The fly in the ointment this week for debt and commodities markets first and then stocks is Glencore.
This mining and commodities conglomerate is on the verge of having its debt labeled as junk, which will cause many debt holders into panic selling mode since they are not able to hold junk debt in their funds.
The cratering oil and metals market have almost taken this European company out in September and now most of its debt is trading at less than $0.60 on the dollar with a bond rating that’s one step from junk.
The stock is down 65% over the last 6 months, despite a 13% run up on Tuesday.
China came in with its slowest economic growth in 25 years. Coming in at 6.9%, which was just below expectations, but that was enough to get markets moving higher.
Equities and crude prices jumped on the not so bad news. It’s called a relief rally and the snap back is needed to flesh out some short sellers and bring markets to a short-term equilibrium.
There’s been — since the first of the year — a tremendous amount of cash on the sidelines that needed to be put to work. Retirement and annuity funds have been looking for a window to put cash into stocks and bonds.
So despite China coming in weaker on GDP and three other measures of growth, the markets will seize the opportunity to charge higher on anticipation that China may need to ease further to spur growth.
That’s for today, and that means we may get back to last Friday’s market opening levels, if. Lastly, Dow and S&P 500 futures are up 1.6% at 7am EST. I’m thinking that might be the high today, let’s see where they finish.
One quick note. Very sorry to hear Glenn Fry is Already Gone. Loved the Eagles, big part of my music growing up. RIP partner.