Category Archives: Markets

(TCVnews) Boeing shares fall sharply after second deadly 737 MAX 8 crash

(TCVnews)

Image result for Boeing shares drop following second deadly crash















Boeing Company shares dropped badly on Monday, the worst in three years, after China, Indonesia and Ethiopia decided to ground their seven three seven MAX eight planes following the second deadly crash of one of the plane in just five months.

Lilian Eze mark reports that an Ethiopian Airlines B737 Max 8 bound for Nairobi crashed minutes after take-off, killing all 157 people on board.

It was the second crash of the B737 MAX, the latest version of Boeing’s workhorse narrowbody jet that first entered service in 2017.

In October, a 737 MAX flown by Indonesian budget carrier Lion Air flying from Jakarta on a domestic flight crashed 13 minutes after take-off, killing all 189 passengers and crew on board.

A source from Reuters said it was too early to say whether the accidents are related but added it would be a “very big issue for Boeing” if they are.

The drop – around 7 percent in late morning trade – wiped nearly $16 billion off Boeing’s market value, marking an abrupt reversal for a stock that had been the runaway top performer this year in the Dow Jones Industrial Average.

With a stock price near $400 a share, it was by far the largest drag on the price-weighted blue chip index on Monday.

Boeing said on Monday the investigation into the Ethiopian Airlines crash is in its early stages and there was no need to issue new guidance to operators of its 737 MAX 8 aircraft based on the information it has so far.

China has taken the unusual step today of telling its airlines to stop flying the 737 Max. But some have critisized that move because it’s not the lead regulator for the 737 which is built in the U.S. asking them to wait for the country where the aircraft is certified to take the lead.

(CNBC) World’s largest sovereign wealth fund to scrap oil and gas stocks

(CNBC)

  • The exclusion will affect companies that explore and produce oil and will not impact integrated oil and gas companies such as BP and Shell.
  • The move, initiated by Norges Bank which manages the fund, is designed to make the Norwegian government’s wealth less exposed to a lasting drop in oil prices.
  • Oil and gas stocks represented 5.9 percent of equity investments by the end of 2018, Reuters reported, citing fund data. That’s the equivalent to approximately $37 billion.

Sam Meredith@smeredith19Published 11 Hours Ago  Updated 7 Hours AgoCNBC.com

An offshore oil rig off the coast of Norway.

Nerijus Adomaitis | ReutersAn offshore oil rig off the coast of Norway.

Norway’s trillion-dollar sovereign wealth fund plans to dump oil and gas companies from its benchmark index, the finance ministry announced on Friday.

The move, initiated by Norges Bank which manages the fund, is designed to make the Norwegian government’s wealth less exposed to a lasting drop in oil prices.

“The Government is proposing to exclude companies classified as exploration and production companies within the energy sector from the Government Pension Fund Global to reduce the aggregate oil price risk in the Norwegian economy,” the finance ministry said in a statement published on its website.

The exclusion will affect companies that explore and produce oil and will not impact integrated oil and gas companies such as BP and Shell. The Norwegian government also said that the companies to be excluded are those belonging to FTSE Russel’s Index sub sector called exploration and production. According to the government, the value of 134 stocks to be excluded from fund amounted to NOK 70 billion ($7.9 billion), Reuters reported.

Shortly after the announcement, energy stocks worldwide extended losses on Friday morning.

International benchmark Brent crude traded at around $65.18 on Friday, down around 1.7 percent, while U.S. West Texas Intermediate (WTI) stood at around $55.78, more than 1.6 percent lower.

Energy stocks are notoriously volatile. Brent crude collapsed from a near four-year high of $86.29 in early October down to $50.47 in late December — marking a fall of more than 40 percent in less than three months.

Energy stocks

Norway’s government said on Friday that the fund would still be allowed to invest in oil and gas firms so long as they were committed to activities concerning renewable energy.

Oil and gas stocks represented 5.9 percent of equity investments by the end of 2018, Reuters reported, citing fund data. That’s the equivalent to approximately $37 billion.

Norway has faced criticism over its attempts to balance environmentally-focused policies and being one of the world’s largest petroleum producers.

It has become one of the world’s leading countries for electric vehicles while putting pressure on emerging market economies, such as Brazil and Indonesia, to better protect their rainforests.

After a strong start to 2019 for stocks, the Norges Bank website said late last month that the fund is currently valued at $1.03 trillion.

At the end of 2018, the fund’s biggest equity holdings were in Microsoft ($7.5 billion), Apple ($7.3 billion), Alphabet ($6.7 billion), Amazon ($6.4 billion), Nestle ($6.3 billion) and Royal Dutch Shell ($6 billion).

(Reuters) Global stocks stuck in worst run of the year ahead of ECB

(Reuters) LONDON (Reuters) – World stocks were stuck in their worst run of the year and bonds were on the rise on Thursday, as investors waited for confirmation that the European Central Bank will start shoveling cheap cash at the euro zone again.FILE PHOTO: Signage is seen outside the entrance of the London Stock Exchange in London, Britain. Aug 23, 2018. REUTERS/Peter Nicholls

The ECB was holding its second meeting of the year, and with the euro almost motionless and stocks suffering from the same growth nerves that will see the central bank chop its in-house forecasts later, markets were poised.

European shares retreated further from five-month highs as MSCI’s 47-country world share index also dropped for a fourth straight session to set its longest losing streak since December’s rout.

Italy’s government bonds rallied to a 7-month high while its banks, which used the biggest share of the previous round of cheap central bank loans, rose 0.1 percent but remained below the highs hit in the previous session.

A return to what was once its flagship crisis-fighting tool would be a wrenching change of direction for the ECB just months after it wound down its 2.6 trillion euro QE program,

But Head of investments at UK fund manager Hermes, Eoin Murray, said he wondered how much impact such measures, or even more U.S. Fed stimulus, would have, considering the potency has tended to wane with every new round in recent years.

“I just don’t think it will have the power to get the economy to the point of takeoff,” Murray said.

Europe’s subdued mood came after Asia and Wall Street had also both stumbled overnight.

MSCI’s broadest index of Asia-Pacific shares outside Japan edged 0.3 percent lower on Thursday, yet hovering not far from its five-month high marked last week, and was up 10 percent year-to-date.

Japan’s Nikkei average fell 0.7 percent, while Hong Kong’s Hang Seng shed 0.7 percent and Chinese blue-chips snapped a four-day winning streak as the boost from new stimulus plans there ran into the sand.

Wall Street’s main indexes had fallen for a third straight session, with the S&P 500 posting its biggest one-day decline in a month, as investors sought reasons to buy after a near 20 percent rally since the start the year.

“For some time, markets had been pricing in good news, namely that the talks between the U.S. and China will likely go well,” said Tatsushi Maeno, senior strategist at Okasan Asset Management. “Now markets are having a pause.”

Adding to concerns about the talks was data that showed the U.S. goods trade deficit surged to a record high in 2018 as strong domestic demand pulled in imports, despite the Trump administration’s “America First” policies aimed at shrinking the gap.

Other U.S. data out on Wednesday suggested some slowing in the labor market, though the pace of job gains remains more than enough to drive the unemployment rate down.

The ADP National Employment Report showed private payrolls increased by 183,000 in February after surging 300,000 in January. Economists polled by Reuters had forecast private payrolls advancing 189,000 in February.

