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Hickey and Walters (Bespoke) submit:
The S&P 500 SPY ETF rallied 6.83% in the month of July. Below is a table highlighting the performance of key ETFs across all asset classes in July (as well as YTD and over the last week). Interestingly, largecaps here in the US outperformed smallcaps, which usually isn't the case during rallies. Growth and value both performed about the same, while Materials, Industrials, and Energy were the best performing sectors. Globally, Italy (EWI) did the best in July with a gain of 18%. France (EWQ) and the UK (EWU) came in second and third with gains of 14.5%. India (INP), Japan (EWJ), and China (FXI) were up the least during the month. Looking at commodities, oil and natural gas were up while gold and silver were down. The aggregate bond market ETF (AGG) was up 0.56% for the month, while long-term Treasuries (TLT) and TIPS (TIP) were down. And with the dollar down, the British Pound (FXB) was up 4.95%, the Euro (FXE) was up 6.57%, and the Yen (FXY) was up 2.24%.Complete Story »

Brian Dolan submits:

• Risk rally stalls, more downside likely
• EU bank stress test are results keenly awaited
• UK Inflation debate may be fuelled

Complete Story »

Ashraf Laidi submits:As long as US economic data shows a fresh round of deterioration, and the eurozone is able to suppress event risk on the sovereign front, the Japanese yen shall continue to draw the lion's share of risk-aversion flows away from the USD. But let's first go over the USD's recent decline before further dissecting the yen flows. The 7% decline in the USD's trade-weighted index from its June highs has evolved from stabilizing global equities to broadening weakness in the US data front. The resulting decline in US bond yields has accelerated the USD sell-off to the extent of eroding US yield differentials relative to EUR, GBP and JPY. The broad downgrade of the US growth outlook by the FOMC shuts the door on any remaining form of policy tightening this year, thereby, exacerbating the decline in yields. In fact, the minutes of the FOMC meeting allowed for renewed easing in if the outlook were to worsen appreciably.Complete Story »

Invest With An Edge submits: By Brandon ClayInvestment managers use many different assets to construct portfolios. One of the top tools for mitigating risk is good old-fashioned cash. However, cash does not always have to be in US Dollars. Investors can store their hard-earned savings in other currencies, too. But currency values fluctuate; so foreign currencies are usually differentiated from cash as an asset class.Complete Story »

Ralph Shell submits: The British economic data announced today was enough to give the pound a turn around. We had felt that a pull back to the 1.49 handle was possible, but that was not to be. This morning the y/y CPI came in at +3.2%, as anticipated but down from last month's 3.4%. Again this exceeds the Band of England's target of 2% increase. This prompted a Monetary Policy Committee member, Andrew Sentance to again vote for an increase in the bank rate. To fight future inflation, he favors gradual rate increases. The pound traders liked the news from Sentance, but the latest COT report did show that many of the big specs are short. In the complete futures and options report the large traders are short 39,055 contracts, more than the 38,451 contracts in the much large euro contract. The small spec was also short almost 14,000 contracts. In yesterday's lower market the futures open interest did increase 7701 contracts, which would normally be a bearish sign.Complete Story »

ETF Database submits: With ongoing weakness in Europe pushing the euro to double digit losses against major rival currencies this year, many investors have sought out safe havens such as the U.S. dollar to ride out the storm. The presence of general economic uncertainty has sent the greenback sharply higher against virtually every major currency year-to-date. However, a few countries have seen currencies rise against the dollar despite the obvious appeal of the U.S. currency in tumultuous environments. One of these is Japan, as the yen has proven to be stubbornly strong despite implementation of policies designed to weaken the currency. A perfect storm over the past few months has helped send the value of the yen higher as many other currencies have plunged. One of the most important factors in the recent rise is the unwinding of the carry trade in which investors would borrow in low yielding currencies (such as the yen) and buy into higher yielding ones (such as the Australian dollar or even the euro). However, as interest rates have converged and loan losses build up at banks around the world, this once profitable trading strategy becomes unsustainable, forcing many to buy back yen in order to ‘unwind’ their trades. Another reason for the relative strength of the Japanese yen as of late is the rock-solid balance sheets that many Japanese banks currently maintain, a fact that has helped the country to avoid the worst of the recent financial crisis.Complete Story »

