Gold set for biggest weekly drop in 3 years on trade optimism
November 8, 2019
“Gold prices fell on Friday and were on track for their biggest weekly decline in almost 3 years as a stronger dollar weighed, while optimism around U.S.-China trade talks dented bullion’s safe-haven appeal. Spot gold was down 0.6% at $1,458.52 per ounce at 1309 GMT, poised for its biggest weekly drop – about 3.7% – since November 2016. Prices earlier fell to their lowest since Aug. 5 at $1,455.80. U.S. gold futures fell 0.5% to $1,459.70. ‘There’s expectation for resolution of the trade war and that is the main story behind this fall in gold,’ said Carlo Alberto De Casa, chief analyst at ActivTrades.
A risk-on scenario, stronger dollar and Thursday’s breakdown of the key support level of $1,480 also weighed on bullion as many traders were looking at gold in a $1,480-$1,520 trading range, De Casa said. Gold fell below its 100-day moving average for the first time since end-May on Thursday. The dollar index was headed for a weekly gain as it benefited from news that China and the United States had agreed to roll back tariffs as part of a potential preliminary pact to end their trade war.
Meanwhile, uncertainty about the fate of trade talks nudged world stock markets off 21-month highs on Friday after what has proved to be a stellar week for risk assets.”
FOX BUSINESS/Jonathan Garber
Stocks seesaw amid US-China trade uncertainty
November 8, 2019
“Stocks fell across the board on Friday as traders digest the uncertainty surrounding the details of a potential trade deal between the U.S. and China. President Trump, speaking from the White House, said the Chinese want him to roll back tariffs and that they want to make a deal more than the U.S. Despite the downside Friday, all three of the major averages closed at record highs on Thursday. Reports, early Thursday said that China and the U.S. agreed to roll back tariffs on each others’ goods as part of the first phase of a trade deal, but White House trade adviser Peter Navarro told FOX Business that if President Trump didn’t say it, don’t believe it.
‘There is no agreement at this time to remove any of the existing tariffs as a condition of the phase one deal,’ Navarro said, ‘and the only person who can make that decision is President Donald J. Trump and it’s as simple as that.’ On Friday morning, Navarro told NPR that the U.S. may be willing to postpone the tariffs that are scheduled to hit $156 billion of Chinese goods. All of that comes after Chinese Ministry of Finance spokesperson Gao Feng said on Thursday that the U.S. and China agreed to “remove the additional tariffs imposed in phases as progress is made on the agreement.”
Fed’s monetary juice has tied directly to the rise in stocks: ‘Here we go again’
November 7, 2019
“Financial markets have seen this story before: The Federal Reserve rides in with piles of freshly minted digitized money that helps send the prices of stocks and other assets lurching forward. But this isn’t 2009. Instead, it’s 2019, and once again the central bank, whether by intention or coincidence, has seen its efforts to keep the financial system running smoothly end up as a bonanza for Wall Street, where the decadelong bull market has taken another leg higher in step with a Fed liquidity effort. Since a mid-September flare-up in the repo market, where banks go for overnight financing, the Fed has been injecting billions into the markets, buying up mostly short-term Treasury bills in an effort, ostensibly, to keep its benchmark funds interest rate within its targeted range, currently at 1.5% to 1.75%. The results: a $175 billion expansion of the Fed’s balance sheet to $4.07 trillion.”
“‘Financial conditions are extraordinarily loose and accommodative,’ said Lisa Shalett, chief investment officer at Morgan Stanley Asset Management. ‘This really speaks to the idea that once again we’re on the brink of potentially being in this bubble, where valuations are about the story and the narrative and not about the cash flow and profits,’ she said. ‘You would think we would have learned this lesson before. But here we go again.’ Wall Street took notice earlier this week when hedge fund king Ray Dalio of Bridgewater Associates penned his latest missive for LinkedIn, this one titled ‘The World Has Gone Mad and the System Is Broken.’”
MARKET WATCH/Mark DeCambre
A surging stock market belies the biggest disagreement between CEOs and consumers about the U.S. economy on record
November 8, 2019
“The stock market was in full flight Thursday, with all three main U.S. benchmarks poised to end at their highest levels ever, but those glorious gains come amid an uneasy gap in what consumers and C-suiters think about future of the U.S. economy. Deutsche Bank Securities’ Torsten Sløk notes that consumers appear to be much more optimistic about the outlook for the economy than chief executive officers, with the gap between their economic outlooks hitting the widest on record, based on data from the Conference Board.
In fact, consumers have been the pillar of the economic expansion in its 11th year, with consumer spending representing about 68% of gross domestic product, according to the most recent data from the Federal Reserve of St. Louis. Consumer confidence in October slipped to 125.9 from 126.3 in September, according to the Conference Board’s most recent report. The consumer confidence survey measures how Americans view their own financial well-being, job prospects and overall business conditions. Still, consumer confidence levels are at levels that suggest that Americans are still spending enough to keep the economy out of recession. Meanwhile, CEO confidence tumbled to a reading of 34 in the third quarter from 43 in the prior period (a reading of more than 50 points reflects more positive than negative responses), marking the lowest level since first quarter of 2009.”
Global Debt Surges to Record High: $188 tn: IMF Chief
November 7, 2019
“The global debt load has surged to a new all-time record equivalent to more than double the world’s economic output, IMF chief Kristalina Georgieva warned Thursday. While private sector borrowing accounts for the vast majority of the total, the rise puts governments and individuals at risk if the economy slows, she said. ‘Global debt — both public and private — has reached an all-time high of $188 trillion. This amounts to about 230 percent of world output,’ Georgieva said in a speech to open a two-day conference on debt. That is up from the previous record of $164 trillion in 2016, according to IMF figures. While interest rates remain low, borrowers can use debt to make investments in productive activities or weather a bout of low commodity prices. But it can become ‘a drag on growth.’
‘The bottom line is that high debt burdens have left many governments, companies, and households vulnerable to a sudden tightening of financial conditions,’ she cautioned. Corporate debt accounts for about two thirds of the total but government borrowing has risen as well in the wake of the global financial crisis. ‘Public debt in advanced economies is at levels not seen since the Second World War,’ she warned. And ‘emerging market public debt is at levels last seen during the 1980s debt crisis.’ She called for steps to ensure ‘borrowing is more sustainable,’ including making lending practices more transparent and preparing for debt restructuring with ‘non-traditional lenders’ – a reference to China, which has become a major creditor to developing nations including in Africa.”
THE GUARDIAN/Nils Pratley
We should mark Carney’s words: global growth looks grim
November 7, 2019
“Don’t lose sight of the big picture, advised Mark Carney. Quite right. None of the highlights from the governor of the Bank of England’s trot around the block could be described as encouraging. The economic weather has worsened alarmingly during 2019. Global growth has decelerated from 4% to 2.9% in the past two years. Global trade has been falling for about a year and looks weak for some time yet amid worries about trade wars and protectionism. As for the UK, the economy is growing at half its recent pace, and business investment has contracted in the five of the past six quarters. Meanwhile, the latest UK employment growth figures were the weakest since 2015 and the brief mini-boom in pay deals looks to be fizzling out.
Brexit has injected a specific uncertainty into the mix and it’s clearly possible that some clouds would clear if the UK leaves the European Union at the end of January next year, which is what the Bank’s models are obliged to assume. On the other hand, the official projections need to be taken with a pinch of salt. The Brexit analysis may have to be rewritten once the outcome of the election is known. And, even if the withdrawal agreement is enacted on schedule in January, companies may simply obsess about the next crucial step – the terms of future trading with the EU – and keep their investment budgets on ice.”