Monday, September 10, 2012

Today's Major Market Move: Cypriot Stock Market Gains 17% in a Single Day

Being the hardest hit economy in the EU and having seen the biggest decline in benchmark equity index in recent times, Cyprus comes up quite frequently as the subject of our Major Market Move posts. We are going to add to that tally again today where the Cypriot stock market made a staggering one day gain of 17%. That's the equivalent of a 2000+ point move in the DJIA. The next largest gainer was in Greece which could manage a measly 6.1%. Here's the top 10 performing benchmark equity indexes for Monday's session:

Click here to go to the live table.
It was less than 2 weeks ago when we featured the Cypriot stock market in our Major Market Move post for having a monthly gain of 21%. If a trader is looking for volatility, Cyprus is the place to go. However even with today's huge one day gain, stocks there still have a lot of ground to make up. Here's the year to date chart of the benchmark General Market CSE Index:

Click here to go to the live chart.

Saturday, September 8, 2012

Today's Major Market Move: Belizean Dollar Weakens 4.2% Against US Dollar for the Week

The Belizean Dollar, which is officially pegged to the US Dollar at 2:1, had in fact been gradually strengthening over the course of 2012. The USDBZD cross got as high as 1.88 in recent weeks.

Click here to go to the live chart.
The difficulty in maintaining the peg and the wild gyrations at the right edge of the chart are the result of this news tidbit (courtesy of the Financial Post):
Belize is offering bondholders 20 cents on the dollar in a debt restructuring, worse than what Argentina gave creditors following its 2001 default, according to Bank of Nova Scotia and Citigroup Inc.
What is ironic is that in the face of the debt restructuring, the currency had been strengthening. Then the recent news of the low bond offer has caused some wild fluctuations and the 4.2% drop over the past week. We unfortunately don't have a Belizean equity index we're tracking. It would be interesting to also observe how stocks are performing during this tumultuous period.

Sunday, September 2, 2012

Today's Major Market Move: Hungarian Forint Strengthens 7% Against US Dollar Year to Date

It's been a volatile year for the Hungarian Forint as well as for the currencies of many of the "fringe" EU countries (look here for a post where we mention the full list of fringe EU countries). 2012 started off very optimistically when the USDHUF cross dropped by 11% in the first 2 months. Then Europe hit a rough patch in May and the Forint quickly gave up all that ground and then some. Now the currency has reversed course once again and is back on a strengthening trend. Here's the line chart of the USDHUF cross in percentage terms going back to January 1st:

Click here to go to the live chart.

After all of the gyrations, the Forint currently stands as the second best performing currency in 2012 (6.9%), just after the Chilean Peso (7.2%). Here's the top ten strengthening currencies relative to the US Dollar in 2012:

Click here to go to the live table.
The Hungarian Central bank took advantage of the recent improvement in the currency by cutting rates by a quarter point on August 28th. This is the cause of the mini-correction on the right edge of the first chart when the USDHUF dropped from 9% to 6% over a couple of days. Here are some more details on the cut courtesy of the Financial Times:
In its statement, the monetary policy council conceded that inflation was running above target due to higher than expected food and fuel prices, and tax increases. But with the economy weakening and “technically in recession” after contracting in each of the first two quarters of 2012, domestic demand is likely to fall further. 
If we check on Hungarian equities, we don't see any obvious indications of trouble ahead. Like the Forint, the Hungarian stock market has been improving (albeit in a choppy fashion) since the beginning of June. The central bank of Hungary must be seeing some signs of rough sailing ahead that don't appear to be obvious to the rest of the markets. Here's the line chart of the benchmark Hungarian Traded Index in percentage terms for 2012:

Click here to go to the live chart.

Friday, August 31, 2012

Today's Major Market Move: Cocoa Futures Gain Close to 9% for the Week

It's been an up week for most commodities with 22 out of the 27 front month commodity futures that we track in positive territory. The top gainer since last Sunday has been cocoa futures which have posted an 8.9% gain.

Click here to go to the live table.
This week's move has pushed front month cocoa futures to a new high in 2012 however prices are still well below the high reached in the year prior.

