Wall Street declined moderately today (SPY -0.7%) and booked losses for a third straight day as investors weighed earnings from big U.S. banks and geopolitical tensions. The US dollar gained strength this afternoon after Trump said it was getting too strong.
WASHINGTON (Reuters) - The number of Americans filing for unemployment aid unexpectedly fell last week and consumer sentiment rose early this month amid continued optimism over household finances, suggesting a sharp slowdown in job growth in March was an aberration.
NEW YORK (Reuters) - Big U.S. banks revealed more evidence of a slowdown in loan growth in their earnings reports on Thursday, though executives assured there is still healthy demand from borrowers and no reason to worry about the state of the economy.
NEW YORK (Reuters) - T-Mobile US Inc bid $8 billion and Dish Network Corp $6.2 billion to win the bulk of broadcast airwaves spectrum for sale in a government auction, the U.S. Federal Communications Commission said on Thursday.
(Reuters) - Wells Fargo & Co posted flat quarterly earnings on Thursday and warned its costs would remain elevated as the fallout from a sales practices scandal continues to impact the third-largest U.S. bank.
FRANKFURT/DETROIT (Reuters) - The race to develop and exploit autonomous vehicle technology is reshaping the hierarchy of the automotive industry, replacing traditional top-down manufacturing relationships with complex webs of alliances and acquisitions.
SEATTLE/SYDNEY (Reuters) - A new version of Boeing Co's 737 jetliner took off for the first time on Thursday, marking another step in Boeing's revamp of its best-selling product line that could see up to five new models introduced by 2020.
Two weeks ago, in order to preserve Goldman's happy narrative that US growth is still strong (which is ironic because while on one hand Goldman tells its clients to buy the dollar, at the same time it tells Trump to short it), Goldman tried to justify the apparent collapse in loan growth, which as we showed earlier this week, is growing at the slowest pace in 6 years, and will soon contract outright.
What Goldman said boiled down to a form of "calendar effect", or the argument that since loan creation had aggressively ramped up one year ago when E&Ps were aggressively drawing down on revolvers, it made Y/Y comparisons appear like a big slowdown, when in fact the current rate of growth was mostly stable and reflected roll offs of borrowing bases. This is what Goldman said:
C&I bank loans represent yet another casualty of the energy sector contraction of 2015 and 2016. More specifically, we believe the current C&I slowdown reflects payback from credit facility usage by commodities firms, many of which began drawing upon credit lines in late 2015 as financial conditions tightened and the debt issuance window closed. Following a brief acceleration in C&I lending in early 2016, bank loan growth waned in late 2016 and early 2017 once capital markets reopened and banks renegotiated and restructured credit lines. Available loan data a ...
Over the weekend, New River CIO Eric Peters had a simple and concise summary for events over the past year: "Pretty much everything that happened in 2016 can be explained by two things; China and oil prices," he said. "Literally, that's it."
Today, thanks to a research report from UBS titled "Where is the epicentre of the reflation trade?", we have confirmation that Peters was spot on.
In the note by UBS strategists Bhanu Baweja and Manik Narain, the duo said that it was indeed China that has been the central growth driver for the world economy, even though "for a spell in Q4 2016 the US was certainly the flag bearer of the reflation trade" although before and since "it was China at the epicentre of the most significant positive growth shock for the global economy", something we have cautioned since February when we said that the global reflation trade was merely a function of the broad credit impulse coming out of China.
And since said impulse turned negative some time ago, the reflation trade is now effectively over, especially with Trump's fiscal plans failing to achieve any traction in the US.
Here are the key details from the UBS report:
Having lifted off the depths of secular stagnation, the market seems to be in the early stages of climbing down from the highest altitude of reflation hope. This journey took place so quickly that few have been able to establish exactly what the reflation trade is all about - hopes of lower taxes and regulations, higher inflation, a revival in investment and manufacturing, or merely defeating extreme pessimism? Unless we recognise its driver, and understand its texture, we won' ...
Every bear market correction since 1947 that didn't come during a recession was relatively quickly reversed. Think about what happened in 1987 and 1998. There were pretty serious corrections and then a bull market.
The bull market that found its footing in 1987 lasted for another 13 years. In 1998, we were only a few years away from a major correction accompanied by a recession.
Obviously, it's important to have a sense of when the next recession will happen. But, though the economy is at stall speed, there are very few signs that we could actually enter a recession this year.
The Strangest Bull Market in the Last 100 Years
We need to put this post-2009 bull market into some historical perspective. Two charts below show the beginnings and ends of every bull and bear market since 1920.
Every bull market (other than the current one) began at a point when the market was at a low P/E ratio, ad every bear market began when the P/E ratio was high.
Since 2000, though, the market has never returned to low valuations. Valuations certainly went down in 2009, but then they turned right around and star ...
The factors pushing the U.S. president into a closer embrace of China have been apparent for some time: the rising threat from North Korea paired with a better economy at home. If the latter disappoints, however, tensions could rebound quickly.
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