On the heels of some wild trading across the globe, look at the shocking moves taking place in these key markets.
Shocking Moves Taking Place!
October 25 (King World News) – Here is a portion of what Peter Boockvar wrote today as the world awaits the next round of monetary madness: As to be expected from a sentiment standpoint as it usually follows price, the AAII said Bulls fell to 28 from 33.9 and that is the lowest since July 5th. Bears rose 6 pts to 41, the most since April. The CNN Fear/Greed index yesterday closed at 6 vs 12 on Tuesday. It got as low as 5 a few weeks ago. An extreme negative sentiment washout is what is needed to establish a short term bottom. I emphasize ‘short term’ because that is only the time frame these indicators are helpful for…
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High yield both in the US and Europe is finally succumbing to the selling in stocks as they’ve held up well so far this year. The Credit Suisse European HY yield has risen 9 bps the past two days to 3.73%. That’s the highest since July 2016. It bottomed at 1.90% one year ago. It’s spread to the German 5 yr (to pick one European proxy) is approaching the late 2016 level.
Yields Continue To Surge In Europe
The Bloomberg Barclays US HY OAS is nearing the upper end of the one year range at 370 bps, up 3 bps yesterday and higher by 57 bps in the last 3 weeks. The high yield 5 yr credit default swap index yesterday jumped to the most since December 2016. From a cost of capital basis, the KDP HY yield has now risen to the highest level since June 2016 at 6.20%. That is up 16 bps just this week.
Shocking Moves Taking Place!
Trouble Also Brewing In Hong Kong
The evidence continues to build that global trade is slowing. Hong Kong exports in September rose 4.5%, almost half the estimate of up 8.6%. Exports to China were up 7% after rising by 14% in August. Exports to the US grew by 5.6% after an almost 18% jump in August. Exports fell to Japan and Germany, to name a few more. Imports were up by 4.8% vs the forecast of up 10.5%. The most important challenge faced by Hong Kong right now could be their property bubble that is now facing rising interest rates that they import from the Fed via the peg. This chart of 3 month HIBOR should be a main focus.
Higher Interest Rates Threaten Hong Kong Property Bubble
Calling Draghi: Trouble Brewing In Europe
The important German IFO business confidence index for October weakened to 102.8 from 103.7 and that was below the estimate of 103.2. That’s a 3 month low with both current conditions and the outlook lower. The manufacturing sector saw particular softness with this index at the lowest since January 2017. The IFO said succinctly, “Growing global uncertainty is increasingly taking its toll on the German economy.” A slowdown in the German economy is now not new news. The euro is little changed and the DAX is bouncing about 1/2 a percent off its near two year low.
We eagerly await what Mario Draghi has to say today. Because he became so obsessed with generating 2% inflation when there was no economic crisis whatsoever in Europe over the past few years, he’s now expended his monetary gun ahead of what could be an oncoming economic slowdown, problem with Italy and damaged profitability in the eurozone banking system, catalyzed by that ECB policy. Message to central bankers going forward: use the monetary arsenal when we are in crisis, not just to generate higher inflation. If only we can turn back that clock.
O Canada
The Canadian dollar is rallying for a 4th straight day after yesterday’s Bank of Canada expected rate hike that came with a hawkish bent in their forecast.
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