Traders work on the floor of the New York Stock Exchange (NYSE) on September 25, 2014 in New York City.Spencer Platt/Getty Images
A roundup of what The Globe and Mail's market strategist Scott Barlow is reading this morning on the World Wide Web.
The Bank of Japan fired the monetary bazooka overnight and the doubling down on stimulus has direct implications for Canadian investors. One, it highlights the lack of success global central banks are experiencing in fighting deflation. More directly, the price of gold fell hard on the news which is exactly the reverse of what should happen when a central bank starts "printing money." The investment thesis for gold, already under pressure, is deteriorating further.
"Yen slides as stocks jump with U.S. futures surge on BOJ " – Bloomberg
"Gold, silver tumble to four-year lows as dollar rallies" – Reuters
"Your Abe put" – Keohane, FTAlphaville (registration required)
"The BoJ's shock stimulus – analysts react" – FastFT (paywall)
The Russian central bank also surprised markets overnight by raising interest rates by 150 basis points when a 50 bp increase was expected. On its own, this is not big news for Canadian investors. But, Brazil also shocked markets this week with a rate hike to support the currency and slow the torrent of capital flight from the country. Brazil and Russia are both members of the now-defunct BRIC club, and the news underscores increasing financial pressure on major emerging markets.
"Russia raises rate more than expected to 9.5 per cent on ruble" – Bloomberg
"Brazil shocks with interest rate hike, market-friendly nod" – Reuters
Luke Kawa's early-morning work for Macleans is becoming a must-read for Canadians. As part of a wide-ranging survey of overnight market news, this morning Mr. Kawa asks "Did Canada's streak of economic growth end in August?"
"Economic growth flatlined in July, up just 0.04 per cent month-over-month, and the consensus estimate is that growth will continue to stall. The danger, however, is that the economy will contract, given the large trade deficit and precipitous drop-off in manufacturing sales seen over the course of the month."
"Is the Canadian economy's seven-month winning streak about to end?" – Macleans
Bloomberg View financial columnist (and ex-Goldman Sachs banker) Matt Levine is always great but lately his posts have been required, and entertaining, reading. Yesterday, Mr. Levine dug deep into the structure of Sears Holdings' seemingly weird debt and rights offering to provide a completely plausible narrative on how the deal was designed.
"Sears has a deal to offer its shareholders " – Levine, Bloomberg
A brilliantly tongue in cheek coilumn by the Financial Times' Tracy Alloway in the form of a therapist-driven open letter to the Federal Reserve explores "25 warning signs that you are in a codependent relationship with loose monetary policy."
"I must confess, I feel rather nervous about the future. I guess I still have Low Interest Rates for comfort, but I'm uncertain how long they will stick around now you are leaving.
And there are so many other things to worry about – geopolitical unrest, Ebola, asset price bubbles (which I think maybe you left behind? Did you mean to take those with you? They are kind of big and taking up a lot of room) – things I have been able to ignore while you've been by my side."
"QE's break-up with markets: no regrets?" – Alloway, Financial Times (subscription may be required)
Tweet of the Day: "@convertbond Plunging oil? A record 17 per cent of the $300-billion high yield junk bonds issued this year came from energy companies."
Diversion: This is great. "Your brain's response to vile images says a lot about your politics" – Quartz
Follow Scott Barlow on Twitter @SBarlow_ROB
Scott Barlow