Thursday, June 9, 2016

Today's Links

1--Stocks Decline Along With Bond Yields

U.S. equity markets have risen for three consecutive sessions, drawing the S&P 500 within 0.6% of its record closing high. But a range of uncertainties, including mixed economic data, a cloudy outlook on the course for U.S. interest rates, and an upcoming referendum in the U.K. have kept the index from topping its best levels....

As investors shed risk, the 10-year German bund touched a new record-low yield of 0.034%, according to data from Tradeweb. Yields fall as prices rise. This week, the average bund yield across the whole curve has gone negative for the first time, according to Jim Reid, strategist at Deutsche Bank. DB -1.27 %

In an effort to lift growth and inflation, the European Central Bank has bought more than a trillion euros worth of bonds, helping suppress yields in the Eurozone.

2--A Bearish George Soros Is Trading Again

Mr. Soros said he is more concerned that continued weakness in China will exert deflationary pressure—a damaging spiral of falling wages and prices—on the U.S. and global economies....

The last time Mr. Soros became closely involved in his firm’s trading: 2007, when he became worried about housing and placed bearish wagers over two years that netted more than $1 billion of gains.

3--Decline in online jobs postings foreshadows recession

After 73 consecutive months of year-over-year growth, online jobs postings have been in decline since February. May was by far the worst month since January 2009, down 285k from April and down 552k from a year ago.

Online job postings are not a direct revenue driver for LinkedIn. We do however believe it is a reflection of overall hiring activity and should be considered a check on demand vibrancy....

LinkedIn caters to professionals, people with well-paid jobs, or people looking for well-paid jobs. They’re software developers, program managers, petroleum engineers, executives of all kinds, marketing professionals, sales gurus…. They span the entire gamut. And companies use LinkedIn to recruit those folks.

So with online job postings on LinkedIn plunging since February, and with May clocking in as “by far the worst month since January 2009,” then by the looks of it, businesses are slashing their recruiting efforts in those professional categories.

If that bears out, it would be another sign that not only the labor market but the overall US economy have taken a major hit recently, that businesses have started to respond to sales which have been falling since mid-2014 and to profits which have been falling since early 2015, and to productivity which declined in Q1 and has been weak for years – and that they’ve begun to look at their workforce for savings. And if this bears out, they will confront the possibility of a looming recession with even steeper cuts

4--Copper Is Crashing Again...

5--Yellen "Call" replaces Bernanke "Put"

In our “Top 10 Market Themes for 2016”, we argued that the ‘Bernanke put’ might gradually be replaced by the ‘Yellen call’. Whereas the ‘Bernanke put’ was the idea that meaningful declines in market sentiment would be met with aggressive monetary action, thus providing a buffer to downside risk, our notion of the ‘Yellen call’ was the converse. With labour markets tightening and inflation rising, we cautioned that the FOMC would likely respond to easier financial conditions with a more robust withdrawal of policy accommodation. This ‘Yellen Call’, we said, would likely ‘cap’ the upside potential for risky assets. 

(Yellen wants to keep stocks rangebound to prevent bigger bubble

6--BLS Says Jobs Openings Up; Actually, Openings Falling Fast!

Since that time, however, the data they track has moved from leveling off to outright decline and Jon just recently emailed us to say he is now “leaning toward forecasting a likely downturn/recessionary scenario” and said, “I don’t think last week’s poor jobs report was just a blip.”

Though the data only goes back around 10 years, it’s clearly rolled over in a manner similar to the last recession. As we noted last month, if the online data is providing a more accurate picture of the US economy vs. the official government surveys, then “expect to see a string of downward revisions” and continued misses moving forward. Last week that prediction was fulfilled quite strongly with only 38,000 jobs added and heavy downward revisions to the two prior months....

Downward Revisions
I have been discussing downward revisions for some time. If they come, revisions are likely to show the US is in recession already.

7--Everything’s a Buy as Central Banks Keep on Greasing Markets

Signs are everywhere that the U.S. economic recovery, which started seven years ago, is maturing. Earnings growth has plateaued. Business spending has sagged and global trade remains stagnant. On Tuesday, the World Bank cut its outlook for global growth this year to 2.4 percent, down from the 2.9 percent estimated in January.

8--"Whatever it takes": Draghi buys junk bonds in new round of QE

The bank’s entry into the corporate bond market on Wednesday was no exception: buying bonds with junk ratings. The second day didn’t disappoint either, with purchases of notes from troubled German carmaker Volkswagen AG.
By casting his net as wide as the program allows, Draghi ensured that the first day of corporate bond purchases made an impact. While the ECB has said it would buy bonds from companies with a single investment-grade rating, investors expected the central bank to start with the region’s highest-rated securities.

9--Victory no longer possible in Afghanistan: Former US generals, diplomats clamor for renewal of Afghan war

The demands for an essentially permanent US presence in Afghanistan, issued one and a half years after President Obama proclaimed the war over, have become more insistent amid signs that the Afghan government is likely to lose more and more territory to the Taliban.

