international market commentary 2014-06-12

davefairtex
By davefairtex on Fri, Jun 13, 2014 - 4:25am

Market Moving News

Oil broke above 105 at 0345 EDT, and climbed +2.26% on heavy volume.  Oil prices have been climbing because of several factors: problems in Iraq and Libya, as well as China buying extra oil to top up their strategic petroleum reserves.  Most likely the recent capture of Mosul by Sunni elements in Iraq (and the widespread defections of Baghdad-controlled military units) just pushed oil right up over the edge of the chart pattern it was already looking to break out of.

Higher oil prices act like a tax on people and businesses, causing them to spend more to receive the same utility.  Its not inflation - its a price increase, and that reduces discretionary spending, and that's deflationary.  While increasing energy prices can be the result of a booming economy, that's not the case this time around, especially with declining CAPEX from the IOCs, peak cheap oil, and a seeming wave of unrest in some important MENA oil exporters.

We also had a speech by Bank of England's governor Mark Carney at 1600 EDT, who said in his speech that rates could rise sooner than expected in England because of rising mortgage debt.  The prospect of higher rates caused the pound to rally strongly, up +0.86% vs the buck.

http://www.bloomberg.com/news/2014-06-12/carney-says-boe-could-raise-rates-sooner-than-markets-expect-1-.html

A bubble in London Real Estate?  Say it ain't so.  However could this have happened?  A pithy comment from Chancellor of the Exchequer George Osborne, who spoke alongside Carney at the event:

“The British people want our homes to go up in value, but also remain affordable; and we want more homes built, just not next to us,” he said. “You can see why no one has managed yet to solve the problems of Britain’s housing market.”

The US market was mostly risk-off today; money fled the US equity market [-0.71%] and the USD [-0.31%], ran to hide in long term treasury bonds [+0.89%], and left a number of emerging country equity markets as well [-0.46%].

It appears that the US equity market may be topping - or at least setting up for a correction.  Today was the second day down, and there seemed to be little inclination to "buy the dip" intraday, although the move down was not particularly violent.

Perhaps in reaction to the selloff, long term treasurys rallied after a unexpectedly strong 30 year US Treasury bond auction.  Treasurys have been on a roll since the beginning of the year, and it seems they have found support yet again on the 50 day MA.

Economic Releases Today (time in EDT):

0830 US Jobless Claims, Import/Export Prices, Retail Sales
Retail sales were a bit cooler than concensus estimates, but the rest of the reports came in more or less as expected.

Economic Releases Tomorrow (time in EDT):

0500 EU Employment Change
0830 US Producer Price Index
0955 US Consumer Sentiment Index

Currency

The dollar fell against most currencies, falling most against the pound which rallied strongly because of Governor Carney's speech that threatened to raise rates more rapidly than expected.

name symbol Day Week Month Qtr
South Africa Rand USD.ZAR 0.00% 0.00% 1.29% 2.67%
Israeli Shekel USD.ILS 0.00% -0.29% 0.17% -0.32%
Canadian Dollar USD.CAD -0.09% -0.55% -0.37% -2.03%
Euro USD.EUR -0.11% 0.81% 1.12% 2.29%
Brazil Real USD.BRL -0.13% -1.39% 0.67% -5.96%
Swedish Kroner USD.SEK -0.13% 0.37% 2.06% 4.59%
Swiss Franc USD.CHF -0.14% 0.79% 0.91% 2.63%
China Yuan USD.CNY -0.16% -0.63% -0.18% 1.32%
Mexican Peso USD.MXN -0.23% 0.85% 0.54% -2.39%
Japanese Yen USD.JPY -0.28% -0.67% -0.53% -0.11%
Australian Dollar USD.AUD -0.47% -0.94% -0.75% -4.34%
Pound Sterling USD.GBP -0.86% -0.68% -0.64% -1.88%

US Style Groups

Value beats growth - mostly.  A (mostly) risk off story.

name symbol Day Week Month Qtr
Small Cap Growth VBK -0.48% 0.50% 3.57% -2.01%
Mid Cap Value VOE -0.58% -0.94% 1.54% 4.73%
Small Cap Blend VB -0.60% 0.15% 3.09% 1.35%
Large Cap Value VYM -0.61% -0.37% 1.57% 6.71%
Small Cap Value VBR -0.64% -0.09% 2.71% 4.01%
Large Cap Blend VV -0.67% -0.47% 1.91% 4.57%
Mid Cap Blend VO -0.68% -0.72% 2.11% 3.15%
Mid Cap Growth VOT -0.69% -0.39% 2.79% 1.52%
Large Cap Growth VUG -0.88% -0.52% 2.72% 3.45%

