Financial Market Report for the week ending October 26, 2012
1) … Earnings, Europe pummel the markets, and China’s stocks decline most in five weeks on earnings concerns, and Korea’s growth slows as global cooling caps export demand
On Tuesday, Breakout reports The stock market got smacked as the third quarter earnings season continues to come in even worse than expected. From high tech darlings the selling has moved into Blue Chips often sold as safe alternatives. Gold hits 6-week low as equities weaken, dollar firms; and Oil price below $88 on global growth concerns.
World Stocks, ACWI, traded lower again from their September 14, 2012 high, led by Russia, RSX, Poland, EPOL, Austria, EWO, Norway, NORW, Sweden, EWD, Canada, EWC, Mexico, EWW, Switzerland, EWL, Brazil, EWZ, Taiwan, EWT, and the Emerging Markets, EEM, traded lower, as Germany, EWG, Spain, EWP, and Italy, EWI, led Europe, VGK, lower, reflecting the failure of neoliberal finance, specifically the inability of the world central banks to stimulate global economic growth.
Deutsche Bank, DB, and Banco Santander, STD, led European Financials, EUFN, and World Banks, IXG, lower.
Argentina Banks, GGAL, BBVA, BFR, led Argentina, ARGT, lower.
The high yielding, that is 5% yielding Brazil Financials, BRAF, led Brazil, EWZ, lower.
Copper Miners, COPX, Energy, XLE, Energy Service, OIH, IEZ, Steel, SLX, Metal Manufacturing, XME, Materials, IYM, Small Cap Materials, PSCM, Silver Miners, SIL, Junior Gold Miners, GDXJ, Rare Earth Miners, REMX, Small Cap Energy, PSCE, Smart Grid, GRID, traded lower. Semiconductors, XSD, which had traded sharply lower since September 14, 2012, bounced slightly higher. Networking, IGN, and Cloud Computing, SKYY, are leading the Nasdaq 100, QTEC, lower as is seen in this ongoing Yahoo Finance chart of IGN, SKYY and IGN. Google, GOOG, and Amazon, AMZN, are leading the Internet Retailers, FDN, lower. Nanotechnology, PXN, is leading Technology, MTK, lower. Biotechnology, XBI, IBB, fell sharply.
General Motors, GM, and American Axle, AXL, fell sharply lower.
On Friday, Dean Food, DF, fell sharply leading food processors, seen in this Finviz Screener, lower.
Dynamic Media, PBS, traded lower, after Bloomberg reports New York Times Co plunges -17% after reporting surprise loss. “A very disappointing third quarter,” Douglas Arthur, an analyst with Evercore Partners Inc. said in an interview of NYT. “Very weak advertising and higher costs than expected,” said Arthur, who has rated the stock the equivalent of buy since August 2010.
Bloomberg reports China’s stocks decline most in five weeks on earnings concerns. China’s stocks fell, CAF, FXI, HAO, CHII, CHIM, CHIQ, CHXX, CHIX, TAO, as is seen in this ongoing Yahoo Finance Chart of CAF, FXI, HAO, CHII, CHIM, CHIQ, CHXX, CHIX and TAO, dragging the benchmark index down the most in five weeks, as companies from Maanshan Iron & Steel (323) Co. to ZTE Corp. reported losses. The market is still worried about the magnitude of the economic recovery and deterioration of corporate earnings,” said Wu Kan, a fund manager at Dazhong Insurance Co. in Shanghai.
Bloomberg reports Korea’s growth slows as global cooling caps export demand. South Korea’s, EWY, economy grew at the slowest pace in three years as Europe’s debt crisis and a slowdown in emerging markets reduced corporate investment and capped demand for exports. Gross domestic product expanded 1.6 percent in the three months through September from a year earlier, the slowest pace since 2009, Bank of Korea data showed today. That compares with the median 1.7 percent estimate of 13 economists surveyed by Bloomberg News. Asia’s fourth-largest economy grew 0.2 percent from a quarter ago.
Bloomberg reports Cliffs misses profit estimate after iron-ore prices decline. Cliffs Natural Resources Inc., CLF, the largest U.S. iron-ore producer, reported third-quarter results that missed analysts’ estimates as the price of the steelmaking raw-material dropped. Net income fell 86 percent to $85.1 million, or 59 cents a share, from $601.2 million, or $4.15, a year earlier, the Cleveland-based company said today in a statement. Profit from continuing operations was 61 cents a share, missing the $1.02 average of 21 estimates compiled by Bloomberg. Sales dropped 30 percent to $1.45 billion. The price of seaborne iron ore fell 36 percent to an average $112 a metric ton in the quarter, compared with $176 a year earlier, according to Steel Business Briefing data compiled by Bloomberg. Cliffs decreased its outlook for the spot price of iron ore this year by 12 percent to $128 a ton from a July forecast of $145 a ton. Cliffs fell 6.9 percent to $39.76 at 6:29 p.m. after the close of regular trading in New York.
In style stocks, the large cap value, JKF, fell the most this week, catching up somewhat with the loss in their peers, the large cap growth, JKE; the value shares now down 0.73 this month, compared with the growth down 4.6% this month. And in sector stocks, the Biotechnology, XBI, IBB, Homebuilders, ITB, and Energy Service, OIH, IEZ, fell the most this week.
The South African Rand, SZR, Euro, FXE, Swedish Krona, FXS, Canadian Dollar, FXC, Swiss Franc, FXF, Mexico Peso, FXM, and Japanese Yen, FXY, traded lower, this week from recent rally highs; and Emerging Market Currencies, CEW, and Commodity Currencies, CCX, traded lower from their October 4, 2012 high. The US Dollar, $USD, UUP, rose from its September 14, 2012 low, as is seen in this ongoing Yahoo Finance Chart, reflecting that competitive currency devaluation is underway with confirmation of such coming from the currency demand curve, that is the ratio of the small cap revenue shares relative to the small cap growth shares, RZV:RZG, trading lower, as well as the weekly Japanese Yen US Dollar Exchange Rate, JYN, trading lower. The Chinese Yuan, CYB, rose to a new high.
Natural Gas, UNG, and Oil, USO, led Commodities, DBC, USCI, lower, reflecting the inability of the world central banks to inflate fiat asset values. Bespoke Investment Blog writes Crude oil inventories surge. And Jeff Cox of CNBC asks Bailing on Commodities: ‘Into the Abyss’?
Bloomberg reports Copper falls to seven week Low. Copper Weekly, JJC, slumped to a seven-week low in thin trading as retreating global equities markets renewed demand concerns for the industrial metal and a stronger U.S. dollar dented sentiment. Copper for December delivery, the most actively traded contract recently traded down 3.70 cents, or 1.1%, at $3.5130 a pound on the Comex division of the New York Mercantile Exchange. Futures fell as low as $3.494 a pound, the lowest intraday price since Sept. 6.
The global government debt trade, underwritten by the world speculative community, that is the banking community, IXG, that has supported Capitalism and European Socialism since the 1980s has failed as Zero Hedge reports Debt driving the economy since 1980. Total Bonds, BND, traded higher this week but below their October 1, 2012 high, on rising US Government Debt, ZROZ, EDV, TLT, BAB, as World Government Treasury Bonds, BWX, Emerging Market Bonds, EMB, International Corporate Bonds, PICB, Junk Bonds, JNK, Leveraged Buyouts, PSP, Senior Bank Loans, BKLN, traded lower, reflecting the loss of monetary authority by the world central banks. Investors, with confirmation coming from the downturn in Pimco’s Income Strategy Fund, PFL. Fidelity Investments mutual fund FAGIX approximates the trend of the US Federal Reserve’s Balance Sheet, has turned lower to 9.44, causing disinvestment out of sin stocks as is seen in this ongoing Google monthy chart of FAGIX and VICEX.
The failure of seigniorage of the world central banks is seen in the downturn of Silver Mining, Gold Mining, GDX, Junior Gold Mining, GDXJ, Silver Standard Resources Inc, SSRI, on September 14, 2012, and October 4, 2012, as the Steepner ETF, STPP rose, and the Zeros, ZROZ, trading lower as is seen in this ongoing Yahoo Finance chart of SIL, GDX, GDXJ, SSRI, STPP, and ZROZ. The global risk on trade has exhausted on the failure of neoliberal finance, with confirmation coming from the ratio of Silver Mining, SIL, relative to the Zeroes, ZROS, SIL:ZROZ, trading lower.
The chart of the Steepner ETF, STPP, shows a slight dip in its Elliot 3 Wave 3 rise Up, reflecting a steepening 10 30 US Sovereign Debt Yield Curve, $TNX:$TYX, since July 25, 2012, when the Interest Rate on the US 10 Year Note, ^TNX, began to rise from 1.40%, as the US Central Bank began to lose monetary sovereignty to the bond vigilantes as they began to call US Interest Rates higher.
2) … Eurozone Money Supply contracts.
Mike Mish Shedlock writes Fed and ECB smokescreens to print money.
Ambrose Evans Pritchard writes contracts at sharp pace; Eurozone nears Japan-style trap as money and credit contracts again at sharp pace. Data from the European Central Bank show that the tentative rebound in the money supply over the summer may have stalled again in September. The broad M3 gauge, watched by experts as an early warning signal for the economy a year or so ahead, shrank by €30bn and is now down by €143bn since April. This is highly unusual. “The message is clear,” said Lars Christensen from Danske Bank. “The ECB needs to stop obsessing about fiscal issues and do real quantitative easing (QE) if it wants to stop the eurozone going the way of Japan.” Loans to firms and households fell 1.3pc as banks continue to shrink their balance sheet to meet tougher rules. Private bank lending has been falling almost continuously since April. “This credit contraction is what happened in Japan in the early 1990 and we have to be careful not get into deflationary spiral,” said Prof Richard Werner from Southampton University, a Japan expert. “They to need to launch true QE or an expansion in broad credit creation, and it cant be done easily.
Doug Noland reports Fred M2 (narrow) “money” supply jumped $28.9bn to $10.211 TN.
3) … In the news
Gary of Between reports on the developing global manufacturing slump. Reuters reports, DuPont, DD, shares fell sharply as it reported lower earnings than expected and announced plans to lay off 1,500. And Bloomberg reports Dow Chemical, DOW, shares fell sharply as it plans to eliminate 2,400 jobs and close factories. The largest U.S. chemical maker by sales, will cut about 2,400 jobs and shut 20 manufacturing plants to reduce annual costs by $500 million in the face of slow global economic growth. And Bloomberg reports 3M Co, MMM, shares fell sharply as it cuts full year forecast range as sales fell in Europe. The manufacturer of products including Scotch tape and dental braces, reduced its full-year forecast as a recession in Europe and slowing Asia growth crimped sales. The shares declined the most in 11 months. 3M now sees earnings of $6.27 to $6.35 a share, including 3 cents of an acquisition-related cost, 3M said in a statement. That’s down from a previous target of $6.35 to $6.50, which didn’t include the expense, and lower than the $6.40 average of analysts’ estimates. Bloomberg reports Colgate, CL, Company plans to cut 6% of jobs, layoff 2300, in restructuring program. Industry Week reports Kimberly Clark, KMB, Company to cut 1,500 jobs in Europe. The company announced it would close or sell five manufacturing facilities and some production would be transferred to other plants.
With excess global manufacturing production and demand destruction underway, WSWS reports that carry traded investing in developing Europe is reversing, 3,500 jobs threatened at chemical plant in Romania. Developing Europe, GUR, as is seen in this ongoing Yahoo Finance Chart, led all of Europe lower this week. Barrons reported back on October 1, that Emerging Europe equity fund inflows hit 77-week high.
Ambrose Evans Pritchard reports Europe ratchets up grip on Madrid. The EU-IMF Troika in charge of Spain’s €60bn (£48bn) bank rescue is to demand much tougher action by the country’s authorities to clean up toxic debts, risking a clash that could deter Madrid from requesting a full sovereign bailout. And Mike Mish Shedlock relates Italy 2013 countdown: rescue me.
CNBC reports US money market funds return to euro zone.
Andre Damon of WSWS reports that UBS Bank, UBS, to lay off 10,000 employees; the largest bank in Switzerland, plans to lay off one sixth of its global workforce, according to sources cited by the Financial Times.
Daily Ticker asks Do the rich have a moral obligation to pay higher taxes? California Governor Jerry Brown thinks so.
NBC Chicago reports Chicago ties 2011 mark for homicides with the 435th homicide reported. Wikipedia reports In 2012, Chicago has the highest murder rate in the Alpha world cities with 19.4 murders per 100,000. The Chicago Police Department Crime Summary Report, relates Census Tracks, 320100, 320500, 320200, and 320400 have the greatest amounts of crime; this is Wards, 42, 2, 28, 27, and 24.
4) … The dawn of Financial Armageddon comes with the failure of neoliberal finance.
With the loss of monetary authority by the world central banks, a world wide credit breakdown and global financial collapse, will be the genesis event for the rise of Regionalism and Totalitarianism to replace Capitalism and European Socialism.
Business Insider reports 8 crucial global regions that were completely ignored in the final debate.
Alex Lantier of WSWS.org writes European Central Bank chief Draghi reassures German parliament: Austerity will continue. Draghi’s visit aimed to reassure the bourgeoisie that the ECB’s trillion-euro handouts to the banks will not stop attacks on workers’ social rights.
Spiegel writes Corruption continues virtually unchecked in Greece. While Athens waits for more aid from the European Union, the country continues to be administered in the same old careless manner. Corrupt politicians and the rich continue to help themselves to Greece’s funds, and little is being done about it. How can someone who has declared an annual income of €25,000 ($32,400) transfer €52 million abroad? What kind of supplementary income must an individual have who, according to his tax returns, earned €5,588 in 2010, yet still managed to move €19.8 million abroad? And how can it be that a Greek citizen sequesters €9.7 million abroad although he supposedly earned exactly zero euros? These are the questions that tax fraud investigators will have to ask of a number of individuals whose identity has so far only been made public in the form of initials. For instance, a “G. D.” stands at the top of a list with the names of 54,000 Greek citizens who relocated major assets abroad between 2009 and 2011. The list stems from the Greek central bank and is now in the hands of the Finance Ministry. It is the longest of four lists that are currently circulating in Athens. Each contains the names of people whose financial circumstances — bank balances and real estate holdings — do not correspond at all with what they claimed on their tax returns. But hardly anything is being done about it. The Greek reality is sometimes paradoxical: While the governing coalition was busy squabbling with international creditors over how many hundreds of euros can still be trimmed from teachers’ and nurses’ paychecks, and Athens continued slashing employee pensions, wealthy Greeks moved billions abroad with relative impunity. The odyssey of the “Lagarde list,” as it’s known, exemplifies the typically lax attitude toward tax criminals. For many months, it was thought to be lost, but then it resurfaced in early October. Now, the public prosecutor for financial crimes has a copy. It lists 1,991 Greek owners of Swiss bank accounts, and reportedly includes many prominent individuals from the realms of politics, business and culture.
Eonomic Policy Journal posts YouTube Nigel Fargel Video The Eurozone is in a very dark place.
Chris Rossini in Economic Policy Journal article writes A lesson in empire building: The use of foreign aid. You can’t have a world empire without cooperation. Harry ‘I dropped the big one’ Truman said so in his Inaugural Address, “In addition, we will provide military advice and equipment to free nations which will cooperate with us in the maintenance of peace and security.” And Jacob Hornberger has eloquently written, The objective of the Empire is to impose its will around the world through influence, money, domination, and force. Foreign regimes, including dictatorial ones, who play ball with the Empire and remain loyal to it, inevitably receive foreign aid, which comes in the form of cash or weaponry. Those who remain recalcitrant by refusing to submit to the will of the Empire or who subject the Empire to criticism are subject to being targeted for a regime-change operation, either through the funding of opposition groups, military coups, embargoes, sanctions, assassination, invasions, and occupations. When it comes to the game of global domination, the “Land of The Free” has shown itself to be the champ. But, if there’s one thing that history has taught us, it’s that empires never last. Here’s Ron Paul, Empires always end, not because another military power comes along, but for economic reasons. As each year passes, it becomes ever more visible that economics is finally catching up with The American Empire. Who knows how long it can last? It may be several years; or, if the elites manage to pull more rabbits from their hats, decades. In any case, if you want to help break this sick cycle that keeps repeating itself (only with different faces) then dive in further here on EPJ, and also at Mises.org. Immerse yourself in understanding sound money and how central banking destroys it; paving the way for massive wars and empires.
