Economics and Banking – Page 18 – Digital Finance Analytics (DFA) Blog

Risk Upon Risk Upon Risk: Market Update 13th May 23

The financial markets have been fighting the Fed since October of last year, especially since the start of this year, in two ways. The first involves bidding-up stock prices in anticipation of a ‘Fed pivot’, which is probably a self-defeating strategy. The second involves factoring lower interest rates into bond prices.

The backdrop is mounting economic uncertainty as Finance leaders of the Group of Seven (G7) nations warned on Saturday in a subdued end to a three-day meeting overshadowed by concerns about the U.S. debt stalemate and fallout from Russia’s invasion of Ukraine.

The gathering in the Japanese city of Niigata came as global policymakers – already preoccupied by U.S. bank failures and efforts to reduce reliance on China – are now forced to grapple with a potential default by the world’s largest economy. While the communique made no mention of the U.S. debt ceiling stalemate, it figured constantly in discussions.

U.S. stocks ended slightly lower on Friday, led by weaker megacap shares following their recent rally, as data showed U.S. consumer sentiment dropped to a six-month low. The Dow was barely lower in its fifth straight day of declines, the blue-chip index’s longest losing streak in two months.

May consumer sentiment dropped to its lowest since November. The University of Michigan’s consumer sentiment reading for May came in at 57.7, much lower than the 63 expected and down from 63.5 in April.

Treasury yields rose in the bond market following the consumer-sentiment report. The yield on the 10-year Treasury erased an earlier dip and climbed to 3.46 per cent from 3.39 per cent late Thursday. It helps set rates for mortgages and other important loans.

The risks are building, and recession is becoming more likely!

CONTENT

0:00 Start
0:15 Introduction
0:50 G7 Warnings
4:44 US Markets
6:50 US Consumer Sentiment Crashes
7:50 Bonds
9:15 Debt Default?
11:22 Europe
13:40 Oil and Gold
15:40 Asia
17:45 Australia
21:20 Bitcoin Halving
23:16 Summary and Conclusion

http://www.martinnorth.com/

Go to the Walk The World Universe at https://walktheworld.com.au/

The Bank Of England Lifts Rates Again!

The Bank of England lifted the cash rate by 0.25%, the 12th rise – to 4.5%. They held a press conference of over an hour, and mindful of the recommendations relating to the RBA review highlighting weakness in communication, I picked out some highlights from the UK session.

This includes the basic rationale for the rate rise, a discussion about the mortgage cliff, what caused inflation in the first place, and the impact on households. It was frankly a more grown up discussion – even if they still anchor inflation to supply chain shocks and energy issues. But their comments on Huw Pill recent comments were also significant.

http://www.martinnorth.com/

Go to the Walk The World Universe at https://walktheworld.com.au/

The Volatility Squeeze

We continue to see massive swings in prices, and I need to remind you that while major players continue to benefit from these wild gyrations in perceived value – as shown in recent trading results, (not least because they can programme trades using algos, and harvest income from the movements) – retail investors hardly benefit, because they are always behind the trade, unable to benefit from the dark pools and high-speed trading. It is an unequal game.

Take Friday, for example, where U.S. stocks rallied with the Dow posting its biggest one-day percentage gain since Jan. 6, as shares of Apple surged more than 4% after upbeat results and U.S. jobs data pointed to a resilient labor market.

Adding to the bullish momentum, regional bank shares rebounded from declines tied to the collapse of First Republic Bank. Analysts upgraded a number of lenders they said were oversold. PacWest Bancorp rallied 81.7% and Western Alliance Bancorp jumped 49.2%, while the KBW regional bank index advanced 4.7%.

Apple’s quarterly results also cheered investors worried about a potential recession. The iPhone maker’s shares hit their highest level in about nine months, and the stock ended up 4.7% in its biggest daily percentage gain since November. The stock was the biggest positive influence on all three major U.S. stock indexes.

The U.S. Labor Department report showed job growth accelerated in April and wage gains increased solidly, suggesting the labor market has stayed strong despite recent interest rate hikes from the Federal Reserve.

All in all, the wild market rides continues…

CONTENT

0.00 Start
0.13 Introduction
1:00 US Markets
2:10 US Labor Markets
6:30 US Earnings
7:00 Europe
9:05 Oil
9:30 Gold
11:57 Asia
13:52 Australia
17:00 Crypto
17:50 Summary and Close

http://www.martinnorth.com/

Go to the Walk The World Universe at https://walktheworld.com.au/

The RBA’s Statement On Monetary Policy Says Not A Lot!

The latest RBA’s Statement On Monetary Policy (More than 80 pages) said very little which was new, with inflation not expected to land within their target zone until 2025, with lower growth and higher unemployment. They reconfirmed an expectation rates could still go higher.

They did try to defend corporate profits as not driving inflation…. hum… but not very successfully in my book.

https://www.rba.gov.au/publications/smp/2023/may/

http://www.martinnorth.com/

Go to the Walk The World Universe at https://walktheworld.com.au/