13 Sep THE ECB AND TRADE
Equities edged higher, helped by fresh stimulus from the ECB, amid mixed signals on whether the Trump administration and China are closer to a trade deal.
Commenting about trade, at one time it was reported that American officials have discussed offering a limited trade agreement to China but such was questioned following a CNBC report that there was no interim deal.
This news came after the ECB lowered its main rate to minus 0.5% from minus 0.4% and would buy about $20 billion bonds a month.
I found it refreshing that many members of the ECB stating that monetary policy is not the issue but rather it is the lack of fiscal and structural reform that will lead to meaningful and comprehensive pro-growth policy package.
In a similar vein, the third Democratic debate was held last night. At this juncture the market does not believe 90% of the candidates could become the eventual nominee. The basis for this thought…all but one is campaigning for the entire restructuring of the American economy into some type of government utopia.
Talk about uncertainty!! Perhaps the vast majority of the Democratic candidates should conference with some members of the ECB.
Changing topics, history’s most popular trade of owning momentum and shorting value is continuing to unwind. The carnage that is occurring below the tranquil surface is horrific. Credit Suisse writes “some managers many not make it through the month given the double blow as both longs and short have worked against them.”
The possibility of the above scenario has been discussed however I rhetorically think we are not near the point Credit Suisse is perhaps suggesting. With the above written, few if any know the amount of leverage that is being used.
Equities had little reaction to the economic data that was released. Core inflation was stronger than expected and jobless claims fell more than forecasted. Treasuries however traded moderately lower.
Last night the foreign markets were up. London was down 0.13%, Paris up 0.39% and Frankfurt up 0.57%. China was up 0.75%, Japan up 1.05% and Hang Sang up 0.98%.
The Dow should open nominally higher on easing trade fears and a new round of central bank stimulus. The 10-year is of 7/32 to yield 1.80%.