“It’s not the size of the dog in the fight, it’s the size of the fight in the dog.”
— Mark Twain
Enjoying The QuiCQ but not yet signed up for The Quotedian? What are you waiting for?!!
With the US bond and equity markets closed yesterday, today’s note will be even shorter than usual.
European stocks were somewhat under pressure yesterday, probably mostly on the back of fears of a US intervention in Iran. With another night passing without such an attack happening and Trump stating that he will decide over the next two weeks on Iran, index futures are up a relieved tad this early Friday morning.
Yet, yesterday’s sell-off was broad, with loser on the day outpacing winners by nearly four-to-one in the STOXX 600:
Only energy stocks were able to close meaningfully higher, with larger retreats noted in the higher beta sectors such as technology and consumer discretionary:
Focus yesterday was of course also central bank monetary policy action, with the Swiss National Bank (SNB) for example cutting their key policy rate by 25 basis points to 0.00 (zero). However, as highlighted in yesterday’s QuiCQ, the “whisper number” was that of a 50 bp cut, resulting in some more upside pressure on the Swiss 10-year yield,
and on the Swiss Franc (downside pressure on the intraday USD/CHF chart below):
Expectations for another cut in December was cut in about half to a 50:50 chance,
as SNB President Martin Schlegel said that the central bank will continue to monitor the situation (regards from Trichet…), but also that “we are also aware that negative interest rates do have undesirable side-effects and present challenges for many economic agents.”
However, the truth is, that for Swiss banks, interest rates are already negative again (sigh), as SNB’s "tiered remuneration" system means banks will face negative rates if they hold excess reserves above a certain threshold.
The Bank of England left interest rates unchanged at 4.25%, while Norway’s Norges Bank cut by 25 basis points to that same 4.25% rate.
As I type, Gold has fallen out of this ascending triangle we have been observing and discussing,
tough we need to wait for today’s closing price before jumping to any conclusions.
Though the big down candle in Silver could be a hint for more correction coming:
The price of Brent remains elevated, though it is the natural gas complex that is starting to pull higher too, with US and European gas up 35% and 25% respectively since late April:
That’s all for this week - make sure to enjoy your weekend and tune back in next Monday (Quotedian) and/or Tuesday (QuiCQ)
(US) small cap stocks (IWM) have underperformed their large cap cousins (IWB) by a wide margin over the past few years. Was that just the beginning and the trend will continue as large cap stocks break out of a massive base?
Or is the trend about to mean revert, as a base is found?
Only time will tell … stay tuned!
