Turnaround Tuesday | Lets focus on the data | What not to say before opening up negotiations via @ConnectedWealth

 

Tuesday, June 28th, 2016

Turnaround Tuesday | Lets focus on the data | What not to say before opening up negotiations
Contributors: J.Price, C.Basinger, D.Benedet, C.Kerlow, D.Mak, S. Obata

 

TODAY

What a difference a day makes.  For now the sellers are exhausted and buyers in Europe have stepped in to buy discounted shares and currencies.  Euro exchanges are up 2.5% in early trading after mixed results in Asia and the pacific regions.  Sterling are also moving higher, by a couple of p against the US$, but at the current U$1.338/£ is a long way from the U$1.50/£ is was on Thursday night.

Alongside the pound barely reversing course are bond yields.  Treasury bonds are lower, but only mildly, while French debt is slightly higher in price on the day and Germany 10 year bunds are just 2 basis points off their low yield of -0.11%… we live in interesting (or should we say negative interesting) times indeed.

We are still swimming in Brexit comments and analysis, but thankfully we will be able to focus on some economic data with the US GDP print due out this morning (see below).  With US rates now pricing in a modest probability of a cut in interest rates, it will be important to see some fundamental, home-grown economic data.  Housing data will be out later in the morning, so we will make a mandatory mid-morning spot to the Calculated Risk blog to check in with Bill McBride about midday.

Even though markets were still falling yesterday, it was interesting to see the VIX index trading way off its highs by the end of day yesterday.  It continues much lower this morning, now down to 21.5 after visiting 26.5 early Monday.  We looked for some analysis, but just found “it doesn’t always go opposite of stocks” posts.  Price Action Lab notes: “What traders need to know is that there is no perfect correlation in the markets and most correlations are random variables.”, while Eric Hunsader charts out the various tradeable VIX ETFs for the day.

Ben Carlson, takes stock of European equites noting recent performance of each country, the cyclical relationship between U.S. and international stocks as well as the large divergence in valuations between the two. Put briefly, Europe is a mess, its stocks are cheap.
You see, markets don’t necessarily trade on absolutes. Markets are all about expectations. And when expectations go too far in either direction, investors tend to be surprised by the future results. There is no such thing as a good or bad investment; just a good or bad price to be paid.

One of our key tenants on the evolution of the market and why we believe volatility swings will increase in frequency is because of the growing use of ETF for short term trading. ETF flows are larger and more erratic than flows into traditional funds. Barron’s notes that last Friday, ETFs accounted for 31% of all stock trading.

The video on this page where U.K. Independence leader Nigel Farage tells members of the European Parliament to allow the U.K. to pursue its own global ambitions is pretty great. He noted it is imperative for negotiations to move quickly on a number of fronts, but it may be difficult since “virtually none of you have ever done a proper job in your lives.” I thought step one was to find common ground, not blatantly insult those you are trying to negotiate with.

Africa has suffered as a result of falling oil prices; however, there are divergences within the continent. Oil importing countries such as Kenya have fared much better than exporters such as Nigeria, Angola & South Africa. The latter accounted for ~60% of Sub-Saharan GDP in 2015.

Africa is also marked by divergences in debt ratios. Some countries have borrowed to invest in power generation and infrastructure while others have borrowed to “expand the public sector and boost governments’ chances in hotly-contested elections.” Countries that have been diversifying away from commodity exports will reap the benefits going forward. Others that have been careless with their finances will struggle. More from Bloomberg here.

Diversion:  Good wholesome fun, or slightly disturbed?  The Marshmallow Crossbow.  Sure.  It’s for marshmallows

Tuesday, June 28th, 2016

Contributors: J.Price, C.Basinger, D.Benedet, C.Kerlow, D.Mak, S. Obata

TODAY

What a difference a day makes.  For now the sellers are exhausted and buyers in Europe have stepped in to buy discounted shares and currencies.  Euro exchanges are up 2.5% in early trading after mixed results in Asia and the pacific regions.  Sterling are also moving higher, by a couple of p against the US$, but at the current U$1.338/£ is a long way from the U$1.50/£ is was on Thursday night.

Alongside the pound barely reversing course are bond yields.  Treasury bonds are lower, but only mildly, while French debt is slightly higher in price on the day and Germany 10 year bunds are just 2 basis points off their low yield of -0.11%… we live in interesting (or should we say negative interesting) times indeed.

We are still swimming in Brexit comments and analysis, but thankfully we will be able to focus on some economic data with the US GDP print due out this morning (see below).  With US rates now pricing in a modest probability of a cut in interest rates, it will be important to see some fundamental, home-grown economic data.  Housing data will be out later in the morning, so we will make a mandatory mid-morning spot to the Calculated Risk blog to check in with Bill McBride about midday.

Even though markets were still falling yesterday, it was interesting to see the VIX index trading way off its highs by the end of day yesterday.  It continues much lower this morning, now down to 21.5 after visiting 26.5 early Monday.  We looked for some analysis, but just found “it doesn’t always go opposite of stocks” posts.  Price Action Lab notes: “What traders need to know is that there is no perfect correlation in the markets and most correlations are random variables.”, while Eric Hunsader charts out the various tradeable VIX ETFs for the day.

Ben Carlson, takes stock of European equites noting recent performance of each country, the cyclical relationship between U.S. and international stocks as well as the large divergence in valuations between the two. Put briefly, Europe is a mess, its stocks are cheap.
You see, markets don’t necessarily trade on absolutes. Markets are all about expectations. And when expectations go too far in either direction, investors tend to be surprised by the future results. There is no such thing as a good or bad investment; just a good or bad price to be paid.

One of our

1, 2  - View Full Page