(Bloomberg) — Gold is rallying, a time-honored sign of gloom. But speculative companies in the stock market are also surging, signaling faith in an economic turnaround. Then there’s the dollar, which just had its worst month in a decade.Moves across asset classes right now seem especially chaotic, lacking a unifying theme. Until you look at interest rates.Specifically, real rates — jargon for yields after accounting for inflation. They’re a concept long familiar in emerging markets, where prices have always bounced around more, often feeding through to their currencies. America is seeing something of the same thing: because increasing consumer costs are expected to outstrip the return on bonds, it’s the dollar that’s depreciating. And it’s doing so against everything from precious metals to the Australian dollar while arguably boosting swaths of the U.S. stock market.One reason real rates have become a focus is that, by one measure at least, they’ve hit a record low, at about -1%. In simple terms, it shows the damage to an investor’s purchasing power from holding 10-year government bonds. Yields in turn have been held down by the Federal Reserve’s pledge to avoid raising policy rates for some time to come.“Historically real rates never really caught much of people’s attention,” but that changed when they climbed in late 2018 and contributed to a sharp stocks selloff, said Nathan Thooft, Manulife Investment Management’s head of global asset allocation in Boston. Now, “the perception is that really low rates is a really good tailwind for equities. Exactly the same for precious metals. All these trades are interrelated.”It helps explain why stocks have held up despite the worst American economic contraction on record. The S&P 500 Index is barely changed for the year. That makes more sense when you consider that lower borrowing costs make rising equity valuations easier to justify. Hence the expansion in technology price-earnings ratios, which at 35 in the Nasdaq 100 are higher than any time since the internet bubble.Conversely, lower yields can depress lending margins, and the S&P 500 Financial Index on Friday capped its worst week in five. That was after Fed Chair Jerome Powell on Wednesday underscored that the U.S. central bank is “not even thinking about thinking about raising rates.”Powell also said the Fed will present results from its strategic review in the “near future,” bolstering economists’ expectations for stronger guidance about the path of interest rates to be unveiled in September. The assumption is a prolonged horizon for near-zero overnight rates.That presumption can already be seen in 10-year Treasury yields, which have averaged 0.66% the past four months and were at 0.53% Friday. Discount that with the 10-year inflation expectation embedded in Treasury inflation-protected securities, and the real yield is about -1.03%.Powell’s take is that “for quite some time we’re going to be struggling against disinflationary pressures rather than inflationary pressures,” so policy can stay easy for an extended period.Some market players aren’t so sure about that, and use strident language about the Fed — and the government, with its record budget deficits — “debasing” the dollar. Goldman Sachs Group Inc. commodity strategists reiterated their call to buy gold, which they termed “the currency of last resort,” in a July 28 note to clients.Charles Gave, who dates his market experience back to 1973, wrote two days later that “Treasuries are as overvalued as they were in 1973, 1978 or 2007.” Colleagues of his at Gavekal Research pointed to a basket of inflation expectations taken from surveys and market data, spanning the short to long term, having rebounded to 1.9%, not far from the Fed’s 2% target. Gave predicted gold will keep outperforming, the dollar will decline and U.S. stocks will underperform other regions.Persistent negative real rates haven’t happened for long periods in the U.S., Evercore ISI strategists highlighted during the week. Their take was that the environment will prove good for value stocks, which had a relatively poorer record during the epic bull run in equities that ended with Covid-19.Real rates aren’t the only dynamic in play. John Zaller, chief investment officer at Mai Capital Management, detects a whiff of speculation in gold and silver. Gold has soared about 25% over four months, reaching a record high around $1,975 an ounce Friday. Silver has surged 74%, to highs unseen since 2013.And some of the dollar’s decline — the Bloomberg Dollar Spot Index has slumped more than 9% from its high in March — has come thanks to a euro boosted by a historic European Union joint economic-stimulus package.The greenback hasn’t been helped by a surge in American coronavirus cases over the past several weeks that left the U.S. comparing unfavorably with other developed nations. The specter of renewed shutdowns has cast a shadow over what had been an improvement in a job market throttled by Covid-19. Economists warn the pace of recovery in payrolls is set to slow markedly in July; the data are due Aug. 7.Yet the S&P 500 was able to grunt out a 1.7% advance the past week, despite data showing a mammoth 32.9% annualized contraction in gross domestic product in the second quarter. The week also saw sharp divisions between Republicans and Democrats in Congress over a fiscal package to sustain support for the economy after the expiration of previously enacted aid.The analgesic for all those headaches has been the Fed, which not only recommitted to its near-zero rate policy the past week but added months onto the timeline of a welter of extraordinary credit and liquidity programs.“That’s the number-one catalyst” in markets, accounting for probably 90% of recent moves, Michael O’Rourke, chief market strategist at JonesTrading in Stamford, Connecticut, said of the Fed. “That’s going to drive the weak dollar. That’s going to push up anything that’s priced in dollars. So obviously that’s fed into commodities, that’s helped equities.”For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
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Samsung Electronics Co will halt operations of its last computer factory in China, the South Korean tech giant said on Saturday, the latest manufacturer to shift production from the world’s second-biggest economy. Around half the 1,700 employees on contract at Samsung Electronics Suzhou Computer will be affected, excluding those involved in research and development, the South China Morning Post reported on Friday, citing a notice to Samsung staff. The factory shipped $4.3 billion worth of goods out of China in 2012, a figure that had sunk to $1 billion by 2018, the Hong Kong newspaper said.
It’s a bearish start to the day for Bitcoin and the broader market. Bitcoin would need to move back through to $11,300 levels to support the pack.
On CNBC's "Mad Money Lightning Round," Jim Cramer said that Ibio Inc (NYSE: IBIO) has an interesting chart. He needs to do more work on the stock.Cramer didn't like the tone of an article about insider selling in Vaxart Inc (NASDAQ: VXRT).Dynatrace Inc (NYSE: DT) has been a winner, but it's a very expensive stock in terms of price-to-earnings ratio, said Cramer. He advised his viewer to stick with the stock.Rosetta Stone Inc (NYSE: RST) is an interesting, good household brand stock, said Cramer. He added that a short-seller recommended the stock as a buy and he sees that as a good sign.Cramer can't recommend Blink Charging Co (NASDAQ: BLNK). He likes Tesla Inc (NASDAQ: TSLA).See more from Benzinga * Why Jeff Kilburg Is Bullish On Crude Oil * 'Halftime Report' Traders Discuss MKM's Sell Rating On Target * 'Fast Money Halftime Report' Picks For July 30: Mastercard, XPO And More(C) 2020 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
As you might know, ONEOK, Inc. (NYSE:OKE) last week released its latest quarterly, and things did not turn out so…
The Euro shot through several barriers during the week, as we even managed to threaten 1.19 on Friday. But then it looks like gravity may be returning.
Li Auto, a Chinese electric vehicle maker backed by mainland online services delivery giant Meituan Dianping, has priced its American depositary receipts at US$11.5 each in an initial public offering on Nasdaq that will raise about U$1.1 billion for the firm to expand in the world's biggest car market, according to a person familiar with the matter.The IPO by the Beijing-based start-up, which designs and makes electric SUVs, looks set to be the largest fundraising by a Chinese company on US exchanges since December 2018 when Tencent Music Entertainment Group raised US$1.07 billion or NIO's US$1.15 billion offer in September 2018, depending on how much of its overallotment option Li Auto exercises, according to data provided by Refinitiv."Electric vehicles will be the largest opportunity for technology start-ups worldwide after smartphones and mobile internet," said Mingming Huang, founding partner at early-stage venture capital firm Future Capital, who was an angel investor in Li Auto and topped up in multiple funding rounds. "EV plus autonomous driving will change the way people travel … the trillion-dollar companies will come from this sector."Li Auto's SUV. Photo: Handout alt=Li Auto's SUV. Photo: HandoutChina's electric car start-ups are tanking up on capital to fuel an intense fight for market share.Xpeng Motors has made a confidential filing for a listing in the US, while New York-listed NIO shares have tripled so far this year. Elsewhere, Zhejiang-based carmaker Geely Automobile Holdings, which makes the Geometry A electric car, said it plans to list on Shanghai's Nasdaq-style Star Market later this year.Investors are keen to jump on the electric-vehicle bandwagon after watching 17-year-old, California-based Tesla overtake Toyota Motor, Volkswagen and Hyundai Motor this year in terms of combined market value to become the world's most valuable carmaker. Tesla sells its Model 3, Model S and Model X in China.Li Auto, founded by serial entrepreneur Xiang Li, is the first company in China to commercialise what is known as extended-range technology for electric vehicles, which helps solve the problem of a lack of charging infrastructure across China and still developing battery technology. If the car's battery runs down then a combustion engine provides electrical power.More than 80 per cent of Chinese car owners do not have their own car parking space which means they cannot install their own charging point, said Future Capital's Huang. Many consumers are still anxious about their car's charge running low with nowhere to top up."Xiang Li has a deep understanding of the preferences and the pain points of car owners in China," said Huang, who has known Li for more than 15 years.While Li Auto still has negative cash flow, the capital-intensive electric vehicle market is at a very early growth stage, still only around 5 per cent of car sales in China. "Its still at a very fast growing and everybody is trying to grab market share," said Huang.Li also founded car internet platform Autohome, which now has a market capitalisation of over US$10 billion on the New York Stock Exchange, which gave many investors the confidence to back his new venture despite fierce competition in the sector.Li Auto and Xpeng have chosen to list in the US despite rising US-China tensions.Legislation passed by the Senate would kick Chinese companies off US stock exchanges unless their audits are open to inspection by US regulators.However, New York still has a far deeper pool of liquidity for start-ups to tap than Greater China, meaning Xpeng and Li Auto could potentially achieve a higher valuation in the US than they would have done closer to home.The company's offer of 95 million ADRs are priced above the marketed range of US$8 to US$10 each due to strong demand among investors. Bookrunners for the deal included investment bankers at CICC, Goldman Sachs, Morgan Stanley and UBS.Li Auto's ADR is expected to begin trading on Nasdaq on July 30. One ADR represents two ordinary shares in the company.Asia-focused private equity firm Hillhouse Capital will buy up to US$300 million of the stock at the offer price, according to its prospectus.With the successful completion of the IPO, Li Auto will also privately place new ordinary shares to existing shareholders totalling US$380 million. These shareholders include Meituan Dianping, which through an affiliate owns about 14.5 per cent in the company before the IPO, and ByteDance, the owner of video-sharing social network operator TikTok.Li Auto plans to use proceeds from the share sale to develop manufacturing facilities, research and development of new products, and as working capital.For the three months ended June this year, Li Auto recorded a net loss of 75.2 million yuan (HK$83 million), narrowing it by 2.5 per cent from a net loss of 77.1 million yuan in the first quarter this year.This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2020 South China Morning Post Publishers Ltd. All rights reserved. Copyright (c) 2020. South China Morning Post Publishers Ltd. All rights reserved.
If a top is forming then the market should stair-step down, first taking out $1966.50 then $1952.30.