Fundamental Flatness

Playing off a supposed agreement between Russia and Ukraine, brokered by western powers like France and Germany, equities markets relaxed a bit and were bid up across the world. Not all is rosy, however, in eastern Europe.

“I have no illusions; we have no illusions,” German Chancellor Angela Merkel said after the marathon talks. “Much, much work is still necessary.”

Indeed, fighting was raging on, despite promises by the Russian invaders, aiding so-called rebels, to do otherwise. Probably bigger news came in the form of $17.5 billion aid package for the elected government in Kiev. The nearly done pact for a ceasefire also allows the U.S. and other interested parties to put off, or at least refine, their response to Ukrainian requests for heavier “defensive” weaponry.

Elsewhere in Europe, the on-again, off-again deal to ease Greek debt burdens is inching its way to the finish line. There is still plenty of uncertainty as to what the final results will yield, but there will be some sort of deal.

The Dow was up on the Russia news, and was seemingly dismissive of the lollygagging on the Greek front. Another swing, this time up, in crude prices, seemed to buoy the Dow, as well. The NASDAQ was up the most of the three New York exchanges on a brighter outlook for cloud computing vendors. Of all the world’s indices the German DAX was up most, showing great faith in the German chancellor’s ability to broker a deal with Putin. We wish we were as convinced of Putin’s integrity.

The euro rose against the dollar by 0.70%, helping gold and silver, which otherwise would have been down because, in “regular” action, traders were in a selling mood. Gold and crude had been tracking one another the last few sessions. Today they came uncoupled.

The U.S. 10-year bond continues to flirt with the 2.00% yield mark. Without a strong, hard reason to breach that level and go beyond, though, there seems to be no real fundamental case for yield to be rising right now. Japan and Germany’s counterpart bonds’ yields are in the mid- to high-0.03% range. The U.S. yield is now consistently a solid point and a half or more higher.

A 30-year U.S. bond auction was disappointing and that dragged up all yields.

The 30-year buyers/traders were concerned with weaker-than-expected retail sales in January and a minor jump in weekly jobless claims. We think the latter is winter weather related.

While gold did not directly benefit from the various movements just discussed, it seems as if the yellow precious metal is setting itself up as a good bet in coming weeks.

Unfortunately, bulls can no longer count on retail purchases of gold to help bolster prices. It seems the people in countries that favor personal investing in gold jewelry, coins and small ingots are, for the moment, sated.

Wishing you as always, good trading,