Today's Coffee - Is There No Safe Place for Capital?
"Today's Coffee" has been designed to provide value-added analytical insight into the economic data of the day, international and commodity market activity, and geopolitical and company specific news.
INTERNATIONAL MARKETS
Asia:
Hang Seng Index 0.53%; Shanghai/Shenzhen CSI 300 1.58%; NIKKEI 225 0.27%; S&P/ASX 200 (0.78%); Taiwan TAIEX (0.31%); BSE SENSEX 30 (0.11%); KRX 100 (1.24%); Ho Chi Minh 1.54%
Europe & Middle East:
DJ STOXX 50 Index (1.45%); FTSE 100 (1.21%); CAC 40 (1.63%); DAX (0.66%); Russian RTS Index (0.1%); ASE General 0.24%; Tel Aviv 25 (0.39%); Tadawul All Share (0.2%); DFM General 0.06%
Americas:
Brazil Bovespa (2.2%); Mexico Bolsa (1.59%)
A good portion of international market activity today was dictated by the fact that tomorrow is a holiday in many nations. In parts of the world, Assumption Day has effectively altered today's trading to resemble that typical of a Friday during a tumultuous market.
In Asia, the Bank of Japan drained $13.6 billion of capital from the market today to curb a drop in its overnight lending rate. The BOJ effectively reversed its actions of the past couple days, and this comforted Japanese investor concerns about their own domestic risks. The yen strengthened against the euro and dollar, and the NIKKEI 225 edged up 0.27%.
China eased foreign exchange rules, backing off a restriction requiring domestic companies to convert at least 20% of foreign earnings into yuan. The rule artificially gave strength to the yuan. Now, firms will be allowed to decide for themselves what to do with the capital. The move is seen as an effort to curb foreign reserve growth and help contain inflation. China's retail sales in July were reported today, up 16.4% from prior year levels. Increases in the prices of food and energy played key roles in the growth, perverting the figure. Yesterday, the government reported that food prices had increased 15.4%. China's industrial growth has converted the country into a net importer of grains and energy, and portends to create a future crisis. The Hang Seng inched higher 0.5%, while the mainland CSI 300 Index climbed roughly 1.6%.
European shares weakened today, and the euro lost strength to the dollar. Germany, Europe's largest economy, reported Q2 growth of 0.3%, compared to Q1 growth of 0.5% and Q4's 1.0%. The European Community also posted economic growth today, with the 13 nation euro currency users recording economic expansion of 2.5%, down from 3.1% growth in Q1. The entire European community of 27 nations showed growth of 2.8%, also down from 3.3% in Q1. As a result, the DJ STOXX 50 fell 1.45%, but the DAX only dropped 0.66%
COMMODITY MARKETS & GEOPOLITICAL ISSUES
WTI Crude is up about a half a percentage point today, as the net impact of several factors have oil firming. Driving oil higher, a tropical depression has formed in the Atlantic. Tropical Storm Dean is headed on a path toward the Carribean apparently. Also, there's a storm in the Gulf of Mexico that threatens to strengthen. Last year's hurricane season was a non-factor, but this year's forecast was for an active season. Yes, NOAA said the same thing last year, but we heard this morning, courtesy of CNBC, that 95% of hurricanes form between August and October. So, don't count your eggs before they've hatched.
Also helping put a floor under oil, the Iranian OPEC minister indicated that OPEC has no plans to increase production. At the same time, OPEC today raised its consumption expectations for next quarter and 2008. Also, according to a Bloomberg News survey of analysts, tomorrow's inventory report will show a draw of 2.5 million barrels.
So why does Wall Street Greek expect oil prices to fall even further. Two factors, one substantial and one intuitive. We believe economic growth is slowing in the second half of the year. Global demand may be softening also, if today's European GDP result is any indication. Economic growth is the most critical factor driving energy prices.
