The ECB hints at adding more stimulus.

* The ECB hints at more stimulus.
* Yen shoots higher on old news …
* G20 finance leaders meet this weekend.
* Gold and Silver finally post positive moves…

And Now, Today’s A Pfennig For Your Thoughts.

Good morning. It will be another group effort today as Chuck begins his summer vacation in sunny Florida. As has become a tradition when Chuck is out today’s Pfennig will be a group effort. Frank Trotter will get things started with a few thoughts and then we will hear from a new Pfennig contributor, Dane Moody who will get us up to date on all of the market movements which occurred yesterday. We have a lot to cover so take it away Frank:

Well it’s much more effective to hit “send” isn’t it. As Mike mentioned yesterday my introduction was missing and like a lost set of keys I found it right here on my desktop. Makes the Friday version a little easier anyway . . .

With literally tons of trees in the Saint Louis area we don’t see approaching storms miles and sometimes hours away like our friends on the great plains. At the back of our home we have a covered sitting area that faces west. We look out across the pool to a line of tall trees about 70 feet away, many well over 100 feet tall. For years now it has been our habit when we hear a storm approaching from far away – or these days when notified to the minute by the spiffy app “DarkSky” – to grab a beverage appropriate for the time of day and watch the fireworks roll in. Since our line of sight is blocked by the foliage our first notice is the breeze, and then the lashing high winds of the front passing through. This is followed by close up lightning and thunder and then, probably like helicopters appearing over a position and letting loose, the clouds and rain simply appear together as the deluge begins.

We have always been impressed by the resiliency of the trees. Some of the tallest sway (my estimate) about 30 degrees each direction without breaking like a maple bat at a ballgame (and some are maple trees – go figure). This ability to give without breaking saves them most of the time and contrasts with the solid steel-like trees I find when hiking near tree-line. Recently a couple have let go – weakened by some invisible malady. The first dropped about the top 65 feet of oak onto our roof, spiking like an arrow into the bedroom underneath. The second, about 85 feet of tree opened up a sightline to the west after it crashed into the yard. We thought we’d be able to see the storms further out as a result, but in the past three weeks a new second story and now a roof has appeared in the lot behind that has been vacant for the 35 years we have lived in this home. Progress rolls on.

The chaos of weather always reminds me of the markets and the economy (well pretty much everything does but that’s another story). Like weather, the economy is a mix of somewhat random inputs by the major players: consumers, enterprise, and government. For me consumers are also generally labor. Trends and attitudes change for each individual on their own, but they are heavily influenced by what is going on around them. We covered the attention deficit approach that traders undertake skipping from on crisis or economic statistic like golden retrievers searching for the next tennis ball – and sometimes coming back with more than one in their mouth. Chuck passed around a wonderful little video that reminds us where economic theory came from and how it stands today – very much apart. The speaker ends with three rules: 1 – Don’t trust economists; 2 – Listen to the other side (kind of like an election year, right?), and; 3 – It is difficult to change the economic reality. Watch it here: https://goo.gl/0MN3lI .

On Monday both Chris and I depart for Vancouver and the Sprott Resource Conference. I think EverBank has been there every year in some form or another. It has always been one of my favorite spots, and Chuck’s too. I’ll be on the ground for a little under 48 hours so not much exploring will occur this time. It’s sold out so I hope to see you there.

Thanks as always for getting things going this morning Frank, and as promised Dane Moody will share his thoughts on what was moving the markets yesterday. Dane has been working for EverBank for a number of years now, starting in our operations department and then spending some time in Wealth Management before finally settling in here at the World Markets desk where he helps out with a little bit of everything. So take it away Dane:

The big headline of the day came from Japan by way of the UK, where BOJ chief Kuroda said in an interview with the BBC that he saw no need for added stimulus for the Japanese economy, pushing the yen to a 1% gain for the day. Though the interview was later reported to have been conducted in mid-June, the upward move had started, and JPY posted the largest daily % gain of the major traded currencies. In a market that hangs (and trades) on every word from central bankers, even a month-old interview can drive the day.

