Global Economic Intersection
Advertisement
  • Home
    • 카지노사이트
  • Economics
  • Finance
  • Politics
  • Investments
    • Invest in Amazon $250
  • Cryptocurrency
    • Best Bitcoin Accounts
    • Bitcoin Robot
      • Quantum AI
      • Bitcoin Era
      • Bitcoin Aussie System
      • Bitcoin Profit
      • Bitcoin Code
      • eKrona Cryptocurrency
      • Bitcoin Up
      • Bitcoin Prime
      • Yuan Pay Group
      • Immediate Profit
      • BitQH
      • Bitcoin Loophole
      • Crypto Boom
      • Bitcoin Treasure
      • Bitcoin Lucro
      • Bitcoin System
      • Oil Profit
      • The News Spy
      • Bitcoin Buyer
      • Bitcoin Inform
      • Immediate Edge
      • Bitcoin Evolution
      • Cryptohopper
      • Ethereum Trader
      • BitQL
      • Quantum Code
      • Bitcoin Revolution
      • British Trade Platform
      • British Bitcoin Profit
    • Bitcoin Reddit
    • Celebrities
      • Dr. Chris Brown Bitcoin
      • Teeka Tiwari Bitcoin
      • Russell Brand Bitcoin
      • Holly Willoughby Bitcoin
No Result
View All Result
  • Home
    • 카지노사이트
  • Economics
  • Finance
  • Politics
  • Investments
    • Invest in Amazon $250
  • Cryptocurrency
    • Best Bitcoin Accounts
    • Bitcoin Robot
      • Quantum AI
      • Bitcoin Era
      • Bitcoin Aussie System
      • Bitcoin Profit
      • Bitcoin Code
      • eKrona Cryptocurrency
      • Bitcoin Up
      • Bitcoin Prime
      • Yuan Pay Group
      • Immediate Profit
      • BitQH
      • Bitcoin Loophole
      • Crypto Boom
      • Bitcoin Treasure
      • Bitcoin Lucro
      • Bitcoin System
      • Oil Profit
      • The News Spy
      • Bitcoin Buyer
      • Bitcoin Inform
      • Immediate Edge
      • Bitcoin Evolution
      • Cryptohopper
      • Ethereum Trader
      • BitQL
      • Quantum Code
      • Bitcoin Revolution
      • British Trade Platform
      • British Bitcoin Profit
    • Bitcoin Reddit
    • Celebrities
      • Dr. Chris Brown Bitcoin
      • Teeka Tiwari Bitcoin
      • Russell Brand Bitcoin
      • Holly Willoughby Bitcoin
No Result
View All Result
Global Economic Intersection
No Result
View All Result

Lessons for the Coming Week

admin by admin
October 14, 2013
in Uncategorized
0
0
SHARES
0
VIEWS
Share on FacebookShare on Twitter

Lessons Learned for the Coming Week:  3 Drivers, 3 Conclusions

by Cliff Wachtel, FX Empire

This past week’s top market drivers and lessons should explain much about the coming week.

spyglass380px

The Key Points

  • Day 6-10 of partial US Government Shutdown , impending October 17 debt ceiling hit, and ramifications
  • Monday and Tuesday: Markets moving with speculation on US budget deadlock resolution. Successful Italian and Spanish bond sales signal EU crisis remains dormant, aided by US budget turmoil, which both distracts markets from EU woes and narrows ‘stability gap’ between US and EU in minds of investors.
  • Wednesday to Friday: Yellen Appointment, Signs of US Debt Deal Lift Most Global Indexes, Risk Currencies
  • Other Noteworthy:
    • Signs of life from Greek economy?
    • US earnings season results not a factor
    • IMF cuts China and East Asia growth estimates and commodity price estimates
    • Lessons & Conclusions – these will help explain the coming week

Lessons For The Coming Week: 3 Big Market Movers To Watch

Let’s review what last week taught us about the coming week and beyond. First, what’s really driving most asset markets?

1. Speculation on US Budget Resolution and What’s At Stake

Most global asset markets moved with fear or hope regarding the chances for the US reaching a budget deal that both ends the shutdown of non-essential Federal government services and eliminates risk of any near term US default.

Nothing makes that clearer than set of four hour charts of major global stock indexes shown below. Just look at how prices were generally falling October 7-8, then suddenly started rising Wednesday through Friday.

Lessons Learned For The Coming Week: 3 Drivers, 3 Conclusions

Four Hour Charts of Leading Global Stock Indexes, Including Week of Oct 6-11:

  • Left Column Top-Bottom: S&P 500, FTSE 100, DAX 30,
  • Center Column Top-Bottom: CAC 40, DJ EUR 50, Nikkei 225,
  • Right Column Top-Bottom: China A50, HSI, MSCI Taiwan,

Sources: MetaQuotes Software Corp, www.fxempire.com, www.thesensibleguidetoforex.com

As we discuss in depth here, leading global stock index trends are a handy quick view of market sentiment, and how both risk and safe haven assets, as well as risk and safety currencies should be moving at a given time.

Why the change in global risk appetite?

From Wednesday to Friday there was growing belief that some kind of deal would be reached to raise the debt ceiling enough to provide 1-2 months to conclude a more durable deal. The current point of contention is whether the government shutdown continues. The Republicans (who control the House of Representatives) want it to continue in order to pressure the President and his Democratic allies (who control the Senate), who in turn want the more borrowing allowed in order to lift the shutdown.

What’s Driving That Trend Change?

Markets jumped on reduced risk of all of the following:

All kinds of bad things can happen to the US and global economy if a deal isn’t reached very soon. October 17th is the day the US is supposed to reach its borrowing limits, though as we’ll see below, there’s some wiggle time. See below for more on that.

For those not familiar with the range of things that are and are not scaring markets and making the US budget battle the key market driver, see here for an in-depth look. For those who are, here’s just a quick listing.

  1. Chaos: This is really the big one, both in terms of market uncertainty (so a big selloff is expected by many if October 17 passes with no deal imminent) and the reality of how the US government continues to function. With its borrowing capacity limited, the U.S. Treasury Department may go into default and eventually be forced to prioritize its payments. However it’s far from clear that there is any such plan extant on how to prioritize payments, nor is it clear that even if the Treasury had one, it would be legal.
  2. Wild Market Volatility: That much uncertainty and risk causes selloffs, which, if given a few days, can take on a life of their own as program trades kick in. Big time.
  3. Hit to GDP grows with each day.
  4. Damage to consumer confidence that could hurt retail sales during the vital Christmas shopping season.
  5. Additional damage to US credibility and credit rating.
  6. Rising US borrowing costs.
  7. Continued Battering For the USD, further hurting GDP.
  8. Government shutdown means blackout on federal government supplied economic data.

I could come up with a few more, but that’s the basic list. Again, see here for a more detailed explanation.

As of this writing, there is still no deal; however markets remain calm in the assumption that Congress wouldn’t be so stupid as to let the deadlock drag on long enough to cause significant damage or a default. That confidence erodes with each passing day.

Don’t Be Surprised If There Is No Deal By October 17th

So what terrible things befall us on October 17th if there’s no deal? Probably not much, actually, at least not right away.

This is when the US is expected to hit the debt ceiling and be unable to issue more debt. However the US probably has another week before it must actually default, because the Treasury keeps an extra $30 bln around for emergencies. This is important to know because given the current brinksmanship both sides are using, a deal may come only when Congress truly believes it’s the last minute. Only then can both sides turn to their supporters eyes aimed piously skyward, and claim they had to make sacrifices for the greater good.

See here for details

The Most Likely Outcome?