Ralph Shell submits: The retreat of the euro which began Friday continued in this morning's trade. The previous pervasive bearishness had culminated with a sell off under the 1.19 handle in early June. Then, the large specs, probably various types of funds, were short 100,558 contracts, futures and options combined, compared to a more manageable 38,451 contracts in the most recent report. The short buying was in part was responsible for the 850 pip run up to the 1.2750 level. Now a diversity of opinions remains, with some analysts looking for a return to 1.35, and others swearing the current rally will be short lived as the pair is destined to trade at 1.15. Later this week there will be some economic reports in the US, Trade Balance, the monthly federal deficit for June, and retail sales. These reports are expected to provide clues how fast the US economy is faltering, and by themselves will not be of sufficient importance to jolt the market. In Europe the bank stress tests and the results seem of paramount importance. We are curious, however. Does the outcome of these tests depend on the severity of the tests as administered by the central bankers? And what is the Central Bankers' goal?Complete Story »

Ralph Shell submits: The economic reports this week for the Canadian economy have been positive. Earlier in the week, the IVY PMI came in at 58.9, less the the anticipated 64.1, but still above a neutral 50. Today the trade was given a pleasant surprise when new employment was up 93.2k, much bigger than the 17.9k anticipated, and the 24.7k in the previous period. This resulted in the unemployment rate dropping to 7.9%, down from 8.1% in the previous period. Housing starts, at 189k, were hearty, though less than the anticipated 193k.The good economic news plus a better global equities market has helped the loonie. Early in the week, the C$ traded at 1.0670 versus the USD, but today's news sparked a rally to the 1.03 handle. This week's price action has given us a tweezers top, and an engulfing candle suggesting there may be more strength forthcoming in the loonie.Complete Story »

Phil Davis submits: "The rich are less susceptible to the shame and fear-mongering used by the government and the mortgage banking industry to keep underwater homeowners from acting in their financial best interest." - Brent White One in seven homeowners with loans over $1M is in default. (Click chart to enlarge.) That compares to 1 in 12 loans below the $1M mark. This is putting a huge amount of stress on the financial system as 23% of all luxury homes bought as investments are now 90 days or more overdue, compared to just 9% of the smaller homes. Don’t think of this as a 1:1 relationship either as the cut-off of $1M means that a single $10M unpaid mortgage above the line is worth 100 $100,000 loans (the national average) that are unpaid below the line so the distortion from a cash basis is close to a level of 100:1, which just so happens to be the difference in the income level between the top 1% and the bottom 99% as well!Complete Story »

Marc Chandler submits:One of the key talking points today will be the fact that late yesterday the US Treasury issued its review of the currency market and found that, while the yuan was undervalued, China was not guilty of manipulation. The report was due out in April and was postponed ostensibly in anticipation that China was going to move shortly. It moved in June ahead of the G20 meeting. China’s gamesmanship yielded rewards.Congressional leaders took exception and hearings have been promised. The Obama Administration is making a wager that this Congress will not be able to cobble together enough support to effectively overturn Treasury’s decision. However, in fairness, Treasury recognized that it is still not clear how far and how fast China will allow the yuan to adjust. It kept the door ajar as well by indicating that the next review will be out in October, which coincidentally is ahead of the November election. For the record, the dollar strengthened every so slightly on the week against the yuan (CNY6.7730 from CNY6.7716 last week). The yuan has strengthened about 0.8% since the decision to break the dollar peg. No matter how much China allows the yuan appreciate it is unlikely to satisfy the critics some of whom talk about as much as a 40% misalignment. From an economic point of view, the focus on a nominal bilateral exchange rate makes little sense.Note that next week China reports a string of economic news, including Q2 GDP, CPI, trade and new yuan loans. A picture of a slight cooling in the economy, with still firm inflation (3.3% expected in June after 3.1% in May) and a large, even if not accelerating, trade surplus.Complete Story »