The charts that matter: the fall of Facebook and the rise of protectionism
As Facebook drags the US stockmarket down and Donald Trump fires the first shots in his big trade war, John Stepek looks at what the charts that matter are saying about the markets.
Welcome to your weekend edition, where we take a look through the charts that matter and catch up on anything else that we missed during the week.
If you missed any of this week's Money Mornings, here are the links you need.
Monday:It's a big week for central bankers on both sides of the Atlantic
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Tuesday:The tech sector has grown too powerful now it's in the firing line
Wednesday:Another US stockmarket domino has toppled
Thursday:Why higher interest rates don't always mean tighter monetary policy
Friday: Trump's trade war is the perfect excuse for a market sell-off
And don't miss this week's podcast (recorded fresh yesterday!). Merryn and I talk about turning into contrarian indicators, about the terrifying possibility of companies or governments using our medical data to read our minds and more prosaically, about what you should be looking for in a "buy and hold forever" fund.
Now on to the charts for this week.
Gold perked up as is its wont amid the news of trade disruption and general fear in the markets. It's also viewed as something of a safe haven play.
(Gold: three months)
The US dollar index a measure of the strength of the dollar against a basket of the currencies of its major trading partners was a little weaker, with concerns about trade being offset partly by the Federal Reserve's relatively hawkish views on markets.
(DXY: three months)
The yield on the ten-year US Treasury bond slipped back further as investors fretted more about global growth than about inflation although the latter won't stay calm if there really is a trade war.
(Ten-year US Treasury: three months)
The yield on the ten-year German Bund the borrowing cost of Germany's government, which is Europe's "risk-free" rate has fallen quite sharply this week. As a major exporter, Germany would be hard-hit by rising protectionism, and meanwhile, the European Central Bank is being cautious about reducing QE.
(Ten-year bund yield: three months)
Copper fell as market fret about the strength of global growth and China in particular.
(Copper: three months)
Bitcoin continued to struggle, trading as low as below $7,500 for a period this week.
(Bitcoin: ten days)
Turning to US employment, the four-week moving average of weekly US jobless claims remained at 221,500 this week, as weekly claims came in at 229,000, a little higher than last week.
According to David Rosenberg of Gluskin Sheff, when US jobless claims hit a "cyclical trough" (as measured by the four-week moving average), a stockmarket peak is not far behind (on average 14 weeks), and a recession follows about a year later. As you can see, we're only just above the most recent trough. If Rosenberg is right (and obviously, there are a limited number of instances to go by historically, so this is "finger in the air" stuff) then it looks as though we're likely to keep on pushing that recession out further and further.
(Four-week moving average of US jobless claims: since start of 2016)
The oil price (as measured by Brent crude, the international/European benchmark) rallied strongly this week, but took a hit on fears of trade wars (if fewer ships are crisscrossing the oceans, you don't need as much fuel).
(Brent crude oil: three months)
Internet giant Amazon held up better than most of its peers in the tech sector, amid the sell-off around Facebook.
(Amazon: three months)
Tesla hit the skids, partly as a result of the wider market sell-off, and surely partly about founder Elon Musk's ridiculous new compensation scheme, which could earn him up to £40bn, apparently. Supporters say that it'll help him focus on the company I don't know about you, but I suspect that after I'd made my first billion, the desire to grab the rest would seem a lot less urgent.
(Tesla: three months)
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John Stepek is a senior reporter at Bloomberg News and a former editor of MoneyWeek magazine. He graduated from Strathclyde University with a degree in psychology in 1996 and has always been fascinated by the gap between the way the market works in theory and the way it works in practice, and by how our deep-rooted instincts work against our best interests as investors.
He started out in journalism by writing articles about the specific business challenges facing family firms. In 2003, he took a job on the finance desk of Teletext, where he spent two years covering the markets and breaking financial news.
His work has been published in Families in Business, Shares magazine, Spear's Magazine, The Sunday Times, and The Spectator among others. He has also appeared as an expert commentator on BBC Radio 4's Today programme, BBC Radio Scotland, Newsnight, Daily Politics and Bloomberg. His first book, on contrarian investing, The Sceptical Investor, was released in March 2019. You can follow John on Twitter at @john_stepek.
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