Nick Batsford, CEO of Tip TV, was joined by Zak Mir, technical analyst for ShareProphets.com, and Tim Price, Partner and Director of Investment at PFP Wealth, on the Tip TV Finance show to discuss Gold/EUR, US retail prices, China, BoE and the Fed, as well as US Treasury volatility and equity weakness.
Gold/EUR inverted head and shoulder breakout confirmed
Batsford highlighted FX Street, who noted that with Fed rate hike bets largely unchanged despite strong US CPI and a further positive outlook for gold, they concluded that the door remains open for a rally to EUR 1056/Oz (200-DMA). Price commented that the FOMC dropping the ball and central banks in general losing the plot, gold has a good backdrop. He added that Gold is not an investment, but a conscious decision to wait before you find an investment. With Mir finally adding that this is a chance for junior miners with the Fed not raising interest rates.
Worries over deflation increasing
Price outlined that China devaluing the Renminbi only creates greater worries over deflation, and he highlighted that heavily indebted governments are the most scared. Thus he believed that there is a possibility of a panic move which could see QE soar. On China, he continued that China GDP is important in the next week.
US retail price index down, US CPI sanguine
Batsford moved to Elliott, who outlined that in the US the retails price index dropped by 0.2% from August to September, the sharpest fall in eight months, taking the annualised rate to exactly zero. Energy components in the index, including oil, electricity, natural gas and petrol fell by 4.7% on the month. Economists were sanguine noting that core CPI ticked higher from 1.8 to 1.9% annualised.
BoE to copy the Fed?
Batsford continued with Elliott, who commented that the BoE is looking whether to copy elements of the US Fed’s remit targeting maximum employment and price stability rather than the current narrower inflation target over the medium term. Messrs Blanchflower, Posen, McFall and Wren-Lewis have been chosen to study and recommend ideas to the Treasury and the bank.
Bonds spreads are widening
Price highlighted that the difference in yield between American Aaa and Baa corporate bonds in percentage points shows bond spreads widening. He added that US Treasury volatility is rising and highlighted a quote, “The $12.9 trillion US government bond market... long considered the deepest and most liquid in the world… is now plagued by more bouts of turbulence than at any time since at least the 1970’s”. Price commented that daily swings in 10-year yield surge shows that moves now exceed one standard deviation about 58% of the time. He also expressed the correlation between the Pope and equity weakness, outlining the crashes in the S&P 500 following papal visits. Price finished on contagion, and noted that US hybrid mutual fund assets total $1.4 trillion, but if the credit market suffers a liquidity crisis we believe the inability to sell the $243 billion credit component would trigger sales in the $843 billion equity component.