While the world remains on the edge of chaos because of the reckless policies of central planners, it’s all about Brexit, big trouble in China, and there is also a note about the gold market.
First, a note from Art Casin…
Brexit And Big Trouble In China
January 15 (King World News) – A portion of today’s note from legend Art Cashin:
Another Pair Of Eyes – Our good friend, Peter Boockvar, the market guru at Bleakley Advisors put out a note to clients this morning. Here’s how it began:
I’m not going to pretend to have any confidence on what happens with Brexit from here other than to say it looks like PM May will lose badly today. It does seem like sentiment is leading to a delay of the end of March deadline but we don’t know if May will stick around after today. Either way, I’m still of the belief that regardless of the outcome, just having one will allow the UK economy and government to adjust. I still believe the British pound is very attractive at current levels and it could be played either directly thru the currency or UK stocks. The FTSE 100 has a dividend yield of 5%. The pound is little changed but at a 2 month high vs the dollar and near one vs the euro.
China again is planning on utilizing tax cuts to offset the softness in its economy. A statement from the Chinese government referred to it being on a “larger scale.” A JPMorgan China economist (according to South China Morning Post) estimates it will be about 1.2% of GDP which equates to 2 Trillion yuan (around $300b). I believe this is a much more efficient way of conducting fiscal stimulus instead of just utilizing the level of government spending and infrastructure building especially because the private sector can directly benefit from it. The Shanghai comp rallied 1.4% and the H share index was higher by 2% on the stimulus news. Copper is up 1/3 of a percent after falling by 1% on the weak export data yesterday. The Aussie $ is little changed.
Bottom line, China at this point is not attempting to drive faster growth. They are instead trying to cushion and offset as much as they can the current slowing that is going on.
The BBC On The Brexit Vote
Votes start from 7pm with main vote expected at 8.30pm (3:30pmET)
Losing by 70 votes or fewer would signal to Mrs. May and Brussels that their plan is salvageable. Losing by 70 to 100 votes would make that harder but not impossible. A defeat in excess of 100 votes would likely spell the end of Mrs. May’s withdrawal deal and force her to articulate her preferred Plan B, WSJ says – She must lay out any next steps to lawmakers by next Monday.
Overnight And Overseas – Tokyo reopened with a 1% bounce, rallying the equivalent of 230 Dow points. China added more stimulation to the cut in bank reserves. That moved Hong Kong up the equivalent of 450 Dow points. The stimulus package also helped the Shanghai index to bounce off that key multi-year uptrend that I wrote of yesterday. The Shanghai closed up the equivalent of 350 Dow points. Stocks in India saw a similar move.
European markets are modestly higher as they await the Parliamentary Brexit vote, due around 2:00 (EST).
Among other assets, Bitcoin is higher, trading around $3750. Gold is flat but crude is back in rally mode on gossip that inventories are shrinking. The euro is a touch softer against the dollar, while yields are flat.
Consensus – Brexit may consume traders today. As the BBC notes, the final vote may be just before the NYSE close. Bulls need to keep the Dow from closing below 23,800, which is the bottom of “the box”.
On this side of the pond, the shutdown appears to be the key.
Stick with the drill – stay wary, alert and very, very nimble.
Also, from Peter Boockvar…
Peter Boockvar: In the current debate over what the Fed should do from here, Fed President Esther George’s opinion is very important because she both votes and has a history of being on the hawkish side. In a speech just given she is calling for a Fed time out. “It might be a good time to pause our interest rate normalization, study the incoming evidence and data, and verify our current location…It is possible that some additional rate increases will be appropriate. But making that judgment is not urgent…”
With respect to the balance sheet, she said “it is unclear whether, or how much, this roll off is further removing accommodation.” She’s right because as the Fed had no idea what the ultimate impact would be with QE (good for asset prices, no discernible impact on the economy), they are flying blind as to what the impact is and will be with the reduction in the size of their balance sheet…
Gold is making its way back into the global monetary
system, to learn more CLICK HERE!
Peter Boockvar continues: But, if QE is good for asset prices, what did they think QT would mean?There was no Treasury market response because we know Powell already feels the same way but at least they are all now on the same page. I’ll say again, would you rather have an uncertain and likely slowing economic picture and the Fed being done with rates or a better economy that eventually takes the fed funds rate to 3%. Either way, an economic slowdown and drop in asset prices inevitably follow in our central bank addicted financial system. In other words, I still see the Fed as being in a no win situation.
King World News note: The fact that the Fed is once again trapped is extremely bullish for gold long-term. In the short-term, we continue to fly blind without any COT report because of the government shutdown.
KWN has released the powerful KWN audio interview with Dr. Stephen Leeb and you can listen to it by CLICKING HERE OR ON THE IMAGE BELOW.
ALSO RELEASED: Bill Fleckenstein Says Goldcorp Acquisition By Newmont “A Disappointment” CLICK HERE TO READ.
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