Continued Easy Money

The European morning session has been fairly volatile for FX markets, with the euro starting off looking fairly well supported at 1.32 and then falling through the floor on the back of some weak Eurozone economic data. The first blow to the single currency came from Germany where it was reported that the unemployment rate jumped by 19,000 in April and the unemployment rate had been revised up to 6.8% from 6.7% for March, which is where it remained last month. This is the largest increase in German unemployment for three years. Although a German labour market official said the decline could be down to the timing of Easter, it was enough to spook the markets. Not such a two-speed economy? The other blow to hit the market was the fall in the German manufacturing PMI survey to 46.2, the ...

Political uncertainty in Europe weights upon risk appetite; Major European PMI data disappoints Economic Data (EU) ECB: €311M borrowed in overnight loan facility v €335M prior; €775.7B parked in deposit facility v €746.5B prior (FR) France Apr Business Confidence: 95 v 96e; Production Outlook: -14 v -15 prior; Own-Company Production Outlook: -4 v +8 prior (FR) France Apr Preliminary PMI Manufacturing: 47.3 v 47.4e; PMI Services: 46.4 v 50.1e (CH) Swiss M3 Money Supply Y/Y: 6.6 v 6.4% prior (CH) Swiss Q1 Real Estate Index Family Homes: 410.4 v 404.6 prior (NL) Netherlands Apr Producer Confidence: -3.3 v -2.6 prior (DE) Germany Apr Advanced PMI Manufacturing: 46.3 v 49.0e; PMI Services: 52.6 v 52.3e (EU) Euro Zone Apr Advanced PMI Manufacturing: 46.0 v 48.1e; PMI Services: 47.9 v 49.3e; ...

A little more than a year ago, a very successful professional investor declared, “If you don’t own a home, buy one. If you own one home, buy another one, and if you own two homes, buy a third and lend your relatives the money to buy a home.” Since that declaration, house prices have continued drifting lower in most parts of the country. The Case-Shiller index of national home prices is down about 4% year over year. Even so, we’re betting this professional investor was merely early…not wrong. US housing isn’t just cheap; it is the cheapest it has been in more than 40 years. And when one considers the possibility that inflation may rear its head soon, housing looks even cheaper still. If you think we’re crazy, you’re not alone. The housing market is a complete bust right now. The following ...

The Week Ahead Highlights FOMC minutes and US labour market in focus More QE for the UK Spain and other sovereign concerns RBA to hold for now Market Moves FOMC minutes and US labour market in focus The past week has seen a multitude of Fed speakers express their views on the economic outlook and monetary policy. Voting members Bernanke, Lacker, Lockhart, Duke, and Dudley all delivered speeches as well as non-voters Plosser, Fisher, and Rosengren. The main focus was on Chairman Bernanke who reiterated his concern that the economic recovery is "slower than we would have hoped" and that "the job market remains far from normal". The Fed Chairman noted the benefits of continued accommodation and kept open the option for further easing. Markets will look to the release ...

If you're waiting for the next meltdown in U.S. stocks or in commodities, you may want to get over it. After several false dawns following the global financial crisis, more investors are starting to believe the current rally in stocks, commodities and emerging markets could be a long-lasting one. The S&P 500 closed above 1,400 points last week for the first time since the 2008 financial crisis. Investors piled into U.S. equity funds, with the biggest weekly inflows since mid-September. "Is this risk rally for real? I think the answer to that question is yes, but it's not a straight line up," said Art Steinmetz, chief investment officer at Oppenheimer Funds in New York, managing more than $177 billion in assets. Oppenheimer is currently betting on stocks tied to upswings in the economy, ...

(Reuters) - If you're waiting for the next meltdown in U.S. stocks or in commodities, you may want to get over it. After several false dawns following the global financial crisis, more investors are starting to believe the current rally in stocks, commodities and emerging markets could be a long-lasting one. The S&P 500 .SPX closed above 1,400 points last week for the first time since the 2008 financial crisis. Investors piled into U.S. equity funds, with the biggest weekly inflows since mid-September. "Is this risk rally for real? I think the answer to that question is yes, but it's not a straight line up," said Art Steinmetz, chief investment officer at Oppenheimer Funds in New York, managing more than $177 billion in assets. Oppenheimer is currently betting on stocks tied to ...

The Week Ahead Highlights Risk rally looks set to stall Central banks likely to wait and see How low can the yen go? Risk rally looks set to stall The rally in risky assets over the past several weeks has been well supported by better macro data along with an ample supply of liquidity and easy monetary policy from central banks (i.e. BoE QE, ECB 3-year LTRO's, BoJ inflation target and asset purchases, Fed low rate pledge and QE3 speculation, and PBoC RRR cuts). As a result, equities have advanced, the dollar has weakened, and high beta currencies have outperformed (NZD is up nearly +7.01% against the USD year-to-date). This past week risk was further supported heading into the ECB's second 3-yr LTRO operation in which the bank allotted €529.5B to 800 financial institutions. ...

Silver rallied more than 4 percent on Tuesday after it breached key technical resistance and gold prices raced toward $1,800 an ounce a day before the European Central Bank will offer cheap loans to banks. Bullion rose to a three-month high as markets focused on economic uncertainty driven by an upcoming ECB move to offer another half a trillion euros of low interest three-year loans to banks and companies in need of investment funds. Silver hit a five-month high and its rally quickened pace after it broke above recent highs near $35.70, a resistance that had failed to breach several times since September. "Both gold and silver are lifted by an expectation of continued liquidity coming into the market," said Frank McGhee, head precious metals trader at Integrated Brokerage Services LLC. ...

Where we part company with Warren Buffet… Here’s the Sage of Omaha, explaining, in Fortune Magazine, why bonds are dangerous: Investments that are denominated in a given currency include money-market funds, bonds, mortgages, bank deposits, and other instruments. Most of these currency-based investments are thought of as “safe.” In truth they are among the most dangerous of assets. Their beta may be zero, but their risk is huge. Over the past century these instruments have destroyed the purchasing power of investors in many countries, even as these holders continued to receive timely payments of interest and principal. This ugly result, moreover, will forever recur. Governments determine the ultimate value of money, and systemic forces will sometimes cause them to gravitate to policies ...