Best of the Week
Most Popular
1. Stock Markets and the History Chart of the End of the World (With Presidential Cycles) - 28th Aug 20
2.Google, Apple, Amazon, Facebook... AI Tech Stocks Buying Levels and Valuations Q3 2020 - 31st Aug 20
3.The Inflation Mega-trend is Going Hyper! - 11th Sep 20
4.Is this the End of Capitalism? - 13th Sep 20
5.What's Driving Gold, Silver and What's Next? - 3rd Sep 20
6.QE4EVER! - 9th Sep 20
7.Gold Price Trend Forecast Analysis - Part1 - 7th Sep 20
8.The Fed May “Cause” The Next Stock Market Crash - 3rd Sep 20
9.Bitcoin Price Crash - You Will be Suprised What Happens Next - 7th Sep 20
10.NVIDIA Stock Price Soars on RTX 3000 Cornering the GPU Market for next 2 years! - 3rd Sep 20
Last 7 days
Gold Mining Stocks: A House Built on Shaky Ground - 9th Apr 21
Stock Market On the Verge of a Pullback - 9th Apr 21
What Is Bitcoin Unlimited? - 9th Apr 21
Most Money Managers Gamble With Your Money - 9th Apr 21
Top 5 Evolving Trends For Mobile Casinos - 9th Apr 21
Top 5 AI Tech Stocks Investing 2021 Analysis - 8th Apr 21
Dow Stock Market Trend Forecast 2021 - Crash or Continuing Bull Run? - 8th Apr 21
Don’t Be Fooled by the Stock Market Rally - 8th Apr 21
Gold and Latin: Twin Pillars of Western Rejuvenation - 8th Apr 21
Stronger US Dollar Reacts To Global Market Concerns – Which ETFs Will Benefit? Part II - 8th Apr 21
You're invited: Spot the Next BIG Move in Oil, Gas, Energy ETFs - 8th Apr 21
Ladies and Gentlemen, Mr US Dollar is Back - 8th Apr 21
Stock Market New S&P 500 Highs or Metals Rising? - 8th Apr 21
Microsoft AI Azure Cloud Computing Driving Tech Giant Profits - 7th Apr 21
Amazon Tech Stock PRIMEDAY SALE- 7th Apr 21
The US has Metals Problem - Lithium, Graphite, Copper, Nickel Supplies - 7th Apr 21
Yes, the Fed Will Cover Biden’s $4 Trillion Deficit - 7th Apr 21
S&P 500 Fireworks and Gold Going Stronger - 7th Apr 21
Stock Market Perceived Vs. Actual Risks: The Key To Success - 7th Apr 21
Investing in Google Deep Mind AI 2021 (Alphabet) - 6th Apr 21
Which ETFs Will Benefit As A Stronger US Dollar Reacts To Global Market Concerns - 6th Apr 21
Staying Out of the Red: Financial Tips for Kent Homeowners - 6th Apr 21
Stock Market Pushing Higher - 6th Apr 21
Inflation Fears Rise on Biden’s $3.9 TRILLION in Deficit Spending - 6th Apr 21
Editing and Rendering Videos Whilst Background Crypto Mining Bitcoins with NiceHash, Davinci Resolve - 5th Apr 21
Why the Financial Gurus Are WRONG About Gold - 5th Apr 21
Will Biden’s Infrastructure Plan Rebuild Gold? - 5th Apr 21
Stocks All Time Highs and Gold Double Bottom - 5th Apr 21
All Tech Stocks Revolve Around This Disruptor - 5th Apr 21
Silver $100 Price Ahead - 4th Apr 21
Is Astra Zeneca Vaccine Safe? Risk of Blood Clots and What Side Effects During 8 Days After Jab - 4th Apr 21
Are Premium Bonds A Good Investment in 2021 vs Savings, AI Stocks and Housing Alternatives - 4th Apr 21
Penny Stocks Hit $2 Trillion - The Real Story Behind This "Road to Riches" Scheme - 4th Apr 21
Should Stock Markets Fear Inflation or Deflation? - 4th Apr 21
Dow Stock Market Trend Forecast 2021 - 3rd Apr 21
Gold Price Just Can’t Seem to Breakout - 3rd Apr 21
Stocks, Gold and the Troubling Yields - 3rd Apr 21
What can you buy with cryptocurrencies?- 3rd Apr 21
What a Long and Not so Strange Trip it’s Been for the Gold Mining Stocks - 2nd Apr 21
WD My Book DUO 28tb Unboxing - What Drives Inside the Enclosure, Reds or Blues Review - 2nd Apr 21
Markets, Mayhem and Elliott Waves - 2nd Apr 21
Gold And US Dollar Hegemony - 2nd Apr 21
What Biden’s Big Infrastructure Push Means for Silver Price - 2nd Apr 21
Stock Market Support Near $14,358 On Transportation Index Suggests Rally Will Continue - 2nd Apr 21
Crypto Mine Bitcoin With Your Gaming PC - How Much Profit after 3 Weeks with NiceHash, RTX 3080 GPU - 2nd Apr 21
UK Lockdowns Ending As Europe Continues to Die, Sweet Child O' Mine 2021 Post Pandemic Hope - 2nd Apr 21
A Climbing USDX Means Gold Investors Should Care - 1st Apr 21
How To Spot Market Boom and Bust Cycles - 1st Apr 21
What Could Slay the Stock & Gold Bulls - 1st Apr 21
Precious Metals Mining Stocks Setting Up For A Breakout Rally – Wait For Confirmation - 1st Apr 21
Fed: “We’re Not Going to Take This Punchbowl Away” - 1st Apr 21
Mining Bitcoin On My Desktop PC For 3 Weeks - How Much Crypto Profit Using RTX 3080 on NiceHash - 31st Mar 21
INFLATION - Wage Slaves vs Gold Owners - 31st Mar 21
Why It‘s Reasonable to Be Bullish Stocks and Gold - 31st Mar 21
How To Be Eligible For An E-Transfer Payday Loan? - 31st Mar 21
eXcentral Review – Trade CFDs with a Customer-Centric Broker - 31st Mar 21

Market Oracle FREE Newsletter

FIRST ACCESS to Nadeem Walayat’s Analysis and Trend Forecasts

Stocks Take Solace In the Fed Economic Beige Book

Stock-Markets / Financial Markets 2009 Jun 11, 2009 - 04:54 AM GMT

By: PaddyPowerTrader

Stock-Markets

Best Financial Markets Analysis ArticleDéjà vu, as there was a late rally yesterday evening spurred by the Fed’s Beige book which noted that 5 of the 12 districts saw “that the downward trend is showing signs of moderating”. The market had earlier dipped on news of a very stodgy 10 year US Treasury Bond Auction (where investors demanded 3.99%, the highest yield since August 2008, to buy the government securities) and worries about inflation and higher gasoline pump prices. Note also that figures yesterday showed new mortgage applications at a four month low. Hardly surprising given a 30 year mortgage now costs 5.57% from 4.61% in March.


Today’s Market Moving Stories

  • US foreclosures are still rising. The latest RealtyTrac data has shown that one in every 398 households in the US is in some state of foreclosure. May 2009 foreclosures are up 18% yoy although a slight improvement from April. The three month run rate is now more than 300k per month. With unemployment still not falling (9.4% in May in the US) coupled with falling house prices (down 19% yoy as at end-March 09) the trend is expected to continue with total foreclosure filings for the first half of 2009 possibly reaching 1.8m. This will continue to show up in banks’ credit losses for the foreseeable future, albeit near-term. The US banks have been much more proactive in pre-provisioning, with average coverage levels north of 100% for now, while the major European bank average is around the 55-60% mark.
  • Overnight we got news of Chinese fixed investment for May. Investment continued to accelerate, with annual growth reaching almost 33%, up from a low of 24% last year. The trade balance for May showed a 4% bounce in exports, although the trend in sales remains on a downward drift (sales are down a worse-than-expected 26% from a year ago).
  • For Asian equities, key psychological barriers could keep equity markets capped for a while, with the Nikkei nearing 10,000 and the HSI closing in on 20,000. Whether the market conquers these markers ultimately depends on continued liquidity.
  • European stocks in the news are pharma giant Glaxo whose shares got a boost after they were rated “attractive” at Morgan Stanley while Electrolux is also up after a buy recommendation from Goldman Sachs.
  • More gloomy tidings from the troubled airline sector. Both Iberia and Lufthansa have released May passenger data which echoes the negative trends from other Flags. Iberia’s volume fell 11%, with domestic down 9.8% and Europe -10.3%. Lufthansa traffic in Europe declined 3.1% to 4.8m (including Swiss). It has been a tough start for summer trading across the entire industry.
  • Allied Irish Bank today confirmed that it has initiated an exchange (buyback) of its subordinate bonds, following the Bank of Ireland initiative. In principle, bond holders will have the opportunity to swap current AIB bonds for that of a specified series of new notes. Up to €2.65 billion in bonds are being bid for by AIB as part of the exchange. The pricing of the exchange will take place on June 22 2009. AIB could benefit to the tune of €700m - €800m which would provide a 10% boost to existing Core Equity Tier 1 capital of €7.7 billion.
  • Élan CEO Kelly Martin gave a little more colour last night on the timeline for the company’s long running and much commented upon strategic review. Élan is in the “last phase” of assessment, after initially receiving a lot of interest when the review process was begun in January. He reiterated the key goals of the review are to access more capital and a global commercial infrastructure, and to minimise dilution to current shareholders. Separately, he also remains very bullish on Tysabri prospects and sees potential for 100,000 patients on this drug within a 3-5 year timeframe.