The government’s more comprehensive “non-farm” payrolls employment report for February is scheduled for release on Friday.

Stocks sink for a 3rd day

(graphic: Impact of TLTRO on Italian and Spanish banks link: tmsnrt.rs/2VH5AZw).

TIME TO TLRTO?

In the currency market, the euro traded at $1.1304, hovering near a two-week low ahead of the ECB and its expected news on its cheap long-term loans for banks, known more formally as Targeted Long-Term Refinancing Operations (TLTROs).

The dollar was little changed at 111.74 yen, moving away from Tuesday’s 2-1/2-month peak of 112.135, while the dollar index, which measures the greenback against a basket of six of its peers, barely moved at 96.887.

The Canadian and Australian dollar sank to two-month lows on Wednesday as traders scaled back holdings on expectations policy-makers would leave interest rates alone in the foreseeable future or even lower them to counter their softening economies.

Adding to the Aussie’s woes on Thursday was data showing local retailers suffered another bleak month in January, in a sign overall economic momentum was slowing. The Aussie dollar last changed hands at $0.7042, up 0.1 percent on the day.

Brexit uncertainty kept the pound below an eight-month high hit last week as investors waited for some clarity to emerge out of negotiations between Britain and the European Union.

Diplomats said talks in Brussels on Tuesday led by British Prime Minister Theresa May’s chief lawyer, Geoffrey Cox, failed to find common ground, with three weeks to go before Britain’s scheduled departure on March 29.

“Markets are getting conflicting signals from lawmakers in Britain and the negative news flow from Brussels on the negotiation process, and that is keeping the pound in a tight range,” said Nikolay Markov, a senior economist at Pictet Asset Management.

Among commodities, oil edged up amid ongoing OPEC-led supply cuts and U.S. sanctions against exporters Venezuela and Iran, although prices were prevented from rising further by record U.S. crude output and rising commercial fuel inventories.

U.S. crude futures rose 0.1 percent to $56.29 per barrel, moving closer to its 3-1/2-month high of $57.88 touched Friday, while international benchmark Brent futures gained 0.3 percent to $66.20 per barrel.

(JN) JPMorgan: Novas subidas nas bolsas terão que ser suportadas por crescimento

(JN) A gestora de ativos do JPMorgan acredita que as bolsas mundiais vão registar um ano positivo, mas a evolução da economia será determinante para perceber se há margem para as ações prolongarem as subidas.

A gestora de ativos do JPMorgan tem vindo a adotar uma postura de investimento mais defensiva. A entidade continua, porém, a identificar espaço para retornos positivos nas ações mundiais. No entanto, após a escalada registada neste início de ano, apenas se houver uma confirmação de notícias positivas no crescimento económico é que as bolsas poderão prolongar as subidas.

Uma política monetária mais acomodatícia, um alívio das tensões comerciais e expectativas de um crescimento mais moderado, mas positivo. São estes os temas que têm estado a determinar a recuperação dos mercados financeiros, mas que, segundo o JPMorgan Asset Management, também estão amplamente descontados nos mercados. Numa apresentação a jornalistas realizada em Lisboa esta terça-feira, Manuel Arroyo argumentou que, grande parte da subida registada em 2019, se deve a um ajuste técnico, depois das descidas expressivas acumuladas nos últimos meses de 2018.

Após uma valorização superior a 10% nas praças norte-americanas e de mais de 8% na Europa, em mês e meio, o diretor de vendas da JPMorgan AM Portugal refere que é necessário “mais crescimento económico” para sustentar a extensão dos ganhos nas bolsas. O especialista acredita que caso a Europa e a China apresentem uma evolução positiva da sua economia, isto pode alimentar maiores retornos nas ações.

Com uma visão moderadamente otimista para a economia mundial, Manuel Arroyo destaca que é esperada muita volatilidade nos próximos meses, fruto de já estarmos numa fase tardia do ciclo económico.

“Os EUA vão continuar a crescer à volta de 2%”, antecipa o mesmo especialista, que lembra, contudo, que este ano não haverá nenhum programa de estímulos orçamental. Vai haver sim estímulos monetários.

A Reserva Federal indicou, em janeiro, uma inversão na sua política de subida de taxas de juro, levando os bancos de investimento e as gestoras de ativos a rever as suas expectativas para a normalização das taxas. Enquanto no final do ano a gestora do JPMorgan previa quatro subidas de juros em 2019, as previsões apontam agora para uma ou duas mexidas nos juros, nos terceiro e quarto trimestre do ano.

Já em relação aos resultados empresariais, Manuel Arroyo realça que está a antecipar um crescimento entre 5% e 7% dos resultados nos EUA. O responsável lembra que, ao longo do último ano, baixaram-se muito as expectativas, mas “ao baixar as expectativas aumenta a margem para surpreender pela positiva”.

(MW) Roubini calls out the big blockchain lie

(MW)

Blockchain isn’t a transformative technology; it’s just Excel spreadsheets with a misleading name

Bitcoin has lost about two-thirds of its value since December.

By

NOURIELROUBINI

NEW YORK (Project Syndicate) — With the value of Bitcoin BTCUSD, +0.19% having fallen by around two-thirds since its peak late last year, the mother of all bubbles has now gone bust. More generally, cryptocurrencies have entered a not-so-cryptic apocalypse.

The value of leading coins such as Ether ETHUSD, +0.45%  , EOS, LitecoinLTCUSD, +1.42%  , and XRP XRPUSD, -0.01%  have all fallen by over 80%, thousands of other digital currencies have plummeted by 90% to 99%, and the rest have been exposed as outright frauds. No one should be surprised by this: four out of five initial coin offerings (ICOs) were scams to begin with.

Now that cryptocurrencies such as Bitcoin have plummeted from last year’s absurdly high valuations, the techno-utopian mystique of so-called distributed-ledger technologies should be next. The promise to cure the world’s ills through “decentralization” was just a ruse to separate retail investors from their hard-earned real money.

Faced with the public spectacle of a market bloodbath, boosters have fled to the last refuge of the crypto scoundrel: a defense of “blockchain,” the distributed-ledger software underpinning all cryptocurrencies. Blockchain has been heralded as a potential panacea for everything from poverty and famine to cancer.

In fact, it is the most overhyped — and least useful — technology in human history.

In practice, blockchain is nothing more than a glorified spreadsheet. But it has also become the byword for a libertarian ideology that treats all governments, central banks, traditional financial institutions, and real-world currencies as evil concentrations of power that must be destroyed. Blockchain fundamentalists’ ideal world is one in which all economic activity and human interactions are subject to anarchist or libertarian decentralization. They would like the entirety of social and political life to end up on public ledgers that are supposedly “permissionless” (accessible to everyone) and “trustless” (not reliant on a credible intermediary such as a bank).

Yet far from ushering in a utopia, blockchain has given rise to a familiar form of economic hell.

A few self-serving white men (there are hardly any women or minorities in the blockchain universe) pretending to be messiahs for the world’s impoverished, marginalized, and unbanked masses claim to have created billions of dollars of wealth out of nothing. But one need only consider the massive centralization of power among cryptocurrency “miners,” exchanges, developers, and wealth holders to see that blockchain is not about decentralization and democracy; it is about greed.