We know we run the risk of drawing criticism with our second reason, but you know what, we are not afraid of criticism. In fact, we embrace it as a way to prove detractors wrong. So, the intuitive reason is one that's always there, but we just have a feeling about now. You know, sort of like our Homeland Security chief's "gut feeling"... We're taking al-Qaeda's most recent threats very seriously. Economic disruption caused by terrorism can be substantial, but we can't live our lives waiting for it. Still, recent threats, and the political situations in Pakistan and Palestine, point toward the strong potential for near-term al-Qaeda efforts (perhaps backed by Iran) to unseat Mahmoud Abbas and Pervez Musharraf. Remember, just before 9/11 al-Qaeda assassinated its enemy commander of the Northern Alliance in Afghanistan. We suspect a similar attempt on Abbas or Musharraf may tip off the next attack on America.
We expect al-Qaeda wants to remind Americans that Bin Laden lives while our president enters the last year of his term; we expect they believe this will help elect a less aggressive Democrat into office. Also, we believe al-Qaeda would like to see Iran involved in a war with America, and will do what they can to ignite it. However, we still view that war a bit too far out to drive oil prices now. We anticipate prices will dip one last time before rising higher on that war.
COMPANY SPECIFIC NEWS
Today's news that a money market fund run by Sentinel Management Group, Inc. might not be a safe place for capital, since the firm sought permission to halt redemptions, kind of shook some investors senseless. Financial stocks once again sank as the holes in this ship seem to be plenty. Citigroup (NYSE: C) is down 1.8% near the end of the trading day, while Lehman Brothers (NYSE: LEH) is off 5%, Morgan Stanley (NYSE: MS) down 3.9%, and Nomura Securities (NYSE: NMR) down 4.25%.
Thornburg Mortgage (NYSE: TMA), which we were once assured by a since forgotten talking head, did not deal in risky mortgage loans, fell 41% off a cliff today. Apparently the safe TMA has also succumbed, and been downgraded by a slew of analysts to boot. Accredited Home Lenders (NASDAQ: LEND), which just received regulatory approval to consummate its rescue deal, is off 5% for the silly reason that it's suing the buyout firm that no longer wants to own it. Buckle up folks. That "Mainstream Armageddon" article we wrote months ago is playing out so close to plan that its scaring even the Greek. We don't like being this right when our forecast is so bearish. Maybe save a prayer tonight for Big Ben, that he might come to his senses and help borrowers with a rate cut.
Please support our effort by supporting our advertisers. Receive Wall Street Greek FREE via email by subscribing here. (disclosure)
INTERNATIONAL MARKETS
Asia:
Hang Seng Index 0.53%; Shanghai/Shenzhen CSI 300 1.58%; NIKKEI 225 0.27%; S&P/ASX 200 (0.78%); Taiwan TAIEX (0.31%); BSE SENSEX 30 (0.11%); KRX 100 (1.24%); Ho Chi Minh 1.54%
Europe & Middle East:
DJ STOXX 50 Index (1.45%); FTSE 100 (1.21%); CAC 40 (1.63%); DAX (0.66%); Russian RTS Index (0.1%); ASE General 0.24%; Tel Aviv 25 (0.39%); Tadawul All Share (0.2%); DFM General 0.06%
Americas:
Brazil Bovespa (2.2%); Mexico Bolsa (1.59%)
A good portion of international market activity today was dictated by the fact that tomorrow is a holiday in many nations. In parts of the world, Assumption Day has effectively altered today's trading to resemble that typical of a Friday during a tumultuous market.
In Asia, the Bank of Japan drained $13.6 billion of capital from the market today to curb a drop in its overnight lending rate. The BOJ effectively reversed its actions of the past couple days, and this comforted Japanese investor concerns about their own domestic risks. The yen strengthened against the euro and dollar, and the NIKKEI 225 edged up 0.27%.
China eased foreign exchange rules, backing off a restriction requiring domestic companies to convert at least 20% of foreign earnings into yuan. The rule artificially gave strength to the yuan. Now, firms will be allowed to decide for themselves what to do with the capital. The move is seen as an effort to curb foreign reserve growth and help contain inflation. China's retail sales in July were reported today, up 16.4% from prior year levels. Increases in the prices of food and energy played key roles in the growth, perverting the figure. Yesterday, the government reported that food prices had increased 15.4%. China's industrial growth has converted the country into a net importer of grains and energy, and portends to create a future crisis. The Hang Seng inched higher 0.5%, while the mainland CSI 300 Index climbed roughly 1.6%.
