US stock future indexes are on track to open lower (SPY -0.6%) as investors awaited comments from the Fed on the timing of the next interest rate hike. Crude prices settled more than 4% higher yesterday, but have declined 2% so far this morning. Short-term indicators are bearish.
Here is the current market situation from CNN Money
European markets are lower today with shares in London off the most. The FTSE 100 is down 0.76% while Germany's DAX is off 0.75% and France's CAC 40 is lower by 0.63%.
LONDON (Reuters) - Some 46 million people in Britain could potentially benefit from a legal case brought against Mastercard demanding 14 billion pounds ($19 billion) in damages for allegedly charging excessive fees, according to court documents filed in London.
PARIS (Reuters) - French oil and gas company Total will increase its exposure to U.S. shale gas by buying 75 percent of Barnett Shale assets from Chesapeake , taking advantage of a far lower price than it paid for its original 25 percent holding.
TOKYO/LONDON (Reuters) - Oil prices edged lower on Friday but were set for the first weekly gain in three weeks after jumping 4 percent a day earlier due to a surprisingly large drawdown in U.S. crude stocks.
CHICAGO (Reuters) - Chipotle Mexican Grill has agreed to financial settlements with more than 100 customers who fell ill after eating at its restaurants last year, lawyers for the consumers said, as it attempts to move on from a string of food-safety problems.
LONDON (Reuters) - European stocks fell and bond yields rose on Friday, driven by German trade figures that cast doubt on the strength of the euro zone's largest economy and lingering disappointment after the European Central Bank's policy meeting the previous day.
BRUSSELS (Reuters) - Facebook's problems with European privacy regulators do not mean that the social network has breached the bloc's competition rules, EU antitrust chief Margrethe Vestager said on Friday.
From Richard Breslow, former FX trader and fund manager
Out of Nowhere, Investing Feels Fun Again
This week is sure ending with a lot more to think about than it began. As the world re-opened after the last of the summer holidays there was a sense of malaise. That we were in for just more of the same. Traders were left to dusting off the summer doldrums playbook. No meaningfully new ideas where expected from policy-makers.
But, happily, we end the week with some interesting issues to debate. Markets have quietly moved toward levels which create opportunity, whatever your view.
Global bond yields, by any measure, are rock-bottom low. But the expectation was they would resume their inexorable downward march. Draghi was probably going to do more, U.S. numbers were soft, the search for the greater fool implacable.
But whether it was the ECB waiting, Fed speakers pressing or, more likely, 30-year JGBs "backing up" to 50bps, global bonds decided some caution was in order.
And in the world of extraordinary monetary "largesse," bonds are the global investing bellwether. Everything else follows their lead.
Lo and behold, we learn that Japanese investors last week were sellers of foreign bonds -- in size. Turns out that with swap rates such as they are, U.S. yields just aren't as attractive as they look at first blush.
To make life more interesting, Jeffrey Gundlach made eager dip buyers double-clutch by warning that it's time for fixed income investors to prepare for rising interest rates. Describing this as a "big, big moment"
We find ourselves with 30-year JGBs sitting on an important pivot at 45bps, UST 10-year back to 1.6%, the first line of support and German bunds threatening the 55-day moving average. Something for everyone.
Analysis of the ECB ran the gamut from out of weapons to preparing a radical new shift. His comments on G-20 fiscal spendin ...
In his latest webcast to DoubleLine investors and the general public, the "new bond king" Jeffrey Gundlach, who had taken a one month sabbatical from public appearances after warning (hyperbolically as he explained yesterday) to "Sell Everything, Nothing Here Looks Good", said that the Fed is determined to show it is independent from market forces, and may hike rates even as investors bet they will not.
As a result, Gundlach said it's time for fixed-income investors to prepare for rising rates and higher inflation by reducing the duration of their positions, moving money into cash and protecting against volatility. In his presentation titled appropriately "Turning Points" (presented below) Gundlach said that "this is a big, big moment," predicting that "interest rates have bottomed. They may not rise in the near term as I've talked about for years. But I think it's the beginning of something and you're supposed to be defensive."
"They want to show that they are not guided by the markets," Gundlach told Reuters in a telephone interview following the DoubleLine webcast. "The Fed wants to show, at some point, that they can't be replaced by WIRP (World Interest Rate Probability). The only way they can do that is to tighten when WIRP is below 50."
However, by trying to prove its independence from the WIRP, the Fed might be "blowing itself up," Gundlach warned. The Fed will not hike in September if the WIRP is below 40 and the S&P 500 is below 2150, he said on the webcast, which we assume means that the market is in control after all.
Meanwhile, the economy continues to contract: Gundlach pointed out that the non-mfg ISM released earlier this week is at the ...
Yesterday we asked if the stealthy Japanese intention to steepen the JGB yield curve will crash global markets. While a crash, if any, has yet to emerge, overnight we have observed another bond selloffs, particularly at the long end of the curve, which has spilled over into stocks around the world on what Bloomberg dubbed were "signs central banks are starting to question the benefits of further monetary easing." Oil pared a weekly gain, leading commodities lower.
As predicted yesterday, today longer-maturity bonds bore the brunt of the losses after the European Central Bank on Thursday downplayed the need for more stimulus, sending 30-year German bund yields to the highest since June, while Reuters added that "The Bank of Japan is studying several options to steepen the bond yield curve, say sources familiar with its thinking, as authorities desperately seek out policy tools to revive an economy that has failed to emerge from stagnation despite years of massive stimulus."
As shown in the chart below, both Japan and German long-term yields are almost back to positive...
... while those invested in Japanese 40-year bond have already suffered a 15% loss.
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