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Gold and Silver Prices
Gold gained momentum and closed higher for the week on Friday following the weakest job report this year.
"The economy created a modest 134,000 new jobs in September. Economists polled by MarketWatch had expected a rise of 168,000 jobs. Still, it and strong revisions to jobs created in earlier months were enough to push the U.S. unemployment rate down to 3.7%, its lowest since 1969.
"'This data print is far from a pivotal moment for markets,' said Stephen Innes, Asia-Pacific head of trading at Oanda. An in-line average hourly earnings figure 'isn't much of a letdown,' and despite the nonfarm payroll headline going into the tanks, 'it's hardly a signal that the U.S. economy is also.'
"...The metal finished roughly 0.8% higher this week, according to FactSet data...The moves for the precious metals followed some weakness in the ICE U.S. Dollar index...
"'It's unlikely the dollar will gain any significant momentum as traders will be more apt to take profits on USD strength,' Innes said. 'I'm already focused on next week when China [comes] back online-and given the escalation in China-U.S. tension, that's probably a more significant game changer for currency markets' than the nonfarm payrolls result. China has been celebrating a week-long holiday that began on Oct. 1.
"The jobs data also showed that the increase in pay over the past 12 months slowed...Higher pay has long been linked to rising inflation and is generally viewed by investors as a sign of upward price pressures." ("Gold logs first gain in 3 sessions, building a weekly rise of 0.8%," Myra P. Saefong, Market Watch, 10/05/18.)
Gold ended the week up $3.90, closing at $1,202.70. Silver ended the week down $0.01, closing at $14.63.
These three conditions imply stocks will plunge more than 40 percent during next bear market - Landsman
It's just a matter of time before the success of stocks plunge and 2019 may be when the troubles begin.
"Wall Street veteran Sam Stovall is warning stock investors the longest bull market on record will end with an epic meltdown. According to the CFRA chief investment strategist, it's a side effect of an unprecedented business cycle.
"'Three conditions: Very long, very high, very expensive,' Stovall said Tuesday on CNBC's "Futures Now." 'History would imply that be careful because now we're likely to fall into a very deep bear market when it does finally hit with the average decline being close to 40 percent plus.'
"His latest thoughts came as the Dow was hitting record highs. The blue chip index is now up more than 8 percent this year. The S&P 500 is performing a tad better - up more than 9 percent for 2018.
"He remains confident stocks will see a fresh string of new highs in the final months of the year. Referring to history as a guide, Stovall noted that the fourth quarter is pretty strong during midterm election years, and seasonality points to more gains. He believes it will be easy for the S&P to grab another 80 points and break above 3,000 by year-end.
"However, 2019 may be where the troubles begin.
"'A lot of the euphoria, a lot of the optimism, is already built into share prices,' he said. 'How much more [in earnings] can companies deliver? Expectations are for a 22 percent gain for the entire calendar year 2018. Then it slips to a 10 percent gain in 2019. Those optimistic numbers are already built into the market.'
"Despite his subdued bullishness going into next year, his rolling S&P 500 12-month target is 3,100, about a 6 percent gain from current levels. His forecast is based on the idea that economic conditions don't suggest a recession will hit in that time frame.
"'Nobody knows for sure when the music will actually stop,' Stovall said. 'But I think it's just a matter of time.'" ("These three conditions imply stocks will plunge more than 40 percent during the next bear market," Stephanie Landsman, CNBC, 10/03/18.)
World economy at risk of another financial crash, says IMF - Inman
The growth of global banks and the failure to reform the banking system could trigger crisis.
"The world economy is at risk of another financial meltdown, following the failure of governments and regulators to push through all the reformsneeded to protect the system from reckless behaviour, the International Monetary Fund has warned.
"With global debt levels well above those at the time of the last crash in 2008, the risk remains that unregulated parts of the financial system could trigger a global panic, the Washington-based lender of last resort said.
"Much has been done to shore up the reserves of banks in the last 10 years and to put in place more rigorous oversight of the financial sector, but "'isks tend to rise during good times, such as the current period of low interest rates and subdued volatility, and those risks can always migrate to new areas', the IMF said, adding, 'supervisors must remain vigilant to these unfolding events'.
"A dramatic rise in lending by the so-called shadow banks in China and the failure to impose tough restrictions on insurance companies and asset managers, which handle trillions of dollars of funds, are highlighted by the IMF as causes for concern.
"The growth of global banks such as JP Morgan and the Industrial and Commercial Bank of China to a scale beyond that seen in 2008, leading to fears that they remain 'too big fail', also registers on the IMF's radar.
"The warning from the IMF Global Financial Stability report echoes similar concerns that complacency among regulators and a backlash against international agreements, especially from Donald Trump's US administration, has undermined efforts to prepare for another downturn.
"The former UK prime minister Gordon Brown said last month that the world economy was ''sleepwalking into a future crisis," and risks were not being tackled now 'we are in a leaderless world'.
"Speaking this week before the fund's forthcoming annual meeting - taking place next week on the Indonesian island of Bali - the IMF's head, Christine Lagarde, said she was concerned that the total value of global debt, in both the public and private sectors, has rocketed by 60% in the decade since the financial crisis to reach an all-time high of $182tn (£139tn).
"She said the build-up made developing world governments and companies more vulnerable to higher US interest rates, which could trigger a flight of funds and destabilise their economies. 'This should serve as a wake-up call,' she said.
"... Increased cybersecurity risks pose challenges for financial institutions, financial infrastructure, and supervisors. These developments should act as a reminder that the financial system is permanently evolving, and regulators and supervisors must remain vigilant to this evolution and ready to act if needed."
"In a separate analysis, as part of the IMF's annual economic outlook, it warned that 'large challenges loom for the global economy to prevent a second Great Depression'.
"It said the huge rise in borrowing by corporates and government at cheap interest rates had not shown up in higher levels of research and development or more general investment in infrastructure.
"This trend since the collapse of Lehman Brothers, which triggered the global financial crisis, had limited the growth potential of all countries and not just those which suffered the most in the aftermath of the crash. It had also left the global economy in a weaker position, especially as it enters a period when a downturn is possible.
"The IMF said: "The sequence of aftershocks and policy responses that followed the Lehman bankruptcy has led to a world economy in which the median general government debt-GDP ratio stands at 52%, up from 36% before the crisis; central bank balance sheets, particularly in advanced economies, are several multiples of the size they were before the crisis; and emerging market and developing economies now account for 60% of global GDP in purchasing-power-parity terms - which compares with 44% in the decade before the crisis - reflecting, in part, a weak recovery in advanced economies."
"Like many institutions the IMF has warned that rising levels of inequality have a negative impact on investment and productivity as wealthier groups hoard funds rather than re-invest them in productive parts of the economy. Without a rise in investment economies remain vulnerable to financial stress." ("World Economy At Risk Of Another Financial Crash, Says IMF," Phillip Inman, The Guardian, 10/03/18.)
The last time rates soared like this, the stock market plunged double digits - Ungarino
Big spikes cause disruption in the marketplace.
"Interest rates are surging in the U.S. and around the world, sending shock waves through equity markets. The last time this kind of breakout in bond yields struck, U.S. stocks tumbled more than 10 percent.
"When the 10-year Treasury note yield broke above resistance in late January, the stock market sharply corrected, Miller Tabak equity analyst Matt Maley said in a note to clients Thursday. Between the S&P 500's high on Jan. 26 to the year-to-date low on Feb. 9, the market fell nearly 12 percent as the benchmark bond yield broke out to multiyear resistance around 2.6 percent.
"After the kind of yield action this week, he wouldn't be surprised if the market again gets 'knocked off balance in a significant way.'
"'We're seeing a similar thing now, where the yield on the 10-year note is breaking strongly above 3.1 percent, which is a multiyear high. ... People have been talking about how whenever we see these gradual rises in rates, it's really not a problem, but when you do get these big spikes, like we got back in January, it does create disruption in the marketplace. That's what we're worried about right now,' Maley said Thursday on CNBC's "Trading Nation."
"The market did erase its losses in early March, and the rally before the early 2018 downturn was more intense than the current environment, but Maley argues that even without a 'spike' in equities, it can still prove vulnerable.
"'I don't think we're going to have a major crash, but the recent all-time high was really only a slight one, and that's a double-top. That's exactly what we saw in 2007, and exactly what we saw in 2000 just before the markets rolled over. There are some similarities, there are some differences, but we just have to be a little bit worried,' he said.
"'This is definitely a shot of adrenaline for the banks, especially regional banks,' Mark Tepper, president and CEO of Strategic Wealth Partners, said Thursday on "Trading Nation."
"Tepper is optimistic on the banks due in part to increasingly less accommodative policy from the Federal Reserve and relatively strong U.S. economic data.
"'All of these regional bank stocks have been on life support because the yield curve has continued to flatten throughout the year, and in order for these banks to boost their net interest margins, they need to see that curve steepen. We're finally seeing that happen, which is going to be a tailwind for these bank earnings,' he said." ("The last time rates soared like this, the stock market plunged double-digits," Rebecca Ungarino, CNBC, 10/05/18.)