The consensus appears to be that at minimum we get some short term deal that gives Congress a month or two to work out a longer term deal. If so, that likely means some kind of short traders’ relief rally, followed by a return of bearish pressure on markets is repeated as yet another deadline inches closer. Whether or not that fear will be felt in the weeks ahead would depend on whether there are other positive or negative surprises (earnings, new sentiment on the size and duration of QE, an new EU crisis, etc.).

2. Yellin Appointment to Fed Chair

News that Janet Yellin would indeed replace Ben Bernanke as Fed Chair…person also helped lift markets from Wednesday to Friday

She’s seen as the most dovish FOMC member and thus expected to maintain the Fed’s bond buying program and defer and tapering until US economic data shows clearer economic improvement. Some of the obvious ramifications include:

  • That’s seen as good for stocks and other risk asset markets that are seen as dependent on continued QE for further moves higher.
  • It’s bad for the USD, as the QE is seen as threatening dilutive inflation. Inflation hasn’t been a problem thus far because subdued economic growth has kept cash sitting in the banks rather than circulating via new loans.
  • It may prove very good for bonds and dividend stocks (MLPs REITs, Utilities), both of with saw steep selloffs in times of taper fears. If data continues to suggest continued weakness yield starved investors will be more likely to start bidding these back to pre-taper levels.
  • She appears ready to keep markets stable if Congress can’t reach a deal. In her acceptance speech she appeared to include a third mandate for the Fed:

“I pledge to do my utmost to keep that trust and meet the great responsibilities that Congress has entrusted to the Federal Reserve-to promote maximum employment, stable prices, and a strong and stable financial system.“

Read: “Sure, everyone talks about the Fed’s mandate to promote jobs and stable prices, but how the heck do you do that if the U.S. runs out of cash and defaults because we’ve got a bunch of jerks in Congress?! See here for more on this.

3. Spain, Italy Bond Sales

On Wednesday both Spain and Italy held successful bond sales. European markets were mostly lower, but sometimes the biggest market movers are the things that don’t happen. These bond sales remain barometers of EU debt anxiety, so signals of calm from the too-big-to-fail-or-bail club kept markets from plunging and helped set up the rally that would start in the US that day and continue through the rest of the week.

Not Market Moving But Noteworthy

Greece Rising?

This matters as Greece remains the most likely default and contagion risk spot, so what happens there matters for the dormant-but-far-from-resolved EU debt and banking crisis.

Prominent hedge fund boss John Paulson (right on US housing crisis, wrong on gold) announced that he’s a believer in the Greek bank recovery. We hope he does better with that than he did with gold.

Also this week Greece announced that:

  • It has forecast that its economy will rebound to grow by 0.6% in 2014 vs. a contraction of 4% in 2013, due to a recovery in investment, exports and tourism.
  • It expects a of 1.6% of GDP primary budget surplus next year, and hopes it can return to bond markets in the latter part of 2014.

Ok, neither Paulson nor Greece is exactly on a roll with their predictions, Paulson blowing a wad of cash on long gold positions and Greece just being generally overoptimistic.

Also

US earnings season results not a factor thus far

Earnings announcements after the market close Tuesday by Alcoa and Yum! Brands marked the official start of Q3 US earnings season, but these had no noticeable effect on markets, as Alcoa beat estimates, (AA), Yum! Brands missed(YUM), so their combined impact was neutral and thus left markets focused on the US budget debate and risks implied. Both stocks are global bellwethers, YUM for consumer consumer/discretionary stocks, AA for global industrial activity.

Of course earnings season’s main influence on global markets occurs in weeks 2 and 3, which are up ahead, as these set the overall tone for how Q3 went for earnings.

IMF cuts China and East Asia growth estimates and commodity price estimates

This is related to the above, as both firms feel the effects of a slowdown in these areas.

Conclusions: 3

1. Judgment Day Deferred

We continue to agree with the consensus view that at least a temporary US budget deal will happen to raise the debt ceiling and so avoid all the nasty things that might happen as noted above.