US Sector Groups

Gold miners, energy stocks, dividend payers up: mostly risk off, but with an oil-and-gold flavored twist.  My guess: industrials and discretionary stocks didn't like higher oil prices.

name symbol Day Week Month Qtr
Gold Miners GDX 2.58% 5.74% 1.17% -14.98%
Solar TAN 1.41% 1.88% 2.93% -12.27%
Energy VDE 0.39% 1.64% 2.90% 11.90%
Utilities VPU 0.30% -2.08% 1.03% 4.51%
REIT VNQ -0.26% -2.95% 0.34% 5.93%
Financials VFH -0.48% -0.37% 2.21% 2.93%
Biotech IBB -0.48% 1.07% 6.99% -2.81%
Healthcare VHT -0.52% -0.58% 2.65% 1.18%
Homebuilders XHB -0.63% 0.03% 1.38% -2.07%
Cons Staples VDC -0.69% -0.87% 0.43% 5.52%
Telecom VOX -0.76% -1.35% -1.09% 5.32%
Technology VGT -0.87% 0.06% 3.74% 4.34%
Materials VAW -0.90% -0.87% 1.18% 4.13%
Cons Discretion VCR -1.28% -1.05% 1.72% -0.36%
Industrials VIS -1.40% -0.93% 0.83% 4.84%

International Regional Equities

Money mostly fled US equities.  There was some flight from emerging markets, but less than one might expect from a strict risk-off posture.

name symbol Day Week Month Qtr
Pacific VPL -0.07% -0.41% 2.36% 6.23%
Europe VGK -0.07% -0.26% 0.75% 6.64%
Emerging Mkts VWO -0.46% 1.27% 2.90% 13.33%
United States VTI -0.72% -0.39% 2.07% 4.00%

Country Equities

Emerging market equities mostly suffered today, with Thailand and Russia getting hit worst.

name symbol Day Week Month Qtr
Austria EWO 0.49% 0.00% 2.56% 5.47%
Argentina ARGT 0.47% 2.82% 6.53% 12.73%
Turkey TUR 0.40% -2.33% 2.28% 26.02%
India INDY 0.37% 0.84% 6.82% 18.39%
Japan EWJ 0.34% -0.34% 3.99% 5.10%
Canada EWC 0.22% 1.60% 2.04% 6.45%
Columbia GXG 0.15% 3.50% 4.53% 16.45%
Spain EWP 0.14% 0.28% 3.22% 9.94%
South Africa EZA 0.13% 1.64% -1.04% 9.53%
Ireland EIRL 0.11% -0.97% -1.67% -5.99%
Peru EPU 0.09% 0.38% -0.41% 7.78%
Netherlands EWN 0.04% -0.38% 1.45% 4.29%
France EWQ 0.00% -0.99% 0.40% 6.62%
Mexico EWW -0.03% 0.80% 1.06% 12.63%
Germany EWG -0.03% -1.10% 0.63% 7.12%
China MCHI -0.04% 0.41% 5.00% 9.21%
United Kingdom EWU -0.05% 0.32% -0.28% 7.08%
Singapore EWS -0.07% 0.07% 1.38% 10.43%
Taiwan EWT -0.13% 0.59% 4.10% 8.14%
Switzerland EWL -0.20% -0.51% 0.31% 4.53%
Sweden EWD -0.22% -0.27% -0.93% 2.94%
Italy EWI -0.22% -0.61% 3.84% 7.24%
Belgium EWK -0.28% -0.17% -1.08% 4.27%
Hong Kong EWH -0.33% -1.52% 2.46% 8.15%
Australia EWA -0.42% 0.00% -0.68% 5.86%
Portugal PGAL -0.45% -0.39% 1.00% 2.62%
Chile ECH -0.54% -1.84% -3.53% 9.72%
Greece GREK -0.63% -1.21% 10.10% -2.22%
South Korea EWY -0.63% 0.15% 1.28% 9.60%
United States VTI -0.72% -0.39% 2.07% 4.00%
Malaysia EWM -0.75% -0.06% 0.25% 6.23%
Brazil EWZ -0.81% 6.20% 0.47% 20.49%
Israel EIS -0.94% -0.84% -0.82% 2.96%
Indonesia EIDO -1.10% -0.66% -4.19% 2.79%
Russia ERUS -1.29% 1.44% 6.80% 22.17%
Thailand THD -1.37% -0.21% 4.91% 7.27%

 

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