Financial market report for the week ending May 6, 2011
1) … World stocks fall lower on debt deflation, that is currency deflation.
Bloomberg news reports the world has entered into the age of deleveraging. Hong Kong Stocks Drop in Longest Streak Since SARS, Iraq War. Hong Kong, EWH, stocks fell for an eighth day, the longest stretch of losses since the 2003 spread of severe acute respiratory syndrome and the U.S. invasion of Iraq, as economic reports in America and falling commodity prices damped investor confidence in the global recovery. “There’s been a decline in sentiment,” said Peter Elston, a strategist at Aberdeen Asset Management Plc, which oversees about $282 billion. “Fears of the U.S. economy grew yesterday. I haven’t been convinced by these recoveries in the developed world as I just see them being driven by stimulus and the major structural trend is one of deleveraging.” The chart of China, YAO, as well as that of world stocks relative to world government bonds, VT:BWX. And the chart of silver mining company Silver Silver Standard Resources, SSRI, reflect the failure of the seigniorage of Neoliberalism as well as the failure of yen carry trade investing.
US Healthcare Provider, IHF, put in a market high today on the rise of Well Care, WCG
Dea Baker relates that the United States unemployment rate edged up to 9.0 percent in April even as the Labor Department reported that the economy created 244,400 new jobs.
Two categories of stocks were helped only a little or not helped at all by Quantitative Easing 2; these being manufacture housing and shipping.
Mobile Housing, CVCO; notice how mobile housing rose with the quantitative easing cool aid, but fell short of going over its previous high
Shipping, SEA; notice how shipping failed in January 2011
Natural Gas, GAZ, was one of the many commodities which experienced debt deflation, that is currency deflation this week.
World stocks, ACWI, have entered an Elliott Wave 2 Decline, which has commenced Kondratieff Winter.
Doug Noland reports For this week the S&P500, SPY, declined 1.7% (up 6.6% y-t-d), and the Dow, DIA, fell 1.3% (up 9.1%). The S&P 400 Mid-Caps, MYY, dropped 2.6% (up 9.0%), and the small cap Russell 2000, IWM, was hit for 3.7% (up 6.3%). The Banks, KRE, declined 1.6% (down 2.8%), and the Broker/Dealers fell 2.0% (down 2.1%). The Morgan Stanley Cyclicals, $CYC, dropped 2.9% (up 6.4%), and the Transports, IYT, slipped 0.8% (up 7.1%). The Morgan Stanley Consumer index dipped 0.4% (up 3.7%), while the Utilities, XLU, added 0.3% (up 5.1%). The Nasdaq100, QTEC, declined 0.9% (up 7.5%), and the Morgan Stanley High Tech index fell 1.5% (up 4.2%). The Semiconductors, XSD, fell 1.3% (up 7.7%). The InteractiveWeek Internet index dropped 1.7% (up 4.4%). The Biotechs, up 0.7% (up 13.4%). With bullion, $GOLD, down $68, the HUI gold index, GDX, sank 9.7% (down 6.7%). The German DAX equities index slipped 0.3% (up 8.4% y-t-d). Japan's Nikkei was little changed (down 1.5%). Emerging markets, were 3.5% lower. For the week, Brazil's Bovespa equities index sank 2.6% (down 7.1%), and Mexico's Bolsa was hit for 4.7% (down 8.7%). South Korea's Kospi index fell 2.1% (up 4.7%). India’s equities index sank 3.2% (down 9.7%).
Sectors falling strongly included
Junior Gold Miners, GDXJ,
IEZ, Energy Service
OIH, Energy Service
GDX, Gold miners
SIL, Silver miners
COPX, Copper miners
XME, Metal manufacturing
PSP, Leveraged buyouts
IWN, Russell 2000 Growth
and the carry trade favorite Silver Standard Resources Inc, SSRI.
Financial shares falling lower this week included
RWJ, Small Cap Revenue, -3.5
EUFN, European Financials, -5.6%
KRE, Regional Banks, 2.8%
XLF, Financial, -1.5%
EFN, Emerging Market Financials, -4,2%
Junk Bonds, JNK, rose 0.2% this week; the Fidelity distressed investments mutual fund FAGIX fell 0.6%
Carry trade investing long is a relic of the bygone era of leverage. Ye Xie and Sebastian Boyd of Bloomberg report “The yield investors receive on real-denominated assets overseas sank to a seven-year low of 1.6% last week from 8.1% on March 30 and 7.7% a year ago, driving investors away from the (Brazil) carry trade.” The carry trade ETN, ICI, entered an Elliott Wave 3 Down this week.
2) … The United States are the sink holes that is the vortexes for the coming global investment death spiral as Bloomberg reports: “China, the biggest foreign holder of Treasury notes, is closely watching the debate over raising the U.S. debt ceiling and wants the Obama administration to do more to curb the deficit, Vice Finance Minister Zhu Guangyao said. ‘We are paying close attention to the domestic discussion in the U.S. on debt and deficits,’ Zhu told reporters ‘We hope the U.S. can take effective measures toward fiscal reorganization just as President Obama suggested.’”