We may well be replaying this crisis in a month or so, in fact the more lasting lesson of the week may concern our new Fed Chairperson, Madame Fed Chairman, or whatever term becomes most used.

2. Markets: “Dammit, Janet, I Love You…..”

The river was deep but I swam it (Janet)

The future is ours so let’s plan it (Janet)

So please, don’t tell me to can it (Janet)

I’ve one thing to say and that’s Dammit, Janet, I love you

(Lyrics: Dammit Janet, Film: Rocky Horror Picture Show)

As noted above, the new Fed head is expected to keep QE around until US economic data indicates a clear and sustainable return to growth. In other words, the big support for risk assets, QE, may yet be around for a while. As that’s still seen as the primary prop for risk asset prices, she’s bullish for risk assets.

3. There And Back Again

That means we’re right back where we were before the latest US budget crisis.

Markets won’t be reacting to data directly, but more reacting to how they think the Fed will react to data. So expect more days of markets being

  • Down in response to good data that raises expectations about the pace and timing of a QE taper.
  • Down on really bad news that suggests QE isn’t helping any more
  • Up when news is good, but not good enough to taper, etc.

That’s it for last week’s lessons about what’s likely to be driving markets this week. Please see our follow up article what else is likely to be moving global markets next week.

DISCLOSURE /DISCLAIMER: THE ABOVE IS FOR INFORMATIONAL PURPOSES ONLY, RESPONSIBILITY FOR ALL TRADING OR INVESTING DECISIONS LIES SOLELY WITH THE READER

Previous Post

October 2013 IMF Global Financial Stability Report

Next Post

Market Commentary: Midday Markets Recovering From Morning Lows

Related Posts

Unlocking the Future: Google's Game-Changing Move to Advertise NFT Games Starting September 15th
Business

Unlocking the Future: Google’s Game-Changing Move to Advertise NFT Games Starting September 15th

by John Wanguba
September 8, 2023
Bitcoin Is Finally Trading Perfectly Like 'Digital Gold'
Economics

Bitcoin Is Finally Trading Perfectly Like ‘Digital Gold’

by John Wanguba
August 5, 2023
Can Worldcoin Overtake Bitcoin?
Economics

Can Worldcoin Overtake Bitcoin?

by John Wanguba
August 4, 2023
Bitcoin Is Steady Above $29,000 Awaiting US NFP Figures
Economics

Bitcoin Is Steady Above $29,000 Awaiting US NFP Figures

by John Wanguba
August 4, 2023
Namibia Will Regulate And Not Ban Crypto With New Law
Finance

Namibia Will Regulate And Not Ban Crypto With New Law

by John Wanguba
July 25, 2023
Next Post

Market Commentary: Midday Markets Recovering From Morning Lows

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

Browse by Category

  • Business
  • Econ Intersect News
  • Economics
  • Finance
  • Politics
  • Uncategorized

Browse by Tags

adoption altcoins bank banking banks Binance Bitcoin Bitcoin market blockchain BTC BTC price business China crypto crypto adoption cryptocurrency crypto exchange crypto market crypto regulation decentralized finance DeFi Elon Musk ETH Ethereum Europe Federal Reserve finance FTX inflation investment market analysis Metaverse NFT nonfungible tokens oil market price analysis recession regulation Russia stock market technology Tesla the UK the US Twitter

Archives

  • September 2023
  • August 2023
  • July 2023
  • June 2023
  • May 2023
  • April 2023
  • March 2023
  • February 2023
  • January 2023
  • December 2022
  • November 2022
  • October 2022
  • September 2022
  • August 2022
  • July 2022
  • June 2022
  • May 2022
  • April 2022
  • March 2022
  • February 2022
  • January 2022
  • December 2021
  • November 2021
  • October 2021
  • September 2021
  • August 2021
  • July 2021
  • June 2021
  • May 2021
  • April 2021
  • March 2021
  • February 2021
  • January 2021
  • December 2020
  • November 2020
  • October 2020
  • September 2020
  • August 2020
  • July 2020
  • June 2020
  • May 2020
  • April 2020
  • March 2020
  • February 2020
  • January 2020
  • December 2019
  • November 2019
  • October 2019
  • September 2019
  • August 2019
  • July 2019
  • June 2019
  • May 2019
  • April 2019
  • March 2019
  • February 2019
  • January 2019
  • December 2018
  • November 2018
  • October 2018
  • September 2018
  • August 2018
  • July 2018
  • June 2018
  • May 2018
  • April 2018
  • March 2018
  • February 2018
  • January 2018
  • December 2017
  • November 2017
  • October 2017
  • September 2017
  • August 2017
  • July 2017
  • June 2017
  • May 2017
  • April 2017
  • March 2017
  • February 2017
  • January 2017
  • December 2016
  • November 2016
  • October 2016
  • September 2016
  • August 2016
  • July 2016
  • June 2016
  • May 2016
  • April 2016
  • March 2016
  • February 2016
  • January 2016
  • December 2015
  • November 2015
  • October 2015
  • September 2015
  • August 2015
  • July 2015
  • June 2015
  • May 2015
  • April 2015
  • March 2015
  • February 2015
  • January 2015
  • December 2014
  • November 2014
  • October 2014
  • September 2014
  • August 2014
  • July 2014
  • June 2014
  • May 2014
  • April 2014
  • March 2014
  • February 2014
  • January 2014
  • December 2013
  • November 2013
  • October 2013
  • September 2013
  • August 2013
  • July 2013
  • June 2013
  • May 2013
  • April 2013
  • March 2013
  • February 2013
  • January 2013
  • December 2012
  • November 2012
  • October 2012
  • September 2012
  • August 2012
  • July 2012
  • June 2012
  • May 2012
  • April 2012
  • March 2012
  • February 2012
  • January 2012
  • December 2011
  • November 2011
  • October 2011
  • September 2011
  • August 2011
  • July 2011
  • June 2011
  • May 2011
  • April 2011
  • March 2011
  • February 2011
  • January 2011
  • December 2010
  • August 2010
  • August 2009

Categories

  • Business
  • Econ Intersect News
  • Economics
  • Finance
  • Politics
  • Uncategorized
Global Economic Intersection

After nearly 11 years of 24/7/365 operation, Global Economic Intersection co-founders Steven Hansen and John Lounsbury are retiring. The new owner, a global media company in London, is in the process of completing the set-up of Global Economic Intersection files in their system and publishing platform. The official website ownership transfer took place on 24 August.

Categories

  • Business
  • Econ Intersect News
  • Economics
  • Finance
  • Politics
  • Uncategorized

Recent Posts

  • Unlocking the Future: Google’s Game-Changing Move to Advertise NFT Games Starting September 15th
  • Bitcoin Is Finally Trading Perfectly Like ‘Digital Gold’
  • Can Worldcoin Overtake Bitcoin?

© Copyright 2021 EconIntersect - Economic news, analysis and opinion.

No Result
View All Result
  • Home
  • Contact Us
  • Bitcoin Robot
    • Bitcoin Profit
    • Bitcoin Code
    • Quantum AI
    • eKrona Cryptocurrency
    • Bitcoin Up
    • Bitcoin Prime
    • Yuan Pay Group
    • Immediate Profit
    • BitIQ
    • Bitcoin Loophole
    • Crypto Boom
    • Bitcoin Era
    • Bitcoin Treasure
    • Bitcoin Lucro
    • Bitcoin System
    • Oil Profit
    • The News Spy
    • British Bitcoin Profit
    • Bitcoin Trader
  • Bitcoin Reddit

© Copyright 2021 EconIntersect - Economic news, analysis and opinion.