China is in a good position to add some stimulus as inflation runs lower than most parts of the world. That’s exactly what reports suggest they do as 2023 infrastructure spending may be pulled forward.
This article was written by Adam Button at www.forexlive.com.
The Prime Minister’s home was set on fire.
The speaker of the legislature is trying to pull together an all-party government to stabilize the situation. He said President Rajapakse will step down on July 13.
The officials were moved to safe locations in anticipation of today’s protests, which were a sharp escalation of recent demonstrations. The catalyst has been a fuel shortage in the country.
The heavily-indebted country of 22 million has more than $15 billion in dollar-denominated debt and $45 billion overall. It has failed to make payments for oil and gasoline deliveries and that caused severe rationing from the government.
High commodity prices, rising rates and the strong US dollar are a toxic mix for heavily-indebted countries, especially those with large current account deficits. Here’s a ranking of some of the most-vulnerable spots:
Aside from the potential turmoil in these countries, it’s an open question whether similar crisis‘ trigger a broader global growth slowdown. The names at the top of this list are insignificant for global demand but as you go down the list, names like Pakistan, Egypt and Brazil stand out. The one I think that’s inevitably heading towards trouble is Turkey because of its chaotic monetary policy and large current account deficit. Time will tell.
This article was written by Adam Button at www.forexlive.com.
The new EUR/USD trade is from spot with a target of 0.97 and a stop at 1.04. That would be a quick move through parity, perhaps running stops.
„We are recommending a short EUR/USD trade idea to reflect our stronger conviction that the pair will soon break below parity,“ MUFG notes.
We are maintaining a long USD/CAD trade idea to reflect the increasing risk that the CAD will weaken further in the near-term on the back of intensifying fears over a sharper slowdown in global growth.
The target in trade was 1.3400 with a stop at 1.2600.
For bank trade ideas, check out eFX Plus. For a limited time, get a 7 day free trial, basic for $79 per month and premium at $109 per month. Get it here.
This article was written by Adam Button at www.forexlive.com.
The US jobs report added 372K new jobs in June. That was higher than the 268K estimate. Admittedly, there was a revision of -74K over the last two months (with May revised to 384K from 390K). Nevertheless, if the current month was adjusted for that number, a net addition of 298K (372K – 74K revision) still beats the consensus estimate.
Looking at the other measures within the report, the unemployment rate remained steady at 3.6%. Average hourly earnings rose 0.3% as expected and rose 5.1% vs 5.0% estimate. The participation rate fell to 62.2% vs 62.3% estimate. The U6 underemployment rate came in at 6.7% vs 7.1% estimate.
Overall, the jobs report – barring a huge surprise in the CPI next week which is expected to show 1.1% gain MoM and 0.6% for the core – is likely to lead to another 75 basis point hike by the Fed when their interest rate decision is announced on July 27. That would take the target range to 2.25% to 2.5% which Fed officials called the neutral rate. The expectations are for the path of rate rises to continue into the year end. The Fed’s central tendencies saw the rate at the end of year at 3.4%, which implies an end of year target rate of 3.25% to 3.5%. That sounds about right.
The questions at that point is „What comes after that?“
This week, the major stock indices moved higher with the Nasdaq outperforming with a 4.5% gain. The ARK Innovation fund rose 13.68%. Admittedly it is down -70.66% from it’s high, but is there roam to roam from lower levels. 10% on the current price of $46.86 is $4.68. Getting to $51 or $52 is not a hard hurdle considering the high in 2021 was up at $159.70 and the price traded at that level on April 25th – not so long ago.
In the forex market today, the USD was mixed with gains vs the JPY and CHF and declines vs the EUR, CAD, AUD and NZD. The greenback was little changed vs the GBP. The price action in the forex saw up and down volatility. The dollar moved higher after the jobs report, but then started to give up those gains into the London close. After London traders exited, there was a modest move back higher, but overall the changes on the day were relatively modest with a 0.33% gain vs the CHF and a -0.24 decline vs the EUR the biggest movers.
The strongest to weakest of the major currencies
Overall, the EUR was the strongest of the majors and the CHF was the weakest. The EURCHF was the biggest currency pair mover with a 0.57% gain on the day. Relatively speaking the changes were modest as traders ponder what may have already been priced in.
Nevertheless, it is hard to see a sharp move lower in the dollar going forward given the green light for the Fed to raise rates from both job gains and inflation, while Japan and the EU are still struggling with the idea of tightening, and the UK has political, inflation and European issues to contend with as well.
Next week, the Bank of Canada and the Reserve Bank of New Zealand are still expected to raise their rates by 50 basis points respectively (both announce on Wednesday).
