Gold steadies near 5-month peak on subdued dollar

Gold prices were steady on Monday, having touched a fresh five-month peak early in the session, as the dollar weakened after a soft U.S. jobs report fuelled speculation that the Federal Reserve may stop raising interest rates sooner than expected. The Fed is widely expected to raise interest rates at its Dec. 18-19 meeting, but the focus is on how many rate hikes will follow in 2019. Gold tends to gain when rate hike expectations recede because lower rates reduce the opportunity cost of holding


Gold prices were steady on Monday, having touched a fresh five-month peak early in the session, as the dollar weakened after a soft U.S. jobs report fuelled speculation that the Federal Reserve may stop raising interest rates sooner than expected. The Fed is widely expected to raise interest rates at its Dec. 18-19 meeting, but the focus is on how many rate hikes will follow in 2019. Gold tends to gain when rate hike expectations recede because lower rates reduce the opportunity cost of holding
Gold steadies near 5-month peak on subdued dollar Cached Page below :
Company: cnbc, Activity: cnbc, Date: 2018-12-10  Authors: simon dawson, bloomberg, getty images
Keywords: news, cnbc, companies, subdued, prices, fed, gold, slipped, analyst, jobs, near, ounce, peak, dollar, interest, rates, 5month, steadies


Gold steadies near 5-month peak on subdued dollar

Gold prices were steady on Monday, having touched a fresh five-month peak early in the session, as the dollar weakened after a soft U.S. jobs report fuelled speculation that the Federal Reserve may stop raising interest rates sooner than expected.

Spot gold inched up 0.1 percent to $1,248.59 per ounce, as of 0813 GMT, after hitting its highest since July 11 at $1,250.55 earlier in the session.

U.S. gold futures rose 0.1 percent to $1,253.4 per ounce.

Weak data points from the United States have been putting pressure on the dollar index which is proving to be positive for gold, said Ajay Kedia, director at Kedia Commodities in Mumbai, adding that: “we expect a resistance level of $1,270 before the upcoming Fed meet.”

The dollar slid against the euro and the yen after data showed U.S. non-farm payrolls increased by 155,000 jobs last month, below economists’ median forecast of 200,000 jobs, and the wage increase was softer than expected.

Some Fed policymakers have struck a cautious tone about the economic outlook, possibly flagging a turning point in the monetary policy.

The Fed is widely expected to raise interest rates at its Dec. 18-19 meeting, but the focus is on how many rate hikes will follow in 2019.

Gold tends to gain when rate hike expectations recede because lower rates reduce the opportunity cost of holding non-yielding bullion. Lower interest rates also tend to weigh on U.S. yields and the dollar, in which gold is priced.

“There is also some safe-haven demand coming back in gold,” said Argonaut Securities analyst Helen Lau.

Global stocks extended their slump on worries over slowing growth and fears that a fresh flare-up in tensions between U.S. and China could quash chances of a trade deal.

“A number of tailwinds are in place for it (gold) to move significantly higher during the month including falling U.S. interest rates, a declining or at least a stalling dollar, wobbly U.S. equity markets,” INTL FCStone analyst Edward Meir said in a note.

“Over the course of December, we see prices trading between $1,230-$1,285 per ounce.”

Meanwhile, holdings in SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, rose 0.20 percent to 759.73 tonnes on Friday.

Spot gold may rise into a range of $1,258-$1,266 per ounce, as it has broken a resistance at $1,245, according to Reuters technical analyst Wang Tao.

Among other precious metals, spot silver was down 0.2 percent at $14.59 per ounce, while palladium slipped 0.6 percent to $1,216.52.

Platinum edged 0.2 percent higher to $791.40 per ounce. Prices had slipped to their lowest since Sept. 12 at $779 in the previous session.


Company: cnbc, Activity: cnbc, Date: 2018-12-10  Authors: simon dawson, bloomberg, getty images
Keywords: news, cnbc, companies, subdued, prices, fed, gold, slipped, analyst, jobs, near, ounce, peak, dollar, interest, rates, 5month, steadies


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If the Fed doesn’t raise rates this month, the market could panic, Cramer says

The Federal Reserve could cause “panic” on Wall Street if it reneges on its widely anticipated December interest rate hike, CNBC’s Jim Cramer said Friday. “Because he’s promised a rate hike, [Fed Chair Jerome Powell] risks stirring a wave of fear if he doesn’t tighten,” Cramer said as stocks fell on weaker-than-expected jobs results and trade worries. “It would be wrong to tighten, but if he doesn’t give us a full quarter-point rate hike, it will cause a panic,” the “Mad Money” host said. In fai


