markets.   The yen's strength itself is the turmoil.  The yen was used as a funding currency to purchase risk assets, like equities, emerging markets, etc.  As those risk assets are being liquidated, the funding currency is bought back.  Earlier today, the Ministry of Finance reported the...

One might be forgiven for believing that nail-baiting start to the year is all China's fault.  It has repeatedly for eight sessions fixed the yuan lower, including earlier today, at a seemingly accelerating pace.  The new circuit breakers, introduced on Monday, appear to be adding to the volatility.  Chinese share trading was stopped today after the first hour with the CSI 300 off 7%.  It appears that the central bank through its agents intervened in the offshore (CNH) market.  The...

Chart 1 This Great Graphic is a favorite of mine.   Created on Bloomberg, it depicts the 2-year spread between Germany and the US on two-year money (white line) and the euro-dollar exchange rate (yellow line).  The chart covers the past five years. The scales of the two time series are different so it makes little sense to claim that euro gravitates toward the rate differential.  And there have been some significant misalignment, like in 2013 and into 2014.  However those periods seem...

It was a miserable week that ended a miserable year, followed by an apparently bad first week in 2016. In fact it was the S&P 500’s worst since the start of the bull market in 2009, ending the year down 0.73% at 2043.94 points! Volume was seasonally very low. If you are frustrated with the stock market’s performance, I can well understand it, but if you look at the video (Ctrl + Click) below, “Ouch! 5 CEOs lost a combined $20 billion in 2015!”, you may be comforted to see that Warren...

Chinese shares and the yuan stabilized with the apparent help of the government's guiding hand, but global markets are still on the defensive.     The euro extended yesterday's decline through the $1.08 level.  The next immediate technical objective is near $1.0730.   The greenback is firmer against most major and emerging market currencies.  The chief exception is the Japanese yen.    Lower equity prices and the continued pullback in US yields are often associated with a stronger yen. ...

(from my colleague Dr. Win Thin) Meet the new year - same as the old year.  EM starts 2016 on a weak footing, with negative sentiment carrying over from 2015.  The global backdrop remains poor, with the Fed likely to continue its tightening cycle with another hike in March.  Commodity prices remain near the lows, while China data suggests that the slowdown (albeit modest) continues. Idiosyncratic EM risk remains in play, but in some instances could take a bit of a breather.  Brazil’s...

Perhaps it may be lesser known than his other Laws, but Murphy wrote one for the basis analysis. It goes like this. If we observe that the fundamental price of a metal is far removed from the market price, the two won’t likely converge the next week. On the other hand, suppose we say this (as we did last week): “The Monetary Metals fundamental price is measuring just that, the fundamentals. As with stocks or any other asset, our centrally banked, government-distorted markets can experience...