In Canada today, their jobs report was weaker than expected with a decline of -43.2K jobs vs expectations of +23.5K (most in part time jobs at -39.1K and in the service sector). However, the unemployment rate declined to a new record low at 4.9% vs 5.1% estimate as the participation rate fell to 64.9% vs 65.3% with workers leaving the workforce.
In other markets today:
In the US debt market today, yields moved sharply higher as it seems 75 basis points is baked in the cake now
Sad notes this week included the killing of seven in Highland Park, Illinois during a 4th of July celebration parade include the mother and father of a 2-year child, and the assassination of former Japan PM Shinzo Abe while he addressed a crowd. during an election campaign rally in Nara, Japan. In the US gun violence is as common as the sun rising, but in Japan it is rare.
It is easy to become numb and complacent to violence. However, at the end of each bullet there are people with stories and incomplete lives and children and families and sometimes even nations that are denied what they could have done tomorrow, next week, next year and beyond. It is a tragedy that should not happen.
Let’s hope the pendulum starts to swing the other way, at some point and that time is soon. In the meantime, say a prayer for peace and for all the victims who happened to be at the end of a bullets path of destruction.
This article was written by Greg Michalowski at www.forexlive.com.
For the week, the major indices were higher.
A look at the final numbers shows:
For the trading week all the indices were higher led by the NASDAQ index:
Looking at the Dow 30 this week, the gains were led by:
The Dow losers this week included:
Some big gainers this week included:
Some big losers this week included:
This article was written by Greg Michalowski at www.forexlive.com.
Yesterday the Washington Post reported that Elon Musk had „stopped engaging in certain discussions around funding for the $44 billion deal“ and that the deal was in serious jeopardy, so this news isn’t out of the blue.
Twitter shares were down 5.35% on the report today and closed at $34.84 — far below the $54.20 agreement. For more than a month, there have been signs that Musk has a bad case of buyer’s remorse.
What’s far less clear is that he will be able to walk away from the deal.
He accused Twitter of being „in material breach of multiple provisions“ of the merger agreement.
„Mr. Musk is terminating the Merger Agreement because Twitter is in material breach of multiple provisions of that Agreement, appears to have made false and misleading representations upon which Mr. Musk relied when entering into the Merger Agreement, and is likely to suffer a Company Material Adverse Effect (as that term is defined in the Merger Agreement)“However he signed an agreement to complete a purchase of Twitter. It wasn’t an agreement to think about buying Twitter and the social media company has said it will enforce the deal.
Delaware courts, where this will be adjudicated, have been consistent in ruling that the bar for breaking a merger agreement is extraordinarily high. Musk has said the bot count is too high but Twitter this week released a presentation saying it was below 5%. Legal expert say that even if it was 20% it will be tough to argue it’s a material adverse clause.
Moreover, unless Musk already has conclusive evidence of fraud, he won’t be getting any further information from the company.
This is what he claims he asked for but didn’t receive:
„Mr. Musk is entitled, under Section 6.4 of the Merger Agreement to “all information concerning the business … of the Company … for any reasonable business purpose related to the consummation of the transactions” and under Section 6.11 of the Merger Agreement, to information “reasonably requested” in connection with his efforts to secure the debt financing necessary to consummate the transaction. To that end, Mr. Musk requested on June 17 a variety of board materials, including a working, bottoms-up financial model for 2022, a budget for 2022, an updated draft plan or budget, and a working copy of Goldman Sachs’ valuation model underlying its fairness opinion. Twitter has provided only a pdf copy of Goldman Sachs’ final Board presentation.“
What could be interesting is that if politics comes into play. Texas‘ attorney general announced on June 6 it will investigate Twitter for potentially misleading on bots. That looks like an out-and-out case of corruption after Musk moved his company to Texas and considering that Texas is not a regulator of Twitter nor is it located there.
If a judge rules against Musk he would owe enormous damages to Twitter, including the difference between the merger price and trading price, plus potential damages. Given that Musk may now go on offense on the very platform he was intending to buy, he could dig himself a hole (if he hasn’t already).
Some have argued Twitter should kick Musk off the platform but their best revenge may be to leave him on there. His social media presence has been divisive and I believe it’s increasingly eroding the Tesla brand.
In any case, buckle up. This will be a better ride that the Model S Plaid.
Here are some details of accusations:
Specifically, in the Merger Agreement, Twitter represented that no documents that Twitter filed with the U.S. Securities and Exchange Commission since January 1, 2022, included any “untrue statement of a material fact” (Section 4.6(a)). Twitter has repeatedly made statements in such filings regarding the portion of its mDAUs that are false or spam, including statements that: “We have performed an internal review of a sample of accounts and estimate that the average of false or spam accounts during the first quarter of 2022 represented fewer than 5% of our mDAU during the quarter,” and “After we determine an account is spam, malicious automation, or fake, we stop counting it in our mDAU, or other related metrics.” Mr. Musk relied on this representation in the Merger Agreement (and Twitter’s numerous public statements regarding false and spam accounts in its publicly filed SEC documents) when agreeing to enter into the Merger Agreement. Mr. Musk has the right to seek rescission of the Merger Agreement in the event these material representations are determined to be false.