The ECB, on the other hand, greased the tracks (Chuck’s term) for added stimulus during the September meeting, as they continue to deal with the fallout of the Brexit referendum. The markets took this in stride, and the euro and the European currencies managed to post small gains against the dollar. Likewise, the Bank of New Zealand provided an update to say that further rate cuts are likely, which pushed the NZD into the loss column on the day, falling 0.6%.

Thursday was a nice turnaround day for the metals. Gold popped by over 1% and silver by over 2% on Thursday to claw back some of the losses posted earlier in the week. However, the price of oil dropped by more than 2.5%, dragging on the Russian Ruble and the Brazilian real, which posted the biggest losses against the USD for the day.

As Mike previewed yesterday, there were a few noteworthy data prints on Thursday. The weekly jobless claims came in at 253k, below the expected 265k. This marks 72 consecutive weeks of claims below 300k, the longest such streak since 1973. Additional good news for the direction of the US economy came from June existing home sales, which beat expectations at 5.57 million – the highest level in 9 ½ years, and the Leading Economic Index showing a 0.3% increase after falling by 0.2% in May.

This morning, we’ll see the Markit US Manufacturing Index, which Reuters’ poll shows expectations of a slight increase over June’s number.

Thanks Dane – now you can add ‘Pfennig contributor’ to your long list of accomplishments.As he mentioned, the Japanese yen was one of the biggest movers overnight on what turned out to be old news. It actually shows you just how dependent the markets have become on easy money from the central banks – when month old comments regarding less need for stimulus send the globes equity markets into a tailspin. The comments by the BOJ’s Kuroda increased investor worries that the free flow of stimulus money may be coming to an end. But the head of the ECB, Mario Draghi eased their worries a bit as he set the stage for additional stimulus to help the European markets deal with Brexit.

The dollar will end the week higher vs. a majority of the currencies as thoughts of a 2016 rate hike here in the US have increased. And those thoughts have also added some selling pressure to the precious metals this week even though we are seeing them rally just a bit in early morning trading. It has been a relatively quiet week in the markets without much data to really move things one way or the other, but this weekend’s G20 meeting could provide the markets with some volatility. The IMF issued a report ahead of this weekend’s meeting of G20 finance ministers in China urging them to back additional stimulus measures to combat ‘stubbornly weak growth’.

Currencies today 7/22/16. American Style: A$ .7471, kiwi .6987, C$ .7618, euro 1.1018, sterling 1.3117, Swiss $1.011 European Style: rand 14.225, krone 8.516, SEK 8.618, forint 284.48, zloty 3.9508, koruna 24.5299, RUB 64.468, yen 106.16, sing 1.3566, HKD 7.7562, INR 67.1225, China 6.6735, pesos 18.5913, BRL 3.2719, Dollar Index 97.12, Oil $44.67, 10-year 1.57%, Silver $19.66, Platinum $1,095.25, Palladium $680.47, and Gold $1,323.77.

That’s it for today, and for the week. Thanks to both Frank and Dane for writing most of today’s Pfennig. It has been a busy week of travel for me as I spoke at a investment conference on Monday and then traveled here to NYC to speak with a number of financial reporters the past few days. I even made it on the ‘Bloomberg Markets’ TV show on Wednesday, you can watch the segement by clicking the following link: The Case for Adding Precious Metals to Your Portfolio. And I’ve wrapped up the week with a couple of vacation days in NYC with my family – including a Billy Joel concert at Madison Square Garden where he was joined by Tony Bennett and a day game at Yankee Stadium (the Yankees lost to Baltimore). Next week it is off to Vancouver for the Sprott Investment conference, lots of travel but I can think of worse places to be in July. Thanks to all of you for reading the Pfennig and I hope you all have a Fantastic Friday and a wonderful weekend.

Chris Gaffney, CFA
President
EverBank World Markets
1-800-926-4922
https://www.everbank.com