German yields reached six week highs after speculation that Spain would ask for a bailout as Spanish yields reached relative lows. Last week at this time short duration German bond were trading more negative than this week. For example, last week’s 6-month German yield was .1%, this week the yield is .02%. I will keep my eye out for any developments in Europe with regards to Spanish bailouts.
Opportunity still exists for traders to profit from the front end inverted yield curves of the UK and Australia.
David Cornes holds a degree in economics from the University of Montana.
The Hang Seng rose near identically to the Nikkei gaining .8% due to Merkel’s support of ECB action, however ended the week down .1% for its worst week in 10. China Mobile was down yet again losing 3.5%, now at its lowest since June 29 after having its worst single day of the year yesterday. Smaller rival China Unicom and China Telecom lost 2.6 and 1%. Industrial and Commerce Bank of China rose 1.1% however remains down 2.4% on the year.
The FTSEurofirst 300 rose .4% boosting the index to a 13 month high to begin today. The index is on track to post its 11 weekly gain in a row, its longest streak since 2005. Autos were the best performing sector rising 1% with banks right behind them gaining .8% whereas healthcare stock top the list of the bottom losing .5%. The index has gained nearly 9% since Draghi’s words in late July. Around Europe Madrid is up 1.6%, the French CAC up .05% and the German Dax up .22%.
Japan predicts it will emerge from 15 years of deflation in FY 13-14’ forecasting the GDP deflator will increase .2%.
To add more salt to the wound, Spanish Bank non-performing loans rose to 9.42% in June from 8.95% in May.
Commodities are set to begin lacking today with Gold up while silver and crude are down and Natural gas looks to be stuck in neutral.
Contributer Chris Rygh is currently pursuing his MBA in Wisconsin and has a passion for the Market. Comments can be directed to ryghcw19@uww.edu
Facebook fell -6.2%, hitting a brand new all time low, as the lockup period ended on early investors. Many investors were allowed to sell for the first time and quickly unloaded their shares to gain the value that remained. The Stoxx Europe rose 0.3%, finishing at a high month high.
PetSmart (PETM) rose 4.58% after the pet products retailer announced better than expected fiscal second quarter earnings, while reducing full year outlook.
Fast forward to today. The last few months have seen the likes of Facebook, Groupon, and Yelp go public. While Groupon has been an utter disaster and Facebook isn’t that far behind, the fact that these companies with no earnings were able to go public at extremely high valuations makes you wonder if we are close to a top in the market.
Facebook lets you see 400 pictures of someone’s kid that you kind of know. Yelp tells people where you are eating at. Then there’s Groupon who sends you coupons. And these companies came public worth billions. Even Linkedin, which hasn’t imploded yet, is basically Facebook for business acquaintances.
The market is clamoring for Twitter to go public. I love Twitter and think it is an awesome platform to converse with people you never would’ve had a chance to meet. You get breaking news faster than online news sites. Yet as with the rest of the companies mentioned I have no idea how they will ever monetize their site. Yet it will no doubt come public worth tens of billions.
Investors seem to be catching on as we’ve seen Facebook and Groupon stock implode. The simple fact that these companies were able to come public in the first place shows the markets desire for social media.
When everyone thinks something is the future as with social media it makes me give pause and think the market may be getting complacent.
This morning’s job’s continuing claims number did not completely tarnish the demand for U.S. treasuries, however I believe that the employment numbers are accurate for a few reasons. The Department of Labor and the BLS constantly revise their numbers shortly after they are released, as well as exclude important factors such as parts of the workforce that have given up looking for work and the underemployed.
The treasury should gain traction as Germany, one of the safest assets on the planet, is facing a possible bailout request from Spain. I will be keeping my out out for any yield curve shifts during the next few months with the coming elections. I believe that the elections will be a pivotal event and key names have speculated that QE3 would not happen before the election is over.
David Cornes holds a degree in economics from the University of Montana.
Call buyers are dominating this strange market and I feel that there should be more fear than what is present. The VIX spot price is below 15 points and is trading near a key support level. I remain bullish on the VIX, as I do not think that it is currently pricing in the uncertainty that is present in the market. I will be watching for a rise in the VIX which will imply higher implied volatility on SPX options, hence rising options prices. I am expecting movement in the S&P in the near future as soon as a catlyst is exposed. Whether the catalyst is Euro fears, QE3 or the election, I am looking to buy vol.
As you can see from the chart below, the spread between the VIX and S&P is relatively tight. Based on the chart I think that this spread is about to widen.
David Cornes holds a degree in economics from the University of Montana.
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