Although Twitter has not yet provided complete information to Mr. Musk that would enable him to do a complete and comprehensive review of spam and fake accounts on Twitter’s platform, he has been able to partially and preliminarily analyze the accuracy of Twitter’s disclosure regarding its mDAU. While this analysis remains ongoing, all indications suggest that several of Twitter’s public disclosures regarding its mDAUs are either false or materially misleading. First, although Twitter has consistently represented in securities filings that “fewer than 5%” of its mDAU are false or spam accounts, based on the information provided by Twitter to date, it appears that Twitter is dramatically understating the proportion of spam and false accounts represented in its mDAU count. Preliminary analysis by Mr. Musk’s advisors of the information provided by Twitter to date causes Mr. Musk to strongly believe that the proportion of false and spam accounts included in the reported mDAU count is wildly higher than 5%. Second, Twitter’s disclosure that it ceases to count fake or spam users in its mDAU when it determines that those users are fake appears to be false. Instead, we understand, based on Twitter’s representations during a June 30, 2022 call with us, that Twitter includes accounts that have been suspended—and thus are known to be fake or spam—in its quarterly mDAU count even when it is aware that the suspended accounts were included in mDAU for that quarter. Last, Twitter has represented that it is “continually seeking to improve our ability to estimate the total number of spam accounts and eliminate them from the calculation of our mDAU…” But, Twitter’s process for calculating its mDAU, and the percentage of mDAU comprised of non-monetizable spam accounts, appears to be arbitrary and ad hoc. Disclosing that Twitter has a reasoned process for calculating mDAU when the opposite is true would be false and misleading.What’s going to hurt his own case that is that as early as May 13, he said he was putting the deal on hold — less than three weeks after the April 25 agreement.
This article was written by Adam Button at www.forexlive.com.
Tuesday, July 12
Wednesday, July 13
Thursday, July 14
Friday, July 15
In addition to earnings, next week, the US economic calendar will be highlighted by:
Wednesday, July 13
Thursday , July 14
Friday, July 15
Other key events/data
Monday, July 11
Wednesday, July 13
Thursday, July 14
This article was written by Greg Michalowski at www.forexlive.com.
The price of WTI crude oil is settling at $104.58, up $2.06 or 2.01%.
The low for the day reached $101.54. The high reached $105.21.
A week ago, the price closed the week at $108.48. The low this week reached $95.13 on Wednesday. The high reached $111.42 on Tuesday.
Looking at the hourly chart, the price is settling between the 100 hour MA below at $102.90, and the 200 hour MA above at $106.12. Next week, traders will be looking for a break in either direction to provide the technical directional bias.
The weekly oil inventory data released on Thursday showed a much larger than expected build in inventories of .
Key event next week, Biden heads to Saudi Arabia.
This article was written by Greg Michalowski at www.forexlive.com.
For me, his political instincts were never on better display than in his courting of Donald Trump. In the aftermath of Donald Trump’s surprise election win, many liberal democratic leaders distanced themselves from him due to his unpopularity abroad.
Abe took a different path that proved to be much wiser for his country.
When you looked at Donald Trump’s rhetoric and economic priorities, one of
his main targets was likely to be Japan. They have a large trade surplus with the US, compete with the US in high-tech
manufacturing and the central bank frequently devalued the yen to be more
competitive.
But Abe knew that Trump highly valued personal relationships and could be swayed by them.
Abe didn’t waste any time after Trump was elected. He flew to New York
and gave him a gold-plated golf club and the worked his way to the front
of the line for a diplomatic visit.
Abe used golf and humility to become fast friends with Trump and while Japan wasn’t totally spared of Trump tariffs, he mitigated the damage with the power of his personality. It was a
tour-de-diplomatic-force. In the years that followed many countries would have been better off if they’d followed the same path. It was a clear demonstration of why Abe was at the year top of the list of modern politicians.
This article was written by Adam Button at www.forexlive.com.
I don’t see this report as a particularly meaningful one in terms of how the market might react. The market is struggling with both growth and recession fears. If anything, I’d make the argument that a jobs number closer to zero is ideal because the Fed wants to see some softening in the labor market before pausing rate hikes.
Equally important might be a pair of appearances from the Fed’s Williams, who is in Puerto Rico. He speaks on a roundtable at 8:30 am ET and again at 11 am ET. The latter speech is slated to be on the economic outlook and any hint at slowing the pace of hikes would be market moving.
This article was written by Adam Button at www.forexlive.com.