Coronavirus outbreak was just an excuse and the worse will be coming to the market?

Vito Corleone (From Wikipedia)
The son of Antonio Andolini.

Don Ciccio had killed Antonio Andolini, and the Don was revenged by Antonio's son. At least, Don Ciccio was right about his future.

Don Ciccio:

...When he grows, he'll grow strong.  ...When he's a man, he'll come for revenge.

As written on the last post, the oil price digged further its bottom at which WTI crude oil contract for May reached in negative territory. Theoretically, the possibility of negative price is anticipated because of the shortage of oil storage. But I thought OPEC+ or US will prevent from the situation being worse.
Some says that hedge funds or speculators sold their holding contracts as the uncertainty of storage availability and its costs ahead.

The Irish Times: What do negative oil prices mean for the prices you pay at the pump?
... The reasons for this are complicated, but essentially for every barrel of oil consumed in the world, 30 are traded. This means that financial institutions and hedge funds are speculating now on the price of oil that will be delivered in May. Contracts for May had to be settled by April 21st, and with a raft of traders left with oil contracts on their hands in the face of extremely low demand, they were forced to offload their contracts at negative prices.

DJIA recovered since the end of March.

While the oil markets tumbled, the global stock markets have recovered since the end of last month. DJIA (Dow Jones Industrial Average) has recovered about 5,000 points (27.0%) though it is still over 6,000 lower than the record high.
Some big economies, including US and Germany, are trying to reopen their businesses as they have been suffering from the lockdown for a month. It maybe a positive sign for the market but the things are not so simple either.

What was the outlook of the financial markets before Coronavirus outbreak? The major stock indices were climbing to the historic high in recent years to decades. No one was thinking the Tokyo Olympic game would be postponed except for some conspiracy theorists.
But on the other hand, PMI numbers in the largest economies have already been in lower territory in which the outlooks were negative. German manufacturing PMI has been well below 50.0 since the beginning of 2019, and the numbers in Eurozone and Japan have been more or less similar to German one, too. UK has been struggling to get Brexit done for 2019 (since 2016). US economy has been relatively stronger than others while its PMI was also in downward trend.
While the stock markets were bullish, the real economies had started slow down even before Coronavirus outbreak. PMI is utilized as a leading indicator to forecast the economic confidence in coming months. As the PMI numbers were below 50.0 in 2019, the recent market crash could have some senses of the adjustment between the market and real economy. Coronavirus just triggered it, perhaps.
By the way, how about today's PMIs? In Eurozone, the manufacturing PMI is 33.6 as of Apr-2020, the lowest since the financial crisis 2008. The composite PMI, overview of service and manufacturing sectors, is overwhelmingly 13.5, the record low.
Reminding it is a leading indicator, the economy is expected to be worse in coming months as the impact of lockdown will be realized in our economies. When it did, we would see something worse in the financial market than the last one in 2008.

When the bubble grows, the bursting impact will grow stronger. When the time comes, it devastates the market and economy.

Coronavirus blasting all the goddamn markets

The Underboss (from Wikipedia)

The Godfather's son was so temper as he killed himself consequently.

Sonny Corleone:

... So why don't he just blast whoever's in the goddamn car?

Since the later last month, the global stock markets overwhelmingly plunged as if we are at verge of a new great recession or so. US's DJIA had the record drop yesterday at nearly 3,000 points. The commodity markets were also down.

While Fed finally set their target rate at around zero, the market reaction was pessimistic. First, the financial policy cannot be a breakthrough against the epidemic. Second, the investors woke up, recognizing how serious of the economic damage. Third, the stock markets were overvalued (Bubble) until Coronavirus outbreak.

Coronavirus brought anxious tension among people in the world where no one is virtually away from the threat of Coronavirus. Once it started spreading into the countries outside of China, the economic and social activities have gradually shrunk. Many events were banned. Bars or nightclubs were closed. Tougher boarder controls. Details of such rules are different between countries, but it continues for a month to a few months at least.

As mentioned in the last post, the airline operators are highly likely at risk because of non essential travel bans. The measure has escalated since then.

BBC: Coronavirus: Europe plans full border closure in virus battle
The European Commission is planning to ban all non-essential travel throughout Europe's Schengen free-travel zone as more countries close their borders to try to limit the spread of coronavirus.

Commission President Ursula von der Leyen said she would ask leaders to implement the measures on Tuesday.

"The less travel, the more we can contain the virus," she said.

