Markets look to start the week on positive footing. Asian shares are higher, led by Hong Kong, despite continued violent protests. Europe as somewhat mixed and North American futures are pointing to a slightly positive open. The British Pound is the clear winner in the currency market this morning on news that the Conservative Party is maintaining its lead in polls, less than a month before elections.
Bond yields are slightly higher, as bonds sell-off a little following last weeks advance. After nearly passing the 2% market, U.S. 10 Year Bond yields came back down from 1.98% to 1.81%. The near-term trend of rising yields remains intact, but we’ll continue to monitor the technical strength. Presently, they are resting just above the 100 day moving average, which is nearing an inflection point.
In our Chart of the Day
we highlight how the Atlanta Feds GDPNow estimate for Q4 GDP moved to just 0.3%, from 1% last week. The poor retail sales numbers and industrial production report from the Fed were the main culprits for the move.
Fear be gone. The VIX is trading back around its lowest level over the past year. Over the course of the past twelve months, each time the VIX was around 12, we saw some sort of increased volatility in the markets shortly afterwards. With a sense of calm enveloping the markets, thanks to continued trade talk and accommodative central banks, we do see a risk of growing complacency. Low VIX levels are associated with extreme price peaks which eventually revert/correct a moderate amount, on average around 5% over the past 12 months.
We continue to see year ahead outlook pieces from major firms. Some are more cautious (rightfully so) while others are all aboard the bull train. One common theme we see from the bulls is that in order to avoid a deeper slowdown trade tensions have to ease, job growth and consumption have to remain robust, and central bank stimulus has to gain traction. The delayed effects of stimulus is a key sticking point. Some believe it will come quickly (1H20) while others forecast a much longer time for stumulus to actually filter its way through the economy. Oh, and Britan needs to find a way out of the Brexit dilemma and Hong Kong needs to find peace. A tall order indeed.
The WSJ published a comprehensive investigation Friday, How Google Interferes With Its Search Algorithms and Changes Your Results
, that provides fodder for ongoing or new antitrust investigations of the company, both in the US, and worldwide. The findings go against one of Google’s core defenses, against global regulators about how it wields its tremendous power. It IN FACT does exert editorial control over what we see when we search, specifically when it comes to big businesses, political bias, and online misinformation. Results have been tweaked in recent years to favour big businesses over smaller, has control over websites that cover vaccinations and autism. As an alternative to google for searches and to play around with different results try using DuckDuckGo
to reveal more of the web than what Google typically reveals.
News broke out Sunday that Aramco will sell a 1.5% stake in itself and is poised to raise as much as US$25.6-billion, potentially making it the most prolific and valuable IPO in history. Newly released data also exhibited a valuation of US$1.6-trillion – US$1.7-trillion, a figure that fell short of the US$2-trillion mark Crown Prince Mohammed bin Salman had sought. 0.5% would be sold to individual investors, including Saudi citizens, and 1% will be sold to institutions, many of which consist of Chinese and Russian buyers. The listing (according to MBS) would, among other things, also raise capital for the country’s sovereign wealth fund, whose revenue could be used to develop new cities and lucrative projects across the region. The ultimate goal of the listing is likely to diversify the country’s revenue streams away from oil, a commodity which the kingdom has been dependent on for its entirety.
The protests in Hong Kong made headlines again this weekend
after a stand off between police and activists at Hong Kong Polytechnic University became heated. Shortly after PolyU called on students and staff to leave campus, the police warned they’d be willing to use live ammunition if they faced attacks while dispersing students. Multiple reporters saw police enter the University leading to a numbers of fires and loud bangs. Police sealed all exits to the University and are making arrests, while protesters attempted to escape. Diversion
: Is Freerunning in Reverse Even Better
? The camera tricks on this one are pretty amazing.