Market Morning: Gold Collapses, Yuan Plummets, MGM Flies High, AT&T Faces Off Justice Dept
Stock Futures Down, Gold Hits New Lows, Dollar Up
Futures are down this morning, modestly, with the S&P 500 futures (NYSEARCA:SPY) falling around 0.2%, oil (NYSEARCA:USO) down on reports of record US output, most currencies down against the US dollar (NYSEARCA:UUP), and gold (NYSEARCA:GLD) hitting new 52-week lows, though just by a week. Gold hit a low of $1,204 an ounce on July 10th, 2017, which would be 53 weeks ago, and then climbed until April 2018.
SEE: Cryptocurrency News Roundup July 18
Yuan Buckles Under Weight of Trade War
China’s Yuan (NYSEARCA:CYB) is crashing again, down to 52 week lows against the US Dollar today. The last time it fell so sharply was in August 2015 and it caused, or at least coincided with, severe downturns in US markets, and one of the worst days for the Nasdaq (NASDAQ:QQQ) on record. It’s hard to see though why the Yuan should necessarily fall on the back of a trade war, given that a trade war should make exports more difficult, increasing the supply of goods within China itself, which should bring down the yuan prices of consumer goods, strengthening the currency.
What to do: Watch for a bounce in the Yuan.
Inflation Expectations Fall as Inflation Indexes Rise, Bonds Remain Quiet
In another somewhat curious development, Bloomberg published a piece today on breakeven treasury rates, basically the rate at which investors think the value of a treasury bond will be, taking into account long term inflation decay. One of the reasons speculated is that real wages have fallen in the United States, which is wage gains minus inflation. Since people are not earning more purchasing power with their increased salaries, the expectation is that spending could decrease, putting downward pressure in price gains. The problem is, inflation gauges are all at 6 year highs, so something is amiss here. With that in mind, Bloomberg also notes that July has been the calmest and least volatile month for treasury yields, which have moved only 7.7 basis points this whole month, since 1973, which happened to be a year of stagflation. Is this the calm before the storm in bond markets?
What to do: Watch out for stagflation. We maybe at the beginning stages of it, where real wages fall but consumer prices rise. (NYSEARCA:BND)
MGM Shares Continue to Climb Despite Lawsuit Against Shooting Victims
Negative press aside, MGM (NYSE:MGM) shares have been on a tear since the beginning of July, up nearly 11%. MGM filed a lawsuit in federal court against the victims of the Mandalay Bay shooting, when madman Stephen Paddock shot at a crowd in Las Vegas from and MGM hotel, killing 58 people in the worst mass shooting in American history. MGM filed the lawsuit in order to deflect lawsuits against itself holding it responsible for the shooting for renting Paddock a hotel room, not knowing he was about to murder people from its balcony. To make a move like that, MGM had to be certain that not doing so would be very damaging, since it must have known how it would look in the press. Calls to boycott MGM over this notwithstanding, boycotting MGM would be pretty hard to do, since it is by far the largest casino owner in Las Vegas, and the single largest employer in the city.
Justice Department Wants Court to Move Fast on AT&T Time Warner Appeal
The Justice Department is getting anxious that if it doesn’t get a decision on its appeal of the previously approved AT&T (NYSE:T) Time Warner merger by February 28, 2019, it may be impossible to untangle the companies that have already merged. By that date, the various Turner network channels will come under the ownership of AT&T, at which point it may prove impossible to separate the companies, which would make winning the case for the Justice Department that much harder, given the logistical difficulties. The Justice Department argues that Judge Richard Leon, who approved the merger in a strongly worded ruling, ignored basic economic principles. AT&T doesn’t think so.
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