FTSE 100
Financial crisis (2007 - 08), down 40% from peak

People are cashing out rather than holding shares, and some goes for panic buying. Even if shelfs in supermarkets become empty, you will see new stocks arrived there next day as far as supply chain works and production of goods continues. In other words, if the supply chain or production were limited or halted as the tougher measure, it could be disastrous. People rush to buy limited stock of foods, hygiene sprays or toilet rolls. Hyperinflation or stagflation could be possible in such situation.

FTSE 100
Last 2 years, down 33% from peak.
Another 10% brings larger dip than financial crisis 2007-08

When it comes to the financial markets, FTSE 100 was at 6,580 on 1-Mar and now marked at 5,217, about 33% down from the peak in last 2 years. During the last financial crisis in 2007-08, FTSE 100 was down by 40% from the peak. Today's market, the index has dropped 33% from the peak in less than a month. It looks just a matter of time until the latest crisis surpasses the one in 2007-08.


In the future when the world finally defeat the Coronavirus threat, financial markets and people's activities would be back in normal manners. But by that time, all the goddamn markets might be blasted in unprecedented scale.

Caporegime says: These things gotta happen every five years or so, ten years.

The Caporegime (from Wikipedia)

The Godfather had many friends with loyalty.

Peter Clemenza:

These things gotta happen every five years or so,... ten years. Helps to get rid of the bad blood. Been ten years since the last one.

In contrast with the consecutive downfalls of global stock prices in last week, it has been on a bumpy ride this week in US market particularly, partially because of Fed rate cut which was unexpected and little explained and Super Tuesday's outcome.

Meanwhile, it is a time to back in reality, isn't it?  After Fed rate cut and Mr.Biden's revival on Super Tuesday, there is no pragmatic solution combating Coronavirus. What is a kind of solution is a vaccine development whose production is expected after months to more than a year. So far, it looks good news are lasting and shadow of bad news ahead.

Flybe, one of the largest regional airlines in Europe, is dragged into administration. Even before the Coronavirus outbreak, Flybe has 40 years of its history and had expected to have a rescue deal to manage the difficult situation. Its employees' jobs are at risk.

China is pushing their business back to normal as much as possible, but the recovery is not enough for global economy. Outbreaks in other parts of the world are spreading faster and faster.
After all, consumers' demands are fading day after day as Coronavirus spread, except for panic buying at some supermarkets. The new James Bond film, which was planned to be released on April, was postponed until November.

The atmosphere surrounding the world is becoming reminiscent of the financial crisis in 2007-2008. The financial crisis 2007-2008 stemmed from credit crunch. The recent financial uncertainty is caused by the fear of epidemic and its economic effects. But the epidemic could not only lead travel industries including Airline companies like Flybe into the dark, but also cause domino effects in other industries, including financial industries.
Airline operators are financed through Structured finance, so called Aviation finance or Aircraft finance. They rise funds in both equity and debt for multi-billion dollars to purchase their Aircrafts to operate. The expected revenue is a source of the repayment and is supposed stable without such pandemics or wars. Reduction of the scheduled flights leads to their revenue cuts. Apart from the basic measures, business insurance or collaterals to avoid delinquency, they may have to cut labor costs. It has started already. (See below)

Sky News: Virus turbulence could give airlines cover to make cuts
Lufthansa, Germany's largest airline and the third-largest in Europe by stock market value, unveiled a cost-saving programme in which it will suspend new hires and offer employees unpaid leave in an attempt to mitigate the financial impact of coronavirus.
...
And it was revealed that KLM, which is the Dutch arm of Air France-KLM, Europe's fifth-largest carrier by market value, is to delay all IT and property projects that have not yet got underway and will be suspending hiring in certain departments.

Even such big names like Lufthansa and KLM struggle due to the Coronavirus outbreak, needless to say that the smaller operators suffer badly. In case that cost cutting is not sufficient, the subordinated debt repayments are first affected and the operator maybe forced into insolvent when senior debt repayments are failed. The insurance companies have to recover the loss, but the pandemic bring such unfortunes for virtually all the airline operators and travel related industries as chain effects. It can be a global credit crunch that we don't know the exact figure yet.

The financial markets have experienced some sharp up and downs for the last 10 years, but they are nothing more than the financial crisis 2007-2008, aren't they?  The Caporegime knows what happens now, perhaps.

Fed emergency rate cut. Coronavirus or Shadow of Mr.Sanders? 3-Mar-2020

Fed overwhelmingly announced 50bps rate cut today soon after the US stock market opened.
DJIA once jumped, reacting to the rate cut, though it stays nearly flat since the market opened. It seems be about the response to the market turmoil due to the Coronavirus crisis. But this sudden announcement is a little weird as such rate cut without anticipation tends to surprise the market, which should be avoided.

While today's news are dominated with Coronavirus, this is the Super Tuesday in US. The latest polls suggest that Mr.Sanders has the best chance to win, who is known of Social Democratic ideology. It can be a weigh on the stock prices shortly even though the likelihood is already priced in.

We'll know it.

Comment on 4-Mar-2020 Morning:

Regarding the current outcome of Super Tuesday, Mr.Biden earning votes remarkably, leaving Mr.Sanders behind. Meanwhile, DJIA future is also gaining, which implies today's opening values will be higher.

Godfather says: I spent my whole life trying not to be careless.

Godfather's discipline is worth not only for mafia nor yakuza but also for investors and traders.

Don Vito Corleone:

I spent my whole life trying not to be careless. Women and children can be careless. But not men.

Since the worst week for global stock markets, investors and traders should have been pessimistic under the market turmoil due to the fear of Covid-19 so called Coronavirus.
As the share price plunged overwhelmingly plunged last week, modest bounce back could have been expected at the beginning of this week. But how many of them could confidently foresee today's market swing, particularly in US markets where DJIA (Dow Jones Industrial Average) shot up above 5.0% in a single day?  There were some positive signs in the markets today, as Bank of Japan and Bank of England ensured their help for the Coronavirus crisis, and Mr.Trump slammed Fed "slow to act". Meanwhile, RBA (Reserve Bank of Australia) will be the first to have the rate decision at 2:30PM on 3-Mar (Local time). Some says that RBA will be forced to cut the rate because of the market turmoil, but US markets closed with huge recovery today and it became unclearer if RBA will cut or keep the rate.

While the markets turned positive today, we didn't get any breakthrough against Coronavirus. For a last few days, we were talking about supply chain problem, travel restriction and economic damage by them. Some says the global GDP could lose a quarter of the forecast even in "mild" scenario whose other scenarios are "modest" and "severe" respectively. The number of cases are now increasing outside of China, including Europe and US as concerned.

As more analysis results came out over the weekend, those mitigated uncertainty of the impact of Coronavirus. But negative outlook looms for coming months possibly beyond 2020. During the financial crisis in 2008, the markets had been down to the bottom on a bumpy ride. It is still likely to see the second round of massive sell-off near future, perhaps in this month again. Who knows?
That's why we have to learn from Godfather's discipline.

Seems little help the financial market as invisible Coronavirus surrounding globally 1-Mar-2020

Since the late last Friday to over the weekend, some good news and bad news are running the world. But as Covid-19 cases continue increasing globally, there is little sign mitigating uncertainty surrounding the societies.

Global stock markets have suffered from massive sell off, which is the worst since the financial crisis in 2008. Although Fed implied their rate cut in March and it recovered the US markets before closing on last Friday, more and more Coronavirus cases are confirmed day after day.

Apart from Coronavirus stories, US and Taliban signed a peace agreement on Staturday, which is a good news in those days. However, it is not good enough news to boost the current grim mood because it is unclear if the agreement actually bring a peace in Afghanistan for coming months. (The Guardian: US and Taliban sign deal to withdraw American troops from Afghanistan)
By the way, the market would little care about another good news of Mr.Boris Johnson's private.

FTSE 100
Financial crisis (2007 - 2008), down 40% from peak.

Traders are keen to the tomorrow's market opening of which Asian & Pacific market is on top. Even though the major global markets are closed, the weekend markets help to anticipate the next market opening.

Hong Kong HS50 (Hong Kong),
DAX 30 (Germany),
FTSE 100 (UK),
DJIA (US)
at IG group respectively.

FTSE 100
Last 2 years, down 16% from peak. Just a beginning perhaps...

Unless any breakthroughs are implemented, this economic stagnation would be just a beginning and it is too soon to hunt cheap shares. Japan's PM Shinzo Abe called unprecedented school closure in nationwide this weekend, and it will be effective from Monday tomorrow. No such announce has been called for workers yet while some parents who have small children are arguing about difficulty to take care of their children during the school closure. If the situation is becoming worse, it could be inevitable for the government to limit the economic activities and it will be certainly a critical damage to the vulnerable economy as Chinese economy is slowing down already.
European countries are also reacting to Coronavirus spreading by emergency measures, such as cancellation of public gatherings or stricter boarder controls. Travel agencies or flight operators must be affected pretty badly.
Of course, United State is not the exception. It just recorded a first death case by Covid-19 this weekend. US stock market has been strongest for last years, but it is not clear how much Fed rate cut could stop further panic in the markets.

