Anything commodity related, including emerging market equities, got hammered today. Gold was down 5 percent! Oil off over $2.00. The consumer discretionary, financials, iondustrials, and technology ETFs recaptured their 20-day moving average this week. The industrials and technology ETFs moved back above their 50-day.
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Key Data Points
German 10-year Bund 5 bps higher;
France 1 bp wider to the Bund;
Belgium 4 bps wider;
Ireland 22 bps tighter;
Italy 10 bps tighter;
Spain 11 bps tighter;
Portugal 10 bp tighter;
Greece 82 bps tighter;
Large Eurozone banks weekly change, 1.35 to 7.83 percent;
Euro$ up 0.87 percent.
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Wow, 32 players shoot under par. Spain’s IBEX rallied in anticipation of Sergio’s 66 today. Efficient markets, no? Should have bet on the Baby Bull!
Hmmmm… El Niño is to Baby Bull as Liquidity is to Stock Bull?
Tweet of the Day – Ian James Poulter +4
19th Hole Fodder – Sergio’s Tree Iron
In the final round of the 2013 Arnold Palmer Invitational presented by MasterCard, Sergio Garcia hits his second from a tree near the fairway on the par-4 10th hole one-handed and backwards.
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Here’s our picks. $100 on each player:
Woods, Rose, Westwood, Donald, and Colsaerts
Famed golf course architect and Augusta designer Alister MacKenzie died before the grass had been planted — never playing or seeing the course in its finished form.
In your life have you seen anything like that!
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Emerging markets are finally starting to find a bid. The Brazilian Bovespa, after a nice reversal on Friday, came into the week down almost 10 percent with most other emerging market equity indices lagging the S&P500 in a big way. Dogs that don’t haven’t hunted.
As the global markets internalize and works through the implications of the Bank of Japan massive quantitative easing and its affect on capital flows, on top of continued Fed QE, EM equities are finally starting to move. Only so much capital can flow into the U.S. without it spilling over and looking for a home in other markets. We’re betting on a “spillover” trade and the reallocation effect as investors become too overweight the U.S. based on relative performance.
Here’s what we said over the weekend:
It’s becoming increasingly difficult to extract market signals as the massive of flood of Bank of Japan money printing begins to flow into the global tributary, which also includes the Fed’s quantitative easing. Markets, in our opinion, are going to become incredibly gummed up and exhibit unprecedented and unpredictable behavior throughout the rest of the year.
Who would of thought the dollar/yen pair could rally 50 percent from April 1995 to April 1997? The yen carry trade fueled massive flows into the emerging markets, pumped up the U.S. dotcom bubble, and distorted Asian exchange rates…
The ETFs do reflect currency movements along with equity returns. The chart of the Mexico (EWW) looks a good with a classic breakout move and Brazil, we think, has a lot of room to catch up.
We may be , and are often, wrong and recognize the liquidity trade is dangerous in the long run and can reverse on a dime. The long run doesn’t put food on the table, however.
Always with a stop.
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Global Macro Monitor 