For example, a small group of companies — mostly located in such bastions of democracy as Russia, Georgia, and China — control between two-thirds and three-quarters of all crypto-mining activity, and all routinely jack up transaction costs to increase their fat profit margins. Apparently, blockchain fanatics would have us put our faith in an anonymous cartel subject to no rule of law, rather than trust central banks and regulated financial intermediaries.

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A similar pattern has emerged in cryptocurrency trading. Fully 99% of all transactions occur on centralized exchanges that are hacked on a regular basis.And, unlike with real money, once your crypto wealth is hacked, it is gone forever.

Moreover, the centralization of crypto development — for example, fundamentalists have named Ethereum creator Vitalik Buterin a “benevolent dictator for life” — already has given lie to the claim that “code is law,” as if the software underpinning blockchain applications is immutable.

The truth is that the developers have absolute power to act as judge and jury. When something goes wrong in one of their buggy “smart” pseudo-contracts and massive hacking occurs, they simply change the code and “fork” a failing coin into another one by arbitrary fiat, revealing the entire “trustless” enterprise to have been untrustworthy from the start.

Lastly, wealth in the crypto universe is even more concentrated than it is in North Korea. Whereas a Gini coefficient of 1.0 means that a single person controls 100% of a country’s income/wealth, North Korea scores 0.86, the rather unequal United States scores 0.41, and Bitcoin scores an astonishing 0.88.

As should be clear, the claim of “decentralization” is a myth propagated by the pseudo-billionaires who control this pseudo-industry. Now that the retail investors who were suckered into the crypto market have all lost their shirts, the snake-oil salesmen who remain are sitting on piles of fake wealth that will immediately disappear if they try to liquidate their “assets.”

As for blockchain itself, there is no institution under the sun — bank, corporation, non-governmental organization, or government agency — that would put its balance sheet or register of transactions, trades, and interactions with clients and suppliers on public decentralized peer-to-peer permissionless ledgers.

There is no good reason why such proprietary and highly valuable information should be recorded publicly.

Moreover, in cases where distributed-ledger technologies — so-called enterprise DLT — are actually being used, they have nothing to do with blockchain. They are private, centralized, and recorded on just a few controlled ledgers. They require permission for access, which is granted to qualified individuals. And, perhaps most important, they are based on trusted authorities that have established their credibility over time.

All of which is to say, these are “blockchains” in name only.

It is telling that all “decentralized” blockchains end up being centralized, permissioned databases when they are actually put into use. As such, blockchain has not even improved upon the standard electronic spreadsheet, which was invented in 1979.

No serious institution would ever allow its transactions to be verified by an anonymous cartel operating from the shadows of the world’s authoritarian kleptocracies. So it is no surprise that whenever “blockchain” has been piloted in a traditional setting, it has either been thrown in the trash bin or turned into a private permissioned database that is nothing more than an Excel spreadsheet or a database with a misleading name.

(JN) “Rei das obrigações” vai reformar-se

(JN)

Bill Gross vai deixar a Janus Henderson para se concentrar na gestão dos seus ativos e na sua fundação.

Um dos gestores de ativos mais conhecidos em todo o mundo decidiu reformar-se.

Segundo o Financial Times, Bill Gross, de 74 anos, vai deixar a Janus Henderson para se dedicar à gestão dos seus ativos, bem como à sua fundação. Uma informação já confirmada pela firma que o contratou à Pimco há quatro anos.

Conhecido por “Rei das obrigações” (“The bond king”), Gross foi um dos mais bem-sucedidos gestores de títulos de dívida do mundo. Estava na Janus Henderson desde 2014, mas foi na Pimco que ganhou fama e sucesso.

Gross foi um dos fundadores da Pimco em 1971 e o principal responsável pela ascensão desta firma ao topo das gestoras de ativos de maior sucesso do mundo.

“Tive um percurso maravilhoso ao longo dos meus 40 anos de carreira – tentando sempre colocar o interesse dos clientes em primeiro lugar e reinventar a gestão de carteiras de obrigações”, diz Gross numa carta de despedida que está a ser citada pelo Wall Street Journal.

O CEO da Janus, Dick Weil, agradeceu a Bill Gross o contributo que deu à firma. “Conheço o Bill há 23 anos. Foi um dos melhores investidores de todos os tempos e foi uma honra trabalhar ao lado dele”, acrescentou.

O gestor, que se apelidava um Justin Bieber com 70 anos, saiu da Pimco em 2014 em conflito com os restantes líderes da firma e numa altura em que a firma estava a perder dinheiro.

Antes deste mau desempenho, Gross era o responsável pela gestão do maior fundo de obrigações do mundo, com ativos avaliados em 300 mil milhões de dólares.

Se a saída de Gross originou uma debandada de investidores da Pimco em 2014, os últimos tempos na Janus também não foram fáceis. O fundo de obrigações da Janus Henderson Global Unconstrained sofreu resgates de cerca de 60 milhões de dólares em dezembro, que reduziram o valor dos ativos para 950,4 milhões de dólares. Abaixo da fasquia dos mil milhões e muito aquém do máximo atingido em fevereiro, quando este fundo totalizou 2,24 mil milhões de dólares de ativos sob gestão.

(BBG) Portugal’s Debt Appeal Grows After Strong 2018 Run for Investors

(BBG)

  •  Bonds could outperform further versus Italy, Citigroup says
  •  Nation returned 1.4 percent in January after 3 percent in 2018

Portuguese bonds look set to extend their peer-beating performance into 2019, after providing investors with the best returns among peripheral euro-area debt markets last year.

In January, the nation’s bonds gave investors 1.4 percent, according to a Bloomberg Barclays Euro Aggregate Index, ahead of Italy and just behind Spain’s 1.5 percent. This comes after beating both countries with a 3 percent gain in 2018.

Portugal spread to Italy forecast to narrow to minus 144 basis points, says Citi

“Portugal could outperform further versus Italy in the coming weeks,” said Jamie Searle, a fixed-income strategist at Citigroup Inc. He cited a supportive issuance outlook, reinvestment of maturing debt by the European Central Bank and the prospects for further upgrades from rating companies.

Citigroup recommended investors buy Portugal’s 2.125 percent bond due October 2028 and sell Italy’s 2.8 percent bond maturing in December 2028. That is to target the yield spread between the two nations’ debt at minus 144 basis points, from around minus 124 basis points on Friday.

(Reuters) IMF cuts global growth outlook, cites trade war and weak Europe

(Reuters)

DAVOS, Switzerland (Reuters) – The International Monetary Fund on Monday cut its world economic growth forecasts for 2019 and 2020, due to weakness in Europe and some emerging markets, and said failure to resolve trade tensions could further destabilize a slowing global economy.Swiss special police officer keeps watch from a rooftop, ahead of inauguration of World Economic Forum (WEF) in Davos, Switzerland, January 21, 2019. REUTERS/Arnd Wiegmann

In its second downgrade in three months, the global lender also cited a bigger-than-expected slowdown in China’s economy and a possible “No Deal” Brexit as risks to its outlook, saying these could worsen market turbulence in financial markets.

The IMF predicted the global economy to grow at 3.5 percent in 2019 and 3.6 percent in 2020, down 0.2 and 0.1 percentage point respectively from last October’s forecasts.