Unlike the financial crisis in 2008, the coronavirus does not only crash the financial markets, but possibly cease the most of people's activity. Nobody wants such draconian measures taken in Wuhan, but nobody wants to be infected by Covid-19, either. In short term, people will demand mental care, rather than vaccine which it expects to take more than a year to be supplied.

Watch out Brazilian stock market on Wednesday, for the first opening this week

Global stock markets plunged for the last two consecutive days. While the scale was relatively smaller than yesterday in Asian & Pacific and European markets, US major stock indices have gone down as much as yesterday. DJIA lost about 1,900 points in just two days.

Japanese and Russian markets opened today for the first time in this week because of their bank holiday, and the impact was well priced in for the last Monday when the other markets plummeted. For example,
Nikkei 225 >>  -3.3%.
RTS index >> -5.1%.
Kospi index >> +1.2%.
S&P/ASX 200 >> -1.6%

There is another market being back from the national holidays, Brazilian stock market opening ahead. Tomorrow (Wednesday) is a key for the market opening. While Asian & Pacific markets were relatively mild on Tuesday, US market was devastated again and it could trigger further crash in Asian & Pacific market on Wednesday.(Nikkei 225 future digged 2.4% by last closing.) Then, European markets could follow the negative sentiment as the Covid-19 recently brought anxious mood into Italy and Europe. Unless breakthrough for the corona virus is indicated, the global markets are unlikely to turn optimistic in coming days.

On Thursday when Brazilian stock market finally opens, it is inevitable to face massive loss and it could overshoot like downward spiral as it is the first opening since last week. The scale depends on how the other markets move next 1 or 2 days, but it can go down by 10%.

Japanese and Russian stock markets opening just after the bank holiday 24-Feb-2020

Global stock market plummeted on this Monday as Coronavirus (Covid 19) outbreak severely hit South Korea and Italy over the last weekend. One of the big Asian markets, Japan had a bank holiday this Monday and it is opening in a few hours from this time since the other market dived into the bloodbath. Japan is also facing uncertainty of Coronavirus spreading as increasing number of patients even excluding ones from Diamond Princess. Russia had a bank holiday on this Monday, too.

In the mean time, Japanese index Nikkei 225 futures market has gone down around 4.7%, and the index's opening price is also expected down near by the same level after the fair value adjustment.

Along with the Japanese market, other Asian and Pacific markets are also opening in the near time zone. If the other markets were bouncing back from the last miserable closing, the potential damage on Japanese market could be limited. This Monday, Australia's ASX 200 index has gone down by 2.25% but its future market does not indicate clear relief yet. US market was also bearish, which was the worst in 2 years. Dow Jones Industrial Average has lost more than 1,000 points equivalent to nearly 3.6%.

Sometimes, good news are suddenly coming in, but Asian and Pacific markets could not be optimistic yet, particularly Japanese market.

Here is the list of global stock indexes.

[Asia & Pacific]

(Australia) S&P/ASX 200
(China) SSE Composite Index

(Hong Kong) Hang Seng Index
(India) S&P BSE SENSEX

(Japan) Nikkei 225 Index
(New Zealand) S&P/NZX 50
(S Korea) KOSPI Index

(Singapore) STI Index

[Europe / Middle East]

(France) CAC 40

(Germany) DAX

(Italy) FTSE MIB

(Norway) OSLOStock Exchange All Index

(Russia) RTSI Index

(Saudi Arabia) Tadawul All-Share Index
(Spain) IBEX 35

(Sweden) OMX Stockholm 30
(Switzerland) Swiss Market Index
(UAE) Abu Dhabi Securities Market General Index

(UK) FTSE 100

[Africa]

(Nigeria) Nigerian Stock Exchange All Share Index
(South Africa) FTSE/JSE Africa All Share Index

[North/South America]

(Brazil) IBOVESPA

(Canada) S&P/TSX Composite index

(US) Dow Jones Industrial Average

Japanese Market sleeping for a coming Golden week, USDJPY vs N225

This year, Japanese people have the longest consecutive national holidays for 10 days, and it started today. Tokyo market will have been closed for next week and on Monday in another week after the next. While Japanese stock market is closed, Forex market is opened in the world and the price naturally moves in Japanese Golden week.

As many investors who look at Japanese market know, N225 and USDJPY are positively correlated though the correlation has been relatively lower than before. Still, compared with other markets, for example FTSE100 vs GBPUSD, CAC40 vs EURUSD or DAX vs EURUSD, the two indexes of N225 and USDJPY have always positive correlations for a reasonable time frame (e.g. 1 year).

