Tag Archives: Interest rate

by | June 5, 2014 · 12:59 pm

Negative Interest Rate in Europe?

The Fed have printed a lot of money, just like Japan have done for years. Now, Europe are thinking of doing the same. ECB is about to join Fed in the money printing scam. Mario Draghi will speak later today, and what can we expect?

ECB

We can see negative interest rate in Europe. Do you really know what that means? It means that you are losing your money if they are in the bank. It means that it is more attractive to put your money under the mattress. Can you belive that?

Many expect that the ECB will cut its deposit rate from zero to negative. The benchmark rate will probably also be reduced to a record low at 0,1%. If so, ECB will be the first major central bank to introduce a negative rate.

The problem for ECB and Draghi is the deflation. Their inflation goal is around 2%, but the inflation remain below 1%, and it has slowed to 0,5% last month. In March, ECB said it won`t return toward its goal until the end of 2016.

Draghi said earlier this year that large-scale asset purchases would be justified if the medium-term outlook for inflation worsens. The ECB and Bank of England have called on regulators to ease rules on asset-backed securities in Europe. That would provide a broader range of funding options for companies and create assets the ECB could buy to supply liquidity.

Rate is the Central banks tools. The lower the rate is, the bigger the problems are. What is the bank signaling if they cut the rate? It says you need to spend your money. Do not put in the bank. That`s all it is about; consumer spending. That what`s makes the world go around. A very simple concept.

European stocks are little changed before the ECB meeting today. Stoxx Europe 600 Index trading near a six-year high. U.S stock-index futures and Asian shares were also little changed. Many have waited for the news today. Will Mario Draghi shock the markets? Let`s wait and see.

Reports today:
07:45 a.m. EUR Minimum Bid Rate
08:30 a.m. EUR ECB Press Conference
08:30 a.m. USD Unemployment Claims
01:30 p.m USD FOMC Member Kocherlakota Speaks

 

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Shiny bull. The author has made every effort to ensure accuracy of information provided; however, neither Shiny bull nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Shiny bull and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

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by | May 26, 2014 · 2:07 pm

Interest-rate cut in the Euro Zone

 

Japan`s Nikkei index rose to a 7-week high today, up +0,97%. Yen retreated against the dollar and a record high for Wall Street helped the Asian stocks on upbeat U.S housing data. The broader Topix advanced 1,2% to 1,194,69.

 

European stocks are also up today, helped by Italy`s Prime Minister Matteo Renzi. FTSE MIB outperform after Italy`s Prime Minister`s centre-left Democratic Party`s reform were endorsed by a strong showing in European elections.

ECB

A big surprise for many nervous «Sell in may and go away»-investors on friday. The U.S indices increased with the DOW up +0,38% to 16,606,27, Nasdaq +0,76% to 4,185,81, and S&P 500 +0,42% to 1,900,53.

 

ECB`s President Mario Draghi says the policy makers are watching the market closely and once they see low inflation they will be ready to take some action. Draghi said they are looking for a negative spiral to take hold between low inflation, falling inflation expectations and credit.

 

«We are not resigned to allowing inflation to remain too low for too long», Draghi said today. He is trying to guide the euro area through a fragile economic recovery that remains threatened by subdued pricing power.

 

Next ECB meeting is June 5 and they are now working on a package including interest-rate cuts and liquidity injections. Many investors will wait for the next ECB meeting and the lower the interest-rate is, the bigger the problem in the economy is. You are tough if you buy stocks now.

 

Reports today:

 

04:00 a.m EST ECB President Draghi Speaks

All Day Bank holiday

 

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Shiny bull. The author has made every effort to ensure accuracy of information provided; however, neither Shiny bull nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Shiny bull and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

 

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by | May 22, 2014 · 1:56 pm

Inflation and interest rate

What a rally in Asia today! Japan`s Nikkei is up +2,11% to 14,338. Hang Seng is up +0,51% and ASX 200 is up +1,02%. It was a great rally in the U.S yesterday too. The Dow was up +0,97%, S&P 500 +0,81% and Nasdaq +0,85%. Great!

Why this rally now? The investors like the good news from China. The China manufacturing data is good, and that will have a positive impact on Europe. The message from the Fed minutes is also good. They say that there will be no rate increase soon.

Asian stocks rose to set for the biggest gain in three months, after minutes showed Federal Reserve policy makers see muted risk of inflation from continued U.S stimulus. Fed`s policy makers said continued stimulus to push unemployment lower doesn`t risk sparking an undesirable jump in the inflation rate.

money2

Policy makers are watching progress toward their goal of full employment as they consider the timing of the first interest-rate increase since 2006. The Fed has said the benchmark rate will stay low for a «considerabe time». They ended its bond-purchase program that set to wind down by late this year.

The Fed have earlier said that they will keep the interest rate low at least as long as the jobless rate is below 6,5% and the outlook for inflation didn`t exceed 2,5%. Is that really possible? Let`s take a look at Japan. They have printed more money than U.S.

Japan`s inflation peaked out in the middle of the 70`s, but the real problems started in 1989. Japan`s Nikkei Index hit its all time high on December 29, 1989, during the peak of the Japanese asset price bubble. It reached an intra-day high of 38,957 before closing at 38,915,87.

700px-Nikkei_225(1970-).svg

(Picture: Japan`s Nikkei Index)

The bubble burst, and the Nikkei stock index plummeted and lost nearly all these gains, closing at 7,054,98 on March 10, 2009. That is 81,9% below its peak twenty years earlier. The unemployment rate increased, but stopped at 5%. Now, Japan`s unemployment is down to 3,6% (April, 2014).

Unemployment_Rate_of_Japan_1953-2009

(Picture: Unemployment rate in Japan 1953 – 2009)

 

Japan`s inflation rate is stable, and that is strange. Normally when you print a lot of money, inflation rate are increasing and it becomes extremely difficult to reduce it. If you look at the Japan`s inflation rate, it is stable.

The inflation rate in Japan was recorded at 1,60% in March of 2014. It had an all time high of 25% in February of 1976, and a record low of -2,52% in October of 2009. Japan`s inflation rate is in black on the picture below:

japan-inflation-cpi and US inflation compared

(Picture: Japan and U.S inflation rate – compared)

 

The most important categories in the CPI (Consumer Price Index) are Food (25% of total weight). Housing (21%), Transport and communications accounts for 14%. Culture and recreation (11,5%), Fuel, light and water charges for 7%. Medical care (4,3%), clothes and footwear (4%), Furniture and household utensils, Education and Miscellaneous goods and services account for the remaining.

Central banks around the world will try to sustain an inflation rate of 2 – 3%. The purchasing power is falling if the prices of goods and services is rising. Central banks attempt to stop severe inflation, along with severe deflation. They will keep the excessive growth of prices to a minimum. Inflation plays a large role in the Fed`s decisions regarding interest rates.

So far so good!

 

Reports today:

08:30 a.m EST unemployment Claims
09:45 a.m EST Flash manufacturing PMI
10:00 a.m EST Existing Home Sales

 

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Shiny bull. The author has made every effort to ensure accuracy of information provided; however, neither Shiny bull nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Shiny bull and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

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by | March 20, 2014 · 1:51 pm

FED raise rates

Silver dropped -2,60%, while gold is down -1,01% after the news from Fed Chair Janet Yellen. Oil and Copper is also down today. Janpan`s Nikkei 225 is down -1,65% to 14,224 points. Hang Seng is also down together with the rest of Asia.

Janet Yellen

(Picture: Fed Chair Janet Yellen)

The U.S indices traded down yesterday too and Europe is also in a red territory. Most investors don`t know what to do right now. It seems to be a red opening in the U.S later today. This is all reactions on the FOMC meeting yesterday.

The Fed will probably end its massive bond-buying program this fall and probably start raising interest rates around 6 months later. This comment sent stocks and bonds tumbling. We will see a more aggressive path toward higher interest rates than anticipated she said yesterday.

The Federal Reserve has held the interest rate near zero since late 2008. They have pumped trillions into the markets with its bond purchases. All this because they tried to foster a stronger recovery. Despite the QE program, the growth has been very slow.

The change in its rate hike guidance did not mark a shift in its intentions and they will wait a «considerable time» after shuttering its asset purchase program before pushing borrowing costs higher. «Considerable time» means about 6 months.

But, as Janet Yellen said: «It depends – what the statement is saying is it depends what conditions are like».

Most people don`t know it, but the best period of economic growth in all U.S history was without a central bank. Do U.S really need Federal Reserve? They created the markets crash in 1929, and so far the FED has been a disastrous.

The FED started about 100 years ago, and since then the dollar has lost more than 96% of its value. The size of the U.S national debt is more than 5000 times larger. The Fed`s «debt-based» financial system has trapped the U.S, and are on the verge of the greatest financial crises in history.

Congress could have shut down the FED long time ago. I HATE DEBT!

Reports today:

08:30 AM ET Unemployment Claims
10:00 AM ET Existing Home Sales
10:00 AM ET Philly Fed Manufacturing Index
10:00 AM ET CB Leading Index m/m
04:00 PM ET Bank Stress Test Results

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Shiny bull. The author has made every effort to ensure accuracy of information provided; however, neither Shiny bull nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Shiny bull and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

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by | March 19, 2014 · 1:09 pm

FOMC Press Conference

Asian stocks fell today as investors are waiting for the Federal Reserve`s policy statement. The FOMC (Federal Open Market Committee) will end a two-day policy meeting today, after data yesterday indicated the U.S home-building industry is stabilizing.

Investors are still very cautious and The Fed will probably water down their forward guidance and keep U.S interest rate low for at least another 18 months. The FOMC will further scale back its bond-buying at the meeting.

They will probably reduce purchases for the third time by $10 billion to a $55 billion monthly rate. Gold had the longest slump since mid December 2013. What is going on with the precious metal? Are the first stage in the gold bull over?

Gold has declined before the meeting and are now trading at $ 1345,10. Nobody knows what Janet Yellen will say today, but it is expected that the gold will bottom out today before the meeting and then go up again.

Traders will probably sell on rumors of Fed tapering and will cover shorts and buy after the announcement. Gold broke out of its first stage, and now have a sharp pullback to previous resistance. Gold is volatile so it is expected.

Now, it will be interesting to follow the bond market. It seems like it is on the way to break out to the upside. If TLT ETF who tracks the value of the 20-year treasury bond breaks out, the rates will drop. So, how will that be if the Fed buy fewer bonds?

Right after the Fed meeting, I will follow the gold price, stock market, bond market and the interest rate. Janet Yellen can move the market, but it depends on what the news is? I look forward to the FOMC meeting today.

Reports today:

02:00 AM ET FOMC Economic Projections
002:00 AM ET FOMC Statement
02:00 AM ET Federal Funds Rate
02:30 AM ET FOMC Press Conference

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Shiny bull. The author has made every effort to ensure accuracy of information provided; however, neither Shiny bull nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Shiny bull and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

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