The new forecasts, released ahead of this week’s gathering of world leaders and business executives in the Swiss ski resort of Davos, show that policymakers may need to come up with plans to deal with an end to years of solid global growth.

“Risks to global growth tilt to the downside. An escalation of trade tensions beyond those already incorporated in the forecast remains a key source of risk to the outlook,” the IMF said in an update to its World Economic Outlook report.

“Higher trade policy uncertainty and concerns over escalation and retaliation would lower business investment, disrupt supply chains and slow productivity growth. The resulting depressed outlook for corporate profitability could dent financial market sentiment and further dampen growth.”

The downgrades reflected signs of weakness in Europe, with its export powerhouse Germany hurt by new fuel emission standards for cars and with Italy under market pressure due to Rome’s recent budget standoff with the European Union.

Growth in the euro zone is set to moderate from 1.8 percent in 2018 to 1.6 percent in 2019, 0.3 percentage point lower than projected three months ago, the IMF said.

The IMF also cut its 2019 growth forecast for developing countries to 4.5 percent, down 0.2 percentage point from the previous projection and a slowdown from 4.7 percent in 2018.

“Emerging market and developing economies have been tested by difficult external conditions over the past few months amid trade tensions, rising U.S. interest rates, dollar appreciation, capital outflows, and volatile oil prices,” the IMF said.Slideshow (2 Images)

The IMF maintained its U.S. growth projections of 2.5 percent this year and 1.8 percent in 2020, pointing to continued strength in domestic demand.

It also kept its China growth forecast at 6.2 percent in both 2019 and 2020, but said economic activity could miss expectations if trade tensions persist, even with state efforts to spur growth by boosting fiscal spending and bank lending.

“As seen in 2015–16, concerns about the health of China’s economy can trigger abrupt, wide-reaching sell-offs in financial and commodity markets that place its trading partners, commodity exporters, and other emerging markets under pressure,” it said.

Britain is expected to achieve 1.5 percent growth this year though there is uncertainty over the projection, which is based on the assumption of an orderly exit from the EU, the IMF said.

China’s economic growth hits 28-year low

The rare bright spot was Japan, with the IMF revising up its forecast by 0.2 percentage point to 1.1 percent this year due to an expected boost from the government’s spending measures, which aim to offset a scheduled sales-tax hike in October.

The IMF has been urging policymakers to carry out structural reforms while the global economy enjoys solid growth, with its managing director, Christine Lagarde, telling them to “fix the roof while the sun is shining”. The IMF has stressed the need to address income inequality and reform the financial sector.

However, as growth momentum peaks and risks to the outlook rise, policymakers must now focus on policies to prevent further slowdowns, the IMF said.

“The main shared policy priority is for countries to resolve cooperatively and quickly their trade disagreements and the resulting policy uncertainty, rather than raising harmful barriers further and destabilizing an already slowing global economy,” it added.

(P-S) Risks to the Global Economy in 2019 – Kenneth Rogoff

(P-S)

Over the course of this year and next, the biggest economic risks will emerge in those areas where investors think recent patterns are unlikely to change. They will include a growth recession in China, a rise in global long-term real interest rates, and a crescendo of populist economic policies.

CAMBRIDGE – As Mark Twain never said, “It ain’t what you don’t know that gets you into trouble. It’s what you think you know for sure that just ain’t so.” Over the course of this year and next, the biggest economic risks will emerge in those areas where investors think recent patterns are unlikely to change. They will include a growth recession in China, a rise in global long-term real interest rates, and a crescendo of populist economic policies that undermine the credibility of central bank independence, resulting in higher interest rates on “safe” advanced-country government bonds.1

A significant Chinese slowdown may already be unfolding. US President Donald Trump’s trade war has shaken confidence, but this is only a downward shove to an economy that was already slowing as it makes the transition from export- and investment-led growth to more sustainable domestic consumption-led growth. How much the Chinese economy will slow is an open question; but, given the inherent contradiction between an ever-more centralized Party-led political system and the need for a more decentralized consumer-led economic system, long-term growth could fall quite dramatically.1

Unfortunately, the option of avoiding the transition to consumer-led growth and continuing to promote exports and real-estate investment is not very attractive, either. China is already a dominant global exporter, and there is neither market space nor political tolerance to allow it to maintain its previous pace of export expansion. Bolstering growth through investment, particularly in residential real estate (which accounts for the lion’s share of Chinese construction output) – is also ever more challenging.1

Downward pressure on prices, especially outside Tier-1 cities, is making it increasingly difficult to induce families to invest an even larger share of their wealth into housing. Although China may be much better positioned than any Western economy to socialize losses that hit the banking sector, a sharp contraction in housing prices and construction could prove extremely painful to absorb.

Any significant growth recession in China would hit the rest of Asia hard, along with commodity-exporting developing and emerging economies. Nor would Europe – and especially Germany – be spared. Although the US is less dependent on China, the trauma to financial markets and politically sensitive exports would make a Chinese slowdown much more painful than US leaders seem to realize.1

A less likely but even more traumatic outside risk would materialize if, after many years of trend decline, global long-term real interest rates reversed course and rose significantly. I am not speaking merely of a significant over-tightening by the US Federal Reserve in 2019. This would be problematic, but it would mainly affect short-term real interest rates, and in principle could be reversed in time. The far more serious risk is a shock to very long-term real interest rates, which are lower than at any point during the modern era (except for the period of financial repression after World War II, when markets were much less developed than today).

While a sustained rise in the long-term real interest rate is a low-probability event, it is far from impossible. Although there are many explanations of the long-term trend decline, some factors could be temporary, and it is difficult to establish the magnitude of different possible effects empirically.

One factor that could cause global rates to rise, on the benign side, would be a spurt in productivity, for example if the so-called Fourth Industrial Revolution starts to affect growth much faster than is currently anticipated. This would of course be good overall for the global economy, but it might greatly strain lagging regions and groups. But upward pressure on global rates could stem from a less benign factor: a sharp trend decline in Asian growth (for example, from a long-term slowdown in China) that causes the region’s long-standing external surpluses to swing into deficits.

But perhaps the most likely cause of higher global real interest is the explosion of populism across much of the world. To the extent that populists can overturn the market-friendly economic policies of the past several decades, they may sow doubt in global markets about just how “safe” advanced-country debt really is. This could raise risk premia and interest rates, and if governments were slow to adjust, budget deficits would rise, markets would doubt governments even more, and events could spiral.

Most economists agree that today’s lower long-term interest rates allow advanced economies to sustain significantly more debt than they might otherwise. But the notion that additional debt is a free lunch is foolish. High debt levels make it more difficult for governments to respond aggressively to shocks. The inability to respond aggressively to a financial crisis, a cyber attack, a pandemic, or a trade war significantly heightens the risk of long-term stagnation, and is an important explanation of why most serious academic studies find that very high debt levels are associated with slower long-term growth.

If policymakers rely too much on debt (as opposed to higher taxation on the wealthy) in order to pursue progressive policies that redistribute income, it is easy to imagine markets coming to doubt that countries will grow their way out of very high debt levels. Investors’ skepticism could well push up interest rates to uncomfortable levels.1

Of course, there are many other risks to global growth, including ever-increasing political chaos in the United States, a messy Brexit, Italy’s shaky banks, and heightened geopolitical tensions.1

But these outside risks do not make the outlook for global growth necessarily grim. The baseline scenario for the US is still strong growth. Europe’s growth could be above trend as well, as it continues its long, slow recovery from the debt crisis at the beginning of the decade. And China’s economy has been proving doubters wrong for many years.

