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JPM | Third Week Markets Fall All Eyes On Trade Talks | Market Indexes
The market fell again for the third straight week with small caps falling the most down 5 19 followed by the NASDAQ down 2 38 the DOW down 2 37 and the S P down 1 84 as investors had renewed recession concerns over weakening US economic data after September manufacturing activity fell to a more than 10 year low In addition to pressures from the impeachment inquiry the market now has an escalation of the trade war with the US imposing 7 5B in tariffs against European goods A rally on Friday occurred after a modest Sept jobs report
This Week s Options Trades
We added covered call and a put selling trades for mega cap banking stock JPMorgan Chase NYSE JPM to our Covered Calls Table and to our Cash Secured Puts Table this week
There are several Covered Call trades with annualized yields above 25 including TLT FB AAPL and others Our Cash Secured Puts table has put trades ranging up to nearly 50
Volatility
The VIX fell 1 this week after hitting over 21 00 on Wednesday ending the week at 17 04
High Dividend Stocks
These high yield stocks go ex dividend next week LOAN CIO PMT ARR
Market Breadth
Only 10 out of 30 DOW stocks rose this week vs 14 last week 38 of the S P 500 rose vs 42 last week
FOREX
The U S dollar fell versus the pound the Loonie and the Aussie but rose vs the euro the yen the Swiss franc and theNew Zealand dollar in September
Economic Reports
U S job growth increased moderately in September with the unemployment rate dropping to near a 50 year low of 3 5 assuaging financial market concerns that the slowing economy was on the brink of a recession amid lingering trade tensions Non farm payrolls increased by 136 000 jobs last month the government said August data was revised to show 168 000 jobs created instead of the previously reported 130 000 positions
The initial August job count was probably held back by a seasonal quirk related to students leaving their summer jobs and returning to school Economists polled by Reuters had forecast payrolls would increase by 145 000 jobs in September Reuters
Automatic Data Processing showed that a modest 135 000 jobs were created in September another sign that hiring is slowing along with the broader U S economy That missed the Econoday consensus forecast of 152 000 jobs The average monthly job growth for the past three months also fell to 145 000 from 214 000 for the same time period last year MarketWatch
U S manufacturing activity tumbled to a more than 10 year low in September as lingering trade tensions weighed on exports further heightening financial market concerns of a sharp slowdown in economic growth in the third quarter The survey from the Institute for Supply Management ISM on Tuesday came on the heels of data last week showing a moderation in consumer spending in August The economy s fading fortunes have been blamed on the White House s 15 month trade war with China which has sapped business confidence and undermined manufacturing
The ISM said its index of national factory activity dropped 1 3 points to a reading of 47 8 last month the lowest level since June 2009 when the recession was ending A reading below 50 indicates contraction in the manufacturing sector which accounts for about 11 of the U S economy September s reading marked the second straight month that the index broke below the 50 threshold Reuters
Outlays for U S construction projects rose 0 1 in August at a seasonally adjusted annual rate of 1 29 trillion the Commerce Department reported Tuesday Economists polled by MarketWatch had expected a 0 4 gain Activity has been weak but economists think housing may pick up as interest rates fall MarketWatch
U S stocks fell sharply Thursday morning after a report on the U S services sector showed it growing at a slower pace than at any point since 2016 following a report on manufacturing earlier this week that showed it contracting for the second month in a row The ISM s index of the Services sector came in at 52 6 in September down from 56 4 in August and below economists expectations of 55 3 according to a MarketWatch poll of economists
Investors also were digesting news that the U S will impose some 7 5 billion in import duties on goods from the EU including jetliners Irish and Scotch whiskies cheeses and hand tools starting later this month after the U S won WTO backing on Wednesday MarketWatch
Week Ahead Highlights
With this week s weak Sept mfg report pointing to trade as a major cause of the economic slowdown the trade talks resuming in DC next week take on even more significance
Next Week s US Economic Reports
Sectors
Defensive Utilities and Real Estate sectors led this week with Energy stocks lagging
Futures
WTI Crude has risen 16 74 in 2019 while Natural Gas has fallen 20 1 |
JPM | Are You Invested In These 3 Mutual Fund Misfires October 07 2019 | If your advisor has you invested in any of these Mutual Fund Misfires of the Market with high fees and low returns you need to rethink your advisor
High fees plus poor performance It s a pretty simple formula for a bad mutual fund Some are worse than others and some are so bad that they have earned a Strong Sell on the Zacks Rank the lowest ranking of the nearly 19 000 mutual funds we rank daily
Below you ll read about some of the funds included in our current list of Mutual Fund Misfires of the Market And if by chance you re invested in any of these misfires we ll help and review some of our highest Zacks Ranked mutual funds
3 Mutual Fund Misfires
Now let s take a look at three market misfires
JPMorgan NYSE JPM Inflation Managed Bond C JIMCX 1 4 expense ratio and 0 35 management fee JIMCX is classified as a Government Bonds fund These funds hold securities issued by the U S federal government in their portfolios and focus across the curve meaning the yields and interest rate sensitivity will vary With a five year after expenses return of 0 34 you re mostly paying more in fees than returns
Rydex Emerging Market 2X Strategy H RYWVX RYWVX is a part of the Non US Equity fund category many of which will focus across all cap levels and will typically allocate their investments between emerging and developed markets RYWVX offers an expense ratio of 1 85 and annual returns of 2 52 over the last five years Even if this fund can be positioned as a hedge during the recent bull market paying more in fees than returns over the long term should never be an acceptable result
Hartford Emerging Market Local Debt C HLDCX Expense ratio 2 Management fee 0 85 HLDCX is an International Bond Emerging mutual fund which focus on fixed income securities from emerging nations around the globe With annual returns of just 1 3 it s no surprise this fund has received Zacks Strong Sell ranking
3 Top Ranked Mutual Funds
Now that you ve seen the worst Zacks Ranked mutual funds let s have a look at some of the highest ranked funds with the lowest fees
Great West Multi Manager Large Cap Growth MXLGX 1 expense ratio and 0 64 management fee MXLGX is a Large Cap Growth option these mutual funds purchase stakes in numerous large U S companies that are expected to develop and grow at a faster rate than other large cap stocks With an annual return of 13 39 over the last five years this fund is a winner
Diamond Hill Large Cap Fund Y DHLYX Expense ratio 0 55 Management fee 0 5 DHLYX is classified as a Large Cap Blend fund More often than not Large Cap Blend mutual funds invest in companies with a market cap of over 10 billion Buying stakes in bigger companies offer these funds more stability and are well suited for investors with a buy and hold mindset DHLYX has managed to produce a robust 10 56 over the last five years
Oppenheimer International Small Mid Company I OSCIX Expense ratio 0 96 Management fee 0 91 OSCIX is a part of the Non US Equity fund category many of which will focus across all cap levels and will typically allocate their investments between emerging and developed markets OSCIX has produced a 10 37 over the last five years
Bottom Line
We hope that your investment advisor if you use one has you invested in one or all of the top ranked mutual funds we ve reviewed But if that is not the case and your advisor has you invested in any of the funds on our worst offender list it might be time to have a conversation or reconsider this vitally important relationship
If you have concerns or any doubts about your investment advisor read our just released report
4 Warning Signs That Your Advisor Might be Sabotaging Your Financial FutureThis report can help you avoid the costly mistake of picking or sticking with the wrong investment advisor Click here for free report |
JPM | Emerging Market Debt ETFs Top Equities In Q3 | The third quarter was all about peaks and valleys in the U S China trade tensions resurfacing global growth worries and a barrage of rate cuts Central banks in South Korea Indonesia India Turkey and South Africa resorted to rate cuts in order to keep signs of a slowdown at bay
Notably top Asian exporters like Singapore Japan and South Korea have been experiencing low exports amid trade tensions Sinceseveral emerging markets had resorted to rate cuts in the third quarter emerging market bonds displayed a better show in the quarter
Against this backdrop below we highlight a few bond ETFs that topped the list emerging market securities list in the third quarter see here
JPMorgan NYSE JPM USD Emerging Markets Sovereign Bond ETF Up 3 1
The underlying JPMorgan Emerging Markets Risk Aware Bond Index is comprised of liquid U S dollar denominated sovereign and quasi sovereign fixed and floating rate debt securities from emerging markets selected using a rules based methodology Sovereign bonds take about 82 4 of the fund followed by foreign agency 13 7 The fund charges 39 bps in fees read
Invesco Emerging Markets Debt Value ETF Up 2 7
The underlying Invesco Emerging Markets Debt Value Index provides exposure to higher value emerging markets debt securities Brazil 10 3 Mexico 10 2 and Russia 10 2 are the top three countries of the fund The fund charges 29 bps in fees
Invesco BulletShares 2024 Emerging Markets Debt ETF JK BSDE Up 1 9
The underlying Nasdaq Bulletshares USD Emerging Markets Debt 2024 Index represents the performance of a held to maturity portfolio of US dollar denominated emerging markets bonds with effective maturities in 2024 Mexico 11 8 United Arab Emirates 10 1 and Turkey 9 7 hold top three spots in the fund The fund holds 27 4 weight in the sovereign debt followed by 15 8 in the financials sector 13 4 in energy and 12 6 utilities The fund charges 29 bps in fees
Invesco BulletShares 2023 USD Emerging Markets Debt ETF Up 1 8
The underlying Nasdaq Bulletshares USD Emerging Markets Debt 2023 Index represents the performance of a held to maturity portfolio of US dollar denominated emerging markets bonds with effective maturities in 2023 Mexico 11 8 United Arab Emirates 10 1 and Turkey 9 7 are the three key holdings of the fund Sovereign debt 27 14 takes the top spot in the fund followed by financials 26 5 and energy 18 5 The fund charges 29 bps in fees
iShares J P Morgan EM Corporate Bond ETF MI CEMB Up 1 7
The underlying JP Morgan CEMBI Broad Diversified Core Index tracks the performance of the U S dollar denominated emerging market corporate bond market China 9 1 Brazil 6 8 and Mexico 5 7 are the top three countries of the fund No securities accounts for more than 2 of the fund Industrial 43 6 Agency 30 2 and Financial Institutions 20 8 are the top three areas of the fund The fund charges 50 bps in fees
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JPM | ETF Strategies To Follow Amid Recession Scares | The latest report by the Institute for Supply Management ISM on U S manufacturing has been disappointing The ISM Manufacturing Purchasing Managers Index PMI in the United States was the lowest level in more than 10 years at 47 8 for 2019 This has recessionary fears among analysts Now all eyes are on the monthly jobs report that is scheduled to be released on However has predicted a 25 30 chance of the U S economy going into a recession within the next 12 months read Meanwhile Credit Suisse SIX CSGN sees the U S economy in as a mix of strong and weak economic data is keeping investors and analysts in the dark It is being anticipated that the jobs report will show 148 000 new payrolls along with a decline in jobless claims Also the on the short end due to the 10 year Treasury note having a lower yield than the 3 month Treasury bill is being considered a recessionary signal read Also the U S stock market is seeing a shaky start to the fourth quarter The Dow Jones Industrial Average has already lost 2 7 since the beginning of October as on Oct 3 The S P 500 index and the NASDAQ Composite have also lost 2 2 and 1 6 respectively in the same period Given the situation let s look at some ETF strategies that investors can follow for a smooth sail in these turbulent times Dividend ETFs to Beat the HeatThe appeal of dividend ETFs has increased this year on investors quest for juicy yields This is especially true against the backdrop of falling yields easing monetary policy globally and market uncertainty triggered by trade uncertainties geopolitical tensions and global growth slowdown concerns Moreover central banks across the globe are taking steps to shore up slowing economies that will hurt yields Against this backdrop let s take a look at some dividend ETFs like WisdomTree U S Quality Dividend Growth Fund FlexShares Quality Dividend Defensive Index Fund WBI Power Factor High Dividend ETF and Schwab US Dividend Equity ETF REIT ETFs to Your RescueReal estate investment trusts REITs have had a good run on the bourses so far this year A dovish Fed can be cited as the main factor driving the upside When interest rate drops mortgage rates fall making real estate or refinancing mortgages more affordable This in turn boosts real estate sales Further Sino US trade war tensions uncertainty in market conditions due to geo political tensions slowdown in the global economy and Brexit woes are making investors jittery adding to the lure of these funds This is because these funds offer outsized yields and act as good investing options when increased safe haven trades keep yields at check In view of this investors can take a look at ETFs like JPMorgan NYSE JPM BetaBuilders MSCI US REIT ETF iShares Core U S REIT ETF Nuveen Short Term REIT ETF TSXV N Invesco S P 500 Equal Weight Real Estate ETF and Schwab U S REIT ETF read Metals Seem More Precious NowThe prices of precious metals like gold and silver rise during chaotic market conditions Geopolitical tensions global recession fears and a stock market slump are currently driving demand for precious metals as a store of wealth Additionally rising hopes of loose monetary policies across the globe are adding to metals strength In such a scenario investors can opt for ETFs like iShares Silver Trust NYSE SLV Invesco DB Silver Fund SPDR Gold Trust P GLD ETF TSXV GLD iShares Gold Trust and Aberdeen Standard Physical Palladium Shares ETF Play Safe With Utility ETFsThe year 2019 has been quite promising for the utility sector The sector is among the most stable sectors for the long term as its players are likely to offer decent returns irrespective of market conditions It is known for its non cyclical nature and often acts as a safe haven for investors Against this backdrop investors can opt for Utilities Select Sector SPDR Fund Vanguard Utilities ETF iShares U S Utilities ETF and Fidelity MSCI Utilities Index ETF read Want key ETF info delivered straight to your inbox Zacks free Fund Newsletter will brief you on top news and analysis as well as top performing ETFs each week |
MS | Romanian shares equal worst day on record after bank tax surprise | By Luiza Ilie and Sandor Peto BUCHAREST BUDAPEST Reuters Romania s stock market plunged 12 percent toward its worst day on record on Wednesday after the country s government announced shock plans to tax banking assets and cap gas prices The move instantly wiped out what had been one of Europe s best market performances of the year and caused trouble as far afield as Austria where banks such as Erste VI ERST and Raiffeisen VI RBIV that operate in Romania fell heavily The trigger was an announcement late on Tuesday by Romania s finance minister for a tax on greed that will cap money market lending rates to 1 5 percent There was also a plan to limit gas prices enforce a turnover tax for energy and telecoms firms and enable Romanians to pull out of mandatory private pension funds after contributing for five years Bucharest s bluechip BETI bourse BETI fell 12 2 percent with lenders Banca Transylvania BX ROTLV and French Societe Generale PA SOGN unit BRD Group shedding 18 percent and 10 3 percent respectively Romania s centrist President Klaus Iohannis and investors slammed the measures saying they would hit consumers and banks and urged the government to scrap the plans This avalanche of fiscal measures is unacceptable and the symptom of a fracture between the government and economic agents said the Coalition for Romania s Development which groups the country s largest investors associations The American Chamber of Commerce called them irresponsible and reckless and said they were throwing the market into complete chaos The 12 2 percent slump saw the BETI match it worst day on record which was back in January 2009 and made an already bad year look worse for Central European markets where only Bucharest had notched up any visible gains before its plummet So far this year Prague s benchmark PX has shed 7 percent while Warsaw s WIG20 WIG20 has slid almost 6 percent as funds flowed into the rallying dollar from emerging market assets Bucharest s government went back and forth on its tax intentions last year provoking more uncertainty among investors and the leu currency having already enforced consumption friendly wage and pension hikes at the expense of infrastructure investment Morgan Stanley NYSE MS said the banking tax implied a reduction of overall profits of more than 50 percent While other Central and Eastern European states have enforced new banking taxes in recent years none had been tied to interbank rates Linking a bank tax on ROBOR developments is also unprecedented and it could impair the central bank s control over its monetary policy BCR said In Austria Erste Bank which gets 8 4 percent of its revenues from Romania s biggest bank Banca Comerciala Romana saw its shares tumble as much as 10 percent and remained the day s worst STOXX 600 faller despite recouping some losses Raiffeisen Bank which has around 6 percent of its assets in Romania according to figures published last month was last trading down 3 8 percent Romania s measures deepened Prague s losses as well The Prague bourse s main index fell 2 2 percent to its lowest level since July 2017 on Wednesday driven by an 8 percent fall Erste s Czech listed shares PR ERST Budapest s BUX also dipped BUX though Warsaw WIG20 bucked the regional trend with a slight gain In the currency markets Romania s leu EURRON shed 0 4 percent against the euro to trade at 4 6525 the zloty EURPLN firmed 0 1 percent and the forint EURHUF was steady as focus also turned to the U S Federal Reserve s final meeting of the year
Signals that U S rate rises will slow next year could make emerging market assets look relatively more attractive The recent steep drop in oil prices has helped corset inflation in Central Europe reducing pressure on central banks to raise their interest rates |
MS | Morgan Stanley moves to speed up collaboration with tech startups | By Anna Irrera and Elizabeth Dilts NEW YORK Reuters Morgan Stanley NYSE MS is simplifying the way it acquires new technologies from small companies to speed up collaboration and address long running concerns by startups that working with big banks is slow and costly The bank has been taking steps to reduce the time it takes to begin working with new vendors by streamlining documentation and broadening the opportunities for executives to evaluate new tech products Shawn Melamed Morgan Stanley s head of technology business development and innovation office said in an interview this week Earlier this year the bank trimmed a 20 page vendor agreement to one page helping reduce from three months to as little as one week the time to begin working together Melamed said The bank also launched a portal for employees to test new technology he added We have looked at how to improve over complicated processes Melamed said The benefit for us and them is saving time and money Large banks have been increasingly working with financial technology startups to launch new digital services as they seek to keep abreast of technological change and fend off competition from new entrants Entrepreneurs have long said however one of the biggest challenges they face when selling to large institutions remains their cumbersome procurement process As highly regulated entities banks must ensure the technology and services they acquire are reliable and sturdy a need often resulting in months of meetings and reams of forms This can be especially challenging for startups with limited resources and few employees I used to be a founder and CEO of a fintech company Melamed said I ve experienced the pain from the other side Morgan Stanley s efforts to shorten on boarding time come as the bank s wealth business rolls out WealthDesk a suite of nearly a dozen new tech tools and services to 15 000 financial advisers WealthDesk is a key part of the growth strategy for the bank s wealth business which contributes half of Morgan Stanley s revenues In November the bank held a fintech event at its New York headquarters where 400 Morgan Stanley executives met with 90 fintech startups Melamed said Morgan Stanley Chief Executive James Gorman has been vocal about the bank s technology aspirations and in June pushed back against the perception that Wall Street is too bureaucratic to work with Silicon Valley
There s this presumption that big firms are dumb and slow Gorman said at Morgan Stanley s U S Financials Conference We ve also got very deep pockets and scale and we are not dumb |
MS | Noble Group completes 3 5 billion restructuring to emerge as smaller unlisted firm | SINGAPORE Reuters Noble Group SI NOBG the once mighty commodity trader on Thursday completed its drawn out 3 5 billion debt restructuring to emerge as a smaller unlisted Asia focused coal trading business The completed restructuring effectively closes the saga of Noble s collapse from Asia s biggest commodity trader with a market value of over 6 billion to less than 80 million that began in February 2015 when its accounting practices were questioned by Iceberg Research To bolster itself Noble sold billions of dollars of assets took hefty writedowns and cut hundreds of jobs while defending its accounting The completion of the company s restructuring allows the company s business to move forward under its new holding company Noble Group Holdings Ltd the company said in a statement to the Singapore Exchange SGX Seventy percent of the shares of Noble Group Holdings will be held by a so called special purpose vehicle representing the previous company s creditors with 20 percent held by the shareholders of the previous company and 10 percent by the management the statement said The debt for equity restructuring plan was in the works for nearly two years but was thrown into disarray after Singaporean authorities last month started investigating the company The authorities blocked the relisting of the restructured company on the SGX because of concerns about its financial position Trading in Noble shares was suspended last month That forced Noble to push ahead with the restructuring by asking a Bermuda court to appoint an officer known as a light touch provisional liquidator to facilitate the process The provisional liquidation program allows a company in the zone of insolvency to move forward with a restructuring while any actions to wind up the company by creditors are on hold according to an industry note issued in July by Bermuda based law firm Taylors part of global law firm Walkers The provisional liquidator will stay in office pending further discussions by the creditors and decisions by the Bermuda court the statement said The reorganization will give Noble Group Holdings a fully restructured balance sheet as well as committed trade and hedging facilities of 800 million according to the statement While the revamped company is set to press forward the Singaporean investigations may linger Noble Group said in Thursday s statement that it sent a detailed response on Dec 11 to the city state s accounting regulators to address the allegations raised in November Noble said it continued to hold the strong view that all of its financial statements have been prepared in accordance with all relevant accounting standards Citing the Singapore investigations Noble said it needed to reconsider the most appropriate composition of the board of directors of the restructured company which will take more time to complete Paul Brough Noble s current chairman agreed to become the first chairman of Noble Group Holdings until a suitable successor has been identified it said Brough a restructuring veteran had previously said he would step down once the restructuring was completed The company was set to appoint Ian Potter a former senior banker at Morgan Stanley NYSE MS as its next chairman in a few weeks sources with knowledge of the matter said last month |
JPM | Sewing s Deutsche Bank Cuts Bear Fruit With Eased Capital Hurdle | Bloomberg Christian Sewing s efforts to scale back Deutsche Bank AG DE DBKGn are paying off with authorities saying the lender is less of a risk to the financial system after the German lender announced plans to cut back its trading business
The German bank moved down a notch in the Financial Stability Board s ranking of risk meaning it will probably face a lower requirement for the so called leverage ratio a list published on Friday showed JPMorgan Chase Co NYSE JPM remained on the list as the world s most systemically important bank while Toronto Dominion Bank TSX TD was added to the list at the lowest level
Sewing Deutsche Bank s chief executive officer is rolling back years of breakneck expansion when it sought to go head to head with U S investment banks In July he unveiled the most sweeping restructuring plan in decades including cutting a fifth of the workforce through 2022 and exiting equities trading The bank is also shrinking the fixed income business long one of its major areas of strength
Deutsche Bank which had flagged the potential change this year acknowledged the new ranking in a statement The change probably won t affect its risk based capital requirements because German regulator BaFin has its own measure The FSB assessment suggests that the leverage ratio a measure of bank s balance sheet that doesn t take account of its risk will be 3 75 of 4 when the requirements take effect in 2022 The bank targets a level of about 5 by the end of that year
What Bloomberg Intelligence Says
The FSB s decision to move Deutsche Bank to Bucket 2 of Global Systemically Important Banks from Bucket 3 is a modest credit positive The decision confirms DB s reduced size and complexity
Jeroen Julius BI credit analyst
That means the change may not not make Sewing s overhaul much easier He plans to use some of the bank s risk based capital to shoulder restructuring charges Still it may be viewed as an acknowledgement of Deutsche Bank s efforts to become simpler and improve relations with regulators
The rankings reflect an international consensus about the relative risk posed by the world s biggest lenders Banks included in the group face more stringent capital demands requirements that they have more capacity to absorb losses in a crisis and more stringent supervisory expectations about risk management The actual capital requirements are set by supervisors in a bank s jurisdiction
The FSB includes the representatives from authorities including the European Central Bank and Bank of England and is chaired by Randal Quarles a vice chairman of the U S Federal Reserve |
JPM | JPMorgan s Blockchain Products Explained by Ex JPM Tech Leads | JPMorgan Chase NYSE JPM whose CEO Jamie Dimon once notably expressed skepticism over cryptocurrency was actually one of the first financial institutions to learn to love the blockchain In 2015 the bank created a division dedicated to exploring emerging technology such as blockchain
We were two of the first members of the JPMorgan blockchain team We built some of its earliest blockchain technology and vetted other blockchain providers for the bank s strategic investment and adoption In this article we ll discuss the technology we developed during our time at the bank and our insights into the current suite of JPMorgan blockchain products from Quorum to JPM Coin |
JPM | China Plans Record Sale of Dollar Bonds With Possible 6 Billion Offering | Bloomberg China is planning a record sale of sovereign bonds in dollars with a potential 6 billion offering according to people familiar with the discussions
The Ministry of Finance is considering tenors of three years five years 10 years and 20 years according to the people who asked not to be named as the talks aren t public The ministry didn t immediately respond to a request for comment
This marks the third straight year for China to issue dollar debt and underscores the nation s continued interest in building out an offshore market where its companies and local authorities can tap funding The 20 year note will fill a gap between 10 year and 30 year securities issued in 2018
It reaffirms China s determination to develop an orderly offshore dollar bond market for Chinese issuers Anne Zhang head of fixed income for JPMorgan NYSE JPM Private Bank in Asia said of the offering The new deal will further complete a sovereign curve she said
China s sale is planned for as soon as Tuesday the people familiar with the discussions said It follows the country s first euro bond in 15 years which saw blowout demand among investors eager to snap up securities with positive coupons amid a swathe of negative yielding debt
A 6 billion dollar issue would be double the size of last year s and triple the amount sold in 2017 when China resumed issuing sovereign dollar debt for the first time since 2004
The Chinese dollar bond market now exceeds 740 billion according to data compiled by Bloomberg and is both a key source of funding for domestic borrowers and an outlet for investing Chinese foreign currency deposits
Issuance dipped in 2018 after a record 2017 hurt in part by depreciation of the yuan as the U S China trade war erupted But sales have rebounded this year as U S Treasury yields came down The yuan has also stabilized in recent weeks following the resumption of Sino American trade negotiations
Chinese borrowers have issued 195 billion of dollar bonds so far this year a record pace according to data compiled by Bloomberg The all time high for a full year was 211 billion in 2017
Investment grade securities account for about 53 of Chinese dollar bonds with high yield notes at 38 Property developers have racked up record issuance of 78 5 billion this year
Updates with context on issuance starting in sixth paragraph |
JPM | Wall Street s Warnings on Warren Turn Into Bet by One Hedge Fund | Bloomberg For weeks now some of Wall Street s biggest names Paul Tudor Jones Steve Cohen Leon Cooperman have been arguing that an Elizabeth Warren presidency would sink U S financial markets Those were just idle forecasts though No one said they were doing anything differently as a result Until now Scott Bessent the Soros Fund Management alum who runs a 4 5 billion macro hedge fund named Key Square NYSE SQ Capital Management is shorting the dollar in a bid to monetize the market reaction he anticipates
Intelligent people can argue whether Senator Warren s numerous programs will be good or bad for American society but they are unequivocally negative for U S asset prices Bessent wrote in a Nov 14 letter to investors
It s a risky proposition as the 2016 election showed Back then many predicted a Donald Trump victory would drive down markets only to watch them surge in the immediate aftermath of his victory Bessent says though that there are many other factors that support his bet now and that all it might take is Warren s further rise in polls to spark a sell off
A Warren presidency or the mere threat of one will likely hasten the exodus of foreign and domestic capital to overseas markets Bessent wrote
The forces that have drawn investors to the U S superior economic growth technological leadership and a hospitable environment for capital have already started to fade he told clients What s more rising equity valuations have made markets vulnerable to any shift in policies that have been favorable to companies
Dollar put options which give the right to sell the currency are particularly attractive given the low level of implied volatility in foreign exchange rates according to the fund manager A JPMorgan Chase NYSE JPM Co gauge of currency volatility is close to a five year low
Warren the senior senator from Massachusetts is among the frontrunners in a still large field of potential Democratic nominees While her national polling numbers have faded since early October they re almost double the level from six months ago according to RealClear Politics averages
Pete Buttigieg has surged to the lead in Iowa the first caucus state with 24 support according to the RealClear Politics average Bernie Sanders Warren and Joe Biden follow with polling averages of 18 3 17 7 and 16 3 respectively
Former New York Mayor Michael Bloomberg entered the Democratic contest on Sunday Bloomberg is the founder and majority owner of Bloomberg LP the parent company of Bloomberg News
In 2016 several marquee hedge fund managers said markets would plunge on a Trump victory But the S P 500 has yet to close below its Nov 8 2016 level and has returned more than 50 including dividends since It set another record high Tuesday
For Bessent stricter labor and environmental standards for trading partners a dramatic rethink of antitrust policy and steps to empower workers are among Warren s proposals that could erode assets stateside
Warren has also called for actively managing the level of the dollar to bolster exports and domestic manufacturing
A dramatically weaker dollar conveniently one of her policy prescriptions is in our view the best way to play the rising chance of the Senator moving into the White House the fund s letter said
The letter didn t indicate the size of the fund s dollar wager A spokesman for Key Square Capital declined to comment The Wall Street Journal previously reported on Bessent s dollar position
Dollar Blame
Trump has been vocal about the dollar as well blaming its strength for hurting U S exports A broad measure of the greenback is up about 1 this year building on last year s gains
Bessent who spent much of his career working for George Soros founded Key Square in 2016 with 2 billion in backing from his former employer While still with Soros Bessent made 1 billion in late 2012 and early 2013 on a bet that the yen would tumble
Citing the roughly 31 gain in stocks in 1980 in the seven months before Ronald Reagan s election Bessent said the inverse could happen with Warren
We posit that if the U S equity markets are spooked by a Warren presidency most of the decline may have occurred by Election Day |
JPM | Lack of legal clause poses risk for crisis hit Lebanon bonds | By Tom Arnold and Tom Perry
LONDON BEIRUT Reuters As Lebanon s crisis hit bonds flash warnings of a sovereign debt distress ahead any potential restructuring is likely complicated by the absence of widely used legal clauses barring bondholders from holding up the negotiations in the courts
Lebanon is one of the few countries alongside the Bahamas Azerbaijan Macedonia and Poland to not include so called enhanced collective action clauses or CACs in the legal framework governing its recent bond sales
The crisis hit Mediterranean state has issued around 15 billion of international bonds since October 2014 without those clauses more than any other country according to an International Monetary Fund report from March
Championed by the IMF such provisions can make it easier for countries to proceed with orderly debt restructuring by enabling a majority of creditors to agree to modify payment terms of the contract or otherwise restructure the debt overcoming any obstacles presented by minority creditors who favor holding out for legal recourse
The absence of these so called CACs effectively means the debtor has to get broad agreement to any restructuring playing into the hands of often litigious speculative funds which seek to stall any workout by demanding court sanctioned payouts
Lebanon gripped by its most severe economic crisis since the 1975 90 civil war following protests since Oct 17 has repeatedly stated its commitment to paying its foreign currency bonds on time including a 1 5 billion maturity due this Thursday Nov 28
SUSTAINABLE FOOTING
But with prices of its dollar bonds having slumped to less than half their face value since the demonstrations began many financial observers believe Lebanon might need to restructure at least a portion of its estimated 86 billion in outstanding bonds in order to put its finances on a sustainable footing
Lebanon will need to demonstrate that the treatment of holders of each bond is comparable to the others said Oussama Himani chief investment officer of Parkview Advisors a wealth and asset management firm not invested in Lebanon
Comparability of treatment is not easy to demonstrate For example delaying all payments for all by 10 years will not be comparable treatment if the coupons paid are different
In the past an absence of CACs posed a challenge for countries such as Argentina It underwent a messy and drawn out restructuring after defaulting on its debt in 2001 in part as few of its bonds at the time included such clauses opening the door to hedge funds and other activist bond holders to pursue legal action
As Argentina prepares for fresh re negotiations over its debt the majority of its new bonds now contain CACs that mean a restructuring can go ahead if it is backed by either two thirds or three quarters of debt holders
Camille Abousleiman caretaker minister of labor and former head of international capital markets for the law firm Dechert said Lebanon s situation was not comparable to Argentina s from a legal perspective
While Argentina s eurobonds required 100 of holders consent for any amendment to the terms Lebanon s terms provide for 75 holders consent voting on a series by series basis he said
Efforts to apply the collective action clause to Lebanon s bonds in 2016 were not successful due to political complications arising from a government vacuum said a financial source familiar with the matter
It is true that political considerations prevented the adoption of the more recent collective action clauses recommended by ICMA International Capital Market Association which permit the aggregation of series for voting and amendment purposes said Abousleiman who worked on drafting the legal framework for Lebanon s bonds
Lebanon is locked in its latest political paralysis with Saad al Hariri on Tuesday saying he did not want to be prime minister of a new government after resigning from the post on Oct 29
The financial source who noted Lebanon had then not issued a eurobond since 2017 said the absence of CACs meant that Lebanon would need to negotiate series by series if it were to go toward a restructuring
The IMF has stressed that such clauses generally contribute to lower borrowing costs and can be particularly helpful for lower rated countries during episodes of market stress
Around two thirds of Lebanon s foreign debt is estimated to be held by local banks but the remainder is held by international names
Amundi Invesco JPMorgan NYSE JPM AllianceBernstein and Fidelity were among those listed as holders of the bonds up to the end of September according to Refinitiv data Fidelity said it still held a position while the others did not immediately respond to a Reuters request as to whether they remained holders
It is not clear who is currently holding the outstanding debt after weeks of domestic upheaval and dramatic bond price falls
Hedge funds that specialize in debt litigation and known for their legal battles with Argentina over its defaulted debt such as Elliott Management and Aurelius Capital Management did not immediately respond to a request for comment |
JPM | 3 Mutual Fund Misfires To Avoid In Your Retirement Portfolio October 02 2019 | If your advisor has you invested in any of these Mutual Fund Misfires of the Market with high fees and low returns you need to rethink your advisor
The easiest way to judge a mutual fund s quality over time is by analyzing its performance and fees Our Zacks Rank of over 19 000 mutual funds has identified some of the worst of the worst mutual funds you should avoid the funds with the highest fees and poorest long term performance
Below you ll read about some of the funds included in our current list of Mutual Fund Misfires of the Market And if by chance you re invested in any of these misfires we ll help and review some of our highest Zacks Ranked mutual funds
3 Mutual Fund Misfires
Now let s take a look at three market misfires
Catalyst SMH Total Return Income A TRIFX 1 56 expense ratio and 1 management fee TRIFX is an Allocation Balanced mutual fund Allocation Balanced funds look to invest across asset types like stocks bonds and cash and including precious metals or commodities is not unusual these funds are mostly categorized by their respective asset allocation With a five year after expenses return of 1 54 you re mostly paying more in fees than returns
SA Emerging Markets Value Fund SAEMX 1 35 expense ratio 0 92 SAEMX is a Non US Equity fund Many of these funds like to allocate across emerging and developed markets and will often focus on all cap levels This fund has yearly returns of 0 13 over the most recent five years Another fund liable of having investors pay more in charges than what they receive in return
Auer Growth Fund AUERX Expense ratio 2 31 Management fee 1 5 AUERX is a Mid Cap Blend mutual fund These funds usually seek a stock portfolio of various size and style which allows for diversification when the focus is on companies with a market cap in the range of 2 billion to 10 billion With annual returns of just 3 5 it s no surprise this fund has received Zacks Strong Sell ranking
3 Top Ranked Mutual Funds
Now that you ve seen the worst Zacks Ranked mutual funds let s have a look at some of the highest ranked funds with the lowest fees
JPMorgan NYSE JPM Intrepid Growth Fund R2 JIGZX is a fund that has an expense ratio of 1 09 and a management fee of 0 5 JIGZX is a Large Cap Growth option these mutual funds purchase stakes in numerous large U S companies that are expected to develop and grow at a faster rate than other large cap stocks With yearly returns of 11 5 over the last five years this fund clearly wins
ClearBridge Small Cap Growth IS LMOIX has an expense ratio of 0 78 and management fee of 0 75 LMOIX is one of many Small Cap Growth mutual funds these funds tend to create their portfolios around stocks with market capitalization of less than 2 billion With annual returns of 11 1 over the last five years this is a well diversified fund with a long track record of success
Dreyfus Boston Small Mid Cap Growth A DBMAX has an expense ratio of 0 98 and management fee of 0 6 DBMAX is a Small Cap Blend mutual fund allowing investors a way to diversify their funds among various types of small cap stocks With yearly returns of 10 92 over the last five years this fund is well diversified with a long reputation of salutary performance
Bottom Line
Along these lines there you have it if your financial guide has you put your money into any of our Mutual Fund Misfires of the Market there is a strong likelihood that they are either dormant at the worst possible time inept or in all probability filling their pockets with high fee commissions at the cost of your financial objectives
If you have concerns or any doubts about your investment advisor read our just released report
4 Warning Signs That Your Advisor Might be Sabotaging Your Financial FutureThis report can help you avoid the costly mistake of picking or sticking with the wrong investment advisor Click here for free report |
JPM | Mutual Fund Misfires Of The Market October 03 2019 | If your advisor has you invested in any of these Mutual Fund Misfires of the Market with high fees and low returns you need to rethink your advisor
How can you tell a good mutual fund from a bad one It s pretty basic If the fund has high fees and performs poorly it s not good Of course there s a range but when a mutual fund earns a Zacks Rank of 5 Strong Sell that means it s among the worst of roughly 19 000 funds we rate each day
First let s break down some of the funds currently part of our Mutual Fund Misfires of the Market If you happen to have put your money into any of these misfires we ll help assess some of our best Zacks Ranked mutual funds
3 Mutual Fund Misfires
Now let s take a look at three market misfires
Brookfield Global Listed Infrastructure A BGLAX 1 35 expense ratio and 0 85 management fee BGLAX is a Global Equity mutual fund investing in bigger markets like the U S Europe and Japan these kinds of funds aren t limited by geography With a five year after costs return of 0 64 you re for the most part paying more in charges than returns
Western Asset Short Duration High Income C LWHIX 1 72 expense ratio 0 55 LWHIX is a High Yield Bonds fund Often referred to as junk bonds High Yield Bonds funds sit below investment grade meaning they are at a high default risk compared to their investment grade peers This fund has yearly returns of 1 12 over the most recent five years Another fund liable of having investors pay more in charges than what they receive in return
PIMCO Dividend Income A PQIZX 1 15 expense ratio 0 89 management fee This fund has yielded yearly returns of 1 02 in the course of the last five years Too bad
3 Top Ranked Mutual Funds
Since you ve seen the most noticeably lowest Zacks Ranked mutual funds how about we take a look at some of the top ranked mutual funds with the least fees
MSIF Global Opportunity Portfolio IS MGTSX Expense ratio 0 84 Management fee 0 74 MGTSX is a Global Equity mutual fund which invests their assets in large markets leveraging the global economy This fund has achieved five year annual returns of an astounding 16 96
BMO Large Cap Growth Fund A BALGX Expense ratio 0 79 Management fee 0 35 BALGX is part of the Large Cap Blend section and these mutual funds most often invest in firms with a market capitalization of 10 billion or more By investing in bigger companies these funds offer more stability and are often well suited for investors with a buy and hold mindset BALGX has managed to produce a robust 11 83 over the last five years
JPMorgan NYSE JPM Large Cap Growth R5 JLGRX has an expense ratio of 0 53 and management fee of 0 5 JLGRX is a Large Cap Growth option these mutual funds purchase stakes in numerous large U S companies that are expected to develop and grow at a faster rate than other large cap stocks With annual returns of 15 4 over the last five years this fund is a well diversified fund with a long track record of success
Bottom Line
So there you have it if your advisor has you invested in any of our Mutual Fund Misfires of the Market there is a good probability that they are either asleep at the wheel incompetent or most likely lining their pockets with high fee commissions at your financial expense
If you have concerns or any doubts about your investment advisor read our just released report
4 Warning Signs That Your Advisor Might be Sabotaging Your Financial FutureThis report can help you avoid the costly mistake of picking or sticking with the wrong investment advisor Click here for free report |
MS | Stocks wait for ECB signals pound strong after Brexit drama | By Marc Jones LONDON Reuters Santa made a lackluster attempt to deliver his traditional end of year rally on Thursday as world stocks squeezed out a third day of gains and the pound and the euro both stayed firm after the latest bout of Brexit drama UK Prime Minister Theresa May s survival in a late night no confidence vote has not changed the markets questions on Brexit but along with tentative signs of truces in the U S China trade war and Italy s budget feud it was enough to keep them jolly The Nikkei and other Asian stocks had pushed roughly 1 percent higher and Europe enjoyed a largely uneventful morning EU Even the long awaited confirmation that the European Central Bank was ending its quantitative easing program did little to rouse activity The euro rose 0 2 percent to 1 1390 having largely traded in a 1 16 and 1 12 range since August That made the dollar a touch softer while the pound was up for a second day at 1 2665 FRX The Governing Council expects the key ECB interest rates to remain at their present levels at least through the summer of 2019 and in any case for as long as necessary the ECB said Though the ECB will technically now stop QE it will still keep buying German Italian and other euro zone bonds possibly for years using proceeds from the 2 6 trillion mountain of debt it has bought over the last few years Analysts were now waiting to hear what signals Mario Draghi sends at his 1330 GMT news conference Next year will be his last in charge of the ECB Morgan Stanley NYSE MS FX strategist Hans Redeker said all eyes would be on Draghi and the ECB s messaging It may revise its growth projections lower but continue to prepare the markets for allowing QE to end Short dated Italian bond yields which move inversely to price hit their lowest in six months after the country s government confirmed it would cut its deficit goal for 2019 potentially ending months of wrangling with Brussels Italian Prime Minister Giuseppe Conte said the deficit goal had been lowered to 2 04 percent of gross domestic product from the 2 4 percent it had originally proposed and it expected the European Commission to accept the proposal Two year Italian bond yields tumbled to 0 51 percent which took them back to where they were before a late May eruption of tensions triggered the worst day for short term Italian debt in 25 years GVD EUR Italy s five year and 10 year government bond yields dropped to their lowest level in 2 1 2 months while the closely watched Italy Germany 10 year bond yield spread improved to its tightest since the start of October I think the momentum can carry on in the near term as we have a number of supportive factors for Italian debt beyond just the hopes the budget deal can be reached said Commerzbank DE CBKG rates strategist Christoph Rieger On Brexit May was heading to an EU summit in Brussels after her confidence vote win to try and secure some additional concessions on the controversial Irish border aspect of the agreement to placate rebels within her own party and Northern Irish Ulster Unionist allies Markets reckon May s continued premiership for now makes a no deal Brexit less likely at the margins and her survival takes at least some of the immediate headline risk out of the market even if the parliamentary impasse over the terms of Brexit looks no closer to being resolved The pound was trading at 1 2670 as the first U S trading started still well up more than cent from the 20 month lows set early Wednesday and at about the levels seen just before the results of the confidence vote on Wednesday night FULL OF BEANS In Asia gains were concentrated in Chinese shares with Chinese blue chips up 1 5 percent and Hong Kong s Hang Seng index gaining 1 1 percent Japan s Nikkei stock index ended 1 percent higher while Australian shares gained 0 1 percent Markets are slowly becoming less pessimistic about the chances of a Sino U S trade deal after a slew of news this week pointed to easing tensions between the two big powers Reuters reported on Wednesday that Chinese state owned companies had bought more than 1 5 million tonnes of U S soybeans in the first major U S soybean purchases in more than six months The purchases are the most concrete evidence yet that China is making good on pledges made when presidents Donald Trump and Xi Jinping met on Dec 1 and agreed to a 90 day detente to negotiate a trade deal But markets have been stung by false dawns in the past Yoshinori Shigemi a global market strategist at JPMorgan NYSE JPM Asset Management cautioned against reading too much into trade headlines U S China trade negotiations are subject to very high uncertainty So lots of headlines come and go and markets come and go also he said We have to see the evolution of this negotiation In the commodities markets oil prices steadied under pressure from high inventories but buoyed by a drawdown in U S crude stockpiles and the indications that the U S China trade war may be easing Copper which is highly sensitive to China s fortunes also rose to a one week high in the metals market at it approached 6 200 a tonne although it remains badly beaten having lost almost 15 percent this year
Signs of positive progression in trade talks between the U S and China should see sentiment in the commodity market remain positive analysts at ANZ wrote in a note |
MS | U S recession risks jump Fed rate hike expectations slump Reuters poll | By Shrutee Sarkar BENGALURU Reuters The risk of a U S recession in the next two years has risen to 40 percent according to a Reuters poll of economists who also found a significant shift in expectations toward fewer Federal Reserve interest rate rises next year What has fueled concerns of a downturn is the flattening of the U S yield curve with the spread between two and 10 year note yields falling to less than 10 basis points the smallest gap since the run up to the last U S recession A flattening yield curve suggests investors believe economic growth and inflation will slow A yield curve inversion has preceded almost all recessions over the last half century The probability of a U S recession in the next two years has jumped to 40 percent according to the median of those polled the highest since that question was first asked in May this year Before that the last time such a high probability appeared in a Reuters poll was in January 2008 just eight months before the collapse of U S investment bank Lehman Brothers which brought on the Great Recession The range of forecasts which runs from 15 to 75 percent also points to a higher probability of a recession in the next two years compared to a poll conducted just last month which had a median 35 percent chance Reuters poll graphic on U S recession probability Those conclusions line up with recent Reuters polls of a total of over 500 economists fund managers currency analysts and equity strategists which have clearly showed economic momentum in the United States has peaked and a downturn may be approaching soon The U S Treasury yield curve was forecast to invert next year and possibly in the next six months with a recession expected to follow as soon as a year after that according to a separate Reuters poll of fixed income strategists on Thursday Reuters poll graphic on U S 2 10 year Treasury yield spread The combination of a Fed that does not think that inverting the yield curve is a problem along with a global outlook that is not likely to improve in a sustained manner is likely to lead to a monetary policy error that will push the economy into recession noted Philip Marey senior U S strategist at Rabobank How many hikes this may take is still unclear The latest poll of over 100 economists taken Dec 6 13 showed the U S economy will slow in the coming quarters with annualized gross domestic product growth easing to 1 8 percent by mid 2020 about half the latest reported rate of 3 5 percent I think all of the impetus for growth will fade in 2019 So where is the growth going to come from asked Joel Naroff chief economist at Naroff Economic Advisors Are we definitely going into a recession I can t say that said Naroff But he added I haven t had negative GDP numbers on my forecast for nine years now and 2020 is the first time I have put negative numbers into the forecast The survey follows a rough period for global stock markets which has knocked the Standard Poor s 500 index down to an eight month low this week and showed a decisive shift in expectations for the Fed s rate hike path over the next year While economists in the latest poll unanimously said the central bank will raise rates on Dec 19 the consensus points to just two increases in 2019 taking the fed funds rate to 2 75 3 00 percent by the end of next year That is one rate hike less than the three increases predicted in the previous poll and by the Fed in its most recent economic projections released in September The Fed will update its forecasts at its Dec 18 19 meeting But fed funds futures are pricing in only one more rate rise next year Indeed 37 of 58 economists over 60 percent who responded to an extra question said their conviction has shifted toward fewer increases compared to a month ago Reuters poll graphic on U S GDP growth and Fed rate hike path If Fed tightening is an important factor escalating recession risks in 2019 then a pause in tightening should be sufficient to prevent those risks from materializing noted economists at Morgan Stanley NYSE MS Fed officials have only just recently begun flagging a turning point for policy The poll also forecast the Fed s preferred inflation gauge core PCE prices would average 2 0 percent in 2019 and then 2 1 percent in 2020 Additional reporting and analysis by Sujith Pai and Manjul Paul Graphics and polling by Vivek Mishra Editing by Ross Finley and Andrea Ricci |
MS | Japan Inc s inflation expectations nudge higher before BOJ meeting | By Stanley White TOKYO Reuters Japanese companies expectations for inflation over the next year edged slightly higher a Bank of Japan survey showed on Monday though the outlook pointed to consumer prices still settling in well below the central bank s 2 percent target Companies expect consumer prices to have risen 0 9 percent a year from now slightly above their projection of a 0 8 percent increase three months ago according to a quarterly survey by the BOJ Firms expect consumer prices to have risen by an annual 1 1 percent three years from now unchanged from the previous survey Companies also expect inflation at 1 2 percent five years ahead slightly higher than a 1 1 percent increase expected three months ago The moderate increase in price expectations may offer the BOJ some encouragement in its battle to spur inflation but many economists are worried about increasing risks to the outlook A separate survey from the BOJ last week showed companies expect the business climate to worsen over the next three months in a sign that the trade war between the United States and China is dragging on the economy Inflation expectations remain intact but this is not enough to meet the BOJ s price target said Shuji Tonouchi senior market economist at Mitsubishi UFJ Morgan Stanley NYSE MS Securities In the short term there are simply too many worries about the economy It is too difficult for the BOJ to move now The BOJ s last policy review for the year on Thursday is widely expected to maintain monetary settings ultra loose primarily as inflation remains quite some distance from its 2 percent target Japan s core consumer price index CPI which includes oil products but excludes volatile fresh food prices is forecast to have risen 1 0 percent in November from a year earlier according to a Reuters poll That is the same rate as October and September The government will publish the latest CPI figures on Dec 19 The world s third biggest economy shrank an annualized 2 5 percent in the third quarter suffering the worst slump in over four years as a string of natural disasters cooled consumer sentiment and disrupted factory output Many analysts expect growth to have rebounded in the current quarter but global trade frictions and a slowdown in China have raised risks to Japan s export driven economy A rebound in domestic demand which has been hit by a string of natural disasters during the summer helped lift non manufacturers sentiment and softened the blow from tougher external conditions the December tankan showed The nationwide core consumer price index which strips away the effect of volatile food costs rose 1 0 percent in October from a year earlier government data showed last month
However half of that increase was due to higher energy costs showing the challenges the BOJ faces in meeting its 2 percent inflation target |
MS | Grinch like US stocks are on course for their worst December since the Great Depression | US stock markets are set for their worst December since 1931 when the country was in the throes of the Great Depression The S P 500 has lost nearly 8 of its value this month eclipsing the 6 fall witnessed during the final month of 2002 Traditionally stocks climb into the year end in what is known as a Santa rally a phenomenon in which stocks rise in December as investors are filled with festive cheer and optimism The US stock market s horrible year looks set for a particularly nasty ending with both the S P 500 and the Dow Jones Industrial Average on track for their worst ends to the year since 1931 The S P 500 is headed down 7 8 in December If it were to close at that level or lower it would mark the index s worst performance in the year s final month since 1931 when it closed with a plunge of about 15 The same is true of the Dow which has dropped more than 7 since December 1 The Dow plummeted 17 in December 1931 Those losses would eclipse the most recent major slump in 2002 when both the in December Read more Traditionally stocks climb into the year end in what is known colloquially as the Santa rally a phenomenon in which stocks rise in December as investors are filled with festive cheer and optimism Occasionally however no such rally materializes and 2018 is shaping up to be one of those years with analysts describing the market s December run as Grinch like A bad omen for 2019 Morgan Stanley NYSE MS which sees a 50 or higher chance of a recession next year is worried that things could get even worse The bank said the US economy could slow even more than markets expect and prompt a bigger sell off to start the year At this point the market is pricing in a material slowdown next year as sentiment and positioning have reached levels not seen since the last recession scare in early 2016 Ahead of a Wednesday policy meeting at the Federal Reserve markets across the board are lower with European stocks dropping during Tuesday morning trade pushed lower by the worries across the Atlantic Here s the state of play in markets European stocks are lower with Germany s DAX slipping 0 35 and Britain s FTSE 100 down more than 0 7 Asian equities also endured a tough day with China s benchmark Shanghai Composite index losing 0 8 US futures are pointing to a minor rebound on Tuesday after stocks fell more than 2 during Monday trading The S P the Dow and the Nasdaq are all set to open about 0 2 to 0 3 higher Both major oil benchmarks have dropped to 15 month lows on the day as fears of market oversupply help subdue the commodity West Texas Intermediate crude is down more than 3 5 trading at 48 41 a barrel while Brent crude is down a similar margin trading at 57 55 Gold is flat on the day trading at 0 00 difference from its opening price Worries about the Fed Much of the weakness in the US market this month has been attributed to worries about the future path of Fed policy At its meeting on Wednesday for the fourth time in 2018 Investors however are worried that the Fed may signal numerous hikes in 2019 which many believe could stall US economic growth The market s overriding fear is that the Fed will press ahead with plans to raise interest rates which could be too much for the US economy to handle Jasper Lawler of London Capital Group said in an email on Tuesday An indication from the Fed that they will slow their pace of hikes could calm these jittery markets he said However until the Fed have confirmed that as a course of action investors will remain skittish |
MS | For Some Curve Inversion Isn t If or When But How Deep | Bloomberg The recession signaled by the inverted U S yield curve may be further off than it appears
The spread between shorter and longer maturity Treasury yields is close to the narrowest since 2007 and sections of the front end of the curve have already turned negative Another couple of Federal Reserve interest rate hikes one of which is expected Wednesday may extend that inversion But while slowing growth and market turbulence have sharpened the market s focus on recession risks it s too soon to read that signal from the curve strategists say
First the curve may steepen if the Fed endorses the market s reduced expectations for rate increases in 2019 that is if Wednesday s updated projections suggest policy makers favor fewer hikes than the three signaled in September Another reason not to panic about inversion according to State Street s Lee Ferridge and Jim Caron at Morgan Stanley NYSE MS Investment Management is that the curve isn t as close to negative territory as it looks They argue that the Fed s crisis era asset purchases are still artificially depressing long term yields
Zero isn t zero in this world in terms of the curve said Ferridge head of North America macro strategy To say it s a real recession signal I think you have to be much more negative than just below zero
Signal Questioned
Looking at the two to 10 year section of the curve fixed income portfolio manager Caron says the compression from around 79 basis points in February to this month s post crisis low of nine basis points is a clear indication of slowing growth But with the jobless rate the lowest since the 1960s it s not signaling a slump even if that spread turns negative from about 16 basis points on in early London trading in Wednesday
I would say the signal strength for the yield curve to predict a recession would increase substantially at around 20 25bps Caron said
This view is backed up by research last year from some Fed economists who estimate that the central bank s government debt holdings was still subtracting around 65 basis points from the term premium on the 10 year yield as of Dec 1 This pressure is gradually diminishing as the Fed s portfolio continues to shrink according to the Fed paper
But there s no clear consensus on this effect as shown by more recent analysis from the San Francisco Fed The research found no clear evidence in the data that this time is different or that forecasters should ignore part of the current curve flattening because of the presumed macro financial effects of QE
SocGen s head of U S rates strategy Subadra Rajappa shares this skepticism pointing out that the symbolism of even a modest inversion can damage investor sentiment She sees risks in downplaying the curve s behavior as a function of exceptional circumstances as former Fed Chairman Alan Greenspan did in 2005 while a housing bubble brewed
Last time it was Greenspan s conundrum and outsized foreign demand for Treasuries and this time it s QE Rajappa wrote in an email But an inversion is an inversion regardless of what technicals are driving the long end of the curve
Updates spread level in fifth paragraph |
JPM | What ECB Watchers Are Eyeing in Lagarde s First Policy Speech | Bloomberg Explore what s moving the global economy in the new season of the Stephanomics podcast Subscribe via Apple Podcast Spotify or Pocket Cast
European Central Bank watchers who monitor its every signal to gauge the future of interest rates would quite like new President Christine Lagarde to give them some clues when she breaks her silence this week
Three weeks into the role the Frenchwoman has yet to make a speech on monetary policy That s allowed murmurings of unease over the impact of negative interest rates and quantitative easing emanating from some colleagues as well as from politicians and bankers to fill the vacuum
Traders in euro area money markets have pared back expectations for further stimulus and the chance of another 10 basis point cut by October has fallen to 40 from around 60 when Lagarde took over While that has largely been a function of cooling trade tensions investors want to know how the ECB would respond should the economic outlook weaken again
We don t really know what s happening behind the scenes said Jan von Gerich chief strategist at Nordea in Helsinki who recently put back his forecast for more easing from December to March Lagarde has not made her monetary policy views and strategic plans clear yet so the time to try to influence the future course of the ECB is now
In her first speech as president earlier this month in Berlin she told the audience to leave the room if they were looking for views on monetary policy
Lagarde could start to lift the fog on Friday when she addresses a banking conference in Frankfurt Otherwise the next scheduled occasion is Dec 12 when she will hold a press conference after her first Governing Council meeting and will unveil new economic forecasts including the first predictions for 2022
Airing Views
Meanwhile members of her Governing Council who opposed elements of the stimulus launched by Lagarde s predecessor Mario Draghi in his final weeks have been open about their concerns that there s little room left for rate cuts
In Frankfurt last week France s Francois Villeroy de Galhau suggested interest rates are unlikely to fall much further His Dutch colleague Klaas Knot argued the ECB should be more cautious with unconventional tools Estonian Governor Madis Muller who opposed September decision to restart QE said over the weekend that keeping rates where they are makes sense but added there was a question of how low they could go before losing effectiveness
JPMorgan NYSE JPM economist Greg Fuzesi has scrapped his call for a rate cut in December and currently predicts no further change citing the inability to read how policy makers are thinking under their new leadership
Even to this day policy makers have not made any clear forward looking statements as opposed to trying to digest the September package he said in a report last week The arrival of Christine Lagarde seems to have slowed this down further
Read more Helicopter Money Might Be the ECB s Best and Worst Options
Lagarde has good reason to move cautiously Recent economic reports show the euro area s downturn seems to be bottoming out and Germany the largest economy skirted recession The ECB s latest package however contentious it may have been could keep providing sufficient stimulus for months to come
The new president s initial focus seems to be containing acrimony from that decision That included the unusual step of taking her Governing Council colleagues on a retreat to a luxury hotel outside Frankfurt to discuss how they ll work together
Still even proponents of the ECB s policy stance are showing a heightened awareness of the risks it brings Vice President Luis de Guindos has grown vocal about potential side effects telling an audience of business people in Bilbao this month that the negative impact on financial stability is increasingly evident
Chief economist Philip Lane acknowledged in an interview with La Repubblica published Wednesday that there will be a lot of discussion about where exactly the limit is while insisting it hasn t been reached yet
The debate worries ABN Amro economist Nick Kounis Like von Gerich at Nordea he too recently pushed back his forecast for a rate cut to March from December and described the policy message coming from the Governing Council as mixed and lacking clarity
Are you trying to convince investors that you re the kind of institution which can take powerful actions and meet your objectives or are you actually telling them that you re out of bullets Kounis said There is really no in between
Updates with Lane comment in 14th paragraph |
JPM | Markets Are Flashing Signs That Trade Is Back on Top of Risk Radar | Bloomberg Haven assets are rallying in Asia as U S China trade tensions take a turn for the worse ending weeks of optimism that a deal between the two countries was close enough to touch
Developed nation bonds in the region extended recent gains Wednesday with yields on 10 year Treasuries sinking almost 20 basis points in the past two weeks Australia s have fallen even more The Aussie dollar a proxy to China s economy due to the two nations close trade ties has dropped versus all its Group of 10 peers in November while stocks have fallen from recent highs
Markets have been guilty for around 20 months of underestimating the risks of a trade deal being done at all said Stephen Miller an adviser in Sydney at GSFM a unit of Canada s CI Financial Group Whether it s Treasuries or stocks or currencies investors are now repositioning their bets in case we see political dysfunctions persist and reach a tipping point that spills over to trade
The haven trade in the region gathered pace after the U S Senate on Tuesday unanimously passed a bill aimed at supporting Hong Kong protesters spurring China to repeat a threat to retaliate It would be difficult for the U S to sign a deal if the demonstrations in Hong Kong are met with violence U S Vice President Mike Pence said earlier this week
Investors have been here before The U S and China were said to be close to sealing a deal about six months ago only for the U S to claim the Asian nation backed away from verbal commitments when the time came to sign the agreement
The market reaction could be much more negative if a repeat of May happens said Eugene Leow a fixed income strategist in DBS Bank in Singapore Tensions in Hong Kong are also adding another element of risk at a time when China U S trade talks enter the crucial last stage he said
Here are a range of market moves showing investors risk off mood
Treasury 10 year yields dropped as much as 4 basis points Wednesday to a two week low of 1 74 Australia s 10 year yield declined 5 basis points to 1 07 South Korea s won often viewed as a proxy for global trade slipped 0 2 extending this month s decline to 0 6 A JPMorgan NYSE JPM gauge of demand for emerging market currencies has fallen for a second weekThe VIX Index a measure of expected volatility in U S stocks has risen more than 6 this week The market mood is definitely shifting said Prashant Newnaha senior strategist at TD Securities in Singapore There are a lot of questions on where this deal is sitting at the moment and developments we ve had in May are now putting some doubts on whether a deal can be signed at all |
JPM | Currency Doldrums Spur Complacency Risk That Could Destroy Profits | Bloomberg The dollar s tightest yearly trading range in more than four decades risks lulling corporate treasurers into a dangerous state of complacency
Intercontinental Exchange Inc s U S Dollar Index is on track for its narrowest annual trading band since 1976 with its 2019 high less than 5 above its low A JPMorgan Chase NYSE JPM Co gauge of foreign exchange volatility lingers near all time low levels reached in July
The subdued moves in the currency market have created an environment where corporations are becoming less willing to pay up for hedging protection they haven t needed according to Cambridge Global Payments which advises companies on cross border transactions For multinational companies looking to trim hedging costs the risk is that volatility erupts again and the subsequent currency moves destroy profits said Cambridge s Karl Schamotta
Asleep at the Switch
As the old metaphor goes what we re looking at is nickels being picked up in front of steamrollers said Schamotta the firm s Toronto based director of FX research and strategy I think many corporates are asleep at the switch right now
There are no exact numbers reflecting currency effects on profits and the benefits of hedging since not every company reports detailed figures North American corporations reported 21 billion in quantified negative currency impacts in the second quarter of 2019 according to a report from FiREapps a foreign exchange management firm In Europe the effect was only 1 55 billion
The U S Dollar Index is currently trading near the middle of its 2019 trading range Much of the calm can be attributed to the euro dollar cross which makes up roughly 60 of the gauge s weighting and is locked in its tightest range on record The common currency has plied in a 6 band between 1 0879 and 1 1570 since Jan 1 and is currently trading at 1 1059
Accurate market expectations for U S economic outperformance relative to Europe may explain the torpor according to Societe Generale PA SOGN strategist Kit Juckes
At a really simple level the market is priced for good things in the U S and bad things in Europe and we go on getting exactly that Juckes said
While hedging costs have ebbed in recent months muted volatility has clients of foreign exchange consultancy Tempus Inc in Washington taking on more currency risk heading into 2020
It s kind of selling insurance it s expensive said Tempus currency strategist John Doyle If FX volatility is low and there s no urgency that can fall down their list of day to day priorities That s what we kind of see with our clients
Among the clients stepping away from hedging are small and medium sized multinational corporations according to Doyle Those companies tend to have thinly staffed treasury or accounting departments with employees wearing different hats rather than a dedicated currency specialist he said
Not everyone is swayed by the low volatility While corporations may approach hedging decisions on a more tactical basis long term investors such as pension funds aren t as quick to abandon protection according to Record Currency Management Chief Executive Officer James Wood Collins
Pension funds tend to view hedging as a long term strategic decision said Wood Collins whose Windsor U K based company oversees roughly 60 billion of currency exposures for pensions and other investors They ll put a hedge protocol in place and renew that program on a multi year cycle
It s unclear where the next bout of turbulence may come from or when it will erupt Schamotta thinks a surprise stabilization in China or Europe s economies could upset the dollar s resilience Doyle is keeping an eye on possible catalysts such as Brexit and the upcoming U S presidential election
In the meantime as currency volatility flirts with record lows Doyle is advising clients to keep hedges on despite the somnolent state the market has been in this year
It s what we don t see and don t talk about that might sneak up on us very quickly Doyle said The point is to protect your bottom line not to speculate
Updates euro level in 6th paragraph |
JPM | Lagarde Calls for Government Help in First Major ECB Speech | Bloomberg European Central Bank President Christine Lagarde called for a new policy mix saying public investment should be stepped up to ease the burden on monetary stimulus and ensure the region can thrive in an uncertain world
In her first major speech three weeks into the job the new ECB chief said her institution will continue to support the euro zone economy But she also said fiscal policy is a key element for overcoming the two main challenges facing the bloc the changing nature of global trade and declining domestic growth Minutes after she finished fresh data showed the current slowdown worsening
Twin external and domestic challenges call on us to consider as Europeans how we should respond to the new environment Lagarde said at a banking conference in Frankfurt The answer lies in converting the world s second largest economy into one that is open to the world but confident in itself an economy that makes full use of Europe s potential to unleash higher rates of domestic demand and long term growth
The size of the challenge was highlighted by purchasing managers indexes published Friday which showed the economy unexpectedly weakened this month with a downturn in services activity That suggests a slump in manufacturing especially in Germany is starting to spread to other sectors That kind of data which drove the euro lower is something Lagarde will need to address at her first policy meeting on Dec 12
It is remarkable that she spoke only about responding to future risks even though in our view there is a problem with low inflation and below potential growth right now said Greg Fuzesi an economist at JPMorgan NYSE JPM Clearly the wait for more clarity about the ECB s thinking goes on
Lagarde is picking up where her predecessor Mario Draghi left off In his final speech he called for euro zone fiscal support so that monetary policy isn t the only game in town a phrase that the new president also used With her remarks the Frenchwoman is building on an idea she expressed in Berlin earlier this month when she urged Europe to overcome its self doubt and show strength and resolve instead
We have a unique possibility to respond to a changing and challenging world by investing in our future she said All of this would be a game changer not just for our own stability and prosperity but for that of the global economy too
Lagarde also said she ll announce a strategy review of the central bank in the near future That s a step that may help to heal the divisions that opened up among policy makers after Draghi drove through another stimulus package in his final weeks She already started building bridges earlier this month by taking the 25 member Governing Council on a retreat to a luxury hotel to discuss their decision making processes and communication
After years of unprecedented stimulus negative interest rates large scale asset purchases and long term loans to banks fears are growing over consequences such as rising real estate prices and excessive risk taking by investors in search of higher yields
The ECB noted its own concerns in its Financial Stability Review this week and the account of Draghi s final policy meeting also published this week included a plea to allow current stimulus to show its potency Lagarde said the ECB will continuously monitor the side effects of its policies
Above all though her speech peppered with quotes from T S Eliot and Saint Francis of Assisi was a call for European leaders to think bigger She said they ve been slow to capitalize on the digital age with the result that productivity growth has slowed and have been hindered from completing the economic and monetary union because of too much attention to risk reduction
Completing EMU is about finding the right trade off enough protection against moral hazard to discourage under saving but enough mutual insurance to prevent over saving she said In this way we could tap into new sources of growth that would otherwise be suppressed And in the spirit of this conference that would truly represent a new approach for Europe |
JPM | Toronto Dominion joins ranks of systemic banks Deutsche drops a level | By Huw Jones
LONDON Reuters Canada s Toronto Dominion Bank TO TD has been added to a global list of systemic banks that must hold extra capital while Deutsche Bank DE DBKGn has dropped a rank within the list the Financial Stability Board FSB said on Friday
The international body based in Basel Switzerland was updating its list of systemic banks introduced in the aftermath of the global financial crisis a decade ago when taxpayers had to bail out struggling lenders
The addition of Toronto Dominion brings the total number of systemic banks to 30
Systemic banks are slotted into one of five buckets although the fifth where banks would be required to hold an extra 3 5 of capital to risk weighted assets on top of minimum requirements remains empty
JP Morgan Chase NYSE JPM remains the sole occupier of the fourth bucket with a 2 5 capital surcharge
Citigroup NYSE C and HSBC are in the third bucket with a 2 surcharge
Deutsche Bank has dropped from the third to the second bucket which has a 1 5 surcharge in a sign of how the struggling German lender is shrinking and simplifying its operations
This was primarily driven by reductions in leverage strategic adjustments in the bank s business and geographic perimeter and lower derivative volumes together with wider industry developments Deutsche Bank said in a statement
Deutsche Bank is however still required to meet a 2 extra capital requirement as a domestic systemically important bank and therefore the overall capital buffer is expected to remain unchanged the German bank said
Toronto Dominion has been placed in the first bucket with a 1 surcharge
Changes to capital requirements come into effect in January 2021
Banks on the list also face more onerous requirements for issuing special bonds that can be written down to replenish capital burned in a crisis to shield taxpayers |
MS | More Angst About Facebook Global Week Ahead | It looks like a quiet Global Week Ahead This happens towards the end of any month
Below are Reuters in London s five big world market themes ranked in order of importance for major stocks These are for the most part a continuation of worries that surfaced in recent weeks
Nothing is new news
1 More Angst and News About Facebook NASDAQ FB
The Facebook shock has been a hugely significant moment in this long running bull market
Tech and internet stocks such as the fabled FAANGs and BATs have dominated and driven the equity rally of the past 2 3 years mainly because the digital revolution underlying the boom in those companies was seen as largely impervious to shifting political winds or even ebbs and flows in the economic cycle
In the long run that may still be true But Facebook s travails and questions over the use of Big Data more generally or at least the advertising model underlying many of these companies has cast some doubt over whether that progress is as linear as market pricing suggests
This week may well be all about the growls coming from governments and their regulators on how far they will go to rein in the power of social networks Mark Zuckerberg already has a long list of what are not exactly friend requests to testify in front of various countries lawmakers
2 Worry Over a China US Trade War and NAFTA
There are fears of a trade war between the world s two largest economies the United States and China If that weren t enough to set the nerves racing the two sides are butting against each other in the South China Sea again Experienced analysts suggest we may not see a full fledged trade war
On NAFTA timelines Unconfirmed guidance has been that the eighth round of talks may commence on April 8th in Washington It takes about 7 to 10 days for the round to be completed That seems a safe bet Therefore we might know by the week of April 16th of any hope for a NAFTA II
3 A European Stock Slump
High expectations for European stocks in 2018 have not been met
Eurozone and UK business confidence data due out this week will either inflame or soothe concerns that the region s economic momentum may be starting to wane
Morgan Stanley NYSE MS equity strategists say Europe is now seeing record outflows versus the United States and even the popularity of French President Emmanual Macron elected last year with a strong mandate to reform rigid labor markets has now hit an all time low in the polls
The French CAC 40 share index is now down 5 percent from when Macron won power last May though that is still better than the near 7 percent the pan European Stoxx 600 has lost
4 The First Quarter of 2018 Draws to a Close
The first quarter draws to a close and what a quarter it has been
Investors have had a lot thrown at them from the biggest ever rise in stock market volatility to rapidly escalating tensions over global trade deepening tumult in the White House and tech sector wobbles
The market melt up they all talked about in January has melted away the Dow and S P are down for the year and the outlook for Q2 is a great deal more uncertain Global trade tensions are now infecting investor sentiment and risk appetite there are signs that growth has peaked particularly in Europe rising dollar interbank rates show no sign of reversing and the global liquidity pool will shrink this year
Will the bears continue to gain the upper hand in Q2 or will the bulls charge again
5 Final US GDP Growth Data from Q4 17
The final U S government read on fourth quarter GDP on Wednesday will come hot on the heels of the Fed s first interest rate hike of the year
In theory it should be reassuring The United States is a fairly closed economy and in the fourth quarter Donald Trump was dishing out tax cuts not threatening trade wars
The U S Commerce Department also said on Friday that new orders for key U S made capital goods rebounded more than expected last month and shipments of core capital goods saw the biggest advance since December 2016
Other real time data though is not so encouraging An Atlanta Fed GDPNow model which updates weekly is now forecasting Q1 GDP increasing at an annualized rate of 1 8 percent At the start of March it was around 3 5 percent
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Key Global Macro
The end of the week looks most promising for key macro data
China releases the state versions of its purchasing managers indices PMIs for the manufacturing and service sectors on Friday
This light data week ahead will also feature data on Japanese unemployment on Friday U S personal income on Thursday and University of Michigan consumer sentiment on Friday It will also offer public comments by the New York Fed chief
On Monday the Netherland s real GDP growth rate comes out The prior has been 2 9 y y
The TJLP long term rate in Brazil is forecast to fall from 6 75 to 6 5
On Tuesday Argentina s 7 day repo reference rate should stay flat at 27 25 The S P Case Shiller Home Price Index comes out It is running a bit hot at 6 3 y y Mexico s seasonally adjusted unemployment rate comes out It should get to 3 4 That is low On Wednesday the South African SARB policy rate comes out It should stay fixed at 6 75 The Bank of Thailand policy rate comes out It has been 1 5 US real GDP growth comes out It should get to 2 7 y y from 2 5 y y On Thursday Germany s unemployment rate comes out It is 5 4 in seasonally adjusted terms The U K real GDP growth rate comes out It has been 1 4 y y The national unemployment rate in Brazil comes out It may go rise from 12 2 to 12 7 U S initial claims come out It was 229K last week which is low U S personal income and spending comes out Personal income this month should be up 0 3 and spending up 0 2 The University of Michigan sentiment index comes out It looked good last month at 102 On Friday Japan s unemployment rate comes out It will stay quite low at 2 5 |
MS | 6 Reasons To Buy These Energy ETFs And Stocks Now | The hated energy sector is now back in favor with 65 crude up about 9 and bullish analyst comments A host of analysts started betting big on this unloved sector Credit Suisse SIX CSGN analysts view the space as attractive for the and have raised their rating to market weight from underweight
Morgan Stanley NYSE MS too is placing bullish bets on energy and has an overweight rating on it The space measured by Energy Select Sector SPDR ETF NYSE XLE down 2 7 outperformed the broader market denoted by SPDR S P 500 ETF NYSE SPY AX SPY down more than 4 9 in the last one month as of Mar 28 2018 read
Analysts believe that the winning trend in the energy space will be maintained ahead Below we highlight the reasons behind this bullishness
Solid Earnings Growth
Energy sector earnings are expected to be up 60 8 in the first quarter of 2018 from the year ago period after 157 2 year over year earnings growth in the preceding quarter per the issued on Mar 23 2018 Revenue growth will likely be 15 7 in Q1 after a 23 8 increase in top line in Q4
Compelling Valuation
Credit Suisse analysts believe that extended valuations led energy stocks to underperform since mid 2016 despite a favorable operating backdrop and strong earnings But a host of tailwinds and weaker stock prices makes the sector s valuations more attractive than they have been in several years
The Shiller P E for energy sector is the lowest among the S P 500 universe The broader market index has a Shiller P E of 31x
Geopolitical Concerns
Geopolitical risks in the Middle East especially the strained relationship between Saudi and Iran can act as a key driver The Arab coalition led by Saudi Arabia said on Monday that the wreckage of missiles fired by Houthi rebels in Yemen bore features of weapons made near Saudi Arabia also declared the 2015 nuclear deal between Iran and global powers a flawed agreement
Favorable Demand Supply
The International Energy Agency IEA recently revised its global oil demand outlook upwardly to 99 3mb d in 2018 Venezuela which has the world s largest has been registering a decline in crude production in recent years IEA warned that Venezuela s situation is worse enough to send the oil market into deficit
Seasonal Tailwind
Investors should note that the energy sector enjoys seasonality at this time of the year As per equityclock com the sector has offered the best over the last 20 years of 3 2 in April followed by 2 7 in March 1 3 in February and 1 2 in December This definitely calls for energy investing in the near term
Will OPEC Deal Continue in 2019
Saudi Arabia s Energy Minister recently commented that the OPEC output cut deal may Global oil inventory came down from their inflated level two years ago but maybe needed more cuts to rebalance the oil market successfully especially the shale oil boom in the United States
ETF Picks
Below we highlight two ETFs that have a P E ratio less than biggest energy ETF XLE P E of 27 65x
VanEck Vectors Oil Refiners ETF P E 11 34x
The fund measures the overall performance of companies involved in crude oil refining Reliance Industries 7 94 Valero Energy NYSE VLO 7 4 and Phillips 66 NYSE PSX 7 3 are the top three holdings read
First Trust Energy AlphaDEX ETF P E 13 89x
The underlying StrataQuant Energy Index comprises stocks from the Russell 1000 Index that may generate a positive alpha relative to traditional passive style indices through the use of the AlphaDEX screening methodology Diamondback Energy 4 17 Valero Energy 4 06 and Whiting Petroleum 4 06 are the top three holdings
Stock Picks
Investors can pick oil exploration and production stocks with a forward P E ratio of less than the industry P E 21 2x The stocks hail from a top ranked Zacks industry top 36
Bonanza Creek Energy Inc NYSE BCEI 8 46x
The company is into the acquisition exploration and development of onshore oil and natural gas properties in the United States It has a Zacks Rank 1 Strong Buy
Antero Resources Corporation NYSE AR 15 5x
It is an independent oil and natural gas company and hails from a top ranked Zacks industry top 42 It has a Zacks Rank 2 Buy
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JPM | 3 Legg Mason Funds To Snap Up Today | Founded in 1899 Legg Mason is one of the world s largest asset managers with assets under management of nearly 780 2 billion as of Jun 30 2019 Legg Mason and its affiliates manage mutual funds across a wide range of categories including both equity and fixed income funds It uses a multi affiliate business model that allows each affiliate to operate with a high degree of autonomy utilizing its unique approach and processes This Baltimore based company serves both individual and institutional investors with around 3 000 employees in 39 offices throughout the globe Below we share with you four top ranked Legg Mason mutual funds Each has earned a Strong Buy and is expected to outperform its peers in the future Investors can their Zacks Rank and past performance ClearBridge Dividend Strategy Fund Class 1 aims for the generation and appreciation of dividend income and capital growth over a long period The fund invests the majority of its assets in equity securities or other investments that pay out dividends The fund mostly invests in common stocks and may invest half of its assets in equity securities of foreign companies directly or via depository receipts LCBOX has three year annualized returns of 12 6 LCBOX has an expense ratio of 0 77 compared with the category average of 0 95 ClearBridge Small Cap Growth Fund Class A aims for long term capital growth The fund invests most of its assets in securities of small capitalization companies The portfolio managers follow a growth oriented approach while investing SASMX has three year annualized returns of 16 Aram E Green is one of the fund managers of SASMX since 2007 ClearBridge Large Cap Value Fund Class A2 aims for long term capital appreciation The fund invests the majority of its assets in equity securities or other investments with similar economic characteristics of companies that have large market capitalization LIVVX has three year annualized returns of 8 9 As of June 2019 LIVVX held 52 issues with 4 61 of its assets invested in JPMorgan Chase Co NYSE JPM To view the Zacks Rank and past performance of all Legg Mason mutual funds investors can Want key mutual fund info delivered straight to your inbox Zacks free Fund Newsletter will brief you on top news and analysis as well as top performing mutual funds each week |
MS | Morgan Stanley Yext in tech partnership for financial advisers | Morgan Stanley MS 0 5 and Yext YEXT 2 8 form a partnership to provide the bank s financial advisers with technology to create and manage their business websites and digital presence Morgan Stanley will also use Yext s intelligent search capabilities to enhance prospecting success Previously Yext 5 3 after Q2 beat with mixed guidance Aug 30 Now read |
MS | Japan machinery orders miss expectations protectionism threatens investment | By Stanley White TOKYO Reuters Japan s core machinery orders rose less than expected in October following an earthquake in the previous month pointing to more subdued business investment as earnings growth slows and as trade protectionism increases headwinds for the economy The 7 6 percent rise month on month in core machinery orders considered a leading indicator of capital expenditure undershot the median estimate for a 10 5 percent gain That followed a record slide of 18 3 percent in September when an earthquake struck northern Japan and flooding disrupted business in western parts of the nation The rebound in machinery orders could be short lived as the U S China trade war Japan s looming trade talks with the United States and a slowdown in overseas economies are expected to weigh on corporate sentiment Underscoring the risks to the outlook the Cabinet Office lowered its assessment of machinery orders to say there are signs its recovery is stalling Weakening capital expenditure puts Japan s government in a bind because policymakers have long predicted that gains in business investment to cope with a shrinking labor force would bolster growth and shield it from risks posed by overseas economies Downside risks have increased because underlying demand is weakening and companies are worried that trade friction will hurt overseas profits said Hiroshi Miyazaki senior economist at Mitsubishi UFJ Morgan Stanley NYSE MS Securities The government has already drawn up extra spending plans which highlights how worried they are about the economy Earnings growth at Japanese manufacturers is already being crimped by the U S China trade dispute with several companies downgrading their profit forecasts recently due to cooling demand Orders from manufacturers rose 12 3 percent on month in October after a 17 3 percent decline in September due to an increase in orders from auto makers and oil refiners the data showed Service sector orders rose 4 5 percent following a 17 1 percent decline in the previous month due to orders from shipping companies and railway operators Core machinery orders exclude those for ships and from electricity utilities Policy makers and investors fear that international trade tensions and slowing global growth could hurt Japan s export led economy Japan s government will spend about 3 trillion yen 26 6 billion in a second extra budget for this fiscal year to boost infrastructure support farmers and deal with natural disasters two government sources with direct knowledge of the matter told Reuters The Bank of Japan s quarterly tankan business sentiment survey is forecast to show big manufacturers confidence worsened for a fourth straight quarter in December due to uncertainties over the global economy and the China U S trade conflict The BOJ will release the data on Dec 14 Corporate sentiment is closely watched because companies tend to cut capital expenditure when they grow less confident about the future In another warning sign Japan on Monday revised down gross domestic product in the third quarter to show the largest economic contraction in more than four years hurt by a steep decline in capital expenditure This month in Argentina U S President Donald Trump and Chinese President Xi Jinping agreed a truce that delayed the U S increase of tariffs on Chinese goods However there are concerns this truce will not hold after Canada s arrest of Chinese tech company Huawei s chief financial officer for extradition to the United States
U S automakers and labor unions have also indicated they want to cap the yen s weakness and limit the number of Japanese auto imports in trade talks with Tokyo expected next year which could also put a dampener on business investment |
MS | Morgan Stanley is said to shut down Moscow equities FX desks | Morgan Stanley NYSE MS is closing its equities and currency sales and trading desks in Moscow joining other banks like Deutsche Bank DE DBKGn and Credit Suisse SIX CSGN in cutting back on its presence in Russia Bloomberg reports citing people familiar with the matter The bank expects to move some employees to London as it eliminates other positions Morgan Stanley has about 40 employees on the sales and trading desks and in support roles in Moscow Its remaining presence in the country will be in corporate finance capital markets and M A MS 0 6 in premarket trading Now read |
MS | FireEye 1 4 as Morgan Stanley steps to sidelines | Morgan Stanley NYSE MS downgrades FireEye NASDAQ FEYE from Overweight to Equal Weight with a 21 price target Analyst Melissa Franchi says FireEye s has delivered a more consistent YTD performance but is a recent relative outperformer suggesting limited upside to the price target FireEye shares are down 1 4 premarket to 19 25 Now read |
JPM | U S charges another ex JPMorgan executive with alleged market manipulation | NEW YORK Reuters The Department of Justice has charged another former JPMorgan Chase Co NYSE JPM executive with alleged racketeering and manipulating precious metals prices between 2008 and 2016 the latest in a string of similar prosecutions The indictment against Jeffrey Ruffo who is also charged with other federal crimes including conspiracy to commit wire fraud is the result of an ongoing investigation federal prosecutors said in a statement Ruffo is the sixth person to be charged with alleged fraud in connection to JPMorgan s precious metals desk The case relates to spoofing which involves placing bids to buy or offers to sell contracts with the intent to cancel them before execution allowing spoofers to influence prices In recent years there has a been a surge in spoofing related prosecutions in the United States by the Department of Justice and the Commodity Futures Trading Commission Ruffo could not immediately be reached for comment A JPMorgan spokesman did not immediately respond to a request for a comment The U S bank has said in recent regulatory filings that it is cooperating with various investigations relating to its metals trading practices According to the indictment Ruffo worked at JPMorgan from 2008 to 2017 as a salesperson serving hedge funds investing in precious metals and he encouraged JPMorgan traders to place deceptive orders to create price advantages for his clients The indictment also alleged that Ruffo and his former colleagues defrauded JPMorgan s clients who had invested in barrier options by pushing option prices to levels that benefited the bank An option is a financial instrument that gives buyers the right to buy or sell an underlying asset at an agreed price and at a fixed time Its value is tied to the value of the asset While previous spoofing prosecutions have led to guilty pleas a former metals trader at the Swiss bank UBS Group was acquitted by a jury in a similar case last year The acquittal highlighted the difficulties in making a case that cancelling orders is a criminal act given that many market orders go unfilled Some lawyers also argue it is aggressive to charge bank executives with a racketeering conspiracy which is usually associated with organized crime
The charges were filed on Thursday and made public on Friday |
JPM | Cryptocurrency Regulation An Indian Perspective | Cryptocurrencies with a market capitalization of over 200 billion can no longer be dismissed as just a fad While still making up only a tiny fraction of overall global financial markets they have matured from the ranks of fledgling startups to being leveraged by large enterprises for use cases ranging from global payments asset backed tokens for metals and commodities fiat currency equivalent digital coins the Internet of Things decentralized cloud storage and more
Earlier this year JPMorgan Chase NYSE JPM announced its United States dollar equivalent JPM Coin for business to business payments a consortium of large banks announced Fnality International which aims to facilitate cross border payments across five major currencies and Facebook NASDAQ FB introduced Libra targeting retail payments |
JPM | U S services data suggests upward revision to third quarter GDP | WASHINGTON Reuters U S economic growth for the third quarter is likely to be revised higher after data on Tuesday showed stronger consumer spending than initially estimated according to JPMorgan NYSE JPM It said the Commerce Department s quarterly services survey or QSS on Tuesday implied spending on legal services increased at a faster pace than the government had assumed in its advance estimate of gross domestic product published last month Data from this survey signaled stronger consumption growth during the quarter than what was first reported by the BEA Bureau of Economic Analysis said JPMorgan economist Daniel Silver We now look for third quarter real consumption growth to be revised up to a 3 2 annualized rate The government estimated last month that consumer spending which accounts for more than two thirds of the economy increased at a 2 9 rate in the third quarter Before the QSS data economists were already expecting that GDP growth for the July September quarter would be bumped up to a 2 0 pace from a 1 9 rate following solid gains in manufacturing inventories and construction spending in September Based on the QSS data JPMorgan estimated another three tenths of a percentage point would be added to the third quarter GDP estimate That means third quarter GDP could be raised to a 2 3 rate when the government publishes its first revision next week That would be a pick up in GDP growth from the 2 0 pace logged in the second quarter The QSS data will impact many different categories of services consumption and we think that an upward revision to the BEA data on legal services consumption could be particularly noticeable said Silver Away from consumption the QSS data had only marginal effects on our tracking of third quarter investment in intellectual property products
Consumer spending is supporting the economy as a 16 month trade war between the United States and China undermines business investment and manufacturing |
JPM | What ECB Watchers Are Eyeing in Lagarde s First Policy Speech | Bloomberg Explore what s moving the global economy in the new season of the Stephanomics podcast Subscribe via Apple Podcast Spotify or Pocket Cast
European Central Bank watchers who monitor its every signal to gauge the future of interest rates would quite like new President Christine Lagarde to give them some clues when she breaks her silence this week
Three weeks into the role the Frenchwoman has yet to make a speech on monetary policy That s allowed murmurings of unease over the impact of negative interest rates and quantitative easing emanating from some colleagues as well as from politicians and bankers to fill the vacuum
Traders in euro area money markets have pared back expectations for further stimulus and the chance of another 10 basis point cut by October has fallen to 40 from around 60 when Lagarde took over While that has largely been a function of cooling trade tensions investors want to know how the ECB would respond should the economic outlook weaken again
We don t really know what s happening behind the scenes said Jan von Gerich chief strategist at Nordea in Helsinki who recently put back his forecast for more easing from December to March Lagarde has not made her monetary policy views and strategic plans clear yet so the time to try to influence the future course of the ECB is now
In her first speech as president earlier this month in Berlin she told the audience to leave the room if they were looking for views on monetary policy
Lagarde could start to lift the fog on Friday when she addresses a banking conference in Frankfurt Otherwise the next scheduled occasion is Dec 12 when she will hold a press conference after her first Governing Council meeting and will unveil new economic forecasts including the first predictions for 2022
Airing Views
Meanwhile members of her Governing Council who opposed elements of the stimulus launched by Lagarde s predecessor Mario Draghi in his final weeks have been open about their concerns that there s little room left for rate cuts
In Frankfurt last week France s Francois Villeroy de Galhau suggested interest rates are unlikely to fall much further His Dutch colleague Klaas Knot argued the ECB should be more cautious with unconventional tools Estonian Governor Madis Muller who opposed September decision to restart QE said over the weekend that keeping rates where they are makes sense but added there was a question of how low they could go before losing effectiveness
JPMorgan NYSE JPM economist Greg Fuzesi has scrapped his call for a rate cut in December and currently predicts no further change citing the inability to read how policy makers are thinking under their new leadership
Even to this day policy makers have not made any clear forward looking statements as opposed to trying to digest the September package he said in a report last week The arrival of Christine Lagarde seems to have slowed this down further
Lagarde has good reason to move cautiously Recent economic reports show the euro area s downturn seems to be bottoming out and Germany the largest economy skirted recession The ECB s latest package however contentious it may have been could keep providing sufficient stimulus for months to come
The new president s initial focus seems to be containing acrimony from that decision That included the unusual step of taking her Governing Council colleagues on a retreat to a luxury hotel outside Frankfurt to discuss how they ll work together
Still even proponents of the ECB s policy stance are showing a heightened awareness of the risks it brings Vice President Luis de Guindos has grown vocal about potential side effects telling an audience of business people in Bilbao this month that the negative impact on financial stability is increasingly evident
Chief economist Philip Lane said the ECB hasn t reached its limit and isn t super loose but also agreed that it s better to move in small steps right now to better assess unintended consequences
That apparent wariness worries ABN Amro economist Nick Kounis Like von Gerich at Nordea he too recently pushed back his forecast for a rate cut to March from December and described the policy message coming from the Governing Council as mixed and lacking clarity
Are you trying to convince investors that you re the kind of institution which can take powerful actions and meet your objectives or are you actually telling them that you re out of bullets Kounis said There is really no in between |
MS | DocuSign Finally Confidentially Files For 2018 IPO | DocuSign the company responsible for the e signature that s become a veritable staple of modern businesses everywhere has finally decided to debut on the public market and has confidentially filed to go public by the end of 2018 The tech company is one of the most closely watched on Wall Street and analysts have been musing that it may decide to debut on the market for years now so the IPO is likely to draw a hefty sum of attention for the e signature company
Here s what you need to know about DocuSign before it goes public and how well it might hold up to the market s intense scrutiny when its shares finally start trading
A possible unicorn forays into the market
DocuSign is no small tech company struggling for some additional capital the company has long been considered a unicorn by authoritative Wall Street analysts having been valued at around 3 billion in the past By the nature of its unicorn status alone the company will be drawing some serious attention from the minute its shares start trading though its confidential filing has left many investors in the dark when it comes to the intimate financial details usually sought out before an IPO
DocuSign which is roughly 15 years old this year has been waxing poetic about going public for some time now and it s now all but certain to debut sometime in the next six months meaning investors who have been anxious to jump aboard can finally get what they ve been after all these years The company hasn t exactly struggled to raise funds for itself in the past after all it s raised more than 550 million alone in venture capital funding before meaning it s likely well endowed when it comes to financing future innovations that will keep it relevant in a hotly competitive tech marketplace
The company had suffered from a two year CEO vacancy though its of Dan Springer in 2017 is likely to appease some investors and financial backers who demanded a fresh set of hands at the wheel before debuting on the marketplace DocuSign certainly hasn t wanted for business despite its recent lack of leadership the company s electronic signature technology from which its name is derived has more than 200 million users around the world today and it s likely looking to expand those figures once it goes public Major companies like Morgan Stanley NYSE MS and T Mobile NASDAQ TMUS rely on DocuSign for their day to day operations signifying the company has a serious appeal to massive corporations who could deliver it serious business in the near future
While DocuSign still faces sizable competition from the likes of Adobe Sign and others who offer similar services it s thus far established itself as the predominant leader of the e signature industry largely thanks to its innovative e signature technology that essentially pioneered the field The company s business model relies on more businesses around the globe digitizing their operations which seems to be one of the safest bets in the contemporary business world given the turn towards computers that virtually all businesses have taken over the past few decades
Investors will have to wait for more details
Despite the hype that s sure to build around DocuSign s forthcoming IPO investors hoping to learn more about the company s financial prospects will have to learn to be patient The confidential filing of its IPO revealed relatively little to the broader market and the company is sure to keep its cards close to its chest as its approaches its market debut
That doesn t mean investors are totally in the dark when it comes to predicting DocuSign s future after all the overall trends of the last few decades that have seen virtually all businesses across a plethora of industries digitizing their operations is likely to continue and signifies that DocuSign won t lack for customers in the future It s impressive 200 million current users will likely soon find themselves joined by more happy customers particularly as DocuSign expands its current business operations in the real estate and financial services industry which make up a bulk of its current dealings
With the tech IPO market currently saturated with of Dropbox s forthcoming IPO investors can expect a bit of a shakeup as more information about DocuSign becomes public The tech market has had a stellar year thus far and its prospects are unlikely to go south anytime soon given the broad economic growth being enjoyed throughout America where DocuSign coincidentally does the majority of its business Expect big things from DocuSign in the immediate future though hold off on any definite plans surrounding the company s stock until more financial details become available to the public While we re left in the dark for now it s safe to assume DocuSign will have one of the biggest IPOs of the year and could reap its early financial backers a hefty return on their investments |
JPM | Does Your Retirement Portfolio Hold These 3 Mutual Fund Misfires September 26 2019 | If your advisor has you invested in any of these Mutual Fund Misfires of the Market with high fees and low returns you need to rethink your advisor
The easiest way to judge a mutual fund s quality over time is by analyzing its performance and fees Our Zacks Rank of over 19 000 mutual funds has identified some of the worst of the worst mutual funds you should avoid the funds with the highest fees and poorest long term performance
First let s break down some of the funds currently part of our Mutual Fund Misfires of the Market If you happen to have put your money into any of these misfires we ll help assess some of our best Zacks Ranked mutual funds
3 Mutual Fund Misfires
Now let s take a look at three market misfires
Dreyfus GNMA C GPNCX 1 92 expense ratio 0 5 management fee for a total annual fee of 2 42 GPNCX is part of the Government Mortgage Intermediate fund section Government Mortgage Intermediate funds focus on the mortgage backed security MBS market and securities that usually have at least three years to maturity but less than 10 With a five year after expenses return of 0 75 you re mostly paying more in fees than returns
Loomis Sayles Strategy Income A NEFZX NEFZX is an Investment Grade Bond Long mutual fund These funds focus on the long end of the curve generally with bonds that mature in more than 10 years NEFZX offers a combined annual fee of 1 52 and annual returns of 0 98 over the last five years Even if this fund can be positioned as a hedge during the recent bull market paying more in fees than returns over the long term should never be an acceptable result
Putnam International Growth M PINMX This fund has an expense ratio of 0 93 and management fee of 0 91 PINMX is a part of the Non US Equity fund category many of which will focus across all cap levels and will typically allocate their investments between emerging and developed markets With an annual average return of 0 47 over the last five years and an annual fee of 1 84 the only thing absolute about this absolute return fund is that it absolutely deserves to be on our worst offender list
3 Top Ranked Mutual Funds
Now that you ve seen the worst Zacks Ranked mutual funds let s have a look at some of the highest ranked funds with the lowest fees
JPMorgan NYSE JPM Large Cap Growth I SEEGX 0 68 expense ratio 0 5 management fee for a total annual fee of 1 18 SEEGX is a Large Cap Growth mutual fund and these funds invest in many large U S firms that are projected to grow at a faster rate than their large cap peers With combined management fees and expenses of just 1 18 and annual returns of 15 2 over the last five years this fund is a winner
MSIF Growth Portfolio A MSEGX Expense ratio 0 82 Management fee 0 41 Total annual fee 1 23 MSEGX is a Large Cap Blend fund targeting companies with market caps of over 10 billion These funds offer investors a stability and are perfect for people with a buy and hold mindset MSEGX has managed to produce a robust 16 14 over the last five years
Fidelity Select IT Services FBSOX Expense ratio 0 74 Management fee 0 54 Total annual fee 1 28 FBSOX is an All Cap Growth mutual fund In order to increase diversification these funds have holdings across small medium and large cap levels FBSOX has produced a 19 07 over the last five years
Bottom Line
We hope that your investment advisor if you use one has you invested in one or all of the top ranked mutual funds we ve reviewed But if that is not the case and your advisor has you invested in any of the funds on our worst offender list it might be time to have a conversation or reconsider this vitally important relationship
If you have concerns or any doubts about your investment advisor read our just released report
4 Warning Signs That Your Advisor Might be Sabotaging Your Financial FutureThis report can help you avoid the costly mistake of picking or sticking with the wrong investment advisor Click here for free report |
JPM | 3 Mutual Fund Misfires To Avoid In Your Retirement Portfolio September 26 2019 | If your financial advisor made you buy any of these Mutual Fund Misfires of the Market with high expenses and low returns you need to reassess your advisor
High fees coupled with poor results It s a straightforward equation for an awful mutual fund Some are more regrettable than others and some are bad to the point that they have got a Strong Sell from our Zacks Rank the lowest positioning of the almost 19 000 mutual funds we rank every day
Below you ll read about some of the funds included in our current list of Mutual Fund Misfires of the Market And if by chance you re invested in any of these misfires we ll help and review some of our highest Zacks Ranked mutual funds
3 Mutual Fund Misfires
Now let s take a look at three market misfires
Western Asset Short Duration High Income C1 SHICX Expense ratio 1 41 Management fee 0 55 Total annual fee 1 96 After expenses the 5 year return is 1 33 meaning your fees are far higher than the fund s returns
AIC McKee International Equity Institutional MKIEX 1 04 expense ratio 0 7 management fee MKIEX is a part of the Non US Equity fund category many of which will focus across all cap levels and will typically allocate their investments between emerging and developed markets This fund has a combined fee of 1 74 with annual returns of 0 7 over the last five years Another fund guilty of having investors pay more in fees than returns
Franklin CT Tax Free Income C FCTIX This fund has an expense ratio of 1 32 and management fee of 0 55 FCTIX is a Muni Bonds mutual fund which focus their investments on debt securities issued by state and local governments these are typically used to pay for the construction of infrastructure the operation of public schools and other municipal functions With an annual average return of 1 74 over the last five years and an annual fee of 1 87 the only thing absolute about this absolute return fund is that it absolutely deserves to be on our worst offender list
3 Top Ranked Mutual Funds
Now that we ve covered our worst offender list let s take a look at some of Zacks highest ranked mutual funds with some of the lowest fees you may want to consider
Parnassus Core Equity Fund I PRILX is a winner with combined fees and expenses of just 1 21 and a five year annualized return track record of 10 39
JPMorgan NYSE JPM Large Cap Growth R6 JLGMX has an expense ratio of 0 43 and management fee of 0 5 for a total annual fee of 0 93 JLGMX is a Large Cap Growth mutual fund and these funds invest in many large U S firms that are projected to grow at a faster rate than their large cap peers With combined management fees and expenses of just 0 93 and annual returns of 15 51 over the last five years this is a well diversified fund with a long track record of success
AB Discovery Growth Adviser CHCYX has an expense ratio of 0 71 and management fee of 0 62 for a total annual fee of 1 33 CHCYX is a Mid Cap Blend mutual fund These funds usually seek a stock portfolio of various size and style which allows for diversification when the focus is on companies with a market cap in the range of 2 billion to 10 billion With consolidated management fees and expenses of only 1 33 and yearly returns of 11 45 over the last five years this fund is well diversified with a long reputation of salutary performance
Bottom Line
These examples underscore the huge range in quality of mutual funds from the really bad to the astonishingly good There is no reason for your advisor to keep your money in any fund that charges more than you get in return unless they re getting something out of it like a high commission
If you have concerns or any doubts about your investment advisor read our just released report
4 Warning Signs That Your Advisor Might be Sabotaging Your Financial FutureThis report can help you avoid the costly mistake of picking or sticking with the wrong investment advisor Click here for free report |
JPM | Does Your Retirement Portfolio Hold These 3 Mutual Fund Misfires September 26 2019 Revised | If your advisor has you invested in any of these Mutual Fund Misfires of the Market with high fees and low returns you need to rethink your advisor
The easiest way to judge a mutual fund s quality over time is by analyzing its performance and fees Our Zacks Rank of over 19 000 mutual funds has identified some of the worst of the worst mutual funds you should avoid the funds with the highest fees and poorest long term performance
First let s break down some of the funds currently part of our Mutual Fund Misfires of the Market If you happen to have put your money into any of these misfires we ll help assess some of our best Zacks Ranked mutual funds
3 Mutual Fund Misfires
Now let s take a look at three market misfires
Dreyfus GNMA C 1 92 expense ratio 0 5 management fee GPNCX is part of the Government Mortgage Intermediate fund section Government Mortgage Intermediate funds focus on the mortgage backed security MBS market and securities that usually have at least three years to maturity but less than 10 With a five year after expenses return of 0 75 you re mostly paying more in fees than returns
Loomis Sayles Strategy Income A NEFZX is an Investment Grade Bond Long mutual fund These funds focus on the long end of the curve generally with bonds that mature in more than 10 years NEFZX offers an expense ratio of 1 52 and annual returns of 0 98 over the last five years Even if this fund can be positioned as a hedge during the recent bull market paying more in fees than returns over the long term should never be an acceptable result
Putnam International Growth M This fund has an expense ratio of 0 93 and management fee of 0 91 PINMX is a part of the Non US Equity fund category many of which will focus across all cap levels and will typically allocate their investments between emerging and developed markets With an annual average return of 0 47 over the last five years the only thing absolute about this absolute return fund is that it absolutely deserves to be on our worst offender list
3 Top Ranked Mutual Funds
Now that you ve seen the worst Zacks Ranked mutual funds let s have a look at some of the highest ranked funds with the lowest fees
JPMorgan NYSE JPM Large Cap Growth I 0 68 expense ratio 0 5 management fee SEEGX is a Large Cap Growth mutual fund and these funds invest in many large U S firms that are projected to grow at a faster rate than their large cap peers With annual returns of 15 2 over the last five years this fund is a winner
MSIF Growth Portfolio A Expense ratio 0 82 Management fee 0 41 MSEGX is a Large Cap Blend fund targeting companies with market caps of over 10 billion These funds offer investors a stability and are perfect for people with a buy and hold mindset MSEGX has managed to produce a robust 16 14 over the last five years
Fidelity Select IT Services Expense ratio 0 74 Management fee 0 54 FBSOX is an All Cap Growth mutual fund In order to increase diversification these funds have holdings across small medium and large cap levels FBSOX has produced a 19 07 over the last five years
Bottom Line
We hope that your investment advisor if you use one has you invested in one or all of the top ranked mutual funds we ve reviewed But if that is not the case and your advisor has you invested in any of the funds on our worst offender list it might be time to have a conversation or reconsider this vitally important relationship
If you have concerns or any doubts about your investment advisor read our just released report
4 Warning Signs That Your Advisor Might be Sabotaging Your Financial Future
NOTE We are re issuing this article to correct an inaccuracy The original article published Tuesday September 26 2019 should no longer be relied upon |
JPM | 3 Mutual Fund Misfires To Avoid In Your Retirement Portfolio September 26 2019 Revised | If your financial advisor made you buy any of these Mutual Fund Misfires of the Market with high expenses and low returns you need to reassess your advisor
High fees coupled with poor results It s a straightforward equation for an awful mutual fund Some are more regrettable than others and some are bad to the point that they have got a Strong Sell from our Zacks Rank the lowest positioning of the almost 19 000 mutual funds we rank every day
Below you ll read about some of the funds included in our current list of Mutual Fund Misfires of the Market And if by chance you re invested in any of these misfires we ll help and review some of our highest Zacks Ranked mutual funds
3 Mutual Fund Misfires
Now let s take a look at three market misfires
Western Asset Short Duration High Income C1 Expense ratio 1 41 Management fee 0 55 After expenses the 5 year return is 1 33 meaning your fees are far higher than the fund s returns
AIC McKee International Equity Institutional 1 04 expense ratio 0 7 management fee MKIEX is a part of the Non US Equity fund category many of which will focus across all cap levels and will typically allocate their investments between emerging and developed markets With annual returns of 0 7 over the last five years Another fund guilty of having investors pay more in fees than returns
Franklin CT Tax Free Income C This fund has an expense ratio of 1 32 and management fee of 0 55 FCTIX is a Muni Bonds mutual fund which focus their investments on debt securities issued by state and local governments these are typically used to pay for the construction of infrastructure the operation of public schools and other municipal functions With an annual average return of 1 74 over the last five years it s no surprise this fund has received Zacks Strong Sell ranking
3 Top Ranked Mutual Funds
Now that we ve covered our worst offender list let s take a look at some of Zacks highest ranked mutual funds with some of the lowest fees you may want to consider
Parnassus Core Equity Fund I is a winner with expenses ratio of just 1 21 and a five year annualized return track record of 10 39
JPMorgan NYSE JPM Large Cap Growth R6 has an expense ratio of 0 43 and management fee of 0 5 JLGMX is a Large Cap Growth mutual fund and these funds invest in many large U S firms that are projected to grow at a faster rate than their large cap peers With annual returns of 15 51 over the last five years this is a well diversified fund with a long track record of success
AB Discovery Growth Adviser has an expense ratio of 0 71 and management fee of 0 62 CHCYX is a Mid Cap Blend mutual fund These funds usually seek a stock portfolio of various size and style which allows for diversification when the focus is on companies with a market cap in the range of 2 billion to 10 billion With yearly returns of 11 45 over the last five years this fund is well diversified with a long reputation of salutary performance
Bottom Line
These examples underscore the huge range in quality of mutual funds from the really bad to the astonishingly good There is no reason for your advisor to keep your money in any fund that charges more than you get in return unless they re getting something out of it like a high commission
If you have concerns or any doubts about your investment advisor read our just released report
4 Warning Signs That Your Advisor Might be Sabotaging Your Financial Future
NOTE We are re issuing this article to correct an inaccuracy The original article published Tuesday September 26 2019 should no longer be relied upon |
MS | As OPEC Meets New Energy ETFs Spy Opportunity in Oil s Decline | Bloomberg Cushing Asset Management has a lot riding on the meeting of OPEC in Vienna Thursday specifically the success of its first exchange traded funds
On the heels of the worst month for crude since 2008 the Dallas based investment firm which manages about 3 3 billion in energy related portfolios is listing four sector ETFs connected to petroleum The funds which focus on energy utilities transportation and the energy supply chain will look to deliver extra yield by investing some of their assets in companies set up as master limited partnerships
It s either terrible timing or a stroke of genius With oil having lost 22 percent in November and now trading at around 54 a barrel OPEC could put a floor under the price by cutting its production But with President Donald Trump pushing for lower prices there s a chance that exporters could let the price hold at this level or slide even further
Calling a bottom is always rife with a challenge said Todd Sunderland Cushing s head of risk management and quant strategies If they do what I think most people expect with a reasonable cut we do have a decent launching pad going into 2019 for energy and energy equities But it s a really difficult call
The funds won t be cheap carrying a fee of 0 65 percent more than eight times the 0 08 percent charged by the least expensive energy ETF run by Fidelity Investments
Cushing will allocate up to 24 percent of each fund s assets to so called MLPs which operate primarily in the energy sector and tend to yield more than other equities MLPs aren t part of traditional indexed funds as their structure can necessitate laborious tax disclosures if they exceed 25 percent of a fund s portfolio Ironically the master limited partnership model for oil and natural gas conduits has fallen out of favor this year due in part to a tax change proposed in March that pummeled the companies unit prices
The firm has previously provided MLP indexes to exchange traded notes run by Morgan Stanley NYSE MS and JPMorgan Chase Co NYSE JPM
The new funds are
Cushing Energy MLP ETF Ticker XLEY
Cushing Utility MLP ETF Ticker XLUY
Cushing Transportation MLP ETF Ticker XLTY
Cushing Energy Supply Chain MLP ETF Ticker XLSY |
MS | European stocks slump to two year low after China executive arrest | By Marc Jones LONDON Reuters Global stock markets slumped for a third day running on Thursday as the arrest of a top executive of Chinese tech giant Huawei in Canada for extradition to the United States fed fears of fresh tensions between the two economic superpowers The arrest of Huawei s chief financial officer Meng Wanzhouof who is also the daughter of the firm s founder triggered renewed fireworks coming just as Washington and Beijing prepare for crucial trade negotiations Asian markets took a beating Huawei is not listed but China s second largest telecom equipment maker ZTE Corp HK 0763 sank 9 percent in Hong Kong while most of the nearby national bourses lost at least 2 percent Europe slumped too in early trading as 3 percent falls for the tech sector miners and also carmakers kicked London Frankfurt and Paris to two year lows We had this very ugly new turn and just the degree to which the market has reacted just suggests to me that they are vulnerable right now said Saxo Bank s head of FX strategy John Hardy It think we should all be very careful it is not looking good especially if the S P 500 goes to new lows Hardy said that U S President Donald Trump may try to send some reassuring tweets later For the time being though S P 500 futures were down almost 2 percent The losses might have been even steeper had CME Group s Chicago Mercantile Exchange not implemented a series of 10 second trading halts in Asia that had limited the initial drop Japan s Nikkei shed 1 9 percent closing at its lowest level since Oct 30 with semi conductor related shares leading the losses Huawei is one of the world s largest makers of smartphones and telecommunications network equipment MSCI s ex Japan Asia Pacific index lost 2 0 percent too Hong Kong s Hang Seng dropped 2 5 percent while Chinese bluechips lost 2 1 percent to take their 2018 slump to 20 percent GROGGY AUSSIE Saxo Bank s Hardy highlighted that the Australian dollar which is highly sensitive to trade tensions due to huge Aussie metals sales to China had failed to lift after some reassuring comments from Beijing on the trade discussions It shed 0 6 percent against the U S dollar to 0 7229 The greenback itself fell as much 0 4 percent against the yen to 112 77 yen as it suffered slightly too The yuan eased 0 3 percent to 6 8835 per dollar in offshore trade the euro barely budged at 1 1338 and the Canadian dollar languished near the 18 month low it had hit the previous day after cautious noises from the Bank of Canada On the Huawei drama Canadian authorities had said they had arrested the firm s CFO in Vancouver China s foreign ministry said neither Canada and the United States had clarified their reason for the move but a source had earlier told Reuters it was related to violations of U S sanctions on Iran The arrest heightened the sense of a major collision between the world s two largest economic powers not just over tariffs but also over technological hegemony Britain s BT Group LON BT said it was removing Huawei s equipment from the core of its existing 3G and 4G mobile operations Australia and New Zealand have also rejected Huawei s products The U S has been telling its allies not to use Huawei products for security reasons and is likely to continue to put pressure on its allies said Norihiro Fujito chief investment strategist at Mitsubishi UFJ Morgan Stanley NYSE MS Securities So while there was a brief moment of optimism after the weekend U S China talks but the reality is it won t be that easy he said OPEC Traders were also waiting to hear from Vienna about what kind of cuts OPEC and other oil producers like Russia could make to their output Consensus among analysts is for somewhere between 1 1 3 million barrels per day and Brent dived back below 60 a barrel as Saudi Arabia s energy minister said going into the day long meeting that 1 million would be enough Yields on top rated German government bonds held near six month lows in risk off environment while those on benchmark 10 year U S Treasuries were near a three month low at 2 886 percent Adding to worries about U S recession risks the Treasury yield curve remained inverted between two and five year zones with five year notes yielding 2 763 percent below 2 778 percent on two year notes
U S jobs data is due on Friday If the figures show any sign of serious weakness markets are likely to react HSBC s head of macro economic strategy Shuji Shirota said |
MS | Japan household spending unexpectedly falls casts doubt over fourth quarter recovery | By Leika Kihara and Kaori Kaneko TOKYO Reuters Japan s household spending unexpectedly fell in October and real wages slipped for a third straight month adding to concerns about the strength of the economy as global trade frictions cloud export prospects The data follow a Reuters survey that showed Japanese firms are becoming more pessimistic about the country s economic prospects due to the Sino U S trade war and next year s scheduled sales tax hike at home Household spending decreased 0 3 percent in October from a year earlier government data showed on Friday confounding a median market forecast of a 1 4 percent rise and marking the second straight month of falls Separate data showed real wages slipped for a third straight month in October adding to concerns a full fledged recovery in consumer spending is still some way off Conditions aren t falling in place for consumption to strengthen Recent rises in fuel and food prices may have hurt non essential spending said Shuji Tonouchi senior market economist at Mitsubishi UFJ Morgan Stanley NYSE MS Securities Wages are gradually increasing but not enough to make up for the higher cost of living so spending isn t rising much A pickup in consumption is crucial for the Bank of Japan to achieve its elusive 2 percent inflation target as weak spending has so far discouraged firms from raising prices for fear of turning away cost sensitive households BOJ Governor Haruhiko Kuroda repeated his resolve to maintain the central bank s massive stimulus program warning of heightened global economic risks The economy is sustaining its momentum for achieving our 2 percent target But that momentum lacks strength so we will carefully watch developments he told parliament on Friday Japan s economy shrank in the third quarter and some analysts warn any rebound in the current quarter could miss consensus expectations as trade protectionism and slowing global demand hurt business sentiment Looking at October s household spending data we re not seeing a strong rebound in services prices said Hiroaki Mutou chief economist at Tokai Tokyo Research Institute
Consumption in October December will probably rise more than the previous quarter But the gain will be fairly small |
MS | The 2018 Contrarians Who Got It Right What They re Saying Now | Bloomberg With just three weeks to go 2018 s market contrarians are proving prescient
The outlook was decidedly bullish for U S stocks and developing nation assets 12 months ago with both forecast to build upon a stellar 2017 The beaten down greenback wasn t expected to fare any better in 2018 as a rosy international growth outlook threatened to lure investors away from American markets And despite some tough talk between the U S and China risks of an all out trade war were an afterthought
Not much has gone according to plan but DWS Cantor Fitzgerald and Morgan Stanley NYSE MS were among the few who bet against the trend and got it right Federal Reserve rate hikes against a backdrop of sharply escalating trade tensions roiled markets in 2018 punishing U S stocks and causing risk averse investors to flee developing nations Meanwhile the down and out dollar has gained against virtually all major currencies amid rising rates and buoyant U S growth
Here s what those who called 2018 correctly expect in the new year
Stalling Dollar
Stefanie Holtze Jen chief currency strategist at asset manager DWS is among the vindicated
In February after the dollar s worst annual slide in 14 years she called for the greenback to strengthen to 1 15 per euro by March 2019 from the prevailing level of about 1 23 The argument that the U S s twin deficits would depress the dollar was over hyped according to Holtze Jen who saw extreme bearish positioning setting up a rebound
The dollar s rally starting in mid April proved her right inflicting pain on global investors But Holtze Jen doesn t expect another strong year for the greenback She sees the euro ending next year at 1 15 as slowing growth and European political woes weigh on the common currency while the Fed approaches the end of its hiking cycle Expectations for Fed rate increases have crumbled with markets now pricing in less than a quarter point of tightening in 2019
Most forecasters expect the euro dollar pair to reach 1 20 by the end of 2019 according to a Bloomberg survey from about 1 14 now
The Fed has come back from autopilot said Holtze Jen Their calls will be more data dependent That s something that takes the needle lower on the dollar going forward
U S Equities Gloom
When it comes to U S stocks 2018 s bears are still skeptical For months Cantor Fitzgerald s Peter Cecchini has forecast the S P 500 to finish the year at 2 805 one of the more bearish projections among Wall Street s strategists and almost 7 percent above Friday s close
A deceleration in U S growth driven in part by higher funding costs on tighter financial conditions and a frothy commercial and industrial loan market will create credit stress next year according to Cecchini
Our disposition towards equities has moved from buy the dip to sell the rally said Cecchini Cantor s chief global market strategist If I m not constructive on the credit markets then I won t be constructive on the equity markets
He has company in his pessimism Morgan Stanley s Mike Wilson the biggest equity bear on Wall Street forecast last month that the S P 500 will end 2019 at 2 750 the same target he called for this year As the fiscal boost from tax cuts wears off and global growth decelerates Wilson expects a material deceleration in corporate profits
That s at odds with what most strategists expect The average prediction as of the end of November was for the S P 500 to climb to 3 056 by the end of next year according to 14 forecasts gathered by Bloomberg It s the most optimistic year ahead call since 2009
Emerging Cheer
Jordi Visser at Weiss Multi Strategy Advisers who predicted the peak of the developing market rally in late January expects emerging markets to be a bright spot in 2019 as the dollar stumbles Visser is calling for the iShares MSCI Emerging Markets ETF NYSE EEM to outperform the S P 500 Index by 15 percent to 20 percent in 2019 Chinese Internet stocks developing nation sovereign debt and emerging market currencies look particularly attractive
Bullishness comes from an expectation of a weaker dollar next year on the back of easier U S monetary policy the lag of recent Chinese stimulus measures and a focus of value as a factor in 2019 rather than growth said New York based Visser chief investment officer at the 1 7 billion hedge fund
Tania Escobedo a strategist at RBC Capital Markets LLC who correctly called a slide in the Brazilian real this year when most of the market was bullish now has another contrarian call for 2019 She s wagering against the real and going long the Mexican peso Most investors are optimistic about Brazil s incoming government and concerned about the populist rhetoric from Mexico s Andres Manuel Lopez Obrador
There are pockets of value in emerging markets including Argentina s beaten down currency Lisa Chua a New York based money manager at Man GLG said in an interview last month The firm boasted this year s top developing nation debt fund with more than 1 billion under management according to data compiled by Bloomberg
Trade Reminder
A year ago Jens Nordvig at Exante Data LLC was cautioning that the markets weren t adequately priced for a building U S China trade dispute as concern about North Korea s nuclear weapons program garnered more attention Now he expects trade tensions will remain a focal point in 2019 even after the world s two biggest economies appear to have reached a tentative truce on tariffs
China will try to delay and delay but not give in on the big stuff said Nordvig Wall Street s top ranked currency strategist for five years running before founding Exante By the second quarter the U S will have to decide if they agree to some cosmetic concessions or whether they are actually ready for a sustained trade war |
JPM | Exclusive Eurazeo hires JPMorgan to exit car rental group Europcar sources | By Gw na lle Barzic Pamela Barbaglia and Arno Schuetze
PARIS LONDON FRANKFURT Reuters European investment firm Eurazeo PA EURA is exploring a partial or full sale of its near 30 stake in Europcar Mobility Group PA EUCAR as it seeks to cash out from the troubled French car rental company sources told Reuters
Europcar s shares have sunk 65 over the past 12 months as the firm grappled with weak leisure demand from British tourists declining rental volumes in the business to business segment and a softening economic environment in Europe
Eurazeo has tapped JPMorgan NYSE JPM to handle the sale which was triggered by a series of approaches made by financial investors in recent weeks the sources said
Discussions are still at an early stage and Eurazeo may decide to keep at least part of its stake they said
Eurazeo said in a statement it was reviewing strategic options for the company following the Reuters report
Europcar and JPMorgan both declined to comment
The business advised by BNP Paribas PA BNPP and Rothschild is saddled with 851 million euros of net debt as of September
In October it revised its full year guidance saying it expected 2019 core earnings of 275 to 285 million euros after net profit dropped 32 in the first nine months of the year while adjusted core earnings were down 13 5 in the same period
Several private equity firms have been monitoring the company s poor performance and approached Eurazeo in October the sources said betting on the turnaround potential of the 70 year old company
Eurazeo is wary of selling at a discount and would retain at least part of its stake if it couldn t negotiate an attractive price one of the sources said
Some of the bidders may also consider bidding for the whole company as this would allow them to delist the business and turn it around away from the public markets some of the sources said cautioning that no deal was certain
Any buyer crossing the 30 threshold will need to submit a mandatory offer for the whole company according to French capital markets rules
BREXIT IMPACT
A former unit of Volkswagen DE VOWG p Europcar was bought by Eurazeo in 2006 and subsequently listed on France s Euronext in 2015
The business based on the outskirts of Paris has grown significantly under Eurazeo s ownership expanding in 140 countries around the world and employing more than 8 900 people
Yet its core European business has started to slow down partly due to Britain s decision to leave the EU that has deterred British tourists from traveling abroad
Europcar boss Caroline Parot has looked at growth overseas trying to crack the U S market with the purchase of Fox Rent A Car while also investing heavily in upgrading the company s digital platform |
JPM | BOJ breaks its stock buying pattern sparks talk of tapering | By Tomo Uetake TOKYO Reuters A subtle change in the Bank of Japan s stock buying has sparked debate among market players on whether the central bank is changing its tactics or even trying to reduce its purchases covertly The BOJ has not bought exchange traded funds ETFs since Oct 9 its operation disclosure shows the longest such spell since the it began buying stocks aggressively under Governor Haruhiko Kuroda as part of its broader efforts to stimulate the economy The change suggests the BOJ could reduce stock buying if Japanese share prices stay near current levels the highest in a year and not far from three decade highs touched last year even though market players say the BOJ will likely step up buying again if the market falls GRAPHIC BOJ has not bought ETFs more than 5 weeks What surprised market players even more was that the BOJ stayed out of the market on Wednesday when the Topix index TOPX fell 0 5 in morning trade Since the central bank raised its stock buying target to 6 trillion yen 55 billion a year in 2016 the BOJ had always bought ETFs on a day when the Topix fell 0 5 or more It had made purchases occasionally even when the fall was smaller It s almost certain the BOJ wants to trim buying although whether that will be possible depends on market conditions If Japanese stocks remain firm until year end this year s buying will fall short of 6 trillion yen said Shingo Ide chief equity strategist at NLI Research Institute So far in 2019 with only 1 1 2 months left to year end the BOJ has bought only about 4 0 trillion yen of ETFs about two thirds of the official target GRAPHIC The pace of BOJ s ETF buying slows in 2019 To be sure the BOJ said last year that it will flexibly act with its policy target of 6 trillion yen buying per year Many analysts expect the BOJ s buying to become more contingent on stock market levels and valuations My interpretation is that the current market level is above the BOJ s self set threshold that would require support said Keishi Ueda strategist at JPMorgan NYSE JPM Securities referring to the current price earnings ratio of 14 in the Nikkei N225 But I don t think the BOJ has any hesitation to step in when fundamentals worsens for instance if U S tariff increases requiring it to support the market This would not be the first time the BOJ changes its stock buying operation Up until mid last year the central bank was purchasing ETFs when the Topix fell 0 2 or more before apparently moving the threshold to 0 5 Officially the BOJ has not acknowledged any rules regarding its ETF purchase The Bank has also trimmed back its massive bond buying in the last two years
GRAPHIC BOJ owns 77 pct of Japan ETFs |
JPM | JPMorgan Automates Derivatives Margin Payments With Blockchain Tech | Major global investment bank JPMorgan NYSE JPM has developed a new blockchain based solution for derivatives designed to speed up cash and collateral transfers The tool was developed in partnership with California based fintech firm Baton Systems and aims to enable the real time movement of transfers to multiple clearinghouses the firm announced Nov 14
The current process requires collateral custodians to manually coordinate multiple systems and reports Integrated with JPMorgan s proprietary automation system the new solution reportedly eliminates manual intervention in the collateral process and therefore expedites the collateral workflow |
JPM | U S Minimum Volatility ETF JMIN Hits New 52 Week High | For investors looking for momentum JPMorgan NYSE JPM U S Minimum Volatility ETF is probably a suitable pick The fund just hit a 52 week high up roughly 26 8 from its 52 week low of 23 95 share But does it have more gains in store Let s take a look at the fund and its near term outlook to gain an insight into where it might be headed JMIN in FocusThe fund provides exposure to a portfolio of low volatility stocks while mitigating stock specific risk JMIN tracks the investment results of the JP Morgan US Minimum Volatility Index JMIN is charging 12 bps in fees The fund has amassed 105 8 million in AUM Why the Move Tensions in the Middle East have increased ever since the globally criticized attacks on Saudi Arabia s crude facilities The drone attacks were so devastating that Saudi Arabia s oil output is expected to be cut by almost half Further Sino US trade war tensions uncertainty in market conditions due to geopolitical tensions slowdown in the global economy and Brexit woes are making investors jittery adding to the lure of these funds This is because these funds have the potential to outpace the broader market in the event of turmoil providing significant protection to the portfolio More Gains Ahead Currently JMIN has a Zacks Rank 2 Buy Moreover it seems JMIN might remain strong given a Want key ETF info delivered straight to your inbox Zacks free Fund Newsletter will brief you on top news and analysis as well as top performing ETFs each week |
JPM | Is It The Right Time To Invest In REIT ETFs Let s Find Out | Real estate investment trusts REITs have had a good run on the bourses so far this year In fact the index has gained 26 2 year to date A dovish Fed can be sited as the main factor driving the upside When interest rate drops mortgage rates fall making real estate or refinancing mortgages more affordable This in turn boosts real estate sales Further Sino US trade war tensions uncertainty in market conditions due to geo political tensions slowdown in the global economy and Brexit woes are making investors jittery adding to the lure of these funds This is because these funds offer outsized yields and act as good investing options when increased safe haven trades keep yields at check read Let s take a closer look at the factors that are making the space red hot for investors Fed Cuts Rate AgainThe Federal Reserve has cut interest rates again the second time since late July 2019 The rate which was slashed a quarter basis points in the two day FOMC meeting that concluded on Sep 18 now stands in the range of 1 75 2 Also the central bank projects at 1 9 down from its June prediction of 2 4 For 2020 the rate is expected to remain at 1 9 below the June forecast of 2 1 For 2021 the rate is now projected at 2 1 down from 2 4 Interest rate in projected at 2 4 for 2020 The same should be 2 5 over the long haul unchanged from the June projection The Federal Reserve also kept chances of alive this year in case the economy deteriorates read U S Economy Goes StrongThe U S economy presently at its historically longest 11th year of expansion has successfully maintained the momentum Majority of consumer centric business centric and labor market data for August clearly indicated a growing U S economy but at a slow pace extinguishing recessionary fears Notably when an economy is going strong the housing sector s prospects brighten up This is because a thriving economy ramps up alike activities and strengthens people s buying capacity Demand for real estate accelerates and occupancy increases In fact landlords are able to charge higher rents With respect to Fed officials expect the same to increase to 2 2 in 2019 and 1 9 in 2021 from its earlier projection of 2 1 and 1 8 respectively Notably unemployment level is at a 50 year low and there has been a rise in wages The Fed officials expect unemployment rate of 3 7 for 2019 up from 3 6 expected at its June meeting read Slew of Encouraging Housing DataPer the monthly National Association of Home Builders NAHB Wells Fargo Housing Market Index HMI builder confidence rose to compared with an upwardly revised 67 in August 65 in July and 67 a year ago Moreover according to existing home sales rose 1 3 to a seasonally adjusted annual rate of 5 49 million units in August This compares with analysts forecast of a decline of 0 4 to 5 37 million units according to a Reuters poll Also recent favorable data shows that U S home construction soared to more than a 12 year high in August U S housing starts jumped 12 3 to a seasonally adjusted annual rate of 1 364 million units the highest level since June 2007 REIT ETF s to Snap UpAgainst this backdrop investors can take a look at the following ETFs JPMorgan NYSE JPM BetaBuilders MSCI US REIT ETF up 25 5 year to dateBBRE tracks the U S equity REIT market and invests at least 80 of its assets in securities included in the MSCI US REIT Index BBRE is charging 11 basis points bps in fees The fund has amassed 635 4 million in AUM iShares Core U S REIT ETF up 25 4 The fund tracks the track the investment results of the FTSE Nareit Equity REITS Index The fund has an AUM of 1 66 billion and charges 8 bps Nuveen Short Term REIT ETF up 25 3 The fund provides exposure to U S REITs with short term lease agreements which might display less price sensitivity to interest rate changes than REITs with longer term lease agreements NURE tracks the investment results before fees and expenses of the Dow Jones U S Select Short Term REIT Index NURE is charging 35 bps in fees The fund has amassed 60 million in AUM read Invesco S P 500 Equal Weight Real Estate ETF up 24 9 EWRE invests at least 90 of its assets in securities included in the S P 500 Equal Weight Real Estate Index EWRE is charging 40 bps in fees The fund has amassed 47 7 million in AUM Schwab U S REIT ETF up 23 The fund tracks the total return before fees and expenses of the Dow Jones U S Select REIT Index SCHH is charging 7 bps in fees The fund has amassed 6 01 billion in AUM read Want key ETF info delivered straight to your inbox Zacks free Fund Newsletter will brief you on top news and analysis as well as top performing ETFs each week |
JPM | HSBC To Escape 33 6 Million Euro EU Euribor Cartel Fine | On Tuesday HSBC Holdings LON HSBA plc NYSE HSBC was relieved partially as the General Court Europe s second highest in conjunction with European Commission EC agreed to revoke 33 6 million euros 36 9 million fine due to inadequate reasoning However it acknowledged that the bank was guilty of law infringement Notably HSBC was fined by EU antitrust regulators for alleged manipulation of Euro Interbank Offered Rate BackgroundHSBC along with Credit Agricole PA CAGR S A and JPMorgan NYSE JPM was fined 485 million euros 520 million by the EC in 2016 The three banks denying any wrongdoing had challenged the decision Notably HSBC was fined with the lowest amount as it was expected to be part of the cartel for a month Notably JPMorgan was fined 337 2 million euros and Credit Agricole 114 7 million euros These three banks were not part of the multi bank settlement deal that was announced by the EU in December 2013 Notably an aggregate penalty of around 825 million 888 million was imposed on four banks Barclays LON BARC PLC NYSE BCS Soci t G n rale PA SOGN Deutsche Bank AG NYSE DB and The Royal Bank of Scotland Group LON RBS plc over similar allegations The banks were accused of colluding to rig the key interest rate benchmark with an aim to influence the prices of several global financial instruments between September 2005 and May 2008 The commission accused HSBC JPMorgan and Credit Agricole of breaching the EU antitrust rules In May 2014 charges were levied against these three banks while they continued to deny any wrongdoing Hence there were delays in penalizing these banks ConclusionBusiness malpractices continue to be a cause of concern for banks Nearly 9 billion fine in total has been imposed on several banks by regulators across the globe for alleged rigging of London interbank offered rate and many such benchmarks over the past few years Notably this decision might help HSBC to develop its business Also the bank would be able to distribute excess capital to its shareholders thus enhancing their value Shares of HSBC have lost around 7 8 year to date against the 2 8 growth of the it belongs to
Currently the stock carries a Zacks Rank 3 Hold You can see 5 Stocks Set to DoubleEach was hand picked by a Zacks expert as the 1 favorite stock to gain 100 or more in 2020 Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth Most of the stocks in this report are flying under Wall Street radar which provides a great opportunity to get in on the ground floor |
MS | Morgan Stanley Upgrades 19 China Stocks Call on Trade Ceasefire | Bloomberg Morgan Stanley NYSE MS upgraded its already positive forecast for China s stocks next year after Washington and Beijing put the escalation of trade tariffs on pause
A pause even one that leaves substantial uncertainty is sufficient for an upgrade to risk assets given how weak investor sentiment on this issue was and how much potential economic degradation was in the price strategists led by Jonathan Garner in Hong Kong wrote in a note Sunday Even if matters escalate again a substantial risk we think this would help bring about the end game
Read here about the U S China trade truce
Morgan Stanley had expected the previously scheduled boost to U S tariffs on Chinese imports to kick in on Jan 1 Among its market forecast changes on the weekend news
The base case year end 2019 target for the MSCI China Index is raised to 82 from 79 implying a gain of more than 8 percent from the close on Friday
The MSCI China s recommendation boosted to overweight from equal weight in allocations relative to benchmarks
Forecast for the Hang Seng Index boosted to 29 850 from 28 500 implying a rise of almost 13 percent from Friday
Hang Seng China Enterprises Index now seen at 12 100 for a rise of 14 percent
The domestic CSI 300 Index now seen rising to 3 650 for a gain of 15 percent
Chinese stocks have fallen into a bear market this year as a combination of trade tensions and a slowing economy battered investor sentiment The MSCI China Index is down about 26 percent from its January high while Hong Kong s Hang Seng Index has fallen 20 percent
We ve been espousing weak markets as a potential circuit breaker that would prompt the U S and China to resume talks the strategists wrote But this recent string of events surpassed our expectations |
MS | The longest bull run in stock market history is on its last legs and a deep and prolonged correction is coming | The longest bull run in US stock market history is on its last legs at least in the view of a team of technical analysts at Societe Generale PA SOGN The team says Elliott Wave Principles point to a stock market top that will produce a deep and prolonged correction Wall Street strategists are mostly bullish for 2019 with an average year end price target of 3 052 The is on its last legs according to one Wall Street bank In our view the bullish cycle that began in 2009 is ending Societe Generale s technical team led by St phanie Aym s said in a note sent out to clients on Monday Precisely the famous wave 5 i e the last wave of the cycle according to Elliott Wave Principles has met its key objectives on the S P500 and Nasdaq The occurrence of bearish divergences on long dated indicators and possibly the beginnings of bearish reversal patterns Head and Shoulders suggest that the US equity indices may be topping out and that a distribution phase is commencing The Elliott Wave Principles identify up and down trends in the market using the assumption that human behavior moves markets in identifiable cycles especially as traders act like a herd What goes up eventually comes down A complete cycle has eight waves the first five numbered one through five are the impulsive waves while the last three labeled A B and C are the corrective waves The S P 500 has seen nearly 10 years of gains after bottoming out in March 2009 Along the way it has experienced or declines of at least 10 and a few more close calls but what is about to transpire has the looks of something bigger According to Soc Gen the recent halting of bullish momentum just shy of the initial target for the fifth and final wave of the cycle just shy of 3 000 resembles what happened just before the sharp sell offs in the first quarters of 2016 and 2018 The selling that ensued erased 25 to 30 of the previous up move and that is what Societe Generale thinks will most likely happen here When support breaks down expect a deep and prolonged correction the bank said without giving a specific target Soc Gen s call goes against the grain of what most of the other Wall Street banks are saying Strategists surveyed by Bloomberg are expecting the S P 500 to close out next year at 3 052 about 9 above where it ended Monday But that s not to say that everyone is on board with the idea of a higher stock market in 2019 Read more The Morgan Stanley NYSE MS strategist Michael Wilson who has been warning of a all year thinks most of the declines have already occurred with the market having fallen by as much as 11 47 from its September peak The Rolling Bear market is now better understood by the consensus and more importantly it is better priced with forward P Es falling 18 from peak to trough he wrote in a recent note In short while 90 of the price damage has been done by this bear we ve likely only served 50 of the time Wilson says that there is more than a 50 chance of a modest earnings recession in 2019 but that the market should look past that as the Federal Reserve pauses its interest rate hike cycle in the middle of next year He has a 2019 year end S P 500 target of 2 750 just below its current level |
JPM | Citi Deutsche get go ahead to probe regulator witnesses in landmark cartel case | By Byron Kaye
SYDNEY Reuters Citigroup Inc N C and Deutsche Bank AG DE DBKGn may cross examine four antitrust investigators involved in a criminal cartel prosecution against them an Australian court ruled on Friday a win for the defence in a closely watched legal battle
The two banks plus JP Morgan Chase Co N JPM worked on a A 3 billion 2 billion stock issue for Australia and New Zealand Banking Group Ltd ANZ AX ANZ in 2015 Citi Deutsche ANZ and eight of their staff were charged last year with withholding crucial information from shareholders about the sale
JP Morgan was granted immunity from prosecution when two of its former executives agreed to co operate with regulators
However lawyers for the defence have said they want to question staff of the Australian Competition and Consumer Commission ACCC in court about how they obtained evidence from the JP Morgan representatives The ACCC opposed their request
On Friday a local court magistrate ruled that the defendants lawyers may cross examine the ACCC staff on the subjects of how they obtained witness statements from the JP Morgan personnel and the staff s level of cooperation with corporate regulator the Australian Securities and Investments Commission
The defence does not have an unfettered right to cross examine witnesses but I m not persuaded that I can or should oppose the magistrate Jennifer Atkinson told the court in Sydney
There will be examination of the following witnesses Atkinson said before naming the four ACCC staff
Spokespeople for the ACCC Citi Deutsche and JP Morgan declined to comment
Prosecutors have accused the banks of forming a criminal cartel to restrict the supply of ANZ shares and maintain the price of ANZ shares after they were unable to sell them all to regular investors court documents showed
Four phone calls in August 2015 which prosecutors said involved bankers from all the companies are at the heart of the case
None of the accused companies or people have entered formal pleas and no trial date has been set but all have said they would plead not guilty
The case could have major implications for the underwriting business and lead to increased scrutiny from regulators worldwide
State prosecutors had opposed allowing the ACCC officers to testify saying it may violate legal privilege and inappropriately expose the regulator s private workings
The next hearing is on Dec 5 |
JPM | Gold Suffers Worst Week in Three Years as Bulls Run for Cover | Bloomberg Gold headed for the biggest weekly loss in three years as progress in U S China trade talks hammered demand for havens and sent miners shares tumbling
The metal dropped 3 5 this week the most since November 2016 as China and the U S indicated they are heading toward an interim deal to halt the trade war Some signs of stabilization in the global economy have also dented gold s allure and JPMorgan Chase NYSE JPM Co and Citigroup Inc NYSE C closed out their bets on the traditional haven
Other precious metals also plunged this week with Silver losing almost 7 of its value
Gold prices got a lift this year from trade frictions interest rate cuts from the Federal Reserve and robust demand from investors and central banks
That trio of drivers is now under attack as the two largest economies near an initial pact with the sides agreeing to a tariff rollback as part of any deal At the same time the U S central bank recently indicated that after three rate cuts policy makers are now pausing
Gold remained under pressure on Friday even as stocks took a breather after Thursday s gains
The large long positions in gold left the metal vulnerable to sharp drops said Georgette Boele an ABN Amro Bank NV strategist
If only a small amount of positions is closed gold prices are back at 1 400 she said A profit taking wave could turn into a bearish vibe causing investors to doubt the positive outlook in gold prices she said
Spot gold was down 0 5 on Friday at 1 460 99 an ounce after tumbling 1 5 on Thursday Australia s Newcrest Mining Ltd ASX NCM hit a five month low and AngloGold Ashanti Ltd JO ANGJ dropped to the lowest since Oct 1
The principal driver behind the weakness in gold has been increasing optimism about the trade outlook John Sharma an economist at National Australia Bank Ltd said in an email However it should be remembered that the trade deal is not done and dusted |
JPM | JPMorgan and Citigroup Get Out of Gold to Tilt Toward Risk | Bloomberg Strategists at two giant Wall Street banks closed out their bets on gold as the traditional haven gets a hammering from investors shifting to risk on mode
JPMorgan Chase NYSE JPM Co s asset allocation team including Marko Kolanovic Nikolaos Panigirtzoglou and John Normand said it unwound its gold hedge moving to an underweight recommendation from an overweight one Citigroup Inc NYSE C strategists including Jeremy Hale abandoned a long position in gold in their asset allocation note Thursday
The rejigging comes amid the worst week for gold since May 2017 when riskier assets were propelled by the story of synchronous global growth and havens were in little demand Bonds have also been losers and the two teams made adjustments there as well Citigroup opened a short bet against German bunds and JPMorgan went more deeply underweight on its government bond position
Signs of a cyclical recovery easing geopolitical tensions synchronized monetary easing and defensive investor positioning across asset classes spurred JPMorgan to tilt more toward risk the bank s strategists wrote in a note Thursday
Indications that Washington and Beijing are heading toward an interim deal to halt the trade war and some signs of stabilization in the global economy s slowdown have driven market shifts in the past month
Citigroup isn t going whole hog on the reflation trade however Its strategists still see an elevated risk of an American recession in the second half of 2020 and refrained from cutting their long position in Treasuries |
JPM | Charting the Global Economy EU Stimulus World Manufacturing | Bloomberg Explore what s moving the global economy in the new season of the Stephanomics podcast Subscribe via Apple Podcast Spotify NYSE SPOT or Pocket Cast
Europe s top central banker is urging larger fiscal responses from governments to invigorate economies while rising commodities prices and slight improvements in a global manufacturing index indicate demand is stabilizing
Following are some of the top charts that appeared on the Bloomberg terminal and Bloomberg com this week The scope of this weekly series grouped by region is a graphical depiction of an evolving world economy Chart selection is based on financial market and national economy relevance shifts in demographics and geopolitical events
American workers in the industries where wages are well above the national average are commanding the biggest bumps in pay the latest jobs report showed
Home equity has increased by almost 20 percentage points over the last decade through a combination of relatively low interest rates which allow for faster mortgage amortization and a robust increase in property prices
Europe
Two Bank of England officials at Thursday s policy meeting wanted an immediate reduction in interest rates to combat threats to growth from Brexit and a weaker global economy
The European Commission s latest forecasts released on Thursday show them all having next year what European Central Bank president Christine Lagarde described in her confirmation testimony as space for stimulus
Exports from China in October fell less than expected offering a tentative sign of stability in trade markets amid hopes of a interim trade deal between Washington and Beijing
Hong Kong officials looking for a fiscal solution to a months long impasse with protesters are doing it on the cheap While Hong Kong spends almost half its budget on social welfare health and education its annual spending lags it peers
Global
While JPMorgan Chase NYSE JPM Co s global manufacturing index contracted for a sixth month in October it inched closer toward positive territory as both output and orders firmed
Commodities are enjoying a revival as optimism over a possible U S China trade pact boosts prospects for demand with gains in energy base metals and crops |
JPM | Singapore s MAS JPMorgan Unveil Multi Currency Blockchain Prototype | Singapore s central bank and state investment firm have created a prototype multi currency blockchain based payments network together with JPMorgan NYSE JPM
A Nov 11 report from The Business Times indicates that the prototype is designed to enable payments denominated in different currencies to be completed on the same network |
JPM | Gold Prices Fall Briefly Below 1 450 Despite Risk Off Move | Investing com Gold prices fell to a fresh three month low on Monday failing to get meaningful support from a general risk off move in other markets on a day when hopes of a trade truce between the U S and China faded
By 11 15 AM ET 1615 GMT gold futures for delivery on the Comex exchange were down 1 0 at 1 454 65 a troy ounce having fallen earlier through the 1 450 level for the first time in more than three months
Spot gold was down 0 3 at 1 453 66 an ounce
The move was all the more striking for taking place when the U S bond market was shut for Veterans Day restricting the choice of those who might have sought haven assets as stocks retreated from last week s highs
While there was no clear catalyst for the fall most of which happened during U S hours some U K driven haven buying a key prop of this year s rally among portolio investors may have unwound after the U K Brexit Party said it wouldn t fight sitting Conservative lawmakers in the upcoming election on Dec 12 That improves the chances of a Conservative majority in parliament and thus the completion of the U K s withdrawal from the EU in the new year
Silver futures and platinum futures were also battered as the reversal that started last week shook out some of the weaker speculative long positions that have accumulated in recent weeks
According to Commodity Futures Trading Commission data published on Friday speculative long interest in gold futures hit their highest level in six weeks last week while long silver positions also stayed at historically high levels despite a modest decline
But the trend of recent months could be about to turn according to cross asset analysts at JPMorgan NYSE JPM led by John Normand
In our view this fall marks the beginning of a bottoming out process in the global economy judging from leading edge indicators like inventory measures manufacturing new orders indices and manufacturing output PMIs Normand s team wrote in a weekly note to clients
As such it may be time to rotate out of defensive commodities such as gold and into cyclical ones such as oil and base metals they said
There wasn t much sign of industrial commodities benefiting on Monday though Copper futures also fell 0 6 to 2 67 a pound while aluminum futures fell 1 2 in London |
JPM | Silver Price Manipulation Abject Corruption | By now you ve heard of the indictment of three key JP Morgan employees and the charges of precious metals market manipulation Well I ve just unearthed a nugget that will leave you speechless
If you ve been around here for a while you ll recall my secondary role in 2012 of assisting Andrew Maguire in his quest to end the Banks ongoing gold and silver price manipulation Though Andy had direct evidence from two whistleblowers inside JPM and though this evidence was officially and legally summarized and submitted to the CFTC in August of 2012 the CFTC sat on the case Their official silver manipulation investigation had dragged on to its fourth year and no end was in sight
Then in September of 2013 the CFTC suddenly closed the investigation and declared that there was
The timing of this was suspect because just one day before Andrew Maguire had appeared on The Keiser Report to disclose the information that the CFTC was seemingly ignoring The video is below The TFMR link posted the next day is
OK so let s get back to that CFTC press release from the day they suddenly closed the investigation Note that the investigation was handled by the CFTC s Division of Enforcement
During the investigation the head of the CTFC s Division of Enforcement was a man named David Meister In a curious development Mr Meister quit the CFTC just one week after the silver investigation
But there were no worries for Mr Meister as he soon landed on his feet at the law firm of Arps Slate Meagher Flom LLP and Affiliates
And so NOW is where we bring all of this full circle
Please see this of the DoJ indictments of Monday
Did you catch it If not here s the excerpt you need to see
So in summary
The Enforcement Division of the CFTC runs a five year investigation into silver price manipulation only to immediately close the investigation once presented with irrefutable whistleblower evidence of said manipulation The head of the Enforcement Division David Meister quits the CFTC within a week of closing this investigation Meister then takes a job with Washington law firm Skadden LLP Skadden LLP has been retained by Michael Nowak former head of the JPMorgan NYSE JPM precious metals desk as his defense attorneys The lead attorney defending Nowak is David Meister And there you have it Abject corruption that is in your face and undeniable with another case of the Financial Political Complex protecting its own |
JPM | Japan ETFs Rally On BoJ s Hints Of Easing In October | After the ECB and the Fed it could be the Bank of Japan BOJ which could come up with further policy easing In its latest meeting BOJ hinted at the possibility of more stimulus as early as its next policy meeting in October to keep economic growth risks at bay read
As expected the BOJ maintained its short term interest rate target at negative 0 1 and a pledge to its yield curve control YCC policy
Pressure on Economic Data May Lead to Policy Easing
Japan s economic growth was revised lower to 0 3 in the second quarter of 2019 from a preliminary estimate of 0 4 and compared to the previous period s 0 5 growth Lower capital expenditure and trade tensions are hurting the economy Net exports per tradingeconomics
However private consumption was a sweet spot The segment makes up about 60 of GDP and increased 0 6 which is the maximum in two years after no growth in the first quarter On an annualized basis the economy grew 1 3 in the second quarter weaker than the preliminary reading of 1 8 and a revised 2 2 expansion in the previous quarter
Also Japan s core consumer inflation slowed to a new two year low in August due to lower energy prices and sluggish economic growth Such tepid inflation data may goad the BoJ to take a dovish stance in the Oct 30 31 meeting
The Japanese economy is due for a sales tax hike in October that the economy may see waning domestic demand if sales tax hike hurts consumer sentiment and weighs on household spending Since domestic demand is counterbalancing some of the weakness in exports some easing action from the BoJ could be seen in October to hold consumer sentiment steady amid tax hikes
Japan has long been enjoying beneficial easy money policies for long which have put the economy on a growth path The growth momentum has cooled lately If the global economy remains this slow and other central banks keep rolling out massive stimulus like what they did in recent months the BoJ may loosen its already ultra easy monetary policy next month This would help keep the yen weaker and help drive Japan s export sector
Hopes of more cheap money inflows should bode well for the stock market and push Japan ETFs higher The following ETFs already gained on Sep 19 see here
ETFs in Focus
iShares Japan Small Cap MSCI ETF Up 1 33 on Sep 19
Japan Small Cap Dividend Wisdomtree Up 1 22
First Trust Japan Alphadex Fund PS FJP Up 1 17
Xtrackers Japan JPX Nikkei 400 Equity ETF Up 1 16
iShares Japan Min Vol Edge MSCI ETF Up 1 08
Wisdomtree Japan Smallcap Equity Hedged Fund Up 1 08
iShares MSCI Japan Value ETF Up 1 00
iShares JPX Nikkei 400 ETF Up 0 9
JPMorgan NYSE JPM BetaBuilders Japan ETF Up 0 7
iShares MSCI Japan ETF Up 0 7
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MS | Forex Dollar Picks Up Ahead of G20 Summit | Investing com The dollar bounced back slightly on Friday morning in Asia ahead of the G20 summit that kick off later in the day U S President Donald Trump and his Chinese counterpart Xi Jinping are expected to discuss trade
The U S dollar index which tracks the greenback against a basket of six major currencies was up 0 01 to 96 685 at 10 36PM ET 02 36 GMT
Trade is in focus for currency traders ahead of the G20 summit in Argentina where Trump and Xi are expected to meet Trump however told the Wall Street Journal earlier this week that the current tariff levels on 200 billion of Chinese products will be kept and rise from 10 to 25 He threatened to slap further levies on a remaining 267 billion of Chinese exports to the U S
Interest rates were also in focus Minutes of the U S Federal Reserve s meeting earlier this month released on Thursday showed that an interest rate hike is in the offing but did not set a clear timeline for any policy shifts The Fed is widely expected to hike rates in December according to various reports
This comes after Fed s Chairman Jerome Powell made some dovish comments on Wednesday He said the current level of interest rates is just below neutral which investors read as a sign that the pace of further hikes might be slower
The USD CNY remained flat at 6 9431 while the USD JPY pair dropped 0 11 to 113 36
A slowdown in the rate of interest rate hikes could give other currencies hammered by a strong dollar some breathing space The dollar has been getting stronger against the Chinese yuan for example
Some expect the Chinese renminbi to break past the CNY7 market against the dollar It would be the first time in a decade Speaking to Bloomberg BNY Mellon Investment Management Chief Economist Shamik Dhar said that as trade tensions intensify the pressure on the renminbi to fall continues The CNY is down around 10 from its peak for the year
But others are less bullish about the dollar
Investment bank Morgan Stanley NYSE MS is far from optimistic about the future of the dollar Hans Redeker Morgan Stanley s global head of FX strategy told CNBC that the dollar is set to depreciate next year and the U S economic growth will slow The Fed is expected to stop hiking rates in mid 2019 pulling down the dollar
When you create debt you need to find somebody to buy it And that means you need to look into the global availability of capital and global availability of capital is in sharp decline Redeker said
If we see a truce the Aussie and kiwi dollar will perform exceptionally well We see a lot of upside in crosses such as Aussie yen which would benefit from a risk on move If tariffs on Chinese imports stay at 10 the dollar is likely to weaken in a risk on move Nick Twidale chief operation officer at Rakuten Securities told Reuters
Down under AUD USD edged up 0 04 and the NZD USD pair also went up 0 12 The USD JPY lost 0 07 to JPY113 39 |
MS | Chinese sneeze could give Europe Inc a nasty flu | By Julien Ponthus Helen Reid and Danilo Masoni LONDON MILAN Reuters With sluggish growth translating into the most disappointing earnings in years European stocks are set for a tough ride if a full blown Sino U S trade war erupts following Presidents Donald Trump and Xi Jinping s G20 dinner on Saturday The ongoing tariff dispute has already made the Chinese economy sneeze and given a cold to some of Europe Inc s most iconic powerhouses due to their heavy exposure to the world s second biggest economy This drag is set to continue even if Trump and Xi s meeting ends cordially If relations between the economic superpowers deteriorate further the impact on many of Europe s top firms could be profound Upmarket German car makers like BMW DE BMWG or French luxury houses such as Hermes PA HRMS have already been tagged as collateral victims of the Trump administration s trade policy after sharp falls in their share prices this year With about six percent or roughly 80 billion euros of its constituents revenues originating from China Germany s DAX GDAXi is typically used as a proxy to bet on a trade war and is lagging with a 12 5 percent fall year to date the less exposed pan European STOXX 600 benchmark BMW will make 18 percent of its revenue in 2018 from the world s second largest economy while Volkswagen s share stands at 14 percent according to Morgan Stanley NYSE MS Even if Germany whose bilateral trade with China hit a record 188 billion euros last year is a key concern worries among investors are widespread A study conducted for Reuters by business insights platform AlphaSense shows a threefold increase in the number of times a China slowdown was mentioned during European earnings conference calls between July and September this year While just 16 companies in the MSCI Europe index mentioned China in the context of a slowdown between April and June that number climbed to 49 companies in earnings calls during the following quarter The mention of China in any form or way jumped from 361 to 540 during the same period For an interactive version of the below chart click here GRAPHIC European companies increasingly cite China If some of the underperformance of European bourses in comparison to Wall Street can be partially explained by the Trump s administration tax cuts many analysts believe the key lies elsewhere Europe is very much exposed being very cyclical it s an open economy and its stock markets already reflect that explained Emmanuel Cau European equity strategist at Barclays LON BARC European markets are quite vulnerable to a slowdown in emerging markets not less given the domestic dynamic which is polluted by the political problems in Italy or Brexit he added referring to Britain leaving the European Union and the Italian government s tug of war with Brussels over its budget An escalation in the Sino U S trade war would force Dutch asset manager NN Investments to reassess its view that European stocks are due for a comeback in 2019 It s the biggest threat said Valentijn van Niewenhuisen head of multi asset at the firm Acknowledging slowing growth the International Monetary Fund has lowered its growth forecast for China and since then indicators from automobile sales to e commerce trends and production data are suggesting the world s second biggest economy is cooling somewhat With creeping corporate and household debts China is believed to have little room for maneuver for fiscal stimulus if it doesn t want to weaken its currency which the Trump administration believes gives it an unfair trading advantage Data compiled by Morgan Stanley shows how European miners are not the only ones dependent on the appetite of material hungry China For an interactive version of the below graphic click here GRAPHIC European companies with the highest China exposure THE BIGGEST THREAT CHINA SYNDROME Aside from basic material providers firms such as France s fashion giant Kering PA PRTP the owner of Gucci and Switzerland s jeweler Richemont S CFR have a sales exposure of 24 percent Analysts at Jefferies have nicknamed the contamination of luxury stocks a reverse China Syndrome in reference to a 1979 movie in which a nuclear meltdown in the United States could make its way through the Earth to China It would appear that the reverse threat is now in place in the Personal Luxury Goods sector with fears of a sharp slowdown in China threatening to contaminate the entire sector starting in 2019 Other companies under threat are the big German industrial powerhouses such as Siemens DE SIEGn or BASF DE BASFn We re concerned about what s embedded in German industrials share prices They embed continued profitability in China that s very strong and continued growth and we re skeptical that s sustainable said Luiz Sauerbronn director at U S based Brandes Investment Partners where he helps manage 30 billion But the reliance on the Chinese market isn t only worrying investors A new strategy paper from Germany s influential BDI industry federation calls on firms to reduce their dependence on the Chinese market While their presence there was once seen as a strength it is now unsettling German politicians and industry as Beijing asserts control over the economy under President Xi Jinping This weekend s G20 meeting between the leaders of the world s top two economies will be key for market sentiment which has been battered by the months long trade spat But investors aren t betting on an end to the dispute any time soon
Ultimately it s hard to see China will be able or willing to offer enough to meet U S demands so things could get worse said Royal London senior economist Melanie Baker |
MS | Nikkei 225 Beats Topix by Most in 20 Years on Abnormal Move | Bloomberg In Japanese equities a gauge of the country s biggest shares is beating the general market by the most in two decades
The closing price of the blue chip Nikkei 225 Stock Average was 13 4 times that of the broad Topix index on Nov 29 the highest level for the measure known as the NT ratio since 1998
The outperformance is the result of an abnormal move in the Nikkei 225 according to Norihiro Fujito chief investment strategist at Mitsubishi UFJ Morgan Stanley NYSE MS Securities Co in Tokyo The Nikkei 225 ranks its companies by the arbitrary measure of the price of one share unlike most stock indexes where market capitalization or size is key
Some of the companies that make up the biggest proportions of the Nikkei 225 have been standout performers this year Take FamilyMart UNY Holdings Co a convenience store operator whose shares have more than doubled in 2018 The stock has the fourth largest weighting on the Nikkei 225 accounting for 2 7 percent of the index which is more than 14 times its weighting on the Topix
Another example is Fast Retailing Co which has the largest weighting in the Nikkei 225 comprising almost 10 percent of the gauge compared with just 0 3 percent of the Topix Its shares are up 31 percent this year set for their best annual performance since 2013
And SoftBank Group Corp which accounts for 4 7 percent of the Nikkei 225 rose in November ahead of the initial public offering of its mobile unit
The Nikkei 225 is down 1 8 percent this year versus an 8 3 percent decline in the Topix
Nikkei Drawbacks
To Fujito the Nikkei 225 s outperformance is just a reminder of the drawbacks of price weighted stock indexes
If a hedge fund wanted to artificially boost the level of the Nikkei 225 they don t have to buy 220 something stocks he said They could have a significant impact by putting selected shares into a basket and buying them
Still it s difficult to ignore the Nikkei 225 It s the most common benchmark for pricing derivatives in the country s 5 8 trillion equity market
The Topix is what reflects reality Fujito said It s an irony that despite its big flaw the Nikkei 225 is such a well recognized measure |
MS | Asian Central Banks Are in for a Quieter Year in 2019 | Bloomberg For most of Asia s central banks things should be a whole lot less exciting next year and that s a good thing
As the U S Federal Reserve looks toward topping off its interest rate hike cycle even those policy makers in the region who haven t followed the tightening path should be in position to keep policy steady according to Deyi Tan an Asia economist with Morgan Stanley NYSE MS
For most of the central banks in Asia we don t have very aggressive rate hike cycles except for maybe in the Philippines she said in an interview in Singapore We don t actually think that central banks really need to keep in tandem with what the Fed does or doesn t do Outside of India or Indonesia we actually have a very shallow rate hike cycle or no rate hikes at all
Morgan Stanley economists are penciling in a weaker dollar next year and U S 10 year yields declining to 2 75 percent providing less stress on emerging markets that had to worry this year about capital outflows and volatile currencies Current accounts that are broadly in good shape and benign inflation risks for much of the region will keep Asian central bankers in a comfortable position Tan said
Here s more from the interview with Tan
Troubled Two
The Indian rupee and Indonesian rupiah bore the brunt of U S dollar strength in Asia in 2018 and in turn should be big beneficiaries as dollar strength moderates India probably has a bit more tightening to do Morgan Stanley sees one interest rate increase in each of the second and third quarters After 175 basis points worth of increases Bank Indonesia s tightening work should be done for now they estimate
For most of the other central banks in Asia most of them run current account surpluses so they don t have this funding squeeze whenever the U S dollar strengthens Tan said And macro fundamentals in Asia are generally quite controlled actually quite favorable
Discount Environment
Domestic inflation could complicate things but in most parts of Asia inflation has surprised to the downside Tan said South Korea has only recently met its 2 percent inflation target and the likes of Singapore Taiwan and Thailand show contained price growth
Exception Economy
The exception to the steady as she goes outlook in Asia the Philippines
Tan sees the problems as more domestic than external in the Philippines suggesting an easing in external pressures won t take its struggles away She sees a significant buildup in debt and credit growth that s running roughly twice the pace of GDP Perhaps most importantly inflation is still a huge problem
Even with oil prices falling the peso appreciating the reality is that s not going to resolve all the inflationary pressures that the Philippines is facing she said
A boost to inflation this year from tax changes will fade in early 2019 and legislation around the rice supply should help damp price growth But Tan sees policy makers at Bangko Sentral ng Pilipinas underestimating the durability of faster inflation particularly as core CPI also has been rising
Morgan Stanley sees another two increases of 25 basis points each in the first and second quarters
Elsewhere in the Toolbox
One X factor for Asia s central banks in 2019 They might find more use in macro prudential tightening that s more targeted to their specific needs said Tan
For Asia maybe macro prudential tightening is the better way to go about dealing with financial stability risks if policy makers still feel like these risks exist more so than interest rates which are a blunt tool she said
South Korea Singapore and Thailand each have shown success in using a more pointed macro prudential approach to perceived financial instabilities in Tan s view |
MS | Chinese Stocks Rally After Trump Xi Agreement Yuan Strengthens | Bloomberg Chinese stocks climbed in pre market trading and the yuan strengthened after presidents Xi Jinping and Donald Trump said they won t announce any new tariffs for 90 days
The Hang Seng China Enterprises Index jumped 3 1 percent to a two month high while the yuan rose 0 5 percent to 6 9163 per dollar in offshore trading The agreement means the U S will hold off on its prior plans to raise tariffs on 200 billion worth of Chinese goods which were set to take effect from January
The news boosted risk assets globally on Monday encouraging strategists at Morgan Stanley NYSE MS to upgrade their already positive forecast for China s stocks next year But skeptics say it will take more than a pause on tariffs to turn around the negative sentiment that s blanketed mainland markets this year Weaker economic growth remains a key overhang for investors who are still reckoning with soaring corporate defaults and a bear market in stocks
The trade situation is slightly better than before but there s no substantial development said Hao Hong a strategist with Bocom International Holdings Co What we have now is a truce at the best This may produce a short term rebound though the resilience of the rally depends on how soon everyone will begin to see the situation through
The Shanghai Composite Index is among the world s worst benchmarks this year down 22 percent for its worst annual performance since 2008 The yuan has weakened about 10 percent since a high in April
To contact Bloomberg News staff for this story Sofia Horta e Costa in Hong Kong at shortaecosta bloomberg net Amanda Wang in Shanghai at twang234 bloomberg net
To contact the editor responsible for this story Richard Frost at rfrost4 bloomberg net
2018 Bloomberg L P |
JPM | JPMorgan CEO says lessons learned from failed WeWork IPO | NEW YORK Reuters JPMorgan Chase Co N JPM Chief Executive Officer Jamie Dimon defended the bank s work advising WeWork on its failed effort to go public but added that the bank learned lessons from the experience
I do think we helped WeWork get to a proper conclusion but there were a lot of lessons to be learned on the way Dimon said in an interview on CNBC I ve learned a few myself
Companies going public should have proper corporate governance before they go public said Dimon who is also chairman of JPMorgan Chase which was the lead of the investment bank advising WeWork on its attempted IPO this year |
JPM | Brazil s Samarco expected to resume 4 billion debt restructuring talks sources | By Tatiana Bautzer
SAO PAULO Reuters A Brazilian mining joint venture between Vale SA SA VALE3 and BHP Group Plc L BHPB paralyzed after a fatal dam collapse is soon expected to resume talks to restructure 4 billion in defaulted debt in coming weeks two sources with knowledge of the matter said
The venture Samarco Mineracao SA last month won permission to resume operations at its Germano iron ore mine four years after a dam burst in the city of Mariana in Minas Gerais state that killed 19 people and contaminated rivers
The license granted in late October clears the way for production to resume in the second half of 2020 but at a fraction of its output before the accident meaning limited potential revenue to service debt at least initially
Although restructuring talks had not been formally interrupted they were paused over the last two years as the company and prosecutors negotiated a time frame to resume operations
Vale is being advised in the talks by Moelis Co N MC BHP Plc by Rothschild and Samarco by JPMorgan Chase Co N JPM according to the sources
Vale Samarco and BHP declined to comment
An agreement with creditors on the debt restructuring which is expected to address the pace of payments as well as any reduction in principal could take months the sources added
Resumption of operations at the mine depends on Samarco s planned adoption of mining waste disposal techniques that avoid the use of tailings dams similar to those which collapsed near Mariana and earlier this year in a similar fatal disaster the town of Brumadinho
Production could resume at 8 million tonnes of iron ore a year with Samarco not returning to its pre collapse level output of 25 million tonnes for a decade the company has said |
JPM | Fearing Another Repo Spike Janus Build Up Its Cash Pile | Bloomberg Janus Henderson Group Plc is bracing for a repeat of September s repo market turmoil to play out in the final weeks of 2019
Nick Maroutsos the firm s global bonds co head expects that repo rates will spike as typical year end funding strains emerge The Fed has been injecting liquidity since Sept 17 to calm money markets But Maroutsos warned that may not be sufficient as banks pare back lending heading into the turn of the year as they shore up balance sheets to meet regulatory requirements
For Maroutsos the best way to prepare for the anticipated strains is by building up cash The firm s 1 billion Janus Short Duration Income exchange traded fund which trades under the ticker VNLA typically keeps up to 5 of its holdings in cash he said He s looking to increase that pile and then deploy it as banks step back
The way to take advantage of this is you have to be cash rich Maroutsos said Dollars will be in high demand so managers that have large amounts of dollars will be able to benefit probably
In September the overnight repo rate spiked to four times usual levels at the time as cash reserves fell out of alignment with the volume of securities on dealer balance sheets The episode prompted the Fed to step into the market with overnight and term repurchase agreement operations and to begin buying 60 billion of Treasury bills per month
The turbulence presented an opportunity for some fund managers Janus s approach was to enter into short dated dollar yen forward contracts which allowed it to effectively lend out greenbacks in exchange for yen cash
It s unclear what opportunities will arise this time around Maroutsos said but he wants to be prepared In 2018 repo spiked at year end with overnight rates soaring above 6
There s a number of ways to do it the problem is we don t know what that s going to be right now Maroutsos said We re waiting we re keeping an eye on it and will be likely putting money to work here in the near term
Papering Over
He s not alone in warning of year end turbulence Deutsche Bank AG DE DBKGn strategists wrote last week that the Fed will need an all in approach to contain repo rates during the final weeks of 2019 The analysts also wrote that sensible revisions to capital requirements are needed though impractical before year end
JPMorgan Chase NYSE JPM Co Chief Executive Officer Jamie Dimon said last month that post crisis regulations prevented his bank from deploying cash into the repo market during the September upheaval Treasury Secretary Steven Mnuchin said he was open to loosening those liquidity rules
While that would help free up banks reserves it s unlikely to happen overnight according to Maroutsos The Fed could also address the problem through a permanent effort toward balance sheet expansion potentially in the form of a repo facility a tool that would allow eligible banks to convert Treasuries into reserves on demand at an administered rate
Either way for him the Fed s actions haven t been enough to fix the deep seated issues in the repo market
They re kind of papering over the problem Maroutsos said They re providing liquidity which is helpful but it doesn t address the real issue at hand |
JPM | Asia Open The Drone Attack Roils Crude And Global Markets | Oil Markets
With Brent Oil Futures gapping 18 at this morning open the primary focus falls on oil markets in the wake of the shocking and market disrupting drone attack on Abqaiq oil facility in Saudi Arabia which is perhaps the most crucial production complex for global oil supplies Moreover it is estimated that the shut down will remove an astounding 5 7 million barrels of oil from the markets as emergency repairs commence which is roughly half of Saudi Arabia s immense oil production
The damage assessment will be crucial to gauge the interval of this weighty unscheduled market disruption and consequential duration for higher oil prices Saudi Arabia official has indicated this morning that they expect to restore one third of lost oil production by the end of the day
While underscoring the severity and the attacks market destabilising effects given that spike in Oil prices will have a substantial adverse influence across a breadth of asset classes President Trump as authorised the release of oil from the Strategic Petroleum Reserves if needed in a to be determined amount sufficient to keep the markets well supplied
Let the blame games begin
Although Iran has denied involvement in the crippling attacks Secretary of State Pompeo pulled few punches and in a guilty until proven innocent approach charged Iran of being complicit in the attack Moreover with President Trumps past willingness to pursue a maximum pressure campaign on Iran any thought of possible talks between Trump and Iranian leadership on the sidelines of the UN General Assembly meeting later this month has also gone up in flames as have the idea of a measured removal of Iran sanctions
A game changer
Middle East supply risk premiums rocketed higher and Brent crude prices spiked 18 at the open Abquaia sat at the epicentre of the Saudi energy ecosystem and was thought to be secure from terrorists attacks However the proliferation of drone technology and its apparent ease of access to rebel factions possesses a clear and present danger to not only the global oil supply chain but the Middle East stability in general
Besides this terrorist attack could also be decoded as more than an Iranian backed Houthi rebel lone wolf act of lunacy especially when coming on the heels of Ayman al Zawahiri al Qaeda leader calling on radicals to strike Western and allies targets on the anniversary of 9 11
While the repairs to Abquaia and oil supplies restored within a week the relative ease of which this attack was staged suggest that other global oil supply chain focal points are also extremely vulnerable to terrorist attacks suggesting that Global Risk Premium could remain elevated for some time Indeed we could be dealing with a significant game changer for oil markets over the short to medium term as security levels continue to flash red
Gold markets
Gold prices jumped higher at the COMEX open as Global Risk Premium ratcheted higher after the terrorist attack at the Abqaiq oil facility in Saudi Arabia Gold traders will be keeping an eye on oil prices today which will be the most concise gauge of geopolitical risk sentiment as investors woke up to a much less safe world this morning
On the fundamental side of the equation Friday s higher bond yields on the back of better consumer sentiment and robust US retail sales are thought to have triggered more long position liquidation on Friday Also with the markets shifting away from a no deal Brexit and gold investors are finding less support from UK political malaise
Markets
The theme of higher rates continued last week with the 10Y UST yield having now climbed 30bp on the month Positive talks out of China again supported the moves in the bond markets
This week brings the highly anticipated round of central bank meetings with the limelight focusing on the Federal Open Market Committee FOMC but don t forget the Bank of England BOE and indeed not The Bank of Japan BoJ as dovish smoke signal billowed over Tokyo last week
Past Peak Tariff
The unwind of the bearish price action from over the summer has been nothing short of frantic with the S P 500 back to within a stone s throw of all time highs while core yields have been selling off USD CNH is now within earshot of the critical 7 0USDCNH level Moreover the JPMorgan NYSE JPM GBI EM Index has pared most of its losses from late July all of which suggests the market believes we are past peak tariff
While the direction of travel makes sense but are markets moving too quickly ahead of the economic realities
China Data Dump
Much of the higher frequency data out of China this week is of the backwards looking variety suggesting the market may continue to focus on developments of the US trade negotiations to assess their growth and rates view beyond this quarter Moreover with the Fed rate decision on September 18 hogging the lions share to the limelight market participants may only give a cursory glance to Monday so called China Data Dump yet it will still provide market participants with a valuable evaluation of trade war carnage
The Federal Reserve
The Federal Open Market Committee FOMC rate decision on Wednesday will be the global markets focus of the week Currently the market is pricing in a long held and unanimous view for a cut in the Fed Funds rate by 25bps to between 1 3 4 and 2 The FOMC meeting will happen on Sept 17 18
However as usual much focus will be on the following press conference by Chair Powell where market participants will focus on how the Committee signals the potential for future actions and whether the Federal Reserve Board Fed shifts its narrative from a tentative mid cycle easing to one closer to the markets dovish expectation
Regional Central Banks
The dovish ECB and an expected Fed interest rate cut will offer regional central banks more policy wiggle room to trim interest rates
Central Bank of China CBC Taiwan is widely expected to keep policy rate steady but could align forward guidance to meet the market expectation of a 12 5bps rate cut by year end however much of that debate may fall on how fair trade war winds blow between now and then
Bank Indonesia BI to deliver another 25bps policy rate cut when it meets on September 19 one day after the Fed BI has turned explicitly more dovish since last month s cut and is likely to do most of the heavy lifting in support of growth given limited 9space
The Bank of Japan BoJ is expected to continue to lean dovish but given the recent smoke signal from Tokyo The Bank of Japan is growing more open to the idea of cutting short term interest rates so in a departure from past BoJ meetings in 2019 this upcoming policy decision could be a market moving event |
MS | Ex Morgan Stanley adviser gets five years in U S prison for fraud | By Nate Raymond BOSTON Reuters A former Morgan Stanley NYSE MS adviser was sentenced to five years in prison on Tuesday after he admitted that he misused client funds to invest in a wind farm project and to cover his own personal expenses including college tuition for his children James Polese 52 was sentenced by U S District Judge Mark Wolf in Boston who said he could not understand how the investment adviser could be so greedy and stupid by carrying out the fraud when he was already financially successful It wasn t just wrong Wolf said It was dumb and it inflicted harm on the people you cared about The proceedings came after a former employee of the New York based financial services firm who worked under Polese Cornelius Peterson was sentenced in June to 20 months in prison for participating in the scheme Polese who pleaded guilty in April to investment adviser fraud and bank fraud charges in court apologized to his victims and Morgan Stanley which employed him as a Boston based adviser I m sorry for tarnishing their name through my actions he said In addition to prison Wolf also ordered Polese to pay a 30 000 fine and 462 000 in restitution jointly with Peterson According to court papers in 2014 Polese and Peterson transferred 100 000 from a Morgan Stanley client s account without his permission to invest in a private equity fund created to support a wind farm project Prosecutors said Peterson was on the fund s board of directors and Polese had himself invested money in the wind farm project which needed additional funding Both men later in 2015 used 400 000 from the account of an elderly Morgan Stanley client Ralph Bates to back a letter of credit in support of the project causing him to incur 12 000 in fees prosecutors said Without Bates approval in 2016 they also transferred 350 000 from his account which was used for a real estate investment and to pay for Polese s personal expenses according to court papers Polese also in 2017 used more than 93 000 from Bates account to make college tuition payments for two of his children and to pay his own credit card bills prosecutors said Bates an 87 year old philanthropist said in court on Tuesday that Polese had ripped me off for big bucks I m at a loss for words he said Morgan Stanley fired Polese and Peterson in June 2017 and has said it terminated them immediately after uncovering their misconduct The case is U S v Polese U S District Court District of Massachusetts No 18 cr 10028 |
MS | Japan stocks to end 2018 largely flat make some gains in 2019 Reuters poll | By Ayai Tomisawa
TOKYO Reuters Japanese stocks will be largely flat in 2018 and then rise over 3 percent next year in part supported by cheap valuations but gains will be limited by a global economy hit by trade disputes a Reuters poll found
This year Japanese equities have been volatile with foreign investors sell off in futures and their quick short covering swaying the market back and forth
Foreign investors had sold 8 5 trillion yen 74 71 billion of Japanese futures and cash stocks by early September according to data from Japan Exchange Group then bought back 2 2 trillion yen in the next four weeks helping lift the Nikkei share average N225 to a 27 year high of 24 448 07 in early October
Then the market was hit by selling again pushing the index down at the end of October to a level not seen since March
The market has been affected by global concerns such as U S China trade frictions political uncertainty in Italy a slowdown in the Chinese economy the U S Federal Reserve s monetary policy falling oil prices and a sell off in emerging market currencies as well as weakening chip demand
Japanese stocks will rise toward the end of the year and into next as cheap valuations should attract some buyers but then they will flatline according to median estimates from 22 analysts and fund managers polled by Reuters in the past week
The Nikkei is expected to trade at 23 000 at year end the median forecast showed up 4 8 percent from Tuesday s close of 21 952 40 The index s 2017 close was 22 764 94
It is seen trading at 24 000 in mid 2019 and then 23 750 at end 2019 an 8 2 percent gain from Tuesday s close
Forecasts for mid 2019 ranged from 18 000 to 26 500 For end 2018 the range was 21 000 to 24 500 In the previous poll in August forecasts for the end of this year stretched from 22 000 to 26 000
Analysts said with the broader Topix s TOPX shares trading at 12 43 times their projected earnings investors will likely scoop up cheap shares if their concerns diminish
Some of the worries will likely ease such as weakness in electronic components demand for smartphones hitting the bottom in the Oct Dec period Then industrial production will recover in early 2019 said Fumio Matsumoto a senior fund manager at Dalton Capital Japan who forecast the Nikkei to end this year at 23 000 and rise to 25 000 by mid 2019
Global cyclical stocks which have been pressured are expected to rebound
GLOBAL SLOWDOWN
While market observers expect the equities market to see an improvement to a certain extent next year worries about the global economy will probably limit the upside they said
The International Monetary Fund last month cut its global economic growth forecasts for 2018 and 2019 saying the U S China trade war was taking a toll and emerging markets were struggling with tighter liquidity and capital outflows
A weaker global economy will likely hurt growth in EPS while stock market s momentum will peak out in mid 2019 said Akio Yoshino chief economist at Amundi Japan who expected the Nikkei to trade at 22 800 by the end of this year
In addition the European Central Bank will bring its asset purchase program to an end next year and the U S central bank will continue raising rates
Yoshino forecast the Nikkei to hit 24 000 in June 2019 and 23 500 in December 2019
Market participants also said they were already worried by the expected blow to consumption from next year s scheduled sales tax hike to 10 percent from 8 percent
A tax hike amid weakening global economy will have a negative impact on the Japanese equities market said Norihiro Fujito chief investment strategist at Mitsubishi UFJ Morgan Stanley NYSE MS Securities
Japanese stocks are likely to rally in the April June quarter but are expected to correct in the second half of 2019
Fujito expects the Nikkei to try 23 500 in mid 2019 but sees the benchmark index falling to 18 000 by the end of next year
Japan s economy shrank more than expected in the third quarter hit by natural disasters and a decline in exports
To read other stories from the Reuters global stock markets poll
1 113 7800 yen
Additional polling by Sarmista Sen and Manjul Paul Editing by Richard Borsuk |
JPM | Gold Prices Stand Firm as Risk Assets Rally on Trade Hopes | Investing com Gold prices stood firm Monday in the face of a widespread risk on rally in global markets as traders refused to abandon their hedge against a breakdown in U S China talks and still lower interest rates
Bond yields rose and stocks around the world rallied after U S Commerce Secretary Wilbur Ross hinted at cutting Chinese telecoms group Huawei a notable hostage of the trade dispute some slack by loosening a ban on U S companies selling to it In addition risk assets also liked Ross comments that fresh import tariffs on European and Asian autos may not be needed
U S Treasury bond yields rose as traders moved out of bonds and pushed the Dow Jones index to a new record high but there was no meaningful drop in gold prices
By 11 AM ET 1600 GMT gold futures for delivery on the Comex exchange were down less than 0 1 at 1 510 95 a troy ounce Spot gold was down 0 4 at 1 507 80
Speculative interest in gold hit its highest level in six weeks last week according to data released on Friday by the Commodity Futures Trading Commission after market participants looked through the Federal Reserve s latest interest rate cut and its guidance that appeared to rule out any further easing in the near term
Analysts at JPMorgan NYSE JPM led by Natasha Kaneva said in a weekly note that the price action suggested many were still prepared to bet on another cut in rates in 2020 However they warned that looking into next year a Fed on hold would represent a significant downside risk to our bullish outlook on gold prices
JPMorgan expects gold to be trading around 1 800 by the fourth quarter of next year
Elsewhere Monday silver futures dipped 0 2 to 18 02 an ounce while platinum futures retreated 1 0 from a six week high of 959 90 an ounce posted over the weekend to 944 45
Copper prices inched up 0 3 to 2 66 a pound |
JPM | Kadena Mainnet Goes Live New 20M Token Sale Starts Tomorrow | The Kadena network which is led by JPMorgan NYSE JPM blockchain veterans has gone live on Monday with the firm announcing a new 20 million token sale
According to an announcement on Nov 4 Kadena has launched its mainnet Chainweb alongside the Kadena token wallet Chainweaver The firm is also planning to carry out its third token sale from Nov 5 Nov 22 |
JPM | Bullet dodged Markets bet global recession averted | By Marc Jones LONDON Reuters World shares climbed back toward record highs and safe haven bonds tumbled on Tuesday as hopes that Washington may roll back some of the tariffs it has imposed on Chinese imports rekindled optimism about the global economic outlook A year end rally looked to be building Wall Street s main markets were expected to add to their 20 gains and best year since 2013 MSCI s 49 country world index MIWD00000PUS was just 1 4 shy its early 2018 peak Europe had galloped to a 21 month high on Monday before retreating on Tuesday Asia had raced to its highest since May China s yuan climbed beyond 7 per dollar for the first time since August Hopes of a trade truce between the United States and China this month fueled the optimism with some more details being filled in on what s expected to be a phase one agreement As part of this agreement China is pushing U S President Donald Trump to remove more tariffs imposed in September according to reports Beijing and Washington spoke of progress in the talks and U S Commerce Secretary Wilbur Ross said licenses for U S companies to sell components to China s telecoms giant Huawei will come very shortly The big picture is that everyone is now setting themselves up for the strong rebound case for the global economy said Peter Garnry Saxo Bank s head of global equities And with the flood gates open for monetary policy assets are just flying especially equities Global readings of the October manufacturing business surveys showed the aggregate ticked up for the third month in a row last month to show an expansion in factory activity Forward looking indicators from the survey such as the new orders component moved into positive territory for the first time since April according to JPMorgan NYSE JPM It all helped ease concern about the recession risks facing the global economy sparking a selloff across the major bond markets that nervy investors huddled into when worry levels spiked earlier in the year The 10 year U S Treasury yield rose 4 basis points to around 1 83 US10YT RR and the U S yield curve measuring the gap between two and 10 year yields was at its steepest in three months In Europe 10 year yields on safe haven German Bunds also climbed to their highest since July DE10YT RR French yields were close to breaking back into positive territory In price terms Germany s 10 year bond has now lost just over 4 percent of its value since early September The markets are adjusting to stronger phase in the cycle I would say said SEB investment management s global head of asset allocation Hans Peterson I m just frustrated because I don t have enough equities Graphic World stocks surge 10 in 2019 YUAN RECLAIMS KEY LEVEL In Asia the mood was also helped by the People s Bank of China cut in its a medium term lending rate the first since early 2016 It was only a token 5 basis points to 3 25 but it underscored Beijing s ongoing desire to support its economy MSCI s broadest index of Asia Pacific shares outside Japan MIAPJ0000PUS gained 0 6 to reach levels last seen in early May It was led by gains in Chinese shares CSI300 which jumped as much as 1 3 to their highest since late April Taiwanese shares TWII gained 0 75 to near three decade highs and Japan s Nikkei N225 rose 1 75 to a one year peak after a market holiday on Monday That followed record closing highs for the U S S P 500 Dow Jones and Nasdaq and after the Financial Times had reported that the U S was considering rolling back levies on 112 billion of Chinese imports which were introduced at a 15 rate on Sept 1 China is pushing U S President Donald Trump to remove more tariffs as part of a U S China trade deal expected to be signed later this month people familiar with the negotiations said on Monday There may have been some expectations that the U S may postpone the remaining tariffs which are due to kick in on Dec 15 But if it goes further by rolling back existing tariffs that would not only benefit the economy but would also make the truce seem more permanent said Yukino Yamada senior strategist at Daiwa Securities The next focus on the U S economic front is a U S non manufacturing survey due later on Tuesday with economists expecting a rebound in business sentiment from a three year low Saxo Bank s Garnry said a better than expected reading could fire markets higher again Graphic U S non manufacturers ISM index In the currency market the dollar gained 0 2 on the yen to 108 80 extending its recovery from the 107 89 touched on Friday Trade optimism pushed the Chinese yuan to its highest levels since mid August after the onshore yuan posted its strongest close since Aug 2 The euro was little changed at 1 1126 EUR off last week s high of 1 1175 The Australian dollar gained 0 2 to 0 6900 on the trade hopes and after the nation s central bank held interest rates after three cuts this year Oil prices gained staying near their highest since late September buoyed by an improved outlook for crude demand as better than expected U S jobs growth added to the hopes for a U S China trade deal U S West Texas Intermediate WTI crude CLc1 traded at 56 95 per barrel up 0 7 after reaching a six week high of 57 43 on Monday International benchmark Brent LCOc1 gained 1 to 62 74 per barrel
Rising economic optimism dented gold which fell 0 5 to 1 503 per ounce |
JPM | 3 Top Small Cap Blend Funds For Amazing Returns | Investors with a high risk appetite and an interest in growth and value investing may choose small cap blend mutual funds to boost their portfolio While blend funds also known as hybrid funds aim for value appreciation by capital gains small cap funds have higher growth prospects than their large and medium counterparts Blend funds provide significant exposure to both growth and value stocks and owe their origin to a graphical representation of a fund s equity style box Funds investing the majority of their assets in securities of companies with market capitalization below 2 billion are generally considered small cap mutual funds Though funds investing in small cap stocks are believed to have more exposure to market volatility than large or medium ones they are also expected to provide diversification across sectors and companies Moreover small cap companies are believed to be less affected by a global downturn thanks to less international exposure Below we will share with you three top ranked small cap blend mutual funds Each has earned a Strong Buy and is expected to outperform its peers in the future Investors can AB Small Cap Growth Portfolio Class A aims for capital growth over a long period The fund invests the majority of its assets in equity securities of small capitalization companies The fund invests in a diversified portfolio of securities As of July 2019 QUASX held 112 issues with 1 79 of its assets invested in Chegg Inc JPMorgan NYSE JPM Small Cap Core Fund Class R5 seeks long term capital appreciation The fund invests the majority of its assets in equity securities of small capitalization companies These companies are those that at the time of purchase have market capitalization equivalent to companies included on the Russel 2000 Index VSSCX has an expense ratio of 0 80 compared with the category average of 1 14 Emerald Growth Fund Class A aims for capital growth over a long period The fund invests across all market capitalizations especially focusing on companies it believes to have strong potential for growth The fund mostly invests in equity securities Kenneth G Mertz is the fund manager of HSPGX since 1992 To view the Zacks Rank and past performance of all small cap blend mutual funds investors can Want key mutual fund info delivered straight to your inbox Zacks free Fund Newsletter will brief you on top news and analysis as well as top performing mutual funds each week |
JPM | Implied Volatility Surging For JPMorgan JPM Stock Options | Investors in JPMorgan Chase Co NYSE JPM need to pay close attention to the stock based on moves in the options market lately That is because the Sep 20 2019 60 00 Put had some of the highest implied volatility of all equity options today What is Implied Volatility Implied volatility shows how much movement the market is expecting in the future Options with high levels of implied volatility suggest that investors in the underlying stocks are expecting a big move in one direction or the other It could also mean there is an event coming up soon that may cause a big rally or a huge sell off However implied volatility is only one piece of the puzzle when putting together an options trading strategy What do the Analysts Think Clearly options traders are pricing in a big move for JPMorgan shares but what is the fundamental picture for the company Currently JPMorgan is a Zacks Rank 3 Hold in the Banks Major Regional industry that ranks in the Bottom 25 of our Zacks Industry Rank Over the last 30 days no analysts have increased their earnings estimates for the current quarter while one analyst has revised the estimate downward The net effect has taken our Zacks Consensus Estimate for the current quarter from 2 42 per share to 2 41 in that period Given the way analysts feel about JPMorgan right now this huge implied volatility could mean there s a trade developing Oftentimes options traders look for options with high levels of implied volatility to sell premium This is a strategy many seasoned traders use because it captures decay At expiration the hope for these traders is that the underlying stock does not move as much as originally expected Looking to Trade Options Check out the simple yet high powered approach that Zacks Executive VP Kevin Matras has used to close recent double and triple digit winners In addition to impressive profit potential these trades can actually reduce your risk |
MS | Hold the phone Cheaper mobile charges to complicate BOJ s inflation push | By Leika Kihara and Kaori Kaneko TOKYO Reuters Japan s central bank is facing fresh challenges as it struggles to hit its ambitious inflation target with planned cuts in mobile phone charges and education fees expected to weigh on consumer prices in coming years While most of the distortions will be transitory they could slow price growth to a halt and make it harder for the Bank of Japan to convince the public that inflation will accelerate toward its elusive 2 percent inflation goal Data on Thursday showed Japan s core consumer inflation was steady at 1 0 percent in October with half the gain driven by higher energy costs Recent oil price falls mean the boost to inflation from energy costs will start to taper off soon and will start to weigh on price growth early next year Inflation could thus lose support from energy costs at a time downward pressure from various one off factors kick in The biggest impact would come from government pressure on Japan s major carriers to cut mobile phone charges Carrier giant NTT Docomo Inc 9437 T said last month it would cut mobile charges by up to 40 percent in April June next year Rivals like KDDI Corp 9433 T and SoftBank Group Corp 9984 T could follow suit The government estimates a 40 percent drop in charges could push down core consumer inflation by 0 96 percentage point Falling contributions from energy and mobile charge cuts could turn core consumer inflation negative around spring next year said Junichi Makino chief economist at SMBC Nikko Securities who expects inflation to hit zero next fiscal year In its latest forecasts made in October the BOJ expected core consumer inflation to hit 1 4 percent in the next fiscal year beginning in April 2019 and 1 5 percent the following year Government plans to make education more affordable could also weigh on prices ahead As part of last year s election campaign pledge premier Shinzo Abe has promised to make pre school education free for all 3 5 year olds and 0 2 year olds from low income households Full implementation will start in October That will push down the fees consumers pay for education which is incorporated into consumer price index CPI data The government expects the move to push down overall CPI by 0 3 point next fiscal year a drag some analysts warn could extend through fiscal 2020 Abe also plans to cut university tuition for low income households from April 2020 which will also weigh on CPI Taken together the education initiatives could push down core CPI by up to 0 9 point said Hiroshi Miyazaki senior economist at Mitsubishi UFJ Morgan Stanley NYSE MS To be sure lower mobile phone charges and education costs could help accelerate inflation in the long run by giving households more purchasing power Still many analysts expect the overall impact on inflation to be negative BofA Merrill Lynch cut next year s core consumer inflation forecast to 0 5 percent citing the one off factors BOJ officials say they will look through one off factors and focus on price moves that reflect the economy s fundamentals That means a slowdown in inflation figures alone won t trigger an immediate expansion of already massive monetary stimulus But soft price growth could delay an exit from ultra loose policy despite the rising cost of prolonged easing such as the hit to financial institutions profits from near zero rates The BOJ is already seen lagging well behind other central banks in unwinding crisis mode stimulus While the drop in the CPI caused by wireless and education price cuts is not a reflection of fundamental inflation trends it will still deliver a slowdown in observed inflation BofA Merill Lynch said in a research note
Since Japan s inflation expectation formation is adaptive backward looking the BOJ may be concerned that negative price shocks would lower household inflation expectations keeping the board on hold |
MS | Oil plunges more than 6 percent despite potential OPEC cut | By Jessica Resnick Ault BOSTON Reuters Oil prices slumped more than 6 percent on Friday with Brent set for a 12 percent plunge this week as fears that supply would overpower demand intensified even as major producers considered cutting output Oil supply led by U S producers is growing faster than demand and to prevent a build up of unused fuel such as the one that emerged in 2015 the Organization of the Petroleum Exporting Countries is expected to start trimming output after a meeting on Dec 6 But this has done little so far to prop up prices which have dropped more than 20 percent so far in November in a seven week streak of losses Deep trade disputes between the world s two biggest economies and oil consumers the United States and China have weighed upon the market The market is pricing in an economic slowdown they are anticipating that the Chinese trade talks are not going to go well said Phil Flynn an analyst at Price Futures Group in Chicago The market doesn t believe that OPEC is going to be able to act swiftly enough to offset the coming slowdown in demand Brent crude oil fell 3 81 or 6 1 percent to 58 79 a barrel by 10 50 a m EST 1550 GMT after earlier touching 58 57 its lowest since October 2017 U S West Texas Intermediate crude WTI lost 3 75 or 6 8 percent to trade at 50 88 to touch a low of 50 60 also the weakest since October 2017 For the week Brent was on track for a 11 9 percent loss and WTI a 9 7 percent decline Prices were on course for their biggest one month decline since late 2014 Market fears over weak demand intensified after China reported its lowest gasoline exports in more than a year amid a glut of the fuel in Asia and globally Stockpiles of gasoline have surged across Asia with inventories in Singapore the regional refining hub rising to a three month high while Japanese stockpiles also climbed last week Inventories in the United States are about 7 percent higher than a year ago Crude production has soared as well this year The International Energy Agency expects non OPEC output alone to rise by 2 3 million barrels per day bpd this year Oil demand next year meanwhile is expected to grow by 1 3 million bpd Adjusting to lower demand top crude exporter Saudi Arabia said on Thursday that it may reduce supply as it pushes OPEC to agree to a joint output cut of 1 4 million bpd However U S President Donald Trump has made it clear that he does not want oil prices to rise and many analysts think Saudi Arabia is coming under U S pressure to resist calls from other OPEC members for lower crude output If OPEC decides to cut production at its meeting next month oil prices could recover sharply analysts say We expect that OPEC will manage the market in 2019 and assess the probability of an agreement to reduce production at around 2 in 3 In that scenario Brent prices likely recover back into the 70s Morgan Stanley NYSE MS commodities strategists Martijn Rats and Amy Sergeant wrote in a note to clients But if OPEC does not trim production prices could head much lower argues Lukman Otunuga Research Analyst at FXTM U S oil has scope to depreciate towards 50 a barrel in the near term VOLATILITY SPIKES TO 2 YEAR HIGH By the middle of November commodity trading advisory funds tracked by Credit Suisse SIX CSGN prime services had dropped 1 5 percent on the month owing to the losses in energy futures and the increased volatility Mark Connors global head of portfolio and risk advisory at Credit Suisse told Reuters this week that the action among macro and CTA funds reflects a risk aversion trade as net long positions have dropped from near five year highs to roughly even exposure between longs and shorts Volatility a measure of investor demand for options has spiked to its highest since late 2016 above 60 percent as investors have rushed to buy protection against further steep price declines additional reporting by Christopher Johnson and Amanda Cooper in London and Henning Gloystein in Singapore Editing by Emelia Sithole Matarise and Marguerita Choy |
MS | Oil Prices Rebound 1 After Friday Slump | Investing com Oil prices rebounded on Monday in Asia after slumping 8 last Friday amid concerns that excess supply and weakening demand pressures could create a glut next year
Crude Oil WTI Futures for January delivery rose 1 to 50 92 a barrel at 12 33 AM ET 05 33 GMT on the New York Mercantile Exchange while Brent Oil Futures for February delivery also climbed 1 3 to 59 82 per barrel on London s Intercontinental Exchange
The gains did little to make up for Friday s selloff as the U S benchmark registered its worst day in about three years amid indications of swelling global inventories Brent lost about 12 for the week
WTI has now lost 34 of its value from its peak on Oct 3 to the trough on Friday Brent has fallen as much as 32
Ministers from the Organization of the Petroleum Exporting Countries OPEC meet on Dec 6 in Vienna to decide on production policy for the next six months
OPEC officials have been making increasingly frequent public statements that the cartel and its partners would start withholding crude in 2019 to tighten supply and prop up prices
Saudi Arabia OPEC s de facto leader wants the cartel to slash production by about 1 million barrels per day bpd according to recent reports
2018 clearly marked the end of the 10 year Asia credit bull market due to tightening financial conditions in Asia especially China and we expect this to remain the case in 2019 Morgan Stanley NYSE MS said in a note released on Sunday
We don t think that we are at the bottom of the cycle yet the U S bank said
Oil markets have also been weighed down by a strong U S dollar that has been gaining momentum since late October
The greenback strengthened due to rising interest rates that have pulled investor money out of other assets like oil which are seen as riskier than the dollar |
MS | Seeing the bigger picture oil price slump is part of broader Asian pullback | By Henning Gloystein SINGAPORE Reuters The steep plunge in crude futures in the last few weeks was triggered by a nascent glut as supply growth started to outpace demand but it was also part of a broader pullback from risky emerging market assets such as Asian currencies and stocks Those assets had done well in recent years boosted by economic growth in nations such as China India and Indonesia But bulging debt across many Asian economies tightening U S fiscal policy and the Sino U S trade war have driven investors to vote with their feet pulling their money out of assets such as oil or Asian stocks and instead turning to safe havens like the U S dollar As part of that shift oil markets have lost a third of their value since early October LCoc1 CLc1 Anything denominated against the USD is under pressure right now said Gregg McKenna an independent cross asset market analyst based in Australia GRAPHIC Oil vs Dollar Billions of dollars have been pulled out of crude futures Traders reported capitulation and liquidation ANZ bank said in a note on Monday It added that net long positions for crude futures which would profit from increasing oil prices were reported to be cut to their lowest level in three years And traders seem to be preparing for further falls Managed short positions in front month U S crude oil futures CLc1 which would profit from further price declines have surged from record lows of around 14 100 lots of 1 000 barrels each in July to almost 110 000 lots by mid November exchange trade data showed That is the highest number of short positions since October 2017 GRAPHIC U S crude oil price short positions What s more the number of puts which give a trader the option though not obligation to sell a financial instrument at a certain price in February Brent crude oil futures at 55 and 50 per barrel has surged to record levels since October Equally the price to buy such an option has jumped as demand for them has increased GRAPHIC Brent put options BROAD DOWNTURN The same pessimism can be seen in broader Asian markets 2018 clearly marked the end of the 10 year Asia credit bull market due to tightening financial conditions in Asia especially China Morgan Stanley NYSE MS said in a note released on Sunday We don t think that we are at the bottom of the cycle yet the U S bank said Its peer J P Morgan said on Friday that the slide in U S and global equity markets shifts the balance of risks more clearly to the downside J P Morgan said the parallel slump in equities and commodities including crude oil and industrial raw materials like iron ore and metals was concerning ANZ bank said steel futures in China posted their fourth weekly decline as investors become increasingly worried about weak economic growth O R GRAPHIC Oil prices vs Asian stock market Beyond financial markets there are also signs of a downturn in global trade More than 90 percent of all products are taken from producer to consumer by ship Here rates for containers which carry finished goods and rates for dry bulk vessels carrying raw materials like coal or iron ore BADI have slumped by 26 4 percent and 38 35 percent respectively from their 2018 highs as shipping stalls amid the economic headwinds Slowing U S growth would dampen demand for exports from Asia possibly weighing on freight Singapore shipping brokerage Eastport said on Monday
GRAPHIC Shipping rates have declined since August 2018 |
MS | Oil prices claw back some losses after Black Friday plunge | By Henning Gloystein SINGAPORE Reuters Oil prices on Monday clawed back some losses from a nearly 8 percent plunge the previous session but Brent failed to hold above 60 per barrel amid generally weak financial markets Front month Brent crude oil futures LCOc1 had risen by 96 cents or 1 6 percent to 59 76 per barrel by 0745 GMT U S West Texas Intermediate WTI crude futures CLc1 were up 62 cents or 1 2 percent at 51 04 per barrel The gains partly made up for Friday s selloff which traders have already dubbed Black Friday Reacting to Friday s falls in Brent and WTI China s Shanghai crude futures on Monday fell by 5 percent hitting their daily downside limit Judging by exchange data traders are preparing for more price falls Managed short positions in front month WTI crude futures which would profit from further price declines have surged from record lows in July to the highest number of short positions since October 2017 GRAPHIC Price for Brent put options What s more the number of puts which give a trader the option though not obligation to sell a financial instrument at a certain price in February Brent crude oil futures at 55 and 50 per barrel has surged to record levels since October GRAPHIC Brent put options The downward pressure comes from surging supply and a slowdown in demand growth which is expected to result in an oil supply overhang by next year 2019 will be a choppy year for the oil market as questions surrounding the prospect of a slowing global economy and a supply surplus are expected to increase analysts at Fitch Solutions said on Monday Fitch said that even an expected supply cut led by the Organization of the Petroleum Exporting Countries OPEC following an official meeting on Dec 6 may not be enough to counteract the bearish forces GRAPHIC Global crude oil supply demand balance WIDER DOWNTURN Oil markets are also being affected by a downturn in wider financial markets 2018 clearly marked the end of the 10 year Asia credit bull market due to tightening financial conditions in Asia especially China and we expect this to remain the case in 2019 Morgan Stanley NYSE MS said in a note released on Sunday We don t think that we are at the bottom of the cycle yet the U S bank said Oil markets have also been weighed down by a strong U S dollar DXY which has surged against most other currencies this year thanks to rising interest rates that have pulled investor money out of other currencies and also assets like oil which are seen as more risky than the greenback Anything denominated against the USD is under pressure right now said McKenna Another risk to global trade and overall economic growth is the trade war between the world s two biggest economies the United States and China The U S China trade conflict poses a downside risk as we forecast the U S to impose 25 percent tariffs on all China imports by Q1 2019 U S bank J P Morgan said in a note published on Friday
GRAPHIC Oil prices vs Asian stock market |
MS | Global Economy Heads Into Final Stretch With Diminished Momentum | Bloomberg The global economy headed into the final stretch of 2018 in weakened shape handing investors renewed reason to question how much central banks will be able to tighten monetary policy next year
Fresh data from the world s third and fourth largest economies on Monday added to the concern A manufacturing gauge in Japan dropped to the lowest since early 2016 and business confidence in Germany fell for a third month
The slowdown against the backdrop of volatile markets and a burgeoning trade war has implications for monetary policy worldwide The European Central Bank has a crucial meeting in December where it s due to confirm the end of net asset purchases a key crisis era tool The U S Federal Reserve looks set to raise interest rates again next month but may be more cautious