The point of this Japan's holiday season is how N225 moves on the first business day after the Golden week, 7-May-2019. Let's have a look at the historical correlation between N225 vs USDJPY, whose correlation period is 250 points for each.

[USDJPY and N225 for last 5 years]

[250 days Correlation USDJPY vs N225]

The current correlation (250D) is at around 40%. Whatever this number is considered, it could anticipate N225 after the holidays follows the direction of USDJPY for next week. USDJPY's latest closing is at around 111.60. Japanese investors would hope the market not to be volatile drastically...

The one side correlation seems be particular in Japanese market, and it is not for some other markets. In European markets, the stock indexes and exchange rates are correlated actually, but the correlation moves in positive as well as negative territories.
Look at other examples in European markets, the below figures describe the correlation between FTSE100 vs GBPUSD.

[GBPUSD and FTSE100 for last 5 years]

[250 days Correlation GBPUSD vs FTSE100]

And the correlation between CAC40 vs EURUSD and DAX vs EURUSD. (Correlation figure only)

[250 days Correlation EURUSD vs CAC40 and DAX respectively]

Their latest correlations are positive, but the numbers are varied from time to time more than Japanese market. However, Europeans do not have such Golden week anyway...

Another monetary easing by BoJ? 23-Apr-2016

JPY has been weaken sharply on Friday, where GBPJPY was at around 156.8 at the opening and it closed at around 161.0.
Ahead of BoJ meeting on 27 - 28 next week, according to some local sources, the market consensus expect another monetary easing is possibly released by BoJ, and JPY has fallen as well as the stock index, Nikkei 225 going up. As already mentioned in this Forex Flyer, N225 is actually N225/JPY and N225 going up doesn't always mean the stock is becoming more valuable in particularly in such cases.
It could say this movement is speculation in the short horizon. After the BoJ meeting, if no further policy is introduced, the market can be reversed to strong JPY and the stock market plunged, but again, it would not mean the stock is less valuable.

Nowadays, more and more news are coming up day by day, and Newsensus allow you to read news in more time-efficient way.

Memo [Stock price and Dividend] 29-Mar-2016

Although there is difference between Stock and FX in CFD trading, I prefer to treat both underlyings in same ground.
First of all, let me list main difference between Stock and FX.

[Market opening hours]
Stock: Limited hours between MON and FRI
            LSE: 8:00AM - 4:30PM (LDN time)
            NYSE: 9:30AM - 4:30PM (NY time)
   FX: Whole time between
            SUN 10:00PM (UTC) and FRI 10:00PM (UTC)  (except for world holidays)

[Source of income gain]
Stock: Dividend >= 0
            (Treatment of dividend may be varied in CFD trading according to the brokers)
    FX: Swap
           (It could be profit or loss)

[Frequency of the income gain]
Stock: Annual, Semi-Annual or Quarterly in usual manner
    FX: Daily

In terms of the value sensitivity, Source of income gain is a big difference. Once the value of dividend is withdrawn from the relevant stock, theoretically the stock price should fall according to the dividend. The market do not always behave theoretically, and the stock price is likely to fall beyond the dividend value due to speculation.

Put them in same ground
If you see the FX market, for example GBP/USD means GBP value against USD. In case that GBP/USD is going up, we have two assumptions, "GBP more valuable" or "USD less valuable".

On the other hand, in stock market, in case that FTSE100 is going up, it looks the portfolio of FTSE100 becomes more valuable, or in case that DJA is going up, it looks the portfolio of DJA becomes more valuable. It maybe correct, but the fact to remind is that FTSE100 is quoted in GBP and DJA is quoted in USD respectively.
Now, we see them precisely as FTSE100/GBP and DJA/USD, and FTSE100 going up could mean "The portfolio of FTSE100 becomes more valuable" or "GBP becomes less valuable".
This point of view makes sense for Japanese stock market trend in 2012 - 2013. In those time, JPY value had been down against major currencies and N225 index goes up in JPY. It implies the pure upside on N225 is actually less than the amount in JPY shows.

More things to be mentioned about it, but maybe next time.

British Pound remarkably low against major currencies 25-Feb-2016

Since the beginning of this month, GBP has sharply gone against major currencies such as USD, JPY, AUD or NZD though GBP peaked out in last Autumn of 2015.

Compared with the level at the end of 2015, GBPJPY got the sharpest decline more than 12.0% down, GBPUSD is following down at 6.0%, and even against AUD and NZD, GBP has gone down 5.0% and 3.6% respectively.

Due to the rate cut of AUD and NZD for a last few years, GBP and other currencies have been relatively stringer against AUD and NZD whose interest rates are more stable now than before.
However, even though their rates had been cut, the policy rate in

Australia is still 2.0% and it is 2.5% in New Zealand while the rate in England is only 0.50%. Also looking at the credit rating of sovereign debts of them, S&P rated AAA (stable) for Australia, AA (stable) for New Zealand and AAA (negative) for United Kingdom. Simply thinking, Australia has better credit rating and more interest rate, which of Australian or English debt do you want to invest?

We cannot miss out that global stock markets have been downward and volatile since the beginning of the year. The market shows

some symptoms of financial crisis, particularly strength of JPY and weakness of GBP. Remember Lehman crisis 2008, JPY had been the strongest currency in the market.
What happened in crisis probably happens now again, it is still a question from the view of investment because Japan has S&P rating only A+ (stable) and negative interest rate at -0.1%. Do you want to invest?

2015 was geopolitically unstable year, and 2016 will be economically and (geo)politically unstable due to the volatile market, US president election, Brexit, Spanish goverment, ...


Keep yourself to follow the global economy more efficiently, why not use Newsensus. Available on Google Play.

Global stock market plummeted in massive scale for a last years 9-Feb-2015

Long Time No See.

As most of you already know, the global stock market have plummeted since beginning of 2016, or now we could say it might have started later 2015.

Despite Japanese negative rate introduced by Bank Of Japan, Japanese stock market has gone down, where Nikkei 225 down 5.40% from last closing.

Italian banks have been vulnerable relatively due to concerns over the bad loan.

Financial Times >> Italian finance official expects big interest in banks’ bad loans
That pile of bad loans made the country’s financial institutions especially vulnerable in the recent market sell-off, causing alarm among investors and policymakers. Stocks in Italian banks tumbled last week even after the deal was announced.
The bad loans will not be sold individually under the new plan but will be packaged through securitisation — a market that has been lacklustre in Europe over recent years — and sold to private investors.

Massive quantitative easing and negative interest rate have been carried out by several economic zones. After all, they will have limited choices to stabilize the financial market, and actually loosened financial policy for a last few years could bring massive bounce back into the market once the market is going out of the control.

To check international news, Newsensus is available on Google Play.

Here is the list of global stock indexes.

[Asia & Pacific]

(Australia) S&P/ASX 200
(China) SSE Composite Index

(Hong Kong) Hang Seng Index
(India) S&P BSE SENSEX

(Japan) Nikkei 225 index

(Singapore) STI Index

[Europe / Middle East]

(France) CAC 40

(Germany) DAX

(Italy) FTSE MIB

(Norway) OSLOStock Exchange All Index

(Russia) RTSI Index

(Spain) IBEX 35

(Sweden) OMX Stockholm 30
(UAE) Abu Dhabi Securities Market General Index

(UK) FTSE 100

[Africa]

(South Africa) FTSE/JSE Africa All Share Index

(Nigeria) Nigerian Stock Exchange All Share Index

[North/South America]

(Brazil) IBOVESPA

(Canada) S&P/TSX Composite index

(US) Dow Jones Industrial Average

Credit Default Swap market signals another trend? 26-Sep-2015

Since the beginning of this year, global financial market have been volatile and chaotic in uncertainty of geopolitics and economics. You easily remember Chinese stock market crashed recently, but we have experienced several events from beginning of 2015, which have driven the market.

(Remarkable events in 2015)
 Jan 2015: Swiss Franc Jumped 30% - 40% against Euro, and massively gone up against other currencies.
 Jan 2015: Greek election. SYRIZA lead by Alexis Tsipras became a leading party in Greek government.
 May 2015: UK general election. Although the leading party is Conservative party lead by David Cameron, opposition parties are restructured in larger scale. Labour and Lib-Dem lost certain number of seats, but Scottish National Party (SNP) got more seats.
 Jun - Sep 2015: Chinese stock market have continued going down, and other market including in UK, US and Japan have declined.
 Aug 2015: Chinese yuan (CNY) has been devalued.
 Sep 2015: Refugee crisis got attention. Number of refugees in this year became record high in Germany.
 Sep 2015: Volkswagen's emissions scandal. German car industry could face slowdown.
 Long term trend 2015: Natural resources including crude oil and iron ore, the price continues going down.
 Long term trend 2015: Currency has been weak in emerging market, including BRL, ZAR, MXN, MYR or PHP.
 Long term trend 2015: Currencies of natural resources provider, such as AUD, NZD and CAD has been weak as the interest rate has been lowered.


By the way, today's subject is about Credit Default Swap (=CDS) market. While such events have been occurred since the beginning of 2015, CDS market indicates some sense of another trend.
CDS market might be unfamiliar with some of you, but it is basically measured in credit spread for each entity. When the spread is widen, the market expect the referenced entity is losing its credit. When the spread is tighten, the market expect the entity is getting credit.

Around 2010 - 2012, it was sovereign  bond crisis, particularly Greek bond yield has shot up record high. 10 year Greek bond yield has gone up 25% - 30% at the peak. Since then, the market has been calm down. Compared with that time, the credit market is still stable.

However, CDS spread have been widening in some economic zones since early 2015. For example, Spanish banking industry have been getting wider spread sharply. Spain is facing political uncertainty about discussion of Catalonian independence. A political party, Podemos, could add another shot into the market.
On the other side of the planet, Australian banking industry have been getting wider CDS spread, too. Australian economy highly depends on Chinese demand, and the demand has been slowing down since beginning of this year. Chinese stock market crisis may drive the Australian CDS market further.
American, British, German and Japanese banking industries are relatively tighten.

It may be too soon to say crisis about Chinese stock market crush. It could be just the beginning of chaos.

If you have confidence to change this uncertainty to profit, Forex Signal by QROSS X will help your forex trading.

Global stock market plummeted further on Monday 24-Aug-2015

On 23-Aug (Mon), global stock market has been plummeted in the world, whose scale is from 0.50% to 8.50%.

Daily value changes:

[Asia & Pacific]

(Australia) S&P/ASX 200 >> -4.09%
(China) SSE Composite Index >> -8.49%

(Hong Kong) Hang Seng Index >> -5.17%
(India) S&P BSE SENSEX >> -5.94%

(Japan) Nikkei 225 index >> -4.61%

(Singapore) STI Index >> -4.30%

[Europe / Middle East]

(France) CAC 40 >> -5.35%

(Germany) DAX >> -4.70%

(Italy) FTSE MIB >> -5.96%

(Norway) OSLOStock Exchange All Index >> -5.34%

(Russia) RTSI Index >> -4.94%

(Spain) IBEX 35 >> -5.01%

(Sweden) OMX Stockholm 30 >> -4.50%
(UAE) Abu Dhabi Securities Market General Index >> -0.51%

(UK) FTSE 100 >> -4.67%

[Africa]

(South Africa) FTSE/JSE Africa All Share Index >> -2.85%

(Nigeria) Nigerian Stock Exchange All Share Index >> -2.22%

[North/South America]

(Brazil) IBOVESPA >> -3.03%

(Canada) S&P/TSX Composite index >> -3.12%

(US) Dow Jones Industrial Average >> -3.57%

Asian and European market have been down relatively in larger scale than other economic zones. Abu Dhabi Securities Market General Index got remarkably small impact, and African and American markets are affected in smaller scale.

In addition to major stock market, oil price has declined further. But remarkable one is USDRUB staying near the peak of early this year. Currently, USDRUB is around 70.52.

[USDRUB as of 24-Aug-2015. Source by Trading View]

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Chinese stock market is under necessary adjustment, according to IMF 23-Aug-2015

It has been mentioned in the last post, whether too soon to call the situation as Crisis. Yesterday, IMF said economic slowdown and stock market falling are necessary adjustment.

Reuters >> IMF official says 'premature' to speak of Chinese crisis

China's economic slowdown and a sharp fall in its stock market herald not a crisis but a "necessary" adjustment for the world's second biggest economy, a senior International Monetary Fund official said on Saturday.

Fresh evidence of easing growth in China hammered global stock markets on Friday, driving Wall Street to its steepest one-day drop in nearly four years.

"Monetary policies have been very expansive in recent years and an adjustment is necessary," said Carlo Cottarelli, an IMF executive director representing countries such as Italy and Greece on its board.

"It's totally premature to speak of a crisis in China," he told a press conference.

Even though the stock market has fallen sharply, the stock index, such as SSE Composite Index, is above the level at beginning of 2015. Numeric figure also implies it is premature to say "Crisis".


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Too soon to call it "Crisis"? 22-Aug-2015

SSE Composite Index in CNY and USD

Stock price has steeply gone down in major economic zones in the world, lead by Chinese market, followed by such US, UK, Western Europe, Asia and Pacific.

Without particular events, such as Sub-prime loan crisis or Lehman crisis, the crisis is defined after the stock market crashed into bottom. Although the stock market has plunged sharply, in SSE Composite Index, the current level is still almost same or slightly above the level at the beginning of this year.

This is both in CNY and USD.

S&P/ASX 200 in AUD and USD

It means, even though CNY itself has been devalued this month, the stock index is still higher than the value at beginning of the year.

However, looking at Australian stock index S&P/ASX200, the level is already record low within last 4 - 5 years in USD, while it is still above the level at beginning of 2015 in AUD. This is because of weakness in AUD in last 3 years.

The stock market is highly correlated as realized last October or movement in this month.

CITY A.M. >> Chaos on European markets as FTSE 100 tumbles, while S&P 500 crashes below 2,000 points

There still seems be room where Chinese stock market is going down, the correlation could bring more chaos into other economic zones than China itself.

See Stock indexes for other economic zones.

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Anomaly in Stock market? 9-Jun-2015

Since the end of last month, stock markets have declined in major economies, UK, US or Japan where Nikkei down more than 1.70% of the last closing.

It is some sense of anomaly to bring technical analysis into the stock market. Some of the stock indexes are likely near the peak of long term cycle. Back to Nov-2014, the potential cycle has been observed in FTSE 100 and Dow Jones Industrial Average indexes, and it was introduced in this blog.

Although the stock markets have not crashed critically yet since that time, the recent market is relatively volatile particularly this month. The cycle analysis still indicates the stock index is still near the peak of potential cycle in FTSE 100. Despite the cycle of DJIA not clearly detected, correlation between DJIA and FTSE 100 is more than 80% in last 20 years. Once one of them has crashed due to critical event, another could suffer as if it is like dominoes.

The market cycle is sometimes anomaly, and it means nothing more than mathematics or statistics. But the fact is both of stock market and bond market are relatively volatile in those days.

Stock market driven by interest rate, financial aid is harder in ending than starting

Since central banks in the world have been rushing to cut their interest rates and bring quantitative easing, the trend in such as stock markets is being driven by monetary policy.

In typical scenario, the stock market soars after the interest rate has been cut or quantitative easing has been taken. While this is under the recovery process, counter effect is likely to be caused in the ending process. The counter effect implies stock market vulnerable to rate hike or quantitative easing finished.
In fact, we have seen some examples of the counter effect in US. The market sometimes reacts negatively when released economic indicators are too good as outstanding recovery is thought to lead interest rate hike and current liquidity can be degraded.

Pick up from CNBC >>
"Good news is bad news again," said Gina Martin Adams at Wells Fargo. Adams said there was a quick jump in the Fed Funds futures this morning. "The percentage chance for a June hike went from 18 percent to 25 percent," she said.

February's nonfarm jobs report showed a gain of 295,000, above expectations of 240,000 in February, down from 257,000 in January. The unemployment rate fell to 5.5 percent, while hourly wages ticked up 0.1 percent, below consensus and off the surprise 0.5 percent gain in January.

Today, Bank of England kept the interest rate unchanged at 0.50%. UK economy has recovered, following to US economy. The market is paying attention to when the interest rate is going up and the ending process of financial aid is likely as tough as US.

Ref.
CNBC - US stocks fall sharply on fears of pending rate hikes; Dow below 18K
FT - Bank of England keeps rates and monetary policy on hold


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Stock Market Risk: Correlation and Triple top 26-Nov-2014

In the market crisis, such as Lehman crisis, stock prices have going down simultaneously in global markets. Uncertainty is always related with Correlation.

I. Correlation

You might have wondered that global stock markets are correlated each other. Last month of Oct-2014, stock indices in global market has been steeply declined simultaneously only except for Chinese market, Indian market or a few others. (See the post.)

Statistically, correlation among global stock indices exists. A below table shows correlation matrix among some major stock indices, which has been estimated from last 18 years. (Click to see in large scale)

Elements whose correlation is more than 50% is filled in blue. You see those stock indices are highly correlated each other.

Although each stock index is dominated in each domestic currency and FX effect exists in measuring, the higher correlation implies those stock indices tend to go up or down at the same time.

Statistics tells us that global stock indices seem be highly correlated each other.

II. Triple top

The idea of triple top may not scientific, but it says stock value is going down after the value has reached at top three times. Naysayers will say it is case by case in scaling of chart, how to define the top, ....

However, the most major indices, FTSE 100 and Dow Jones Industrial Average, are described with triple top for last 18 years. Applied trend & momentum fitting, the right figure implies somehow market cycle is observed and the current market seems be near the top of a cycle.

Obviously, this is just statistics and out of fundamentals discussion. But to avoid uncertain disaster, we must keep structure of our own portfolio in mind and restructure as necessary.