Click here to go to the live chart.
The last time we wrote about cocoa futures was near the 2011 lows back in December and prices have been stuck in a channel since then, until this week. According to this blurb from Bloomberg (Bloomblurb? Blurbberg?), anticipated lower output from the Ivory Coast is one motivating factor for the current move.

Wednesday, August 29, 2012

Today's Major Market Move: Cypriot Stocks Down 21% Month to Date

While the rest of Europe appears to be stabilizing (at least as far as the stock markets are concerned), Cyprus remains the odd man out. Stock markets across Europe have seen decent gains for the month of August while Cypriot equities have gotten hammered to the tune of a 21% decline. Even Cyprus' typically conjoined twin Greece has managed to break the correlation (for this month at least) with Greek stocks gaining 6.8%. Here's the bottom 10 performing benchmark equity indexes for the month of August:

Click here to go to the live table.
This is a warning for those with squeemish stomachs or heart problems, this next chart is not pretty. Here we have  the General Market Index CSE (Cypriot benchmark equity index) going back to the beginning of 2011. It's reached yet another new low.

Click here to go to the live chart.
We expect that this news regarding continued losses by Cyprus' largest bank has contributed to the most recent decline (courtesy of Bloomberg):

Bank of Cyprus Pcl, the island’s largest lender, said its first-half loss widened by 25 percent after increasing provisions for bad loans and reducing the value of Greek government bonds.

The net loss in the six months to June 30 widened to 134 million euros ($167.5 million) from a loss of 107 million euros in the same period of 2011, according to an e-mailed statement today from the Nicosia-based lender.

Bank of Cyprus, which sought aid from the Cypriot government in June to meet capital requirements, said the capital shortfall was defined by the European Banking Association on June 30 at about 730 million euros. 
It appears that a scapegoat for the bank's poor performance has been found (ht to
Bank of Cyprus announces that the Chairman of the Board of Directors, Mr Theodoros Aristodemou, has submitted today his resignation from the position of Chairman and member of the Board of Directors of Bank of Cyprus.

Monday, August 27, 2012

Today's Major Market Move: OJ Furtures Decline 3.5% in Today's Session

It was rough day in the commodities complex today (at least for the longs) with 22 out of 29 front month commodity futures contracts in negative territory. The biggest decline was seen in FCOJ futures which dropped 3.5%, followed by natural gas and oat futures which both experienced a 3.2% decline. Here's the list of the top 10 decliners in Monday's session:

Click here to go to the live table.
We wrote about the remarkable spike and subsequent retrace in FCOJ futures back in April. The market got way out in front of itself on the initial reports of the possible ban of Brazilian imports, and the momentum of the retrace has pushed the prices another 23% lower from where they were in April.
Click here to go to the live chart.

Prices remain at depressed levels despite this being the middle of hurricane season which by most accounts runs in the US from June 1st to November 30th.

Saturday, August 25, 2012

Today's Major Market Move: Egyptian Stock Market Up 44% for the Year

The Egyptian stock market continues to digest the prospects for growth in Mubarak-less future, the sentiment over the last two months has been decidedly positive. The benchmark EGX 30 Index, after a nice rebound over the past 2 months, is now up 44% for the year.

Click here to go to the live chart.
The Egyptian economy is in the process of recovering from the regime change and associated turmoil that occurred in the first half of last year. Egypt possessed one of the worst performing equity markets in 2011 so even with a strong 2011, investors have a lot of ground to make up. Much of the market's current optimism hangs on successful completion of an IMF loan agreement. Discussions have been going on since January and an agreement won't be finalized until at least November, but the latest reports have had a positive tone (courtesy of
 On August 22, Christine Lagarde, the IMF's managing director, was in Cairo where she met with President Mohamed Morsi and other Egyptian government officials.  At the end of her meetings, she announced that the new government has officially requested an IMF program and that the Fund will respond as quickly as possible to this request.  A Fund mission will visit Cairo in September to hold discussions, and the parties plan to reach agreement in November.
The Egyptian pound has remained stable throughout 2012 but we know that the Egyptian central bank has been an active participant in the currency markets to bolster their currency (the following chart shows the EGX 30 Index alongside the USD / Egyptian pound cross in % terms):

Click here to go to the live chart.
We were unable to locate a resource to indicate how much existing firepower (foreign reserves) the central bank had remaining in their battle to support the pound but one thing we know for sure is that it is a finite amount.