European shares weakened today, and the euro lost strength to the dollar. Germany, Europe's largest economy, reported Q2 growth of 0.3%, compared to Q1 growth of 0.5% and Q4's 1.0%. The European Community also posted economic growth today, with the 13 nation euro currency users recording economic expansion of 2.5%, down from 3.1% growth in Q1. The entire European community of 27 nations showed growth of 2.8%, also down from 3.3% in Q1. As a result, the DJ STOXX 50 fell 1.45%, but the DAX only dropped 0.66%
COMMODITY MARKETS & GEOPOLITICAL ISSUES
WTI Crude is up about a half a percentage point today, as the net impact of several factors have oil firming. Driving oil higher, a tropical depression has formed in the Atlantic. Tropical Storm Dean is headed on a path toward the Carribean apparently. Also, there's a storm in the Gulf of Mexico that threatens to strengthen. Last year's hurricane season was a non-factor, but this year's forecast was for an active season. Yes, NOAA said the same thing last year, but we heard this morning, courtesy of CNBC, that 95% of hurricanes form between August and October. So, don't count your eggs before they've hatched.
Also helping put a floor under oil, the Iranian OPEC minister indicated that OPEC has no plans to increase production. At the same time, OPEC today raised its consumption expectations for next quarter and 2008. Also, according to a Bloomberg News survey of analysts, tomorrow's inventory report will show a draw of 2.5 million barrels.
So why does Wall Street Greek expect oil prices to fall even further. Two factors, one substantial and one intuitive. We believe economic growth is slowing in the second half of the year. Global demand may be softening also, if today's European GDP result is any indication. Economic growth is the most critical factor driving energy prices.
We know we run the risk of drawing criticism with our second reason, but you know what, we are not afraid of criticism. In fact, we embrace it as a way to prove detractors wrong. So, the intuitive reason is one that's always there, but we just have a feeling about now. You know, sort of like our Homeland Security chief's "gut feeling"... We're taking al-Qaeda's most recent threats very seriously. Economic disruption caused by terrorism can be substantial, but we can't live our lives waiting for it. Still, recent threats, and the political situations in Pakistan and Palestine, point toward the strong potential for near-term al-Qaeda efforts (perhaps backed by Iran) to unseat Mahmoud Abbas and Pervez Musharraf. Remember, just before 9/11 al-Qaeda assassinated its enemy commander of the Northern Alliance in Afghanistan. We suspect a similar attempt on Abbas or Musharraf may tip off the next attack on America.
We expect al-Qaeda wants to remind Americans that Bin Laden lives while our president enters the last year of his term; we expect they believe this will help elect a less aggressive Democrat into office. Also, we believe al-Qaeda would like to see Iran involved in a war with America, and will do what they can to ignite it. However, we still view that war a bit too far out to drive oil prices now. We anticipate prices will dip one last time before rising higher on that war.
COMPANY SPECIFIC NEWS
Today's news that a money market fund run by Sentinel Management Group, Inc. might not be a safe place for capital, since the firm sought permission to halt redemptions, kind of shook some investors senseless. Financial stocks once again sank as the holes in this ship seem to be plenty. Citigroup (NYSE: C) is down 1.8% near the end of the trading day, while Lehman Brothers (NYSE: LEH) is off 5%, Morgan Stanley (NYSE: MS) down 3.9%, and Nomura Securities (NYSE: NMR) down 4.25%.
Thornburg Mortgage (NYSE: TMA), which we were once assured by a since forgotten talking head, did not deal in risky mortgage loans, fell 41% off a cliff today. Apparently the safe TMA has also succumbed, and been downgraded by a slew of analysts to boot. Accredited Home Lenders (NASDAQ: LEND), which just received regulatory approval to consummate its rescue deal, is off 5% for the silly reason that it's suing the buyout firm that no longer wants to own it. Buckle up folks. That "Mainstream Armageddon" article we wrote months ago is playing out so close to plan that its scaring even the Greek. We don't like being this right when our forecast is so bearish. Maybe save a prayer tonight for Big Ben, that he might come to his senses and help borrowers with a rate cut.
Please support our effort by supporting our advertisers. Receive Wall Street Greek FREE via email by subscribing here. (disclosure)
posted by The Greek | 3:31 PM
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