The Federal Reserve could cause “panic” on Wall Street if it reneges on its widely anticipated December interest rate hike, CNBC’s Jim Cramer said Friday. “Because he’s promised a rate hike, [Fed Chair Jerome Powell] risks stirring a wave of fear if he doesn’t tighten,” Cramer said as stocks fell on weaker-than-expected jobs results and trade worries. “It would be wrong to tighten, but if he doesn’t give us a full quarter-point rate hike, it will cause a panic,” the “Mad Money” host said. In fai
If the Fed doesn’t raise rates this month, the market could panic, Cramer says Cached Page below :
Company: cnbc, Activity: cnbc, Date: 2018-12-07  Authors: elizabeth gurdus
Keywords: news, cnbc, companies, rates, month, doesnt, cramer, wrong, fed, raise, trade, investors, interest, market, tighten, panic, rate, hike


If the Fed doesn't raise rates this month, the market could panic, Cramer says

The Federal Reserve could cause “panic” on Wall Street if it reneges on its widely anticipated December interest rate hike, CNBC’s Jim Cramer said Friday.

“Because he’s promised a rate hike, [Fed Chair Jerome Powell] risks stirring a wave of fear if he doesn’t tighten,” Cramer said as stocks fell on weaker-than-expected jobs results and trade worries. “Investors will start presuming that something must be wrong, very wrong, that things are worse than they thought.”

But even if the central bank decides that it’s worth taking a more data-dependent approach after the weaker jobs data, its chief has put himself in a difficult position with his recent statements, Cramer said.

“No one wants the Fed to tighten going into a slowdown, especially when we might be in a tariff war around the globe. People want the Fed to be flexible. Thanks to his previous comments, though, Powell’s in a lose-lose situation,” he said, pointing to Powell’s remarksthat interest rates were “just below” where they should be.

“It would be wrong to tighten, but if he doesn’t give us a full quarter-point rate hike, it will cause a panic,” the “Mad Money” host said. “I hate to say it, Mr. Powell, but, here goes: I told you so.”

In fairness, Cramer said he “totally” understood why the Fed would raise interest rates this month, citing still-strong Purchasing Managers’ Index reports, healthy retail sales and close-to-full employment.

“The fact is, though, the economy’s slowing and the stock market sure shows it. […] That’s why it’s so skittish,” he explained. The major averages have endured drastic intraday swings this week as investors fretted about a host of economic pressures, including but not limited to the U.S.-China trade dispute.

Earlier this week, a “yield curve inversion” between the three- and the five-year Treasury yields also set off warning bells on Wall Street and spurred a sharp sell-off in stocks.

“Maybe a creative Fed chief could square that circle by holding off on a rate hike, but maybe selling some of the long-term bonds that they’ve been sitting on since the financial crisis — a different kind of tightening that would fix the inverted yield curve situation,” Cramer said. “Although, … ideally, you don’t want any tightening and the Fed would simply sit tight.”

All things considered — including the S&P 500 index turning negative for the year — investors should prepare for more market swings in the coming weeks, the “Mad Money” host warned.

“I think we’re going to have to slog through these volatility sessions for a bit, as there are all sorts of difficult crosscurrents here” including U.S.-China trade relations and the weakness in shares of stock market bellwether Apple, he said.

“And, of course, an errant Federal Reserve that’s backed itself into a corner when it comes to the next rate hike,” he added. “Get used to these crosscurrents, because this is the new normal, at least for now.”


Company: cnbc, Activity: cnbc, Date: 2018-12-07  Authors: elizabeth gurdus
Keywords: news, cnbc, companies, rates, month, doesnt, cramer, wrong, fed, raise, trade, investors, interest, market, tighten, panic, rate, hike


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Wells Fargo sees stock gains in 2019 despite aging expansion, higher rates

While U.S. stocks should continue to climb in 2019 amid record earnings, the trek to new highs will be marked by turbulence as both fiscal and monetary stimuli recede and economic activity slows, according to Wells Fargo. Critical to the Wells Fargo thesis for continued gains in the stock market is the belief that earnings per share can continue to grind to all-time highs in the year ahead. Forward S&P 500 EPS topped $172 by the end of the third fiscal quarter; Wells Fargo believes that number c


While U.S. stocks should continue to climb in 2019 amid record earnings, the trek to new highs will be marked by turbulence as both fiscal and monetary stimuli recede and economic activity slows, according to Wells Fargo. Critical to the Wells Fargo thesis for continued gains in the stock market is the belief that earnings per share can continue to grind to all-time highs in the year ahead. Forward S&P 500 EPS topped $172 by the end of the third fiscal quarter; Wells Fargo believes that number c
Wells Fargo sees stock gains in 2019 despite aging expansion, higher rates Cached Page below :
Company: cnbc, Activity: cnbc, Date: 2018-12-05  Authors: thomas franck, michael nagle, bloomberg, getty images
Keywords: news, cnbc, companies, gains, wells, despite, rates, expansion, aging, end, stock, sees, levels, investment, economic, higher, fargo, eps, sp, continue


Wells Fargo sees stock gains in 2019 despite aging expansion, higher rates

While U.S. stocks should continue to climb in 2019 amid record earnings, the trek to new highs will be marked by turbulence as both fiscal and monetary stimuli recede and economic activity slows, according to Wells Fargo.

Global equity strategists Audrey Kaplan and Scott Wren wrote in the Wells Fargo Investment Institute’s annual outlook that the broad S&P 500 index should climb to a range between 2,860 and 2,960 by the end of next year despite greater volatility across riskier securities. The 2019 outlook, published Wednesday, implies about 7 percent upside from current levels around 2,700.

“The end of easy means, in part, that more historically normal volatility has returned to financial markets,” the strategists told clients. “Rising interest rates make credit more expensive and the sudden shift in the geopolitical environment spark surprises.”

“However, we believe that investors should not fear the changing trend, so long as low inflation and solid earnings-per-share growth continue,” he added. “To this point, even if EPS rises more slowly late in the cycle, it can still reach higher levels that, in turn, drive higher equity prices.”

Critical to the Wells Fargo thesis for continued gains in the stock market is the belief that earnings per share can continue to grind to all-time highs in the year ahead. Corporate profits have accelerated to new heights over the past two years as President Donald Trump’s historic tax cuts eased levies on the nation’s largest companies in the hopes of spurring investment and rewarding workers.

Forward S&P 500 EPS topped $172 by the end of the third fiscal quarter; Wells Fargo believes that number could rise to $177 by December 2019.

“Household and business spending should keep profit margins at sustainable levels,” Wren and Kaplan added. “EPS for the large-cap benchmark index, the S&P 500, should have additional support from repatriated overseas profits.”

Earnings will also likely climb thanks to share buybacks, which reduce the number of outstanding shares and, in turn, boost profits per share.

The Investment Institute sees stock gains despite a slowdown in economic activity, with Wells Fargo’s economic team predicting gross domestic product to grow 2.7 percent in 2019. Darrell Cronk, the institute’s president, also warned of the end of outsized job gains as the economy enters its final stages.


Company: cnbc, Activity: cnbc, Date: 2018-12-05  Authors: thomas franck, michael nagle, bloomberg, getty images
Keywords: news, cnbc, companies, gains, wells, despite, rates, expansion, aging, end, stock, sees, levels, investment, economic, higher, fargo, eps, sp, continue


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India keeps rates on hold; to gradually reduce SLR

The monetary policy committee (MPC) kept the repo rate unchanged at 6.50 percent on Wednesday as predicted by 64 of 70 analysts in a Reuters poll. All six members of the MPC voted to keep the rates on hold. The central bank said starting in the January-March quarter of 2019 it would begin to lower banks’ mandatory bond holding ratios by 25 basis points each quarter until it reaches 18 percent of deposits. The so-called statutory liquidity ratio (SLR) currently stands at 19.50 percent and the mov


The monetary policy committee (MPC) kept the repo rate unchanged at 6.50 percent on Wednesday as predicted by 64 of 70 analysts in a Reuters poll. All six members of the MPC voted to keep the rates on hold. The central bank said starting in the January-March quarter of 2019 it would begin to lower banks’ mandatory bond holding ratios by 25 basis points each quarter until it reaches 18 percent of deposits. The so-called statutory liquidity ratio (SLR) currently stands at 19.50 percent and the mov
India keeps rates on hold; to gradually reduce SLR Cached Page below :
Company: cnbc, Activity: cnbc, Date: 2018-12-05  Authors: arun sharma, hindustan times, getty images
Keywords: news, cnbc, companies, inflation, india, statementthe, quarter, policy, hold, lower, slr, gradually, central, rates, banks, keeps, mpc, bond, reduce


India keeps rates on hold; to gradually reduce SLR

The monetary policy committee (MPC) kept the repo rate unchanged at 6.50 percent on Wednesday as predicted by 64 of 70 analysts in a Reuters poll. The central bank also retained its “calibrated tightening” stance as expected.

All six members of the MPC voted to keep the rates on hold.

“Even as inflation projections have been revised downwards significantly and some of the risks pointed out in the last resolution have been mitigated, especially of crude oil prices, several uncertainties still cloud the inflation outlook,” said the MPC in its statement.

The central bank said starting in the January-March quarter of 2019 it would begin to lower banks’ mandatory bond holding ratios by 25 basis points each quarter until it reaches 18 percent of deposits.

The so-called statutory liquidity ratio (SLR) currently stands at 19.50 percent and the move to lower the SLR should prod banks to lend more rather than park their cash in safe-haven government securities.

After the RBI policy announcement, India’s 10-year benchmark bond yield fell to 7.48 percent from 7.54 percent before the policy statement.

The Indian rupee strengthened to 70.46 to the dollar from 70.50 before the policy statement, while the broader NSE stock index was down 0.68 percent at 0905 GMT.


Company: cnbc, Activity: cnbc, Date: 2018-12-05  Authors: arun sharma, hindustan times, getty images
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‘Trumponomics’ writer Art Laffer: I am a ‘huge fan’ of Fed chief Powell’s handling of interest rates

Federal Reserve Chairman Jerome Powell, often criticized for increasing interest rates by President Donald Trump, has been effective at the helm of the nation’s central bank, conservative economist Art Laffer told CNBC on Wednesday. “I’m a huge fan of Powell’s,” said Laffer, formerly an economic advisor to presidents Trump and Ronald Reagan. The Fed later this month is expected to raise rates for the fourth time this year. Powell last Wednesday said that rates are “just below” neutral, perhaps i


Federal Reserve Chairman Jerome Powell, often criticized for increasing interest rates by President Donald Trump, has been effective at the helm of the nation’s central bank, conservative economist Art Laffer told CNBC on Wednesday. “I’m a huge fan of Powell’s,” said Laffer, formerly an economic advisor to presidents Trump and Ronald Reagan. The Fed later this month is expected to raise rates for the fourth time this year. Powell last Wednesday said that rates are “just below” neutral, perhaps i
‘Trumponomics’ writer Art Laffer: I am a ‘huge fan’ of Fed chief Powell’s handling of interest rates Cached Page below :
Company: cnbc, Activity: cnbc, Date: 2018-12-05  Authors: matthew j belvedere
Keywords: news, cnbc, companies, fed, president, laffer, trumponomics, writer, powells, handling, fan, huge, told, powell, hes, rates, tax, trump, trade, interest


'Trumponomics' writer Art Laffer: I am a 'huge fan' of Fed chief Powell's handling of interest rates

Federal Reserve Chairman Jerome Powell, often criticized for increasing interest rates by President Donald Trump, has been effective at the helm of the nation’s central bank, conservative economist Art Laffer told CNBC on Wednesday.

“I’m a huge fan of Powell’s,” said Laffer, formerly an economic advisor to presidents Trump and Ronald Reagan. “I think he’s done a great job in normalizing interest rates.”

Trump, who actually appointed Powell as Fed chief, has repeatedly railed against hiking rates too aggressively, blaming Powell most recently in a Washington Post interview last week for stock market declines and GM’s planned plant closures and layoffs.

The Fed later this month is expected to raise rates for the fourth time this year. But the path next year is up for debate. After its September rate hike, the Fed projected three rate increases into 2019. The current target range for the central bank’s benchmark federal funds rate, which banks charge each other for overnight lending, stands at 2 percent to 2.25 percent.

Trump’s Post interview on Nov. 27 came one day before Powell appeared to walk back his comments from Oct. 3 that rates were a “long way” from so-called neutral, which for October led to the worst monthly stock market losses in about seven years.

Powell last Wednesday said that rates are “just below” neutral, perhaps indicating that concerns about much higher rates may no longer be warranted. The market then rallied three out of the next four sessions.

On Monday, which saw stocks on a two-session winning streak, Treasury Secretary Steven Mnuchin told CNBC that the president was pleased with Powell’s latest speech.

However, on Tuesday, the Dow Jones Industrial Average tanked nearly 800 points, or 3 percent. It was the biggest decline since October’s rout as investors worried about a bond-market phenomenon that’s historically signaled a possible economic slowdown. Lingering worries around U.S.-China trade were also to blame. The Dow and S&P 500 were able to stay out of a correction. But Tuesday’s decline sent the Nasdaq back into correction territory.

Co-author of the book, “Trumponomics: Inside the America First Plan to Revive Our Economy,” Laffer said he’s “very optimistic” about the economy, describing the Trump tax cuts as “kicking in beautifully.” The Laffer Curve, named after the economist, is a theory that basically argues that increasing tax rates beyond a certain point becomes counter-productive for raising tax revenue — and that when taxes are too high, tax revenues actually sink.

Laffer said he hopes the administration tackles runway government spending as its next agenda item. “If it is, I don’t see any reason for a recession. I think we’re going to continue on a long prosperous path with the sky’s the limit.”

On CNBC Tuesday, Commerce Secretary Wilbur Ross said the U.S. economy is in good shape. He blamed the media for stoking worries about a slowdown.

However, Laffer said he’s concerned about the uncertainty surrounding U.S. trade relations with China. “Watching all this play out in real time is terrifying to me.”

Over the weekend, Trump and Chinese President Xi Jinping reached a truce in their bilateral trade war, agreeing to a 90-day period of no new tariffs on each other’s goods as talks continue.

Mnuchin told CNBC Monday he’s hopeful the Trump-Xi trade cease-fire can be turned into a “real agreement” to address what the president feels are unfair trade practices by the Chinese. Ross said on CNBC Tuesday that Trump got “very good” assurances from Xi on trade.

(The New York Stock Exchange and the Nasdaq were closed Wednesday for the funeral of George H.W. Bush, the nation’s 41st president. They reopen Thursday on a normal schedule. U.S. stocks futures, which closed at 9:30 a.m. ET, reopen Wednesday evening at 6 p.m. ET.)


Company: cnbc, Activity: cnbc, Date: 2018-12-05  Authors: matthew j belvedere
Keywords: news, cnbc, companies, fed, president, laffer, trumponomics, writer, powells, handling, fan, huge, told, powell, hes, rates, tax, trump, trade, interest


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Dollar stays defensive on Treasury yield curve inversion worry

The dollar trimmed some of its recent losses but remained under pressure on Wednesday, as an inversion in part of the Treasury yield curve raises concerns about a potential U.S. slowdown. Investors were nervous over an inversion of the yield curve between three-year and five-year U.S. Treasury notes and between two-year and five-year notes which limited the dollar’s gains. These were the first parts of the Treasury yield curve to invert since the financial crisis, excluding very short-dated debt


The dollar trimmed some of its recent losses but remained under pressure on Wednesday, as an inversion in part of the Treasury yield curve raises concerns about a potential U.S. slowdown. Investors were nervous over an inversion of the yield curve between three-year and five-year U.S. Treasury notes and between two-year and five-year notes which limited the dollar’s gains. These were the first parts of the Treasury yield curve to invert since the financial crisis, excluding very short-dated debt
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Dollar stays defensive on Treasury yield curve inversion worry

The dollar trimmed some of its recent losses but remained under pressure on Wednesday, as an inversion in part of the Treasury yield curve raises concerns about a potential U.S. slowdown.

The Australian dollar slumped more than half a percent against the greenback as disappointing economic data further dimmed the chance of a rise in rates. The Aussie moved sharply off a four-month top of $0.7394 hit early in the week.

Investors were nervous over an inversion of the yield curve between three-year and five-year U.S. Treasury notes and between two-year and five-year notes which limited the dollar’s gains.

These were the first parts of the Treasury yield curve to invert since the financial crisis, excluding very short-dated debt.

“In the initial phase of the inversion of the yield curve markets are worried about whether there’ll be a recession,” said Masafumi Yamamoto, chief currency strategist at Mizuho Securities.

“They react more aggressively to weak data than to strong data,” Yamamoto said. “I think the dollar can be in correction-mode in a yield-curve inversion environment.”

Against a basket of six key rivals, the dollar edged up 0.1 percent to 97.092, trimming this week’s losses to 0.2 percent. It was 0.6 percent off a 17-month peak of 97.693 touched on Nov. 12.

Interest rate hikes have sent short-dated yields higher, even as slowing economic growth expectations have kept longer-dated yields down.

The dollar has been under pressure since Federal Reserve Chairman Jerome Powell said last Wednesday that U.S. interest rates were nearing neutral levels, which markets interpreted as signalling a slowdown in the pace of rate hikes.

Ayako Sera, market strategist at Sumitomo Mitsui Trust Bank, said there is proof that an inversion between three-month Treasury bills and 10-year Treasury notes precedes a recession.

The spread between three-month Treasury bills and 10-year Treasury notes was 50 basis points as of Tuesday, its smallest since Oct. 2007.

“The Federal Reserve may slow down the pace with which it hikes interest rates, but it won’t lower rates yet, so the likelihood there will be an inversion of these is low,” Sera said.

The euro edged down 0.1 percent to $1.1328 after also slipping 0.1 percent during the previous session.


Company: cnbc, Activity: cnbc, Date: 2018-12-05
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Why investors near retirement should fear the big yield curve inversion

A normal curve with the two-year offering a lower yield than the 10-year is fundamental to how banks make money. Banks borrow short term at lower interest rates so that they can make long-term loans to borrowers at higher interest rates. The difference between those two interest rates, the positive spread, is their profit. There are a few important caveats: In a longer-range chart going back to 1962, there has never been a recession that wasn’t preceded by an inversion of the yield curve. Also i


A normal curve with the two-year offering a lower yield than the 10-year is fundamental to how banks make money. Banks borrow short term at lower interest rates so that they can make long-term loans to borrowers at higher interest rates. The difference between those two interest rates, the positive spread, is their profit. There are a few important caveats: In a longer-range chart going back to 1962, there has never been a recession that wasn’t preceded by an inversion of the yield curve. Also i
Why investors near retirement should fear the big yield curve inversion Cached Page below :
Company: cnbc, Activity: cnbc, Date: 2018-12-05  Authors: mitch goldberg, guest contributor, scott olson, getty images, zinkevych, istock, blend images – hill street studios, brand x pictures, daniel grill, roger wright
Keywords: news, cnbc, companies, twoyear, curve, inversion, loans, big, fear, rates, making, interest, banks, treasury, investors, near, yield, market, retirement


Why investors near retirement should fear the big yield curve inversion

A normal curve with the two-year offering a lower yield than the 10-year is fundamental to how banks make money. Banks borrow short term at lower interest rates so that they can make long-term loans to borrowers at higher interest rates. The difference between those two interest rates, the positive spread, is their profit. If a bank is borrowing short term at a higher interest rate and making loans to borrowers at a lower interest rate, the difference is a negative spread.

In this interest-rate environment, banks would lose money by making loans. Not necessarily on all loans, but it does make some loans unfeasible and some less profitable, forcing banks to cut back on making loans, thereby choking off the access to credit markets that businesses need to grow.

This helps explain why bank stocks entered a correction on Tuesday. But the news is bad for all businesses.

More from Fixed Income Strategies:

Investors avoid emerging markets due to currency volatility

What to do with an old 401(k)? Very little

Save for retirement … even without an employer 401(k)

When it becomes harder for businesses to borrow, many companies cancel or delay projects and hiring. Weaker enterprises go out of business because they lose access to credit, which in turn causes layoffs. When this happens, it takes about a year, on average, for the U.S. economy to slip into a recession.

Many market pundits say that the history lessons from a flattening or negative yield curve is not relevant in today’s world of massive central bank intervention, encouraging foreign investors to scoop up long-term U.S. treasuries because their home-country government bond yields are much lower.

But to believe that “it’s different this time” means you’d have to believe that the bank-sector math in the above example stopped working. Last I checked, banks still borrow at short-term rates and lend at long-term rates, as long as it is profitable. In other words, central bank-induced market distortions do not change the basics of the banker’s math I described above.

There are a few important caveats: In a longer-range chart going back to 1962, there has never been a recession that wasn’t preceded by an inversion of the yield curve. Yet it doesn’t happen overnight. In fact, stocks have risen in the 18 months after an inversion, though after that all bets are off. Also important: This is a market stat that specifically refers to an inversion between the two-year Treasury and 10-year Treasury bond.

It looks more like that is going to occur, but it still has not happened. On Tuesday the 10-year was at 2.9 percent, still above short-term rates, if not by much — the two-year was at 2.8 percent. On Tuesday it was the five-year Treasury that slipped below the two-year and three-year bonds. In the last three recessions, the curve of the three-year and five-year had inverted an average 26.3 months before the recession.


Company: cnbc, Activity: cnbc, Date: 2018-12-05  Authors: mitch goldberg, guest contributor, scott olson, getty images, zinkevych, istock, blend images – hill street studios, brand x pictures, daniel grill, roger wright
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Japan faces risk of falling back into deflation, BOJ’s Wakatabe warns

Wakatabe, a vocal advocate of aggressive monetary easing, said it was important to maintain the BOJ’s massive stimulus program to ensure the economy remains strong enough to nudge up prices and wages. “Doing so would enhance the sustainability of our policy and heighten the chance of achieving 2 percent inflation.” As an academic, Wakatabe had repeatedly called for stronger steps to drive up inflation. If downward pressure is exerted on the economy again, it may revert to deflation,” Wakatabe sa


Wakatabe, a vocal advocate of aggressive monetary easing, said it was important to maintain the BOJ’s massive stimulus program to ensure the economy remains strong enough to nudge up prices and wages. “Doing so would enhance the sustainability of our policy and heighten the chance of achieving 2 percent inflation.” As an academic, Wakatabe had repeatedly called for stronger steps to drive up inflation. If downward pressure is exerted on the economy again, it may revert to deflation,” Wakatabe sa
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Company: cnbc, Activity: cnbc, Date: 2018-12-05  Authors: kiyoshi ota, bloomberg, getty images
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Japan faces risk of falling back into deflation, BOJ's Wakatabe warns

Bank of Japan Deputy Governor Masazumi Wakatabe said on Wednesday the country could slide back into deflation if the economy comes under downward pressure again, highlighting risks such as the fallout from U.S.-China trade frictions.

Wakatabe, a vocal advocate of aggressive monetary easing, said it was important to maintain the BOJ’s massive stimulus program to ensure the economy remains strong enough to nudge up prices and wages.

But he noted the central bank would be vigilant to the side-effects of prolonged easing, as its huge purchases dry up bond market liquidity and near-zero interest rates hurt financial institutions’ profits.

“It’s necessary to continuously examine not only the effects of our policy on inflation, but also the impact on financial markets and the banking system,” Wakatabe said in a speech to business leaders in Niigata, northern Japan.

“Doing so would enhance the sustainability of our policy and heighten the chance of achieving 2 percent inflation.”

As an academic, Wakatabe had repeatedly called for stronger steps to drive up inflation. But he has toned down his demands for more stimulus since joining the BOJ board in March.

The central bank is now at a crossroads because it has been pursuing radical quantitative easing for more than five years with only mixed results.

Wakatabe said while Japan’s economic expansion would continue, it faced various risks such as the effects of next year’s scheduled tax hike to 10 percent from 8 percent and the U.S.-China trade dispute.

“Japan is only half way to achieving 2 percent inflation. If downward pressure is exerted on the economy again, it may revert to deflation,” Wakatabe said.

“The BOJ will seek to accelerate inflation to levels deemed appropriate for the economy by continuing large-scale monetary easing,” he said.

Under a policy dubbed yield curve control, the BOJ guides short-term interest rates at minus 0.1 percent and long-term rates around zero percent to achieve its 2 percent price goal.

Subdued inflation has forced the BOJ to maintain its huge stimulus program despite the rising costs, such as the hit to financial institutions’ profits from years of near-zero rates.

The BOJ took steps in July to make its policy framework more sustainable, such as allowing bond yields to move more flexibly around its target.

The central bank’s nine-member board is split between those who see room to ramp up stimulus, and those who are becoming increasingly worried about the dangers of prolonged easing.


Company: cnbc, Activity: cnbc, Date: 2018-12-05  Authors: kiyoshi ota, bloomberg, getty images
Keywords: news, cnbc, companies, risk, policy, inflation, rates, easing, faces, warns, falling, stimulus, economy, japan, central, wakatabe, bojs, boj, financial, deflation


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Mortgage applications rise 2%, but buyers seem unimpressed by lower rates

Mortgage rates have now been falling for three straight weeks and that is reinvigorating the refinance business. Total mortgage application volume rose 2 percent last week compared with the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index. Volume was still 36 percent lower than a year ago, when interest rates were lower. Mortgage interest rates are still 89 basis points higher than a year ago and home prices are still gaining, making home buying ever more


Mortgage rates have now been falling for three straight weeks and that is reinvigorating the refinance business. Total mortgage application volume rose 2 percent last week compared with the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index. Volume was still 36 percent lower than a year ago, when interest rates were lower. Mortgage interest rates are still 89 basis points higher than a year ago and home prices are still gaining, making home buying ever more
Mortgage applications rise 2%, but buyers seem unimpressed by lower rates Cached Page below :
Company: cnbc, Activity: cnbc, Date: 2018-12-05  Authors: diana olick, daniel acker, bloomberg, getty images
Keywords: news, cnbc, companies, market, applications, mortgage, unimpressed, volume, lowest, interest, rates, higher, economic, rise, lower, buyers, week


Mortgage applications rise 2%, but buyers seem unimpressed by lower rates

Mortgage rates have now been falling for three straight weeks and that is reinvigorating the refinance business. It is not, however, bringing many more buyers back to today’s very expensive housing market.

Total mortgage application volume rose 2 percent last week compared with the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index. Volume was nearly 19 percent lower than the same week one year ago.

Refinance activity drove the volume, increasing 6 percent for the week. Refinances are highly rate-sensitive week to week, as borrowers seek to save money on monthly payments. Volume was still 36 percent lower than a year ago, when interest rates were lower.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($453,100 or less) decreased to 5.08 percent last week from 5.12 percent the previous week, with points decreasing to 0.44 from 0.46 (including the origination fee) for loans with a 20 percent down payment.

“Treasury rates continued to slide last week, driven mainly by concerns over slowing global economic growth and U.S. and China trade uncertainty. The 30-year fixed-rate fell for the third week in a row,” said Joel Kan, MBA’s associate vice president of economic and industry forecasting.

Mortgage applications to purchase a home rose just 1 percent for the week and were 0.2 percent higher than a year ago. Mortgage interest rates are still 89 basis points higher than a year ago and home prices are still gaining, making home buying ever more expensive. While the price gains are now shrinking, affordability is still at the lowest level in a decade and proving to be the biggest barrier to housing demand today; sales of both newly built and existing homes continue to suffer because of it.

Luxury homebuilder Toll Brothers saw new orders decline this fall, according to its earnings release this week. CEO Douglas Yearley blamed higher mortgage rates and high prices in California, where it sells a large share of its homes. Luxury buyers, it seems, are not exempt from today’s weaker affordability, and that is showing up in the size of loans for which borrowers are applying.

“We saw a decrease in the average loan size for purchase applications to the lowest since December 2017 ($298,000 from $313,000),” Kan said. “This is perhaps an indication that there are fewer jumbo borrowers, or maybe first-time buyers are having better success reaching the market as we close out the year.”

Mortgage rates continued to slide this week, falling to their lowest level in two months on Tuesday as the U.S. stock market sold off sharply and bond yields fell.

“Mortgage rates didn’t experience nearly as big of a move as the broader bond market,” said Matthew Graham, chief operating officer for Mortgage News Daily, noting that economic data at the end of the week, specifically the U.S. monthly employment report, could cause more dramatic moves. “If it’s weaker than expected, rates could easily continue lower, but if it surprises to the upside, the bounce back in rates could be somewhat abrupt.”


Company: cnbc, Activity: cnbc, Date: 2018-12-05  Authors: diana olick, daniel acker, bloomberg, getty images
Keywords: news, cnbc, companies, market, applications, mortgage, unimpressed, volume, lowest, interest, rates, higher, economic, rise, lower, buyers, week


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The economist who discovered the yield curve’s predictive powers says he’s getting worried

Flattening yield curve spooks markets — Here’s what three experts say that means for investors 2:22 PM ET Tue, 4 Dec 2018 | 03:33Having said that, he finds the flattening of the curve that he watches to be increasingly worrisome. When that curve flattens or inverts, a recession is anywhere from nine to 15 months away, with the average lead time of one year. That leads Estrella to say he is more nervous about the yield curve’s message now than he was several months ago. If the Fed continues to ra


Flattening yield curve spooks markets — Here’s what three experts say that means for investors 2:22 PM ET Tue, 4 Dec 2018 | 03:33Having said that, he finds the flattening of the curve that he watches to be increasingly worrisome. When that curve flattens or inverts, a recession is anywhere from nine to 15 months away, with the average lead time of one year. That leads Estrella to say he is more nervous about the yield curve’s message now than he was several months ago. If the Fed continues to ra
The economist who discovered the yield curve’s predictive powers says he’s getting worried Cached Page below :
Company: cnbc, Activity: cnbc, Date: 2018-12-04  Authors: ron insana, getty images
Keywords: news, cnbc, companies, worried, discovered, curve, estrella, getting, say, indicators, hes, rates, recession, predictive, yield, months, inverts, percentage, powers, curves, economist


The economist who discovered the yield curve's predictive powers says he's getting worried

Flattening yield curve spooks markets — Here’s what three experts say that means for investors 2:22 PM ET Tue, 4 Dec 2018 | 03:33

Having said that, he finds the flattening of the curve that he watches to be increasingly worrisome.

When that curve flattens or inverts, a recession is anywhere from nine to 15 months away, with the average lead time of one year.

Before Tuesday, the last time I spoke to Estrella the difference between the 10-year and 3-month Treasurys was around 90 percentage points, or nine-tenths of one percent.

As of Tuesday, however, it had narrowed even more noticeably, down to under one-half percentage point. That leads Estrella to say he is more nervous about the yield curve’s message now than he was several months ago.

If the Fed continues to raise short-term rates beyond December, Estrella says that an inversion of this spread would be virtually guaranteed. And that is a very bad omen for the economy.

He agreed with my assessment that the stock market declines in tandem with, or just after the curve inverts, but before a recession actually begins.

That process may be playing out right now before our very eyes, assuming the Fed keeps hiking rates and economic indicators continue to weaken.

Most assuredly, the uncertainties surrounding the on-going trade war with China are of concern to him, as are indicators of global economic weakness.

All Treasury curves of note have flattened considerably, one has even inverted. That has sparked a lot of discussion about the implications for both Main Street and Wall Street.

There is no way to take our eyes off this ball for weeks to come. It could be strike three for the 2019 economy.


Company: cnbc, Activity: cnbc, Date: 2018-12-04  Authors: ron insana, getty images
Keywords: news, cnbc, companies, worried, discovered, curve, estrella, getting, say, indicators, hes, rates, recession, predictive, yield, months, inverts, percentage, powers, curves, economist


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