Reuters blog archive
The big question of the week is whether financial market gyrations continue, worsen or calm. European stocks are being called higher at the open.
Greece has been effectively shut out of the bond market. If it and others on the euro zone’s southern flank come under persistent market pressure, in a way that hasn’t happened for two years, the onus on the European Central Bank to act will grow and grow.
None of the countries likely to be in the firing line appear to qualify for the conditions attached to the ECB’s still-unused OMT bond-buying programme, the legality of which is under review by the European Court of Justice.
So full-on QE might be the only option to restore calm if the turmoil persists or worsens. We’re a long way from that yet and internal divisions within the ECB may rule it out altogether. Maybe that dawning realization, as the Federal Reserve prepares to turn the money taps off, has contributed to the unnerving of investors.
Russian President Vladimir Putin and Ukrainian President Poroshenko are due to meet on the sidelines of the EU/Asia summit in Milan today to try to find a way out of the Ukraine crisis.
Germany’s Angela Merkel and French President Hollande will also meet the pair as part of a four-way contact group. The Kremlin has just said Putin and Merkel have "serious differences".
from Morning Bid with David Gaffen:
There’s a glut of various stresses operating in the markets right now: Europe’s inability to get out of its own way, the sharp fall in oil prices that probably says more about supply issues and lackluster demand in Asian markets than the United States, the uncertain path of the Federal Reserve and a nagging concern that weak inflation figures show the economy really isn’t healing all that much.
But make no mistake about it - Ebola is a pressure point for markets at this moment, and one only need look at the “scare” moments in markets to really see it.
from Morning Bid with David Gaffen:
Time to sit up and pay attention. Monday's end-of-day regurgitation of 100,000 futures contracts in a five-minute span around 3:30 p.m. (1930 GMT) would have been more nerve-wracking had we not already seen the same thing writ small, when about 30,000 contracts were dumped in the waning seconds of last week's trading action.
In each case, the activity was striking and a bit disturbing. See, it's never a great sign when the only thing that ends the selling on a given day is the moment when they turn the machines off (a la Randolph and Mortimer Duke), and Monday wasn't all that much different.
By Edward Hadas
The author is a Reuters Breakingviews columnist. The opinions expressed are her own.
Market historians could call the last five years the QE period. Quantitative easing, a polite term for money creation by central banks, has pushed free and ultra-cheap money into almost all financial markets, supporting or pushing up prices. The era is coming to a close. As investors overcome their monetary dependence, they have to look at the real economy. It’s not encouraging.
from Edward Hadas:
By Edward Hadas
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
Finance doesn’t get the disrespect it deserves. Nothing about money and credit is sacred – certainly not quantity of currency outstanding. The political and monetary authorities should feel free to add and subtract money as needed to help the economy function better.
Plenty of cross-currents to be aware of in the markets right now - many of which are pretty confusing and relate countervailing messages when it comes to where equities and other risky assets are headed. Stocks were heavy at the open on Monday and slowly got better throughout the day but energy stocks remained under pressure. The expectation of more unrest in Hong Kong certainly has contributed to the jitters, but the U.S. is a pretty resilient economy regardless of outside forces so it's while it's easy to blame China broadly, it's hard to apply too much of a causation (probably why equities recovered throughout the day).
The bond market might be the better signal for the worries in equities. Last week speculators increased their short position in two-year notes to their longest since 2007, and asset managers hold their biggest short position in five-year notes since 2011; taken together that's a clear sign of bearishness in the front end of the curve, reflecting expectations for a flattened yield curve as part of higher rates across the board. With the dollar continuing to strengthen, there's a bearish sense in the air when it comes to U.S. central bank policy, and that's something that again threatens to undermine equities -- witness the weakness again in energy names.
from Expert Zone:
(Any opinions expressed here are those of the author and not of Thomson Reuters)
The past week was one of the most eventful post the general elections, and the action continued till Saturday with a landmark speech by Prime Minister Narendra Modi at the U.N. General Assembly and Tamil Nadu Chief Minister Jayalalithaa Jayaram being sentenced to four years in jail in a corruption case. Markets were volatile and the Nifty closed the week at 7,968, down 2 percent despite a recovery on Friday.
The week started on a positive note but weaker European manufacturing data and concerns about growth in China led the markets to crack. The Supreme Court’s decision to charge a penalty as well as deallocate almost all coal blocks awarded since 1993 led to another bout of selling in power, metal and banking stocks.
from Expert Zone:
(Any opinions expressed here are those of the author and not necessarily those of Thomson Reuters)Markets began the week on an optimistic note with the Nifty touching a new high of 8,178 but fatigue was noticeable in frontline stocks as action shifted to the mid- and small-caps.
The jobs report takes a bit of heat off of Thursday’s selloff, which was predicated in part on some nonsense out of Europe and more importantly some kind of growing consensus that the economy is getting hot enough that it might force the Federal Reserve to start raising rates a bit earlier than expected, given a sharp and unexpected rise in the employment cost index on Thursday. And while it’s fair to suggest the stock market has gotten a bit ahead of itself when the Fed is rapidly moving toward the end of its stimulus policies, it’s also possible that stocks have gotten ahead of themselves for a far more prosaic reason – the economy isn’t strong enough to support the kind of valuations we’re seeing in equities right now.
That’s not to say we’ve got bubbles all over the place in stocks – they’re pretty few and far between – but credit standards in various places have loosened, and if the Fed starts raising rates we’re going to see a pretty quick reversal of that before long. There are significant signs of concern emerging in places like the high yield market, which has dropped off sharply in recent days, particularly among the weakest credits, and the housing and auto markets, which are better leading indicators than the jobs data, also suggest that the slack credit standards may end up hitting a wall before long.