Jeff Gundlach’s Warning And Danger For Key Global Markets

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Here is a look at Jeff Gundlach’s warning and danger for key global markets.

Here is a portion of what Peter Boockvar wrote today as the world awaits the next round of monetary madness:  Yes, markets globally are trading lower after the Apple numbers but we are also seeing another rise in interest rates, especially in Europe. It’s another day of both bonds and stocks trading lower which makes perfect sense as its contra to the last 7 years where bonds and stocks rallied together (and the same trend from 1981 to 2000)…

We can continue to analyze earnings and the economic fundamentals every which way to try to figure out where stocks go but let’s be honest, it’s all about where rates go in the monetary world we live in. The German 10 yr bund is up 5 bps to .08% which would be a closing 4 month high. 
The 10 yr Gilt yield is breaking out by 6 bps to 1.15%, the highest since the day of the UK vote. The French 10 yr yield is up by 5 bps and the Italian 10 yr yield is higher by 6 bps to also a 4 month high. I can’t blame bond weakness in Asia as yields there were little changed. The US 10 yr is getting dragged up to 1.77-1.78%, testing yesterday’s intraday high. The US 2 yr yield is up by 1.5 bps to .87%, the highest since early June on the heels of the weak 2 yr note auction yesterday.

I’ll reiterate the factors in our bearish case for bonds:

1) In a bond world dominated by central banks, damaged bank profitability in Japan and Europe has the BoJ and ECB acknowledging their monetary limits with NIRP and curve flattening.

2) The BoJ and ECB are also running out of bonds to buy.

3) Starving pension funds, savers and insurance companies of yield is gaining fodder for political pushback against central bankers, especially from politicians in Europe including in the UK.

4) Mark Carney and Janet Yellen admit that they’re willing to tolerate higher inflation at the same time inflation stats are moving higher.

5) With core inflation sticky due to gains in services, commodity prices ending their 5 yr bear market (I believe) will continue to shift headline inflation higher in coming months and quarters. CRB raw industrials index is just shy of a 16 month high and energy prices are all up y/o/y.

6) Atlanta Fed wage growth tracker is at its highest level since January ’09.

7) Foreigners are aggressive net sellers of US notes and bonds, $180b year to date.

8) Even without fiscal stimulus, the US budget deficit is expected to gap higher in coming years.

Also of importance…

And here is a portion of today’s note from Art Cashin:  Overnight And Overseas – In Asia, markets were a bit mixed. Japan was up a smidge, but Hong Kong and India got dinged smartly. Shanghai saw more moderate losses. 

In Europe, stocks are generally lower as crude continues to trade below $50 and Apple is getting beat up a bit after their earnings report. 
In other assets, the euro rallied a bit against the dollar. Crude trades near $49.25 and gold is down a shade.

Consensus – The Apple fallout weighs on the equity futures. Crude will be followed closely and could have a big influence if it breaks below $49. If equity selling turns intense, traders will watch the S&P 2130 level. A close below that would trigger the Gundlach warning. 

Stay wary, alert and very, very nimble.