Economics
Flattering to deceive
The buy everything trade returned with gusto overnight. Equities rose strongly in Europe and the United States, the US dollar fell, and precious metals and energy rallied. Looks may flatter to deceive though, with the rallies in precious metals and oil likely propelled by the knock-on effects of the rise in equities, rather than a […]
The buy everything trade returned with gusto overnight. Equities rose strongly in Europe and the United States, the US dollar fell, and precious metals and energy rallied. Looks may flatter to deceive though, with the rallies in precious metals and oil likely propelled by the knock-on effects of the rise in equities, rather than a sudden structural change in their outlooks, especially oil.
With the end of the month and the quarter upon markets, a lot of portfolio rebalancing is occurring in the institutional investor space. I would suggest that those flows, rather than a sudden “the world is saved” epiphany are the genesis of the overnight equity rally. That appears to have dragged in the FOMO buy the dip mob on a day when nothing materially changed in the world to justify the moves. US airline stocks, in particular, and banks had an exceptional day. A session where the buy everything mob think airlines look cheap is as good a warning sign for the longevity of the overnight rally as I’ve ever seen. At least big tech is cashflow positive, even if they are not cheap.
In the absence of any headlines to disagree with the buy everything premise, Asian stock markets look set to trade positively today, with the US index futures all in the green. The procyclical Australian and New Zealand dollars will no doubt capture the same tailwind, as will regional Asian currencies.
The potential for four seasons in one day, ending in winter, is there before markets though in the shape of the first Presidential debate this evening. Revelations from the New York Times (NYT) about the state of President Trump’s financial affairs and his business empire will bring an extra edge to the debate. Behind in the polls and wrongfooted by the NYT, President “Tax-Return” Trump will have quite a bit of ground to make up on Democrat candidate Mr “Sleepy-Joe” Biden. We can expect fireworks from the President in particular, with the first debate regarded as the most important by political commentators.
With China PMIs and the US Non-Farm Payrolls still to come this week also, there is plenty of risks ahead, and precious little reason to get excited that the global recovery started yesterday on the 28th of September. Investors should be aware of getting sucked into what may be a sucker’s rally.
This morning, South Korean data for August disappointed. Construction Output, Industrial Output and Manufacturing Production all disappointed, although Retail Sales rose. The data highlights the uneven nature of the Asia region’s recovery, and that will likely be confirmed by Singapore PPI this afternoon and Vietnam’s data dump at 1000 SGT.
One positive of real substance being reported by UK’s The Times newspaper today is a potential breakthrough in trade negotiations between the UK and Europe. European negotiators are indicating they are prepared to start working on a joint legal text, while sidestepping the government subsidy and fishing rights sticking points. Sterling rallied overnight and has moved higher to 1.2850 this morning in Asia. If confirmed, it would be a breakthrough for both sides, but notably for the UK. Broadly speaking, my view is that a trade-deal failure would see sterling fall back to the 1.2000 region, whilst an agreement would see Sterling retest 1.3400. Neither outcome is, in my opinion, priced into the market.

Peter Schiff: The Federal Reserve Is Nowhere Near Victory
Peter Schiff: The Federal Reserve Is Nowhere Near Victory
Via SchiffGold.com,
The mainstream is optimistic about both the economy and the…
Canadian dollars pares losses after GDP
The Canadian dollar has edged lower on Tuesday. In the North American session, USD/CAD is trading at 1.3410, up 0.17%. Earlier today, USD/CAD rose as much…
Much Of The Wealth Destroyed Through The Creation Of Irrational Exuberance Is Never Recovered
I wrote last week about how statements discouraging market timing/price discipline are wealth destroyers. It would be impossible for the CAPE level ever…
-
Companies16 hours ago
Independent Preliminary Economic Assessment for Atlas Salt’s Great Atlantic Project Supports State-of-the-Art “Salt Factory” Vision
-
Base Metals20 hours ago
“Recession Is On Its Way” – Dallas Fed Shows Factory Activity Slumps For 9th Straight Month
-
Uncategorized17 hours ago
Are metals headed for a golden age?
-
Financing News17 hours ago
CORRECTION FROM SOURCE: Excelsior Mining Announces Extension of Nebari Loan and US$3,000,000 Financing
-
Financing News22 hours ago
Blue Thunder Mining Inc. to Combine with Analog Gold Inc.
-
Uncategorized22 hours ago
My top picks in the resources sector
-
Financing News23 hours ago
Medgold signs Definitive Amalgamation Agreement for proposed acquisition of Balkan Metals Corp. and issues Convertible Debenture
-
Uncategorized15 hours ago
Auric drilling reveals widespread clay-hosted REEs at Chalice West