Optimism Continues As The World Changes
We hope everyone has had a good start to the week thus far. We are still dealing with the devastating effects from Hurricane Helene whose continued aftermath demonstrates wide spread destruction from FL through the Carolinas. Our thoughts and prayers are with all of those affected by this. The storm was massive some 420 miles wide and our Florida coasts will take some time to clear all the debris from this massive storm.
Ok on to the markets, first up we suspected the post rate cut euphoria may indeed push equity markets higher under the premise that cheaper money is good. However not only have we had this thought process come to fruition, we now have the PBOC, China’s central banks pulling out all the measures to thwart any further erosion in asset prices by printing money and lowering rates as well. Here is a summary of what the PBOC has done to assist its economy:
Cut in Reserve Requirement Ratios (RRR): The People’s Bank of China (PBOC) announced a reduction in RRR, allowing banks to lend more and increasing liquidity in the financial system. This move aims to boost the economy by making it easier for banks to provide credit to households and businesses.
Injecting capital into the stock market: The PBOC announced an injection of 800 billion yuan (approximately $114 billion) into the stock market to stabilize the market and support the economy.
This has seemingly sent the all clear to Chinese investors and greenlit the buy programs. The HSI is +24% since 9/11
We also have in Japan an underdog that was elected as the leader of the ruling Liberal Democratic party, and per Zerohedge:
“Shigeru Ishiba, who was widely viewed as an underdog in today's LDP leadership election, was elected leader of Japan’s ruling Liberal Democratic party, handing national power to a noted China and monetary policy hawk who wants a more equal defense relationship with the US and has vowed to fight to prevent the nation falling back into deflation.”
So does this mean the BOJ will be normalizing and continue to raise rates, which should be bullish for the Yen. So what this means to us is that the Yen should benefit from a more hawkish stance especially as the FOMC will most likely continue to dump rates here stateside. This will continue to put pressure on the Yen Carry trade unwind and the repercussions could become widespread and lead to increasing volatility.
We like the basing formation in the Dec Yen futures and will expect a break out higher to bring in plenty of momentum:
Here is one thing that really is disconcerting, and we know all the global central banks work together to try and smooth out the volatility during these regime changes. However and we aren’t sure why reporters don’t ask J Powell as to why they increase their assets higher than their stated inflation target? It has never made sense to us and we will continue to pound the table as to the clear intention of this agenda to increase their asset base to concentrate wealth. We decided to draw a red line in Yardeni Researches total central banks total assets as to where we are now and where they honestly should be. The big question is why do they need to increase at the rate they do and not at their stated inflation rate:
Anyway there is a lot going in the world that we feel is a very big deal and could potentially lead to some very dire consequences. What is going on in Ukraine and in the Middle East has the potential to blow up into a major conflict. We do not take this lightly and neither should you. We will keep monitoring this situation and you should too.
Ok let’s get to the weekly settlements from last Friday. We added a new column to track the weekly results for the markets that we cover:
We will take a look at all the charts tonight and send some insight to some of these markets. One thing we expect today is that there will be a lot of window dressing for month and quarterly end. This is where the corps shed some weakness on their balance sheet and add some quality USTs to sugar coat the numbers or buy some better performing assets and shed their losers. So we will be back tonight with the settlements and some technical chart analysis.