Markus Salzmann of WSWS writes The consequences of austerity in Latvia. In the midst of deepening social distress, Latvia has been praised by numerous institutions and the media as a role model for the success of austerity policies.
Doug Noland writes of the Perils of bubbles and speculative finance. Three years ago, Greece could borrow for two years at about 2.0%. The marketplace recognized that Greece had buried itself in debt, although players were as well confident that Europe would never allow a Greek default. By May of 2010, Greek two-year yields surpassed 18% and the nation was hopelessly insolvent. Two and one-half years later, Greece (population – 11 million) has burned through two bailouts – and more than $200bn – and is today trapped in depression and desperate for additional bailout support. It seems inevitable that Greece will exit the euro. Yet, and especially after the European crisis began spiraling out of control this summer, the marketplace is confident that European officials remain determined to postpone all days of reckoning. I comment that the day of reckoning has arrived as reflected by the downward trading FAGIX, BLK, BX, and VICEX .
Justin Raimondo writes Déjà Vu: Fascism on the Rise.The Golden Dawn party was founded in the early 1990s by Nikolaos Michaloliakos, a fifty-five year old rightist agitator and ex-military man with a long history as a pro-Nazi propagandist. Like Hitler, he served a jail term early in his political career for his violent “activism”: imprisoned in the same facility with the leaders of the 1967 military junta, their example inspired him to create “Golden Dawn,” initially a magazine which featured apologias for Naziism, and Holocaust denial. He and his followers registered Golden Dawn as a political party in 1993. A marginal force initially, the party, which garnered less than 1 percent in previous polls, received a stunning 14 percent of the national vote in Greece’s recent parliamentary elections. Golden Dawn’s message is all too familiar: while the far left, which is also gaining ground,blames “capitalism” for the country’s woes, the Golden Dawners are far more explicit: Jewish bankers, they say, are the cause of Europe’s economic problems and Greece’s plight (oh, and by the way, the Holocaust is a lie). Their response to the “austerity” policies of centrist politicians is to blame foreigners — 2 million of whom currently reside in Greece, for rising crime and “stealing jobs” from natives. Black-shirted toughs patrol the streets, beating up foreigners, attacking immigrant hotels, and even infiltrating the police, who have “out-sourced” law enforcement in large sections of central Athens to Golden Dawn thugs. Like all fascists everywhere, they cite historical fantasies of a “Greater” nation: if Golden Dawn ever came to power, the “lost” lands of Macedonia and portions of the former Yugoslavia would be “reclaimed,” and war with Turkey would only be a matter of time.
Business Insider reports Golden Dawn MPs are taking the Nazi comparisons to a whole new level in Greece.
4) … Monster Storm seen barreling down on Northeast US.
Business Insider reports Frankenstorm: The mother of all snowicanes is barreling toward New York City.
Nature economist Elaine Meinel Supkis writes Storm of Century redux and global warming: No candidate is talking about that. Twenty years ago, I lived through the Perfect Storm—in a tent! We struggled to tie down an emergency tarp over the whole thing as the winds began to buffet us hard. A tree came down between the tent and the chicken roost and missed everything but we had to stand outside in the violent storm while the tree swayed back and forth before finally deciding where to fall. This was a killer storm and was made into a movie and…we are having sequel, Son of the Perfect Storm, again on Halloween this year!
The Washington Post blogs Experts sound alarm on Hurricane Sandy, likely to be worse than 1991 Perfect Storm
5) … Are you looking for a home in Irvine CA?
Are you looking for a home in Irvine, California, for between $500,000, and $550,000. Well then perhaps 3 Woodland Dr, Irvine, CA, 92604, as featured on Refin is for you.
6) … Stock markets likely to be closed for Monday and Tuesday of next week.