Random Market News, 28 July
"How to Pick a Manager When No One Knows What It Does.
Such investor interest signals both the frustration with current active — and specifically quant — managers and the nascent promise shown by AI hedge funds.
Requiring interpretability of investment strategies is a vestige of old-world assumptions and is entirely unsatisfactory for reasons that transcend investing...
We need to better invest beneficial assets. AI investing can help, but its adoption compels us to judge AI strategies not by their degree of interpretability but by their results."
"Americans Aren’t Saving Money Like They Used To.
American households scaled back their pace of savings to the lowest level in nine years at the end of 2016 as the growth of their wages and salaries slowed, updated government figures show."
"Getting more for your Q2 money.
Low rates of inflation may be raising concern that underlying demand is on the ebb but it is giving us purchasing power. Lack of inflation is one of the good news/bad news themes of the second-quarter GDP report which in any case showed fundamental strength of its own, getting support from key components and helping to firm what were sagging economic trends."
"Weak inflation - a global problem.
Equities were mixed last week. They reflected in part a combination of mixed earnings reports and economic data. The FOMC dovish policy announcement also weighed on investors. The Fed left its policy fed funds rate range unchanged at 1.0 percent to 1.25 percent and said that balance sheet reduction will likely begin "relatively soon". The U.S. dollar was particularly vulnerable during the week. After the Fed's announcement, the currency tumbled. With one more trading day remaining in July, most global indexes were up for the month. The exceptions are the All Ordinaries, Nikkei, DAX, OMX and S&P/TSX Composite.
Equities reacted relatively calmly to the FOMC announcement of no policy change but currencies did not. The U.S. dollar retreated against its major counterparts with the exception of the Swiss franc.
Looking at what affects inflation, there is demand pull and cost push. The central banks are concerned with cost push which is generally caused by rising wages. That has been lacking. Demand pull inflation describes what happens when prices are driven up because of an imbalance between demand and supply — that is, the supply of goods and services cannot meet the demand."
Implied rate hike probability for September 20th is ~0.0%, November 1st is ~5.0%; 0% probability of rate cut through June 13th, 2018.
VIX ~10.29. 10-yr treasury vol (TYVIX) ~3.85.
"US Stocks Close Mixed On Friday
Wall Street closed mixed on Friday July 28th of 2017, as market participants assessed the US economy expansion at an annualized 2.6% in Q2, following a downwardly revised 1.2% growth in Q1 and matching market expectations. Technology shares ended mostly in the green, albeit a 2.5% decline in Amazon stocks following downbeat earnings for Q2. The Dow Jones gained 34 points or 0.2% to a new record of 21830. Contrastingly, the S&P 500 edged down 3 points or 0.1% to 2472, while the Nasdaq lost 8 points or 0.1% to 6374.68. During the week, the three major indices booked mixed results, with the Dow Jones climbing 1.2%, the S&P 500 trading flattish, and the Nasdaq dipping 0.2%.
US GDP Grows 2.6% in Q2, Matches Forecasts
The US economy advanced an annualized 2.6 percent on quarter in the second quarter of 2017, following a downwardly revised 1.2 percent expansion in the previous period, matching market expectations, an advance estimate showed. The improvement was boosted by strong consumer spending and a rebound in government consumption while exports slowed and housing investment shrank.
US Consumer Sentiment Remains At 9-Month Low
The University of Michigan's consumer sentiment for the United States was revised up to 93.4 from a preliminary of 93.1 in July of 2017 and compared to 95.1 in June. Still, it is the lowest reading since October of 2016 as the future expectations declined, although less than previously estimated, while barometer of current conditions rose further.
Canada GDP Grows More Than Expected in May
The Canadian economy expanded 0.6 percent month-on-month in May 2017, beating market expectations of 0.2 percent and following a 0.2 percent growth in April. It was the seventh consecutive monthly increase, as goods-producing industries rose 1.6 percent, led by mining, quarrying, and oil and gas extraction (4.6 percent), more specifically non-conventional oil extraction (13 percent), and manufacturing (1.1 percent). Service-producing industries grew 0.2 percent, driven by finance and insurance services (0.9 percent), retail trade (0.9 percent) and wholesale trade (0.7 percent). Meanwhile, construction output fell 0.6 percent and real estate and rental and leasing declined 0.2 percent.
Canada Budget Surplus at C$100 Million in April-May
Canada's government posted a budget surplus of USD 100 million in the April to May 2017, almost unchanged from the same period of the previous year. For the two months combined, revenues grew by CAD 2.3 billion, or 4.7 percent, to CAD 50.3 billion, as increases in tax revenues and other revenues were partially offset by a decrease in Employment Insurance (EI) premium revenues. Program expenses were up CAD 2.6 billion, or 6 percent, to CAD 46.1 billion, reflecting increases in major transfers to persons and other levels of government and direct program expenses. Public debt charges decreased by CAD 0.3 billion, or 7.1 percent.
Canada 10Y Bond Yield Hits 32-month High
Canada 10 Year Government Bond Yield increased to a 32-month high of 2.026%.
Eurozone July Economic Sentiment at Near 10-Year High
Eurozone economic sentiment rose to 111.2 in July 2017 from 111.1 in the previous month, beating market expectations of 110.8. It was the highest reading since August 2007, as sentiment improved among service providers (14.1 from 13.3 in June) and constructors (-1.7 from -3.5), while confidence among manufacturers was flat at 4.5. In contrast, confidence fell among consumers (-1.7 from -1.3 in June) and retailers (4 from 4.4).
Brazil Consumer Sentiment Falls to 15-Month Low
Brazilian consumer confidence fell to 99.5 in July 2017 from 100.5 in the previous month. It was the lowest reading since April last year, due to a deterioration in expectations over the next six months regarding unemployment, inflation and personal income. Meanwhile, there was an improvement in the current financial situation and in the indebtedness level.
Chile Manufacturing Production Rises Less Than Expected
Chile's manufacturing production increased by 0.9 percent year-on-year in June 2017, following an upwardly revised 3 percent gain in May and missing market expectations of 1.1 percent. Output growth was mainly boosted by higher production of vehicles, trailers and semitrailers (120.8 percent), metal products, except machinery and equipment (4.8 percent), paper and paper products (4.5 percent), alcoholic and non-alcoholic beverages (4 percent), clothing (37.7 percent), and pharmaceuticals, medicinal chemicals and botanicals for pharmaceutical use (7.6 percent). By contrast, output fell sharply for food products (-2.3 percent) and base metals (-16 percent). On a seasonally adjusted monthly basis, manufacturing production fell 0.2 percent.
Hong Kong Stocks Join Asian Selloff
Hong Kong's Hang Seng Index dropped 152 points, or 0.6 percent, to 26,979 on Friday 28th of July, as most bourses across the Asia-Pacific closed in the red. The index slipped after rallying in the four previous sessions, but still booked over 2 percent for the week. Investors expect the Hong Kong Dollar to resume its decline soon, due to excess liquidity from monetary policy loosening and widening interest rate differentials from the United States. Within the index, declining stocks outnumbered advancing stocks 29 to 21. On the mainland, Shanghai's SSE Composite edged up 0.1 percent and Shenzhen's Component Index gained 43 points, or 0.4 percent, to 10,438.
Vietnam Inflation Rate Lowest In A year At 2.52%
Consumer prices in Vietnam rose 2.52 percent year-on-year in July of 2017, compared to a 2.54 percent rise in a month earlier and reaching the lowest figure since July 2016. Cost increased at a slower pace for: beverages, tobacco (1.46 percent vs 1.50 percent in June), housing (3.24 percent vs 3.35 percent), transport (1.43 percent vs 4.22 percent) and culture, entertainment (0.78 percent vs 0.83 percent). Cost went up more for: garments (1.06 percent vs 1.05 percent), household appliances (1.05 percent vs 1.02 percent), medicine (46.64 percent vs 46.14 percent), education (9.85 percent vs 9.80 percent) and other goods & services (2.27 percent vs 1.71 percent). In contrast, cost fell for: food (-2.52 percent vs -3.10 percent) and posts and telecoms (-0.60 percent vs -0.64 percent). On a monthly basis, consumer prices rose 0.11 percent, following a 0.17 percent drop in a month earlier."
"28th Annual State of Logistics: Into the great unknown.
E-commerce continues to fuel a boom that’s tempered by overcapacity, rate pressures, sluggish demand and political doubt. The result: “cognitive dissonance” that finds a $1.4 trillion market scratching its head."
"U.S.-NAFTA trade is up for seventh straight month, reports BTS.
United States trade with its North American Free Trade Agreement (NAFTA) partners Canada and Mexico headed up 9.4% annually to $98.2 billion in May, for its seventh straight annual increase, according to the Department of Transportation’s Bureau of Transportation Statistics (BTS)."
"New competitive logistics option for grocers."
"Europe orders France, Belgium to end port tax breaks."
"Temasek, Emerson Collective lead $40m Series B in US virtual reality startup Within."
"Here's what insurance industry CEOs from The Hartford, Travelers, Chubb, and Markel had to say on insurance tech in recent earnings calls."
"HackerRank: Washington, not California, has the most highly skilled
Wyoming is #2 and California is #3.
"Glowing Tumor Technology Helps Surgeons Remove Hidden Cancer Cells."
"Artificial Photosynthesis Process Promises Highly Selective Carbon Dioxde Reduction."
"Video Friday: Boston Dynamics, Inflatable Robots, and Japan's Space Ball."
"Secret Chamber in the Rock of Gibraltar.
The Rock of Gibraltar’s reputation as a war tool is well established. The British Army dug a maze of defensive tunnels inside the rock during the Second World War, and the massive cliff is famous for the more than 30 miles of cleared space that served as a housing area for guns, ammunition, barracks, and even hospitals for wounded soldiers. It wasn’t until relatively recently, however, did a secret come out about the rock’s surprising use during wartime."
JP: Industrial Production, 7:50 PM ET (7/30)
CN: CFLP Manufacturing PMI, 9:00 PM ET (7/30)
DE: Retail Sales, 2:00 AM ET
DE: Unemployment Rate, 3:55 AM ET
GB: M4 Money Supply, 4:30 AM ET
EZ: HICP Flash, 5:00 AM ET
EZ: Unemployment Rate, 5:00 AM ET
IT: CPI, 5:00 AM ET
IT: PPI, 6:00 AM ET
CA: IPPI, 8:30 AM ET
US: Chicago PMI, 9:45 AM ET
US: Pending Home Sales Index, 10:00 AM ET
US: Dallas Fed Mfg Survey, 10:30 AM ET
US: Farm Prices, 3:00 PM ET
JP: PMI Manufacturing Index, 8:30 PM ET
CN: PMI Manufacturing Index, 9:00 PM ET
https://tradingeconomics.com/calendar (More complete listing, including consensus)