So 2019 could turn out to be another year of solid global growth. Unfortunately, it is likely to be a nerve-wracking one as well.

(CNBC) Shares of NYSE owner fall as Morgan Stanley and Fidelity plan rival exchange

(CNBC)

  • Shares of the company that owns the NYSE fall as some of Wall Street’s largest investors near the launch of a new, low-cost exchange.
  • Nine banks, brokerages and other firms including Morgan Stanley and Fidelity plan to launch the exchange early this year.
  • The launch of another stock exchange would come amid a mass migration toward cheap, no-fee investing options and exchanges across Wall Street.
Premium EA: Wall Street NYSE exterior rain gloom dark

A woman carrying an umbrella walks past the New York Stock Exchange (NYSE) in New York.John Taggart | Bloomberg | Getty Images

Shares of Intercontinental Exchange — the company that owns the NYSE — fell more than 2 percent Monday as some of Wall Street’s largest financial companies neared the launch of a low-cost rival trading platform.

Shares of Nasdaq also fell more than 2 percent Monday.

The new venue is called Members Exchange, or MEMX. Nine banks, brokerages and other firms including Morgan Stanley, Fidelity Investments and Citadel Securities will maintain control over MEMX. MEMX investors also include Bank of America Merrill Lynch and UBS, as well as retail brokers Charles Schwab, E-Trade and TD Ameritrade.

“MEMX’s mission is to increase competition, improve operational transparency, further reduce fixed costs, and simplify the execution of equity trading in the U.S.,” according to a press release announcing the exchange. “In addition, MEMX will represent the interests of its founders’ collective client base, comprised of retail and institutional investors on U.S. market structure issues. MEMX will seek to offer a simple trading model with basic order types, the latest technology, and a simple, low-cost fee structure.”

Members of the investor group plan to apply for exchange status with the Securities and Exchange Commission early this year. The Wall Street Journal first reported on the upcoming exchange launch.

In a statement, Nasdaq said: “We welcome competition to our transparent, highly regulated equity markets. However, with more than 40 equity trading venues already in operation in the United States, we are keen to learn more about the value proposition of a new exchange.”

The launch of another stock exchange would come amid a mass migration toward cheap, no-fee investing options and exchanges across Wall Street. Another such company, the IEX Group, emerged in 2016 with a system that slowed down trading in an effort to neutralize the effect of high-frequency trading. Controversial at first, the so-called speed bumps have proliferated among U.S. market sites, though they differ from IEX’s to varying degrees.

The 2-year-old IEX, which was founded in 2012, had its first stock listing as of September.

(Time) Warren Buffett Just Obliterated Bitcoin in Four Words

(Time)

Billionaire investor Warren Buffett is taking his already harsh criticism of Bitcoin to another level.

Buffett, who has previously said that cryptocurrencies like Bitcoin will almost certainly “come to a bad ending,” was asked over the weekend at the Berkshire Hathaway annual meeting about comments made by business partner Charlie Munger—who has called Bitcoin “turds” and compared it to rat poison.

Buffett didn’t mince words. Bitcoin is “probably rat poison squared,” Buffett replied.

On Monday, Buffett appeared on CNBC to explain that he was so down on Bitcoin, and cryptocurrencies in general, because they don’t produce anything—so they’re essentially investments based on pure speculation.

“When you buy non-productive assets, all you’re counting on is that the next person is going to pay you more, because they’re even more excited about another next person coming along,” Buffett said. “The asset itself is creating nothing.”

Buffett has said in the past that he and many investors really don’t understand BitcoinOn CNBC Monday, he added that cryptocurrencies’ mystique actually entices investors—because it seems like magic when, say, the price of Bitcoin rose 36% in April. (Mind you, that increase came after Bitcoin’s price had fallen to one-third of its all-time high near $20,000, which it hit last December.)

“It’s better if they don’t understand it,” Buffett said Monday. “If you don’t understand it you get much more excited.”

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Warren Buffett on bitcoin: It’s an asset that creates nothing; cryptocurrencies “just sit there” and “if you don’t understand it, you get much more excited”20410:25 AM – May 7, 2018159 people are talking about thisTwitter Ads info and privacy

Buffett is hardly the only well-respected high-profile investor to blast the cryptocurrency. Yale economist economist Robert Shiller often bashes Bitcoin, once saying that it’s likely to “totally collapse and be forgotten.”

And investing legend Jack Bogle, the founder of Vanguard, trashed Bitcoin when the cryptocurrency was nearing its all-time high last December. “Avoid Bitcoin like the plague,” Bogle said. “Did I make myself clear?”

(ZH) The Richest People In The World Lost More Than $550 Billion In 2018

(ZH) Like the old saying goes: What goes up must come down. And just as the fortunes of the world’s wealthiest swelled during the post-crisis era as QE and ZIRP bolstered asset prices, now that trend has been thrown into reverse thanks to the turbulence in global markets during the second half of the year.

According to Bloomberg, even the world’s richest individuals failed to find respite from a global market meltdown that has rendered 2018 the “worst year for markets on record.”

DB

Bloomberg’s Billionaires Index showed that the 500 richest people in the world had a combined $4.7 trllion in wealth as of Friday’s close, some $511 billion less than they had at the beginning of the year. With one week left to trade this year, 2018 is set to become the second year since the list was created in 2012 that the world’s wealthiest have seen their wealth decline.

Coaster

At their peak, soaring markets drove the aggregate wealth of the world’s wealthiest above $5.6 trillion before the downturn began shortly after the Federal Reserve raised interest rates for the third time this year back in September.

“As of late, investor anxiety has run high,” said Katie Nixon, chief investment officer at Northern Trust Wealth Management. “We do not expect a recession, but we are mindful of the downside risks to global growth.”

Even Amazon founder and CEO Jeff Bezos, who saw his fortune swell to $168 billion earlier this year, has watched it fall more than $50 billion from the highs as FANG stocks have lead the market lower.

Even Jeff Bezos, who recorded the biggest gain for 2018, wasn’t spared the volatility. His fortune peaked at $168 billion in September, a $69 billion gain. It later tumbled $53 billion – more than the market value of Delta Air Lines Inc. or Ford Motor Co. – to leave him with $115 billion at year-end.

But Bezos’ losses were mild compared with Mark Zuckerberg, whose net worth took the biggest hit among the world’s tech titans.

Zuck

The Amazon.com Inc. founder had a better year than Mark Zuckerberg, who recorded the biggest loss since January, dropping $23 billion as Facebook Inc. careened from crisis to crisis.Overall, the 173 U.S. billionaires on the list — the largest cohort — lost 5.9 percent from their fortunes to leave them with $1.9 trillion.

Billionaires in Asia lost a combined $144 billion…

Even Asia’s fabled wealth-creation machine stumbled as the region’s 128 billionaires lost a combined $144 billion in 2018. The three biggest losers in Asia all hailed from China, led by Wanda Group’s Wang Jianlin, whose fortune declined $11.1 billion.

Despite the turmoil, Asia continued to mint new members of the three-comma club. The Bloomberg index uncovered 39 new members from the region in 2018, although that status proved short-lived for some. About 40 percent had lost their 10-figure status as of Dec. 7.

…While billionaires in Europe also saw their fortunes decline.

From Zara founder Amancio Ortega to former Italian Prime Minister Silvio Berlusconi, most of Europe’s billionaires saw their fortunes fall. Germany’s Schaeffler family, the majority shareholders of car-parts maker Continental AG, lost the most as extra costs and tough business conditions in Europe and Asia hampered the company’s performance.

Georg Schaeffler and his mother Maria-Elisabeth Schaeffler-Thumann are $17 billion worse off than at the start of the year. That sum alone would place them among the world’s 100 richest people.

Mexico’s Carlos Slim, the majority shareholder of Latin America’s largest mobile-phone operator, also suffered big losses. Once the world’s richest person, Slim now ranks sixth with a $54 billion pile. 3G Capital co-founder Jorge Paulo Lemann saw his fortune drop the most among Latin American billionaires, losing $9.8 billion. But even with that fall, he remains Brazil’s richest person.

Russian fortunes on average fared better. The volatility caused by collapsing oil prices, a flare-up in tensions with Ukraine and tightening sanctions was partially offset by periodic gains. The combined net worth of the country’s 25 wealthiest people was down only slightly, ending at $255 billion, according to the ranking.

One outlier, though, was Russia, where billionaires fared better than elsewhere in the world (though only slightly).

Russian fortunes on average fared better. The volatility caused by collapsing oil prices, a flare-up in tensions with Ukraine and tightening sanctions was partially offset by periodic gains. The combined net worth of the country’s 25 wealthiest people was down only slightly, ending at $255 billion, according to the ranking.

Still, 16 of the 25 Russian billionaires on the Bloomberg index saw their net worth fall in 2018. Aluminum magnate Oleg Deripaska, who remains under U.S. sanctions, lost the most — $5.7 billion — and dropped out the Bloomberg ranking of the world’s top 500 richest people.

By contrast, energy moguls Leonid Mikhelson, Gennady Timchenko and Vagit Alekperov added a total of $9 billion. Timchenko, sanctioned in 2014, added 27 percent to his net worth as shares of gas producer Novatek rose 40 percent.

And if the co-CIO of the world’s largest hedge fund is right, the aggregate net worth of the world’s richest and most powerful individuas could be on track to worsen next year, which would, in our view, only ratchet up pressure on central banks to do whatever it takes to spare the global elite any more discomfort.

(Investors) S&P 500 Today Down Sharply; This Sign Will Tell A Lot About Current Stock Market

(Investors) Stocks were broadly lower Thursday afternoon, as the S&P 500 today and other indexes held some of the prior day’s outstanding gains.

Indexes gave up more ground in afternoon trading but were trying to bounce with about an hour left in the session.

The Nasdaq composite slid 2.5% and headed for the fourth straight move (in either direction) of more than 2%. The S&P 500 lost 1.9% and the small-cap Russell 2000 declined 1.8%. (For updates on this story and other market coverage, visit the Stock Market Today.)

Indexes held more than half of Wednesday’s monumental gains. If the market can close with such losses, it could be considered an acceptable loss in the context of the week’s action. But it’s still too early to decide if a new confirmed market uptrend is in play. Read this Investor’s Corner to learn how to spot key turning points in the market.

The Dow Jones industrial average was off 1.7%. Tech heavyweights Apple (AAPL) and Microsoft(MSFT) declined the most, off 3.8 and 3.1% on the Dow. Both are the two largest stocks in the market by capitalization but both are trending lower still.

Market volume was tracking lower compared with the same time on Wednesday. Declining stocks led advancers by a 9-to-2 ratio on the NYSE and by 5-to-2 on the Nasdaq.

Wall Street is waiting for new signals as it winds down the year. Late Wednesday, Bloomberg reported U.S. officials will travel to Beijing in early January to hold trade talks. There was no update on that front Thursday. There was also no news on the partial government shutdown.

The retail sector was today’s weakest, one day after it rallied on strong holiday sales data. The SPDR Retail ETF (XRT) fell 3% after Wednesday’s 5.7% surge. Department stores, online retail and consumer electronics stores were in the bottom 10 industry groups.

Energy stocks were sharply lower, resuming a downward trend. Russia’s energy minister rejected a formalized partnership with OPEC, a decision that reduces the chances to reduce output and shore up oil prices. U.S. crude was down 2.7% to $44.93 a barrel.

Leading stocks performed in line with the broad market. The Innovator IBD 50 ETF (FFTY) fell 1.8%, holding on to most of the 6.3% increase of the previous day. More than half the 50 stocks fell more than 2%, however.

Horizon Pharma (HZNP) tumbled 4.3% as the pharmaceutical company remained below the 50-day moving average, but volume was way below normal levels.

Shares fell even though the company announced the FDA approved expanded use of its Ravicti drug for younger infants. Ravicti is used to treat a rare genetic disorder in newborns that can result in brain damage, coma or death.

(CNBC) Dow rallies 1,000 points, logging its biggest single-day point gain ever

(CNBC)

Fred ImbertEustance HuangPublished 6:28 PM ET Tue, 25 Dec 2018  Updated 12 Hours AgoCNBC.com

Dow posts largest daily point gain in history

Dow posts largest daily point gain in history  13 Hours Ago | 00:45

Stocks posted their best day in nearly a decade on Wednesday, with the Dow Jones Industrial Average notching its largest one-day point gain in history. Rallies in retail and energy shares led the gains, as Wall Street recovered the steep losses suffered in the previous session.

The 30-stock Dow closed 1,086.25 points higher, or 4.98 percent, at 22,878.45. Wednesday’s gain also marked the biggest upside move on a percentage basis since March 23, 2009, when it rose 5.8 percentage points.

The S&P 500 also catapulted 4.96 percent — its best day since March 2009 — to 2,467.70 as the consumer discretionary, energy and tech sectors all climbed more than 6 percent. The Nasdaq Composite also had its best day since March 23, 2009, surging 5.84 percent to 6,554.36.

Wednesday also marked the biggest post-Christmas rally for U.S. stocks ever.

Retailers were among the best performers on Wednesday, with the SPDR S&P Retail ETF (XRT) jumping 4.7 percent. Shares of Wayfair, Kohl’s and Dollar General all rose more than 7 percent. Data released by Mastercard SpendingPulse showed retailers were having their best holiday season in six years. Amazon’s stock also jumped 9.45 percent, snapping a four-day losing streak, after the company said it sold a record number of items this holiday season.

The market closed down 653 points on Christmas Eve—here's where it's headed next

The market closed down 653 points on Christmas Eve—here’s what’s next  15 Hours Ago | 03:07

Energy stocks also jumped as U.S. crude oil prices catapulted more than 8 percent. Shares of Marathon Oil and Hess were the best performers within the energy sector, jumping 11.9 percent and 11 percent, respectively.

John Augustine, chief investment officer at Huntington Private Bank, said he welcomed Wednesday’s rally but added: “We still have a ways to go. We need to have three days of moving higher into the close to stem this wave of selling.”

A strong sell-off on Monday sent the major indexes down more than 2 percent and ended with the S&P 500 falling into a bear market. Monday’s pullback was also the worst Christmas Eve decline ever. The S&P 500 was down 20.06 percent from an intraday record high set on Sept. 21 before Wednesday’s sharp rebound. U.S. exchanges were closed Tuesday for the Christmas holiday.

The recent decline in stocks “is a buyer’s strike due to lack of confidence in policymakers around the world,” said Augustine. “It’s going to take a long time to recover that confidence.”

The plunge in stocks on Monday came after Treasury Secretary Steven Mnuchin held calls with CEOs of major U.S. banks last weekend and issued a statement saying, “The banks all confirmed ample liquidity is available for lending to consumer and business markets.”

Monday’s move lower also came after President Donald Trumpcommented on the Federal Reserve once more, calling it “the only problem our economy has” in a tweet. Trump also said Tuesday the Fed was “raising interest rates too fast because they think the economy is so good.” Trump has been critical of the Fed’s decisions regarding monetary policy this year. The central bank has hiked overnight rates four times this year.

“With the end of the quarter, we could get a bounce in the next few days,” said Peter Cardillo, chief market economist at Spartan Capital Securities. But “the problem is [President Donald] Trump continues to create a lot of uncertainty. We can’t focus on the fact there are a lot of good bargains out there.”

This is all taking place amid an ongoing government shutdown that started last week. The Trump administration and congressional leaders are at a stalemate over funding for a wall along the U.S.-Mexico border. The administration says the wall is important for national security while opponents of the barrier note it will not solve the U.S.’ immigration issues.

“Government shutdown starts with no end game strategy by either side,” L. Thomas Block, Washington policy strategist at Fundstrat Global Advisors, said in a note to clients. “The President … remains convinced that fighting for HIS wall is worth a government shutdown and his base loves the confrontation.”

(ZH) WSJ Discovers How Algos Broke The Market

(ZH) For years, as the market rose in seemingly uninterrupted fashion buoyed by trillions in excess central bank liquidity and algos programmed to buy any dip while frontrunning each and every buy order, virtually nobody – except for a few “fringe”, “fake news” blogs – complained about the threat posed by algo trading and the quiet but dire deterioration in market liquidity.

Now that the S&P has finally suffered its first bear market in a decade, the mass media is out in full force looking for scapegoats and, predictably, in an attempt to deflect attention from the biggest, and only, culprit behind each and every bull-bust cycle namely the US central bank, has focused on “computerized trading.”

In a front page article, the WSJ is out today with “Behind the Market Swoon: The Herdlike Behavior of Computerized Trading“, in which a bevy of WSJ authors, among which the paper’s new ‘Fed whisperer‘ Nick Timiraos (who may or may not have been tasked with delivering a piece drawing attention from the inhabitants of the Marriner Eccles building), write that “behind the broad, swift market slide of 2018 is an underlying new reality: Roughly 85% of all trading is on autopilot—controlled by machines, models, or passive investing formulas, creating an unprecedented trading herd that moves in unison and is blazingly fast.”

A quick note: 85% of this “autopilot” trading also took place on the upside, yet the WSJ – and all the other bulls – were oddly quiet for years and years. Of course, to Zero Hedge readers, the story is all too familiar: after all we have covered all of this not just when the market snapped lower, but more importantly, during its levitation phase, setting up the inevitable crash:

Today, quantitative hedge funds, or those that rely on computer models rather than research and intuition, account for 28.7% of trading in the stock market, according to data from Tabb Group–a share that’s more than doubled since 2013. They now trade more than retail investors, and everyone else.

Add to that passive funds, index investors, high-frequency traders, market makers, and others who aren’t buying because they have a fundamental view of a company’s prospects, and you get to around 85% of trading volume, according to Marko Kolanovic of JP Morgan.

In terms of specific downside factors, the collapse in momentum has been explicitly highlighted:

One reason the dynamic might have changed: Many of the trading models use momentum as an input. When markets turn south, they’re programmed to sell. And if prices drop, many are programmed to sell even more.

Of course, the topic of collapsing momentum was widely discussed here just last Saturday, when we said that as a result of the dominance of algo trading, Deutsche Bank argued that momentum has emerged as the most important force in markets, something we have claimed for years:

However, one key reason why trading has become so complicated for most, and certainly the algos, is that there is currently virtually no momentum in the market – with the MTUM ETF which tracks momentum stocks having its worst month and quarter since its 2013 inception – results in making any attempt to piggyback on the market a money-losing trade.

There are the usual quotes from traders who are suddenly very concerned about stuff:

Boaz Weinstein, founder of credit hedge fund Saba Capital Management LP, said the market had been underpricing uncertainty. Now it’s taking into account political issues “at the same time as the Fed is hiking, the economy is slowing, and a lot of people are feeling like the best days for markets are over,” he said.

Mr. Weinstein says there are dangers building in the junk-bond market. One worry, he says, is that so many junk bonds—he estimated about 40%—are held by mutual funds or exchange-traded funds that allow their investors to sell any day they like, even though bonds inside the funds are hard to sell.

When enough investors want to cash out, such a fund has to start selling bonds. But without much liquidity, finding buyers could be hard.

A selloff could start simply, he said. “It has its own gravity.”

It’s “suddenly” so bad, in fact, that comparisons to virtually every previous crash are coming out of the woodwork:

Some analysts see similarities to the late 1998 pullback in U.S. stocks that followed a year of turmoil in emerging markets, punctuated by the Asian financial crisis of 1997 and the Russian default of 1998 and culminating in the collapse of the highly leveraged Long Term Capital Management hedge fund.

Others point to the market shakeout in late 2015. Like the current episode, it lacked an obvious trigger and was accompanied by anxiety over the Federal Reserve’s plans to raise interest rates—in that case, the Fed’s first rate increase in nearly a decade. Like this year, the 2015 retreat featured a sharp decline in oil prices and a significant drop in the S&P 500.

And the punchline:

Electronic traders are wreaking havoc in the markets,” says Leon Cooperman, the billionaire stock picker who founded hedge fund Omega Advisors.

There is much more in the full WSJ article, which also focuses on the collapse in market liquidity (which we covered just last week), the equity contagion to credit markets (which we also just covered), and virtually all other pernicious aspects of pervasive algo trading which have been discussed ad nauseam on this website for years.

Odd how electronic traders were not “wreaking havoc in the markets” when the markets were rising. A cynic may almost say that the president, the Fed and/or traders such as Cooperman (who have had an abysmal year) are desperate for a diversionary cover, and hence the WSJ article finally reporting on the other key facet of what made market levitation possible for the past decade: HFTs, algos and various other computerized traders, which however merely do what their human programmers instruct them to do, and which is to simply accentuate momentum either up, or as the case may be for the past 3 months, down by frontrunning key shifts in investor sentiment (as a reminder, all HFTs really do is frontrun orderflow) and in the process confirming that instead of adding liquidity to the market, HFTs were notorious in soaking it all up as recent market moves demonstrate.

In any case, we are content that the mainstream press is finally reporting on the event which we have warned for the better part of the past 10 years will ultimately catalyze the next big crash – the takeover of the market by computerized trading – a crash which, however, will only be made possible by the Fed blowing the biggest asset bubble in history to monstrous proportions, something which the WSJ article does at least acknowledge in its final paragraph:

“It’s not just about the equity market throwing a temper tantrum, it’s far deeper than that,” said David Rosenberg, chief economist at Gluskin Sheff & Associates in Toronto. “This is a much broader global liquidity story.”

Encouraged by signs of economic strengthening, the Fed has been gradually raising interest rates from rock-bottom levels and selling back the trillions of dollars in bonds it bought in the postcrisis years. The central bank says the roll-back of stimulus is smooth. Others aren’t so sure what comes next. There has never been such a huge stimulus, and one has never before been unraveled.

Some believe there’s a hidden risk in debt that consumers and companies took on when borrowing was inexpensive. The Fed’s campaigns were  “fundamentally designed to encourage corporate America to lever up, which makes them more vulnerable to rising borrowing costs,” said Scott Minerd, chief investment officer at Guggenheim Partners. “The reversing of the process is actually more powerful,” he said.

Read the full WSJ article here.

(Yahoo) S&P 500 enters bear market

(Yahoo) The S&P 500 is now in a bear market.

On Monday, the S&P 500 (^GSPC) fell 2.71%, or 65.52 points, and cracked below 2,400. Now at 2,351.1 points, the S&P 500 is at its lowest level since April 2017. The index fell into a bear market at the close, down more than 20% from its September intraday high of 2940.91 points

The Dow (^DJI) slid 2.91%, or 653.17 points, as of market close Monday. The Nasdaq (^IXIC) declined 2.21%, or 140.08 points, having closed in bear market territory on Friday.

Crude oil prices also continued their downward spiral on Monday. Prices for U.S. crude oil fell 6.7% to settle at $42.53 per barrel, the lowest settlement price since June 2017, as investors broadly fled from riskier assets.

Monday was a shortened trading day for investors. U.S. equity markets closed at 1 p.m. ET in observance of Christmas Eve.

On Sunday, Treasury Secretary Steven Mnuchin held individual calls with CEOs of six of the largest banks in the U.S. and discussed liquidity concerns. Mnuchin said in a statement that “the banks all confirmed ample liquidity is available for lending to consumers and business markets.” The discussions come amid an escalating stock market sell-off as well as ongoing tension between President Donald Trump and Federal Reserve Jerome Powell over rising interest rates.

The Treasury Secretary also said he would convene a call on Monday with the president’s Working Group on Financial Markets, a group sometimes known as the “Plunge Protection Team” that also convened in 2009 in the late stage of the financial crisis. The group includes Federal Reserve as well as Securities and Exchange commission officials.

Mnuchin also said in separate Twitter posts that Trump never suggested firing Powell, attempting to quell concerns after reports late last week stated that the president had discussed firing the Fed chairman over the central bank’s recent moves to tighten monetary policy. Markets have responded to the Fed’s latest rate hike decisions with increased volatility, which could potentially threaten Trump’s reelection prospects.

Steven Mnuchin@stevenmnuchin1

(1/2) I have spoken with the President @realDonaldTrump and he said “I totally disagree with Fed policy. I think the increasing of interest rates and the shrinking of the Fed portfolio is an absolute terrible thing to do at this time,…3,42211:02 PM – Dec 22, 2018Twitter Ads info and privacy2,437 people are talking about thisTwitter Ads info and privacy

Steven Mnuchin@stevenmnuchin1

(2/2) especially in light of my major trade negotiations which are ongoing, but I never suggested firing Chairman Jay Powell, nor do I believe I have the right to do so.”1,99311:03 PM – Dec 22, 2018Twitter Ads info and privacy2,191 people are talking about thisTwitter Ads info and privacy

Trump on Monday again assailed the central bank in a Twitter post, calling the Fed the “only problem our economy has.”

Meanwhile, a fresh government shutdown began over the weekend after Congress failed to pass a measure to fund several government agencies that have not yet received appropriations. The affected agencies include the Treasury, Agriculture, Homeland Security, Interior, State, Housing and Urban Development, Transportation, Commerce and Justice departments. Although the Treasury is one of the agencies subject to the partial shutdown, treasury auctions, payments of principal and coupons and other payments including social security should all continue as usual, since those operations are characterized as “essential.”

Traders work on the floor at the closing bell of the Dow Industrial Average at the New York Stock Exchange on December 19, 2018 in New York. (Photo by Bryan R. Smith / AFP) (Photo credit should read BRYAN R. SMITH/AFP/Getty Images)

While the shutdown adds uncertainty to an already overwrought market, it will not itself prevent a March Fed rate hike, Andrew Hollenhorst, an analyst with Citi, wrote in a note. But if the shutdown persists, “it might become a marginal reason for the Fed to be more cautious,” he added.

Hollenhorst also noted that the shutdown will create a “limited drag on growth” in the economy, even as about an estimated 380,000 workers are furloughed and another 420,000 continue working with delayed payments.

The Trump administration warned on Sunday that the partial government shutdown could continue into January when the new Congress takes control, Mick Mulvaney, director of the Office of Management and Budget, said on Fox.

ECONOMY: Chicago Fed national activity index rose in November

The Chicago Federal Reserve’s barometer for U.S. activity increased November, with the reading coming in at 0.22. October’s reading was revised to a neutral 0.0. Consensus expectations were for a reading of +0.2 in November, according to Bloomberg data. A positive reading for the index, which accounts for 85 indicators of growth in national economic activity, points to an economy expanding faster than the historical average. Contributions from indicators relating to production, sales, orders and inventories rose in November after decreasing in October, the Chicago Fed said in a statement.

STOCKS: Tesla cuts Model 3 vehicle prices in China

Tesla (TSLA) cut its prices on some of its Model 3 electric cars in China. Prices of certain Model 3 vehicles were cut by as much as 7.6%, with the starting price for a Model 3 in China now the equivalent of $72,000. This marks the third price cut for Tesla vehicles in China in the past two months, and comes after the vehicle maker said it was “absorbing a significant part of the tariff” from the U.S.-China trade war to keep prices affordable for overseas consumers.  Shares of Tesla tumbled along with the broader market, falling 7.62% to $295.39 each as of market close.

A number of Chinese companies are urging employees to boycott Apple (AAPL) products after the arrest of Huawei Technologies CFO Meng Wanzhou, who was arrested earlier this month in Vancouver by Canadian authorities at the request of the U.S. Many Chinese businesses told employees they will get subsidies for purchasing Huawei smartphones, according to a report from the Nikkei Asian Review. Others are boycotting Apple, which competes with Huawei as a smartphone producer. Shares of Apple fell 2.59% to $146.83 each as of market close.

Snap (SNAP) CEO Evan Spiegel reportedly ignored warnings of the company’s redesign of the Snapchat app after visiting China in 2017 and deciding that his messaging app needed an overhaul based on trends he saw there, according to the Wall Street Journal. Snap lost users for the first time in its history after the redesign debuted in February, and its stock has fallen about 76% since then. Spiegel also dismissed Facebook CEO’s Mark Zuckerberg’s interest in purchasing Snap in 2016 and did not report Zuckerberg’s advances to the entire board, the WSJ reported. Shares of Snapchat bucked the trend of the broader market and rose 4.21% to $5.20 each as of market close, bouncing back after hitting an all-time closing low of $4.99 per share on Friday.