Dow jumped up 201, advancers over decliners better than 3-1 & NAZ gained 69. The MLP index added 2+ to the 234s & the REIT index rose 1+ to 401 (in record territory). Junk bond funds crawled higher & Treasuries slid back in price. Oil went up in the 56s & gold was off 2 to 1513.
AMJ (Alerian MLP Index tracking fund)
Stocks rebound with help from retailers
US existing home sales rise, boosted by lower interest rates
Germany will auction a 30-year bond with a 0% interest rate for the first time today. The bond sale will mean the German gov will not make any interest payments to those buying the bond until it matures in Aug 2050. Bondholders would usually receive both the face value back as well as interest payments over the assets lifetime. But a zero-coupon bondholder would only receive the face value back. The sale of €2B of the long-term bond that was announced last week comes at a time when the yields of these fixed-income assets have hit record lows, with many moving into negative territory as investors look to shelter from market turbulence & capitalize on central bank easing. A zero-coupon bond from the German gov is an option for investors to park their money in a longer term safe-haven asset & lock their cash for a 30-year period amid global uncertainties. In a challenging market environment, investors tend to move their investments from riskier assets into safe-havens like gold & gov bonds, thereby bumping up demand & prices. Bond yields move inversely to prices & hence have been turning negative. A bond's coupon rate is the rate of interest it pays annually, while its yield is the measure of return based on coupon & purchase price. Germany is on the brink of a recession after new economic data showed the economy shrank by 0.1% in Q2 of 2019. The slowdown along with uncertainty around trade wars & Brexit is ramping up the pressure on the gov to deliver a fiscal stimulus package.
Germany sells a zero-percent 30-year bond for the first time
IMF warns that currency devaluations will not fix a country’s economic problems
The bulls came back from vacation to buy stocks. While retail earnings were good today, previous reports have been uneven. China remains a very important player in the global economy & it has a lot issues to deal with (Hong Kong, slow growth & US-China trade). Markets are likely to remain choppy with wild swings before the Labor Day holiday.
Dow Jones Industrials
AMJ (Alerian MLP Index tracking fund)
| CL=F | Crude Oil | 56.98 | +0.85 | +1.5% |
| GC=F | Gold | 1,511.60 | -4.10 | -0.3% |
Stocks jumped higher, rebounding with help from the retail sector. On
the earnings front, shares of Target (TGT), a Dividend Aristocrat, is trading higher after quarterly
results beat expectations & the retailer bumped up its annual
forecast. Today will include the release of minutes from the last Fed meeting in which the central bank cut interest rates. Fed Chair Jerome Powell will also address the gathering of central bankers on Fri in Jackson Hole, Wyoming. Stock averages closed lower yesterday, their first decline in 4 sessions, as stocks took a breather from recent gains, digested retail earnings & looked ahead to Fed-related events this week. In Europe, London's FTSE was up 1.1%, Germany's DAX climbed 1.3% & France's CAC jumped 1.7%. In
Asian markets, Tokyo's Nikkei shed 0.3%, Hong Kong's Hang Seng
inched up 0.2% & China's Shanghai Composite was little changed.
Stocks rebound with help from retailers
US home sales rose more than expected in Jul,
boosted by lower mortgage rates & a strong labor market, signs the
Federal Reserve's shift toward lower interest rates was adding support
for the economy. The National Association of Realtors said existing home sales rose 2.5% to a seasonally adjusted annual
rate of 5.42M units last month. Jun's sales pace was revised
slightly higher to 5.29M units from the previously reported 5.27M units. The forecast said existing home sales would rise to a rate of 5.39M units in Jul. Last
month's increase left existing home sales, which make up about 90% of US home sales, higher than they were a year earlier for the
first time in 17 months. The home market slipped into a rut last
year as the central bank continued a rate-hiking campaign. After
raising rates in Dec, the Fed later signaled it was done with the
tightening, & by Jul the central bank switched gears completely,
cutting rates for the first time since 2008 in a bid to keep a global
downturn from causing a US recession. The rate cut came despite the US unemployment rate being at its lowest level in nearly 50 years. The
30-year fixed mortgage rate dropped to an average of 3.77% in Jul from
more than a 7-year peak of 4.94% in Nov, according to data
from Freddie Mac. The average rate fell to 3.6%
in the Aug 15 week & rates could decline further as the Fed is
expected to cut rates in Sep due to concerns about economic
weakening.
US existing home sales rise, boosted by lower interest rates
Germany will auction a 30-year bond with a 0% interest rate for the first time today. The bond sale will mean the German gov will not make any interest payments to those buying the bond until it matures in Aug 2050. Bondholders would usually receive both the face value back as well as interest payments over the assets lifetime. But a zero-coupon bondholder would only receive the face value back. The sale of €2B of the long-term bond that was announced last week comes at a time when the yields of these fixed-income assets have hit record lows, with many moving into negative territory as investors look to shelter from market turbulence & capitalize on central bank easing. A zero-coupon bond from the German gov is an option for investors to park their money in a longer term safe-haven asset & lock their cash for a 30-year period amid global uncertainties. In a challenging market environment, investors tend to move their investments from riskier assets into safe-havens like gold & gov bonds, thereby bumping up demand & prices. Bond yields move inversely to prices & hence have been turning negative. A bond's coupon rate is the rate of interest it pays annually, while its yield is the measure of return based on coupon & purchase price. Germany is on the brink of a recession after new economic data showed the economy shrank by 0.1% in Q2 of 2019. The slowdown along with uncertainty around trade wars & Brexit is ramping up the pressure on the gov to deliver a fiscal stimulus package.
Germany sells a zero-percent 30-year bond for the first time
Senior economists at the IMF have warned countries against relying too heavily on monetary
policy easing & argued that currencies are “neither the hammer nor
the nail” in efforts to reinvigorate economies. With global growth sluggish & inflation low, a host of central banks have recently cut interest rates to prop up their respective economies, with others, such as the ECB, expected to follow suit later this year. Cutting
interest rates reduces the cost of borrowing in the hope of encouraging
consumers & businesses to spend & invest more. However, in a
blog published today, the IMF warned that the recent surge in monetary
easing from both advanced & emerging market economies has created
concerns over so-called “beggar-thy-neighbor” policies & fears of a
currency war. Beggar-thy-neighbor refers to intl trade
policy which aids the country which enacted it while harming its
neighbors or trade partners. While monetary easing can help
stimulate domestic demand, in turn benefiting other countries by
increasing demand for their goods, the IMF expressed concern about its
weakening of exchange rates. This makes exports more competitive &
reduces demand for other countries' imports as their prices increase, an
effect known as “expenditure switching.” Currency devaluation has become a focal point for global trade tensions.
IMF warns that currency devaluations will not fix a country’s economic problems
The bulls came back from vacation to buy stocks. While retail earnings were good today, previous reports have been uneven. China remains a very important player in the global economy & it has a lot issues to deal with (Hong Kong, slow growth & US-China trade). Markets are likely to remain choppy with wild swings before the Labor Day holiday.
Dow Jones Industrials
No comments:
Post a Comment