Market Takes Positives From Downbeat Beige Book
The Fed’s Beige book released last night noted improved economic expectations in several districts. Indeed five districts noted that the downward trend shows moderating signs. Eight districts reported home upticks in sales (however most of these upticks in housing sales upticks were concentrated in the lower-priced end of the market). The good news more or less stopped there. Overall lending activity remained stable to weak. Credit conditions were judged to be on the whole stringent or even tightened further. Financing for new commercial properties was harder to get. And the residential real estate market was still judged to remain weak. Labour market conditions are still judged weak, with wages flat or falling. No one at the Fed believes there will be much inflation till that changes. Moreover, prices at all stages of production are flat or falling. Demand for non-financial services was judged down again, retail spending is still seen as soft and manufacturing activity declined or remained low.

So in sum, no substantial rise in economic activity is seen through year-end. Hard to see then where the market is getting it’s optimism from. Richmond’s Fed governor Lacker said there’s “no single bullet” to end the recession. Lacker is still talking as if there is and will be a recession, even if the market has decided otherwise.

FT Blowing Swedish Loan Way Out Of Proportion
There’s a misguided headline in the FT saying that ECB has lent the Swedish Central Bank €3bn, as if without this, Sweden would implode. Tosh! Sweden drew down €3bn under a pre-existing swap line (which has been disclosed - well, I knew about it and I’m no freakin’ genius) as a matter of precaution given the massive uncertainty position of the Latvian economy. It’s not like the ECB is now wading in outside its remit – the ECB was reactive here, not proactive. Meanwhile, on Swedish banks, the stress test results were released yesterday, and while they were reasonably stressful scenarios, GDP Latvia minus 20% for example, the bottom line was that the banks could take SEK150bn of losses and survive. That’s not huge but it does provide a tangible buffer and, just as importantly, some time.

There’s an excellent comment by Mary Stokes in RGE Analysts’ EconoMonitor about the possibility of contagion from the Latvian crisis. She said a Latvian crisis would hit Estonia and Lithuania through trade and financial linkages, and it would affect Sweden through the exposure of Swedish banks in the region. The question is how would it affect the other CEE countries? Direct trade and financial linkages are not very strong. The main effect would be what she calls the “wake-up channel”, a wake-up call to investors to pull out of the region as a whole.

Data Ahead Today
US retail sales for May are released at 13:30. Activity should rise by 0.6%, helped by higher car and gas sales. Excluding the latter, sales should be up 0.2%. I continue to expect real consumer spending to decline in Q2 after posting a surprising 1.5% annualised advance in Q1.

And Finally… Looking For A Lawyer, Call This Guy

Disclosures = None

By The Mole
PaddyPowerTrader.com

The Mole is a man in the know. I don’t trade for a living, but instead work for a well-known Irish institution, heading a desk that regularly trades over €100 million a day. I aim to provide top quality, up-to-date and relevant market news and data, so that traders can make more informed decisions”.

© 2009 Copyright PaddyPowerTrader - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

PaddyPowerTrader Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules