EQUITY
Condition
DOW 24,753.09 (+0.15%) / S&P 2,721.33 (+0.31%) / NASDAQ 7,433.86 (+1.08%)
Modest rising was being continued in stock market. Temporary plunge of Thursday's worry for cancelling
the summit between President Trump and Kim, was recovered very fast. NASDAQ showed more increase than
other two indices based on strength of FANG. Hardware Giants like Micron Tech, Intel, Apple also showed
their strength. Dovish stance of Fed which broke expectation of the markets eases tightening of stock market
too except bank sector. Oil majors plummeted with plunge of Oil at Friday, Exxon mobile -1.94%, Chevron -3.49%,
Total -2.90%, BP -3.06%, Royal Dutch Shell -2.22%.
Comment
Looks like stock market is recovering its pace before early Feb, with exceptional skyrocketing of Netflix and
outperformance of Amazon against Facebook and Alphabet. I believe that dovish stance of Fed was applied
to their outperformances more or less. So it could be dangerous to take too much long position in those companies
which couldn't generate appropriate profits. their rising isn't based on fundamental.
but, there will be no plunges in near future, considering other tech companies also rose. If oil price goes down continuously,
there is a need to reconsider about Oil majors because their strength in recent is being based on strong oil price.
Dovish stance of Fed will be unfavorable for Commercial Bank sector which are being in yield-spread trap already,
So I keep my recommendation for REDUCE to Commercial Bank sector. Trade-war couldn't be macro factor even if GM and Ford
was rising with mention of tariffs on automobiles of Europe, Japan and Korea. There will be appropriate adjustment in duties if US government
imposes on the automobiles.
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Fixed Income
Condition
(yields, Generic Government Bonds) 2y 2.4758% (-0.0709%) / 5y 2.7652% (-0.1229%) / 10y 2.9313% (-0.1246%) /
30y 3.0920% (-0.1054%)
Bull flattening was proceeding in the market with dovish stance of Fed. Everyone expected Fed would raise
Federal Fund rate four times in this year, but now, the expectation change to three times. The indices which
didn't good enough were also positive factors for FI market. In this week, US Treasuries had shown its feature
as safe asset, showing strength when President Trump announced cancelation of the summit and stock market
fell and Italian instability came up.
Comment
I think the strength in this week is just temporary. Fed's stance could change anytime considering strength of
Netflix and Amazon which I believe are symbols of skyrocketing from liquidity of QE. it's too obvious that there
are bubbles in financial markets, and the experts will keep addressing bubble issue globally. This week, we need
to focus on their feature as safe asset doesn't die, yet.
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Currencies
Condition
Dollar Index 94.253 (+0.66%) / EURUSD 1.1651 (-1.03%) / USDJPY 109.41 (-1.24%)
USD kept its strength although decreasing interest rate. EUR was too weak because Italian instability led to lower
yield of German bund. A few currencies of EMs like BRL, INR or THB was strong against USD, but currencies of
overall DMs and unstable EMs like Argentina or Turkey didn't good. Turkish rise of standard interest rate led to
additional weakness of TRY, just showing their imminence. The safest assets, JPY and CHF, shown hyper-strength
based on the events of Turkey and Italy.
Comment
I believe strong USD keep going whether US bond market gets strength or not. Instable macro economic
situations of EMs which be continued during this year will be giving additional momentum to USD. It's impossible
that yield of German bund rise separately from that of US Treasury. JPY and CHF could preserve their hyper-strength,
but I don't think so because the strong currencies were just based on the events. Macro couldn't support their strength.
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Oil / Gold
Condition
WTI $67.88 (-4.77%) / Brent $76.44 (-2.64%) / Gold $1,303.30 (+1.02%)
WTI, which had shown poor movement until Thursday, plunged at Friday with coming up of possibility of no
additional decrease from Saudi and Russia. Increasing stock and weak demand to real goods also led to poor
movement of Oil. Among decreasing worry for supply, Saudi announced delaying ARAMCO IPO. Gold had restored
its plunge with +1.02%, based on strong market yield and instability of Turkey and Italy.
Comment
Eventually, WTI got into my band '60-70' again. I believe the event was a spur, and fundamental situation will follow
soon, leading to additional downside movement. My first target $65 is still valid. I expected it's possible that WTI could
pierce my band down, temporarily in this year. Gold had shown its strength, but it looks like just traditional a little restore.
As comments in above Currency part, the events are just temporary, and couldn't make Gold move to positive way.