David Mildenberg and Brendan A. McGrail of Bloomberg report: “California has stronger growth prospects than Greece and is better able to repay debt, so similarities in the financial condition of the two don’t hold up to ‘closer scrutiny,’ Standard & Poor’s said. Unemployment rates are at least 12% in both, and they face budget deficits that will boost borrowing costs, S&P said today. However, California’s economy grew 3% in 2010 and is expected to expand 2.9% this year. Greece’s contracted 4.5% last year and may shrink by 3.5% this year, and the country hasn’t posted a budget surplus since 1990, the report said.”
Zero Hedge reports Deutsche Bank, DB, Put Volume Surges on Greek News. Chart of DB
3) … Serena Saitto of Bloomberg report global merger boom peaks once again. “Dealmaking is at the beginning of a recovery whose peak will exceed the record $4 trillion of takeovers clinched at the height of the merger boom in 2007, according to Evercore Partners Inc.’s Roger Altman. Buyers racked up more than $32 billion in purchases globally this week, bringing 2011’s total to $839 billion, a 23% increase from a year earlier.” Chart of PSP
4) … Competitive currency devaluation, that is competitive currency deflation, commenced the first week of May 2011, almost marking the anniversary onset of the European Sovereign Debt Crisis which came the second week of May 2010. This Finviz database report of FXA, FXE, FXM, FXC, ICN, FXB, FXS, SZR, FXF, CYB, BZF, XRU, FXY, BNZ, DBV, CEW, CCX, UUP, shows competitive currency devaluation is underway as he US Dollar, $USD, rose this week from 73.0 to 74.75.
Norwegian Krone, -5.1%
Danish Krone, -3.3%
The Singapore dollar 1.2%,
The South Korean won 1.1%,
World government bonds, BWX, succumbed to debt deflation, that is currency deflation, and the Wall Street Journal reports yield spreads on Spanish and Italian government bonds widened as bond vigilantes called interest rates higher on lower currency values.
5) … Coffee, JO, Isis Almeida of Bloomberg reports: “Coffee climbed to the highest price inNew York in almost 14 years as rains may hurt crops in Colombia, the world’s second-largest producer of arabica beans.
6) … Asia’s trade and inflation bubble grew larger. Eunkyung Seo of Bloomberg reports: “South Korea’s, EWY, and SKOR, exports climbed to a record in April as exporters weathered the won’s gains, adding pressure on the central bank to boost borrowing costs next week to rein in consumer prices. Exports climbed 26.6% from a year earlier to a record $49.77 billion.”
Suttinee Yuvejwattana of Bloomberg report: “Thailand’s, THD, inflation accelerated to a 15-month high in April as food costs increased, giving the central bank more scope to raise borrowing costs further. An index of consumer prices increased 4.04% last month from a year earlier.”
7) … Camila Russo of Bloomberg report: “Argentine banks, ARGT, are lending the most to companies and consumers in at least 15 years as growth and inflation in South America’s second-biggest economy exceed forecasts. Loans to the private sector climbed 41% in the first quarter from a year earlier to 178 billion pesos ($44 billion). Outstanding credit in Brazil increased 21% in March from a year earlier. In Mexico, lending rose 11% in November from a year before.”
8) John Quigley of Bloomberg reports: “Peru’s, EPU, monthly inflation rate held close to its highest level in 33 months in April as food prices surged, increasing pressure on the central bank to increase its benchmark lending rate. Consumer prices rose 0.68% in April from the prior month. Peru has shelved plans to sell as much as $1.2 billion of bonds after yields on the nation’s debt jumped to a two-year high on concern former military rebel Ollanta Humala may win next month’s presidential runoff.”
9) … Regional economic governance based upon Framework Agreements nullifying national sovereignty will emerge from the chaos and failure of Quantitative Easing as well as the failure of currencies and World Government Treasury Bond auctions. This governance will be the first step to replace the seigniorage of Neoliberalism. Finally a world chancellor, the Sovereign, and a world Banker, the Seignior, will arise to provide, strong authoritarian rule and a new seigniorage, that is a new moneyness. Feudal regional economic governance is seen in the Wall Street Journal report that China, YAO, fines Unilever for price hike comments. And feudal regional Economic Governance is seen in the example of Michigan appointing stakeholders to manage pubic institutions and local governments as budgetary crises arise. The Huffington Post News Editors report from Detroit that state education officials have ordered the emergency financial manager for Detroit Public Schools to immediately implement a plan that balances the district's budget. Janel Flechsig of WSWS.org reports that on March 16, Michigan Governor Rick Snyder signed Public Act 4 of 2011 into law; the bill, also called the Local Government and School District Financial Accountability Act. Free trade agreements further the ongoing development of state corporate rule, that is state corporatism. The BBC reports South Korea’s Parliament has ratified a free trade deal with the EU, clearing the way for the agreement to enter into force in July