Stephen Biddle of the Council on Foreign Relations wrote, “The range of plausible outcomes in Afghanistan is now very narrow. The Afghan government could lose the war outright, or it can negotiate a compromise settlement with the major insurgent factions. There is no longer any meaningful prospect to defeat the Taliban.”

“What’s needed isn’t a slower timetable for withdrawals – it’s the end of timetables altogether,” he continued...

A similar catastrophe now threatens the US position in Afghanistan. Despite 15 years of murderous warfare waged by the United States military in the name of suppressing insurgency and terror but directed, in reality, against all opposition to the Kabul regime, and against the Afghan population as a whole, the US puppet government remains incapable of controlling the cities without help from tens of thousands of Western troops and heavy fire support from the US Air Force.

The Afghan national army, trained at huge expense by the American government, has proven incapable of holding territory without US air and ground support. In the course of 2015, Taliban forces briefly seized the northern city of Kunduz, staged attacks against the Afghan Parliament building in the center of Kabul, and launched offensives in Helmand province that forced Washington to redeploy hundreds of combat forces in support of collapsing Afghan national units.

10--Swiss, German bond yields set fresh record lows

Easy-money policies from central banks keeps sovereign bonds in demand

Switzerland and Germany set new records in debt markets on Tuesday, as central banks extended easy-money policies in a bid to strengthen global growth and avert deflation.....

For investors, buying these assets makes no sense unless you have a deeply pessimistic outlook for the global economy, said Dierk Brandenburg, senior sovereign analyst at Fidelity.
“You have to take a very gloomy view of risks, growth and inflation to find these rates attractive,” he said.

11--Japan’s Largest Bank Considers Quitting Role in Government-Bond Market

The BOJ has been buying ¥80 trillion ($745 billion) of JGBs annually, roughly equivalent to all new issuance, and now owns about one-third of the outstanding market. Its JGB purchases, and the introduction of negative rates, are meant to drive interest interest rates lower across the yield curve, creating demand for loans and pushing investors into higher-yielding “risk assets” as part of efforts to fuel economic growth.
The lower yields also help the Japanese government, which is relying on the central bank to absorb enough bonds to finance its deficits. The government is likely to propose an economic-stimulus plan valued at about ¥10 trillion this fall, an aide to Prime Minister Shinzo Abe said Wednesday....

Banks say negative rates haven’t created more demand for loans but have hit their stock prices and threaten to cut their profits. Executives say they are growing concerned that the BOJ, which in February set a rate of minus-0.1% on some commercial-bank reserves, might move the rate even lower—possibly as low as minus-0.3%—and are pushing against such a move. ...

Japanese banks have been shedding exposure to JGBs. The top three lenders have cut their holdings by about 20% over the past year. Bank of Tokyo-Mitsubishi now has ¥22 trillion, while the banking units of Mizuho Financial Group Inc. MFG -3.13 % and Sumitomo Mitsui Financial Group Inc. SMFG -2.94 % hold about ¥16 trillion and ¥10 trillion, respectively. Lenders are reluctant to hold negative-yielding bonds and are seeking higher yields elsewhere.

12--Corporate-Bond Yields Fall in Europe as ECB Starts Buying

wsj  admits WHO the program serves: "The ECB hopes that this money will flow straight into corporate coffers while also helping banks as investors look to buy banks’ bonds, which aren’t eligible for this program, in an attempt to gain extra yield. "...

Yields in the eurozone’s corporate-bond market fell to their lowest in more than a year on Wednesday, heralding the arrival of a very big buyer: the European Central Bank.

The ECB bought bonds from telecommunications, insurance and utility companies, pushing yields down in these sectors, according to people familiar with the matter. The purchases kick-started a multibillion-euro program of corporate-bond purchases that is part of the central bank’s yearslong attempt to stoke inflation and lower financing costs across the euro area....

On  Wednesday, yields kept falling. Markit’s iBoxx euro corporate-bond index registered an average yield of just 1.09% for debt maturing in one to 10 years, down from 1.10% on Tuesday and the lowest close since April 2015....

But the program comes with risks. Some investors are concerned that the ECB could own so much of the market that it becomes difficult to buy or sell. Some analysts warn of a bubble in debt markets....

But the program comes with risks. Some investors are concerned that the ECB could own so much of the market that it becomes difficult to buy or sell. Some analysts warn of a bubble in debt markets....

Among the companies whose yields fell furthest was brewing giant Anheuser-Busch InBev BUD -1.42 % NV, whose bond maturing in 2028 fell from 1.4% at the opening to 1.339% at the end of trading in Europe. A bond maturing in 2021 issued by German electrical utility RWE AG RWEOY -0.46 % sank from 1.177% to 1.062% at its lowest. And yields on 10-year bonds from Spanish telecommunications firm Telefónica SA fell to their lowest on record, touching 1.427%, after being at 1.466% as European markets opened Wednesday.

The ECB already has bought more than €1 trillion of mainly government bonds under its quantitative-easing program. But this is the first time that the Frankfurt-based central bank has ventured into corporate bonds.

13--Russia Will 'Poke US in the Eye' if Assad Retakes Raqqa Before Rebels

1 comment:

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