Investment Commentary – February 10th, 2016
Market Indices as of Market Close February 10th, 2016
Dow 15,914 (-8.67% YTD)
S&P 1,851 (-9.40% YTD)
NASDAQ 4,283 (-14.45% YTD)
Global Dow 2,086 (2,075 52 week low /2,644 high)
10-year Treasury 1.68 (1.68 52 week low /2.50 high)
Gold 1,196 ($1,047 52 week low /high $1,239)
Oil $3 ($27.27 52 week low /high $65.69)
Thought of the Week
Widespread doubt over the authenticity of Chinese growth numbers has caused uncertainty around just how much Chinese economic growth is slowing. Premier Li Keqiang is reported to have said several years ago that Chinese growth figures were “man-made” and that electricity consumption, rail freight volumes and new lending were better indicators of the true pace of Chinese growth. Those indicators suggest growth is currently lower than that claimed by the official numbers. However, the index based on these inputs places too much emphasis on the manufacturing part of the Chinese economy without fully capturing the rapid growth in the now dominant retail and service sectors. Retail sales continue to grow at over 10% year-on-year. What’s more, monetary stimulus has led to recent rapid growth in money supply which, if history is anything to go by, suggests that even Premier Li’s indicator of Chinese growth could be about to pick up.
Wall St. rises as Yellen hints at ‘gradual’ rate hikes
Wall Street was higher on Wednesday, led by financial stocks, after Federal Reserve Chair Janet Yellen said conditions in the United States would allow the Fed to pursue “gradual” adjustments to monetary policy.
However, tightening financial conditions driven by falling stock prices, uncertainty over China and a global reassessment of credit risk could throw the U.S. economy off track from an otherwise solid course, Yellen said in a prepared testimony to Congress.
Uncertainty over interest rates had hit bank stocks in recent days. Banking stocks were up, led by Citigroup (C.N). Goldman Sachs (GS.N), up 1.3 percent, gave the biggest boost to the Dow. The S&P financial sector .SPSY was up nearly 1 percent.
China’s economic rebalancing toward more consumer-oriented growth has global businesses cautious, but pessimists need only look at the country’s annual e-commerce event for a powerful reminder of consumer buying power.
Created by a group of young Chinese in the 1990s, the holiday known as Singles Day was originally a way to celebrate single life. Held on Nov. 11 every year, it’s popularly described as “China’s anti-Valentine’s Day.”
Shoppers spent nearly $8bn in the first 10 hours of Chinese e-commerce giant Alibaba’s “singles day” event on Wednesday, the company said, reinforcing its status as the world’s biggest online retail promotion.
Total gross merchandise volume, a measure of sales, reached 50bn yuan ($7.86bn) at 9.52am, it said on its website, after the promotion began at midnight.
In comparison, desktop sales for the five days from Thanksgiving through to Cyber Monday in the US stood at $6.56bn in 2014, according to Internet analytics firm comScore.
“Singles day” is not a traditional Chinese festival, but Alibaba has been pushing the 11 November date – named after the digits it contains – since 2009 as it looks to tap an expanding market in internet shopping in China, which has the world’s biggest online population of 668 million people.
The event has received vocal support from the government at a time when China’s economic expansion is slowing and Beijing is trying to transform the growth model into a more sustainable one driven by consumption.
THIS DAY IN FINANCIAL HISTORY
February 10th 1997, CBS Goes To Nashville: On this day CBS’s parent company finalizes the purchase of the The Nashville Network and Country Music Television for a reported $1.5 billion in stock.
The views presented are not intended to be relied on as a forecast, research or investment advice and are the opinions of the sources cited and are subject to change based on subsequent developments. They are not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy.