 The Market Sum | Insight after the bell
By Caleb Silver, Editor in Chief Tuesday's Headlines 1. Markets Rise on Trump-Xi G20 Meeting Plans 3. Facebook Launches Libra - Bitcoin Soars 5. Euro Shrinks on ECB Cut Plans Markets Closed
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To go to the survey, click here.  U.S. Markets Soar on Trump-Xi G20 Meeting Plans President Trump tweeted this morning that he and China's President Xi plan to have an extended meeting at the G-20 Summit next week in Japan, and that helped put investors in the buying mood. The DJIA, Nasdaq and the S&P500 all popped on the news, as investors took Trump's tweet to mean that a deal might be in sight. The S&P500 is a small hop away from a new record high.  What Does it Mean? If you feel like you've seen this movie before, you have. As we know, relations between China and the U.S. can change on a dime, or a tweet, for that matter. But, with the G-20 ten days away, this seems like a good sign that progress may be made building up to that summit.
Incidentally, President Trump is kicking off his re-election bid this evening in Florida while U.S. Trade Representative Robert Lighthizer testified in front of the U.S. Senate Finance Committee on the impact of tariffs on the U.S. economy, today. Good timing, all around.
Draghi Strikes ECB President Mario Draghi reassured his constituents in the EU today that the European Central Bank would use fiscal stimulus to prop up the European economy if it falls into, or gets close to a recession. Investors took it as a sign that Draghi and the ECB would cut interest rates sooner than forecast and continue its accommodative policy to prop up European banks if necessary.
(James has more on what this did to the Euro/Dollar currency trade in our daily chart, below.)
His words from the ECB Forum in Sintra, Portugal:
"The (European) Treaty requires that our actions are both necessary and proportionate to fulfill our mandate and achieve our objective, which implies that the limits we establish on our tools are specific to the contingencies we face. If the crisis has shown anything, it is that we will use all the flexibility within our mandate to fulfill our mandate — and we will do so again to answer any challenges to price stability in the future,"
Translation: "We've got your back, and a European recession won't happen in my final four months as ECB President."
Like the U.S. Federal Reserve, Draghi and the ECB have been pulling out all the monetary policy stops to keep the European economy from sliding back into crisis.
Since the sovereign debt crisis of 2011, the ECB announced a series of measures to boost inflation and ensure price stability, including interest rate cuts, purchases of corporate and government bonds, and cheaper loans to banks. Sound familiar?
photo courtesy Bloomberg News  Powell is on Deck The U.S. Federal Reserve's Open Market Committee is meeting today and tomorrow and the expectations are high that Fed Chair Jerome Powell will also assuage investors that the Central Bank will do what it takes to keep the economy humming.
As we have said, don't expect an interest rate cut tomorrow (but, anything's possible). Instead, we'll be listening closely to what Powell has to say about future rate cuts and the overall health of the U.S. economy in light of the trade war and a few surprisingly low economic reports of late.
The stock market has been rising in anticipation of a friendly Fed, so a disappointment will land hard. Bond Yields Keep Falling With the EU and the U.S. potentially poised to cut interest rates again, it's worth noting that yields 10-Year Treasury bonds just keep on tumbling. The U.S. 10 year Treasury, considered to be among the safest on the planet given the relative stability of the U.S. economy, just hit its lowest level since September 2017.
Remember - yields move inversely to price. If you own 10-year bonds, the price has gone up, but your reward or 'yield' for holding them has fallen. If you are a long-term investor, that's not very helpful.
Watch: Understanding Bond Yields and Price
This is not only a U.S. phenomenon. Government bond yields are falling all over the planet, as central banks slash rates to prop up weakening economies. It's like giving a limping athlete a shot of steroids so they can stay in the race. In many countries, government bond yields are negative. Investors get a negative yield for loaning governments money. That's not the way things are supposed to work.
Charlie Bilello, one of our favorite market researchers, charted government bond yields around the world to see where they are the lowest. It's shocking to see governments like Switzerland and Germany with negative yields on their government bonds, but that's the world we are living in today, and that's yet another reason why stocks are near record highs. 
 Facebook Announces Libra Launch Facebook unveiled plans for its highly anticipated Libra cryptocurrency today, and this one feels different. The social media giant has been developing Libra for several years in the hopes that it will one day be used on a global scale among its 2 billion users like the U.S. dollar. The thing is, it's not like the U.S. dollar, although it's closer to the dollar, which is a fiat currency, than it is to Bitcoin.
Libra is what is known as a stablecoin - a digital currency that's supported by government backed currencies and securities. Bitcoin is not backed by any real assets or currency, which explains why it's so volatile.
According to the white paper on Libra (most new cryptocurrencies come with a white paper explaining how they work) Libra's value will be pinned to a basket of 'low volatility assets' which will include bank deposits and government backed securities in a variety of currencies. In other words, it won't be pinned to the dollar or the Euro exclusively. The value of a Libra will fluctuate, but it won't be too impacted by one currency or another.
Another key point and differentiator from other crypto tokens is that Libra will be fully reserved. For every unit of Libra cryptocurrency that is issued, its reserve value in whatever basket of currencies and securities backing it "will be issued and held in a geographically distributed network of custodians with investment-grade credit rating to limit counter-party risk." This is basically the blockchain in action, except in a regulated environment.
Read more: Blockchain Explained
Sounds like real money to me, or at the very least, a real asset-backed security.
Read more: Facebook Gathers Companies to Back Libra Launch.
Facebook has created a Reserve with its partners in an Association which will manage the Reserve to back the value of the Libra coin. They have to pay for this somehow, and while Facebook can afford to launch the project, it's not in the business of losing money.
Here's what The Reserve plans to do: "The reserve will be invested in low-risk assets that will yield interest over time. The revenue from this interest will first go to support the operating expenses of the association — to fund investments in the growth and development of the ecosystem, grants to nonprofit and multilateral organizations, engineering research, etc. Once that is covered, part of the remaining returns will go to pay dividends to early investors in the Libra Investment Token for their initial contributions."
Facebook has gathered some powerful venture capital backers to launch Libra, and it's signed on some big payment companies like Visa, PayPal and Mastercard to launch it.  Why Facebook? Why Now? Simply put, there is no other company that could even try to pull this off (though the encrypted messaging app Telegram did raise $2 billion to do just this, last year). Facebook has 2 billion users around the world. That is bigger than any one country on the planet. They all speak Facebook's language, share personal information on the platform, and watch advertisements... a lot of them.
When Mark Zuckerberg announced last year that Facebook was going to unify its messaging platforms Instagram, Messenger and WhatsApp, many people wondered what the end-game was. The end-game is creating one platform and one currency where its 2 billion users can interact, share, send money and buy things they "like", and never leave.
The original Social Network has come a long way from Zuckerberg's college dorm room at Harvard.
I highly suggest you read and watch the videos on the Libra site to learn more.
chart courtesy www.koyfin.com  Chipmakers like Nvidia and Micron were up today, as Trump tweeted that he and Chinese president Xi Jinping would have an "extended" meeting, at the G20 summit next week. Boeing surged more than 5% today, as the airplane maker put its first orders from the Paris Air Show in the book.  Western Union Company dropped more than 2% today, following the announcement of Facebook's cryptocurrency and the news that the cryptocurrency Ripple had bought a $50 million stake in MoneyGram. In other words, there may be new players in the money transfer business.
Kellogg also dropped nearly 2% today as the company announced a second restructuring, and a 150 job cut.  Word of the Day Already, Facebook has made some crucial moves to try and gain credibility with its cryptocurrency. For one, the company has partnered with 27 high profile companies, and hopes to partner with as many as 100 before the cryptocurrency launches. For another, the project is to be run by a non-profit entity in Switzerland, the Libra Association, independent of the social network. The Libra Association will be overseen by other companies which will having voting power over the design and release of Libra. Financial customer data will not be used to target ads, and Facebook's connection to Libra, its subsidiary, Calibra, will not be allowed to share financial data with other divisions of Facebook.
Another one? Libra is a Stablecoin backed by currencies like the dollar or the euro.
Want more info on what a Stablecoin is? Read on: "Stablecoin refers to a new class of cryptocurrencies which offer price stability and/or are backed by reserve asset(s). In recent times, stablecoins have gained enough traction as they attempt to offer the best of both world's – the instant processing and security of payments of cryptocurrencies, and the volatility-free stable valuations of fiat currencies."  credit: Chesnot / Getty Images
Today in History June 18th, 2019 - Today's today in history is literally today. That's because Facebook announced its cryptocurrency, Libra, today. Read all about it, above. Chart of the Day: Dovish Draghi Drags Down Euro  The euro has been on a sharp downtrend against the U.S. dollar since its most recent high in February 2018. Helping to drag down the euro even further on Tuesday was none other than European Central Bank (ECB) President Mario Draghi. In a morning speech at the ECB Forum on Central Banking, Draghi said that the central bank is poised to implement more stimulus measures, including further interest rate cuts and asset purchases, if inflation and economic growth in the eurozone do not pick up. The benchmark eurozone interest rate is already at 0%, and inflation estimates have been consistently below forecast. Draghi's speech, which comes a day before the U.S. Federal Reserve issues its own monetary policy decision, indicates that the central bank is prepared to drop the benchmark rate into negative territory.
Predictably, the euro dropped against its major counterparts, most notably the U.S. dollar, after Draghi's dovish talk on Tuesday. For EUR/USD, the drop was an extension of the latest slide for the embattled currency pair. As noted, EUR/USD has been entrenched in a downtrend for the better part of a year and a half, and last month, hit a new two-year low. Currently, the currency pair is trading below both its 200-day and 50-day moving averages, and the prevailing trend is decisively to the downside. The next major downside target is around the key 1.1100 level, which would constitute a new long-term low if hit. Any further breakdown below that level would be a substantially bearish signal.
The next major catalyst for EUR/USD movement will be Wednesday's FOMC announcement. This key event will likely make a significant impact on the dollar, which would, in turn, move EUR/USD. If the Fed cuts interest rates, which most Fed-watchers are NOT expecting, the dollar could fall, potentially boosting EUR/USD. If there is no rate cut (as expected) and less-dovish talk than expected, the dollar could surge, potentially dragging further on EUR/USD.
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Tuesday, June 18, 2019
Enter Libra
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