Thursday, August 23, 2012

Today's Major Market Move: UK 2 Year Bond Yield Doubles in August

At first glimpse it appeared that the BOE may be making some progress in the current war against deflation. The 2 year gilt yield has doubled from .08 to .16 month-to-date. The 1 year has also doubled (from .11 to .22) and the 3 year yield has increased from .14 to .21. Here's the chart of the short end of the UK bond yield curve for the month of August:

Click here to go to the live chart.
The BOE may not hold the territory gained for long however. The 2 and 3 year durations have already reverted course and the 3 and 6 month durations have remained flat. If we look at yield curve in its entirety and expand our time window out to the beginning of the year, the current yield increases in the short end don't look like much more than noise.

Click here to go to the live chart.
The discussion in the UK continues to revolve around excessive debt both, public and private. Case in point is this Aug 23rd Financial Times article:
That said, there is a risk that a wider point on the eurozone is being missed. This recession is all about debt. And there is an important lesson to be gleaned from Japan, whose supposedly dismal economic performance over the past two decades is beginning to look rather good in the light of current events. It is that the way to stave off slump is to have a supportive global economic backdrop that allows the export sector to drive the economy while domestic demand is deficient. That is just what the UK and other heavily indebted countries do not have, as the eurozone looks set to topple back into recession.
What also emerges clearly from the numbers on the UK economy this year is the tortuous and protracted nature of any recovery in which both government and households need to bring down debt – deleverage, in the jargon. This applies across much of the developed world. The Bank for International Settlements, the central bankers’ bank, reckons that in most advanced economies, the fiscal budget excluding interest payments would need 20 consecutive years of surpluses exceeding 2 per cent of gross domestic product just to bring the debt-to-GDP ratio back to its pre-crisis level
Talk of reducing debt, either through default or the lengthy process of paying it down, is the hallmark of a deflationary period. Minor fluctuations aside, we anticipate rates in the UK and many other locales to be low for some time to come.

Tuesday, August 21, 2012

Today's Major Market Move: Vietnamese Stock Market Drops 4.7% in Tuesday's Session

The top declining benchmark equity index in Tuesday's session was Vietnam's Ho Chi Minh Stock Index which fell 4.7% on the day. It was by far the worst performer with the Mongolian stock market coming in second-to-last with a 1.5% decline. Here's the bottom ten performing benchmark equity indexes for the day:

Click here to go to the live table.
After a strong beginning to 2012, Vietnamese equities have struggled going into the second half of the year. They've gone from being up close to 40% since January to now only being up a little over 15%.

Click here to go to the live chart.
This recent downturn was sparked by the arrest of one of Vietnam's wealthiest banking tycoons. Here are some details courtesy of and Xinhua news agency:
Xinhua news agency reports the 48-year-old cofounder of Asia Commercial Bank (ACB), one of Vietnam's biggest lenders, was taken into custody on Monday after police raided his residence in capital Hanoi and seized documents.

Information about Kien's arrest caused the country's stock market to tumble and sparked concerns about the operations of several local banks, where he reportedly held shares including ACB, where he once served as vice chairman of the board.

On Tuesday, right after local media reported of the arrest, both Ho Chi Minh City Stock Exchange (HOSE) and Hanoi Stock Exchange (HNX) saw their Vn-Index and HNX-Index tumble 5 percent on average.

Monday, August 13, 2012

Today's Major Market Move: Oat Futures Decline 3.5% in Monday's Session

On Monday Grain commodities took a short reprieve from their drought related run up. Oat futures were the biggest decliner in the commodities complex with a one day 3.5% drop while wheat (CBT) and soybean front month futures contracts also dropped (2.2% and 3% respectively). Here's the top 10 commodity decliners for Monday's session:

Click here to go to the live table.
Due primarily to the drought in the midwestern U.S., Grain prices have made strong gains in 2012. The gains are even more pronounced if makes the comparison to from now until mid-June. Here's the front month futures contract chart for corn, soybeans, oats and wheat:

Click here to go to the live chart.
While not quite reaching the top spot in the record books (yet), this drought is still severe enough to get into the top 3 droughts experienced in the U.S. over the last 100 years (exceeded only by the 1930s and 1988). Conditions aren't expected to improve over the coming weeks according to this article on Bloomberg:
A large part of the Midwest will be drier than normal through the end of the month even with the rain and lower temperatures, said Joel Widenor, co-founder of Commodity Weather Group LLC in Bethesda, Maryland. He said time may be running out for soybean yields.
“Once you get past the end of the 10-day forecast the soybean crop will be too far along in most areas to benefit from rain as far as yield potential goes,” Widenor said.

Saturday, August 11, 2012

Today's Major Market Move: Seychellois Rupee Strengthens 8% Against Dollar in Past Week

The Seychellois Rupee looked like it was on the verge of joining the likes of Myanmar, Syria and Malawi on the list of countries with severely devalued currencies in 2012. But after an 8% decline in the Seychellois Rupee / US Dollar cross in the middle of July and another 8% decline this past week, it looks like the Rupee will avoid that fate for now.

Click here to go to the live chart.
Here's the reason for the dramatic turnaround in the middle of July (courtesy of Reuters):
Seychelles' central bank will intervene in the foreign exchange market to curb excess volatility which pushes up inflation, the Indian Ocean archipelago's central bank governor said on Thursday.

"The Central Bank has decided to intervene in the foreign exchange market order to smooth out the excess volatility, and to provide orderly market conditions as well as reduce eliminate any speculative element," Caroline Abel said in the capital Victoria.
Abel said the Seychelles' rupee had depreciated by 14.5 percent against the dollar and by 6.9 percent against the euro since the beginning of the year.
"The Central Bank is very concerned about the rapid depreciation of the domestic currency, particularly in recent weeks, given that it is translated into higher inflation," Abel said.
So far the central bank's efforts are succeeding and have almost drivem the USDSCR back down to the level of the peg that was being maintained up until September of last year (below is the same chart as above but with the time window extended back to the beginning of 2011).

Click here to go to the live chart.
Switzerland, Japan, Brazil, Colombia and Syria are some of the countries who have taken a crack at currency intervention in the recent past. The majority of interventions that have taken place in recent times have had the goal of weakening a currency. A central bank (theoretically) has an unlimited ability to do so. Strengthening a currency is a much more difficult proposition with the government and central bank possessing only a finite amount of firepower (foreign currency reserves). The market knows that if it can drive the intervening entity to the end of its fiscal rope, the value of the currency will inevitably tank.

Thursday, August 9, 2012

Today's Major Market Move: Polish Stock Market Gains 4.5% in August

Global equity markets have performed well in the first third of August with 66 out of 91 (73%) benchmark equity indexes in positive territory. One of the stock markets near the top of the list is Poland's, which has gained 4.5% month to date. The momentum generated by the ECB's stimulative comments on July 26th continues to propel many European equity markets. Here's a list of the top 10 performing benchmark equity indexes for the month of August:

Click here to go to the live table.
Polish equities are nearing their highs for 2012 but still sit 12% below where they were at the beginning of 2011.

Click here to go to the live chart.
Going back to before the 2008 crisis, Polish equities have held up rather well, relatively speaking. When compared to the major economies of the EU, only the German Stock market has held up better.

Click here to go to the live chart.
To be fair to the members of the Eurozone, the resilience of Polish equities has come at the expense of the Zloty. In fact the USDPLN cross and the WSE WIG Index are practically exact mirror images of each other going back to November of 2010 (when we first started tracking currency data).

Click here to go to the live chart.

Tuesday, August 7, 2012

Today's Major Market Move: Brent Crude Oil Futures Up 2.9% Week to Date

In a sign of the times, a false twitter rumor on Monday about the death of Syrian president Bashar Al Assad caused a spike in many energy related commodities, including Brent and WTI oil futures. Even after the rumor was dispelled, the momentum carried over to today where energy based commodities continued to gain. Brent Crude front month contracts are now up 2.9% for the week and WTI Crude now sits at $93.25/barrel after gaining 2.3%. Here's the top 10 performers in the commodities space week to date:

Click here to go to the live table.
This article on provides some additional details as well as a timeline surrounding the 'embellished' tweet.
The market was quick to respond. Just 16 minutes after the first tweet, futures for light, sweet crude started to increase, topping out at $91.99 a barrel by 10:45 a.m.

“A well-placed story can move the market, and that looks like what happened,” Price Futures Group Analyst Phil Flynn told The Wall Street Journal.

Oil prices closed at $92.20 on the New York Merchantile Exchange. According to WSJ, it’s the highest settlement price since July 19.
Here's a line chart of Natgas, Brent and WTI futures at 15 minute granularity going back to Sunday evening. The impact of the rumor hits about 1/3 of the way into Monday the 6th. Interestingly, the price gains in WTI and Brent were higher today then they were yesterday.

Click here to go to the live chart.
These types of shenanigans are the last thing that the ECB and the Fed need right now. Many global equity markets are in the midst of a nice little uptrend right now, thanks in large part to the perception that the ECB's printing press is all warmed up and ready to go. We've long held the opinion that the primary metric that gives central banks pause when considering additional liquidity is the price of oil. Brent over 120 and/or WTI over 100 seems to be (roughly) the border of the danger zone.

Sunday, August 5, 2012

Today's Major Market Move: Sudanese Dinar Weakens by 65% in July

The latest currency to experience an overnight devaluation in 2012 is the Sudanese Dinar. The other victims so far this year have included the Myanmarese Khat, Malawian Kwacha and the Syrian Pound. Sudanese officials decided to weaken the official which resulted in an overnight rise in the US Dollar / Sudanese Dinar cross of 65%. This change didn't show up in our data provider until August but the event actually took place in early July.

Click here to go to the live chart.
This event moves the Dinar up to third place in the dubious list of worst performing currencies in 2012. Here's the bottom 10:

Click here to go to the live table.
As is almost always the case, the official recognition of a currency's lower value lags well behind market recognition. Here are some more details from a Reuters article:
The pound's street value has dropped since South Sudan seceded a year ago, depriving Sudan of three quarters of its oil output as well as its main source of state revenue and foreign currency.
The Sudanese currency is still significantly overvalued - a dollar bought between 6 pounds and 6.10 pounds (Pikefin note: divide the rates listed in the above table by 100 for comparison) on the black market on July 19, close to a historic low of 6.20 reached in May - and further devaluation could be on the cards.

Friday, August 3, 2012

Today's Major Market Move: 4 Year German Bond Yield Surges 12 Basis Points in Today's Session

Lately we've been keeping an eye on the German 4 year, expecting it to be the next sovereign bond yield to fall into negative territory. The day of that eventuality was pushed back by today's action as the 4 year yield went from .07 to .19. We saw "eventuality" since we feel confident it will happen based off of recent action. We put very little credence in technical analysis but the chart shows a fairly consistent declining trend and it at these levels, it should only take one or two significantly negative economic developments, in either Europe or the U.S., to push it below zero.

Click here to go to the live chart.

The yield recently got as low as .04 and at the beginning of July it plummeted more than 20 basis points in the span of a week. So the zero level remains well within striking range and it may take less than a month to get there.

While many German and UK sovereign bond durations were being sold off hard, equities, particularly European equity indexes, were having a banner day. Here's the top 10 top performing benchmark equity indexes in today's session:

Click here to go to the live table.
And here's the primary reason for all of this "risk-on" activity (courtesy of the FT):
Stock markets rallied sharply on Friday as Spain responded to a conditional offer of intervention from the European Central Bank by signalling it would consider seeking a sovereign bailout. 
European and US equities gained while the borrowing costs of Spain and Italy fell. Those “exceptionally high” bond yields had prompted the ECB to say on Thursday it was devising a plan to buy bonds – but only if the affected countries applied to Europe’s rescue funds first.
Our friends at the ECB are back making waves however we would suggest that they be judicious with their tape-bombs, what with brent well over the $100 level and in the midst of an upward trend:

Click here to go to the live chart.

Wednesday, August 1, 2012

Today's Major Market Move: Turkish Stock Market Up 25% Year to Date

While the EU has been the one to drag its heels in bringing Turkey into the fold, maybe Turkey is the one who should be expressing reluctance in joining into a partnership with a bunch of economic basket cases. Turkey's economy has held up extremely well over the past 5 years of turbulence. When comparing Turkey's stock market to the major players in the EU, Turkey comes across as a model of growth. The benchmark Turkish equity index, the ISE National 100 Index, is up 25% so far in 2012. Here's how it stacks up against the stock markets of Germany, France, Spain and Italy:

Click here to go to the live chart.
If we broaden the time horizon to reach back to 2007 before the beginning of the crisis, the disparity gets even larger:

Click here to go to the live chart.

Now to be fair, we need to check on the performance of the currencies to see if the Turkish authorities artificially juiced growth through currency devaluation. Unfortunately we only have currency data going back to Nov 2010 (if anyone knows of an online source of historical currency data, we'd very much appreciate hearing about it).

Click here to go to the live chart.

The Turkish Lira has weakened a "not insignificant" 30% over the past 21 months. By comparison, the Euro has gone through its own bout of devaluation, albeit half of what the Lira has experienced. Yahoo does have data for the crosses going back to mid 2007 which changes the amounts to 40% and 10% devaluation (vs. the USD) respectively.

Click here to go to the chart on Yahoo.

The take away from all this is that the differential in normalized growth between Turkey and the rest of Europe is not as significant as initially indicated, but there's still a gap of roughly 25% growth between Turkey and the 4 European majors combined.

Monday, July 30, 2012

Today's Major Market Move: Chinese Shanghai SE B Share Index Drops 8.3% Week to Date

At the time of writing this post, the Chinese stock market has not even completed it's 2nd day of trading for the week and already the Shanghai SE B Share Index is down 8.3%. Most of China's other equity indexes are down as well but not to the same extent as the SE B Share Index. Here's the top 10 declining equity indexes for the week so far:

Click here to go to the live table.
What is particularly disconcerting for investors in Chinese equities is that several Chinese equity indexes have broken down to new lows not seen since 2009, including the benchmark Shanghai SE Composite Index.

Click here to go to the live chart.
While we're on the subject of China, let's take a look at what the Chinese authorities have been doing with the Yuan.

Click here to go to the live chart.
There's been a slight amount of devaluation in 2012 but not enough it appears to rankle the politicians. The number of references to China and the Yuan by the competing campaigns appears to have dropped way off over the last couple of months. We think this next chart is also a big part of why that is:

Click here to go to the live chart.

Saturday, July 28, 2012

Today's Major Market Move: Cypriot Stock Market Drops 13.6% This Past Week

Despite the best efforts of central bankers, the European crisis continues to drive markets to lower lows. One of the recent victims is the Cypriot Equity market, which received zero boost from the Draghi statement earlier in the week and as a result touched a new low on Thursday. Here's the chart of the benchmark Cypriot equity index for the past 2 months at 15 minute granularity:

Click here to go to the live chart.
For the entire week the Cypriot stock market was down well over 13%, making it worst performer over that time frame. Greek equities, which tend to track Cyprus' fairly closely, were down a little over half that amount. Here's the bottom 10 performing benchmark equity indexes going back one week:

Click here to go to the live table.
The Cypriot economy has suffered mightily during the global economic crisis, particularly during the second wave that started in November of 2009. Cypriot equities are down over 93% since then, the worst on the planet. Surprisingly, unlike many of its European cohorts, Cyprus has yet to receive a bailout from the EU/IMF/ECB triumvirate (although they were granted a 2.5 billion Euro low-interest loan from Russia). However that fact will soon change as Cypriot authorities are currently in the process of negotiating a troika-supplied bailout. Here's more from
Cyprus last month became the fifth country to seek financial support from its Eurozone partners. It needs at least 2.8 billion euros (Dh12.5 billion) to recapitalise its banking sector, which took heavy losses on Greek debt.
The country's 18 billion-euro economy is projected to shrink by 1.5 per cent of gross domestic product this year before returning to marginal growth in 2013.
Credit ratings agency Standard & Poor's estimates Cyprus' bailout needs to amount to as much as 15 billion euros over three years.

Thursday, July 26, 2012

Today's Major Market Move: Spain's Stock Market Up Over 6% in Thursday's Session

In Tuesday's post we indicated that we were expecting some type of activity to come out of the ECB in the near future. Today (a mere two days into the future), we received the following announcement from Mario Draghi, head of the ECB (quote courtesy of Bloomberg):
“Within our mandate, the ECB is ready to do whatever it takes to preserve the euro,” Draghi said during a speech in London today. “And believe me, it will be enough.”
Sometimes words speak louder than action. Draghi's statement kicked off a fury of short covering in European equities and the main beneficiary was the Spanish stock market which gained 6.1% on the day. Here's the top 10 performing benchmark equity indexes in today's session:

Click here to go to the live table.
What we find odd is the market reaction to oil and the Euro. Oil was up a disproportionate .5% and the Euro actually strengthened 1.2% against the Dollar. Apparently the thought process being that the stabilizing effect of the ECB printing Euros to soak up PIIGS bonds is going to outweigh the inflationary impacts. If Draghi's statement carries any truth and is more than just bluster, it means that Germany has completely caved. However we would not be surprised that the country with the most detailed plans for leaving the Euro, and very well might be the first one to do so, is also Germany.

Speaking of Germany, there has been a slight rally in the short end of the Bund yield curve that actually started a few days before today's announcement. Here's the current state of German bonds where now only 2 durations have negative yields (oh, and the 3 month is at zero).

Click here to go to the live table.

Wednesday, July 25, 2012

Today's Major Market Move: Spanish Stock Market Drops Over 30% Year to Date

The economic situation in Europe is the crisis that keeps on giving. Despite multiple bailouts and central bank interventions, conditions continue to deteriorate, the latest example being the Spanish stock market hitting a new swing low on Tuesday. The benchmark Ibex 35 Index is down over 30% for the year and has dropped below the floor set by the bailout at the end of May.

Click here to go to the live chart.
If we expand over view back to before the 2008 crisis, the view isn't much prettier.

Click here to go to the live chart.
With Spanish stocks plumbing new lows, we go on alert for central bank intervention. However lets check on the Euro and oil prices in order to gauge how much room for action the ECB has.

Click here to go to the live chart.
The Euro has been on a steady weakening trend since the end of April, having declined in value by over 9% against the US dollar. And now here's Brent front month contracts:

Brent is well off the highs we saw earlier in the year although it has seen a decent pop over the last month. The cost of gas in real terms for Europeans is less now then it was back in Feb/March so we think the ECB is going to act, more than likely within the next week and a half. The economic environment has entered into the realm of the surreal, with several German Bund denominations in negative territory. The battle for Spain may already be lost but we feel that the ECB is not going to sit by and watch the same thing happen to Italy, who happens to have a debt level 140% larger and a gdp 50% larger when compared to Spain's.

Tuesday, July 24, 2012

Extend the Standard Day by 6 More Hours...

Or alter our intended posting schedule; those are our 2 options in an attempt to provide a more regular posting rhythm. We began with every day posts but then as the work on the main site grew we found we had to cut back on the blog. We thought we could handle a Mon-Fri posting schedule but that also proved to be too challenging to maintain. So in an attempt to find a schedule that we can stick to, we are going to cut it down once again, this time to every other day. We're hoping this will give us the appropriate workload balance between the blog and expanding the data collection/analytical capabilities of the main site.

Friday, July 20, 2012

Today's Major Market Move: Dean Foods (ticker: DF) Declines 28% Month to Date

After a stellar first half to 2012 in which the stock gained over 50%, Dean Foods (ticker: DF) is finding the 2nd half of the year less palatable. The stock is down over 28% for the month, having given back a large portion of its over the previous 6 months.

Click here to go to the live chart.
The 28% monthly decline makes it the 2nd worst performer in the S&P 500 month to date. Here's the bottom 10:

Click here to go to the live table.
It appears that the cause for DF's plummeting stock price is the same as the one driving Lean Hogs futures lower (which we wrote about for Wednesday's post): higher grain prices. Here's some commentary from an analyst at BMO Capital Markets after he lowered his rating on DF this past Monday:
In a client note, the analyst said that the unusually warm weather and escalating feed costs are pushing raw milk prices higher at a quicker-than-expected pace.

There is also concern that Supervalu Inc.'s decision to be more aggressive to lower prices will see other supermarket operators do the same. Sharma says this makes it more likely that there will be more milk promotions.

The analyst reaffirmed a $16 price target.

Here's a chart of DF alongside Cattle Feeder front month futures contracts for the past 12 months. The correlation isn't tight but as cattle feed prices declined over  the past month, we see how DF sharply reversed its upward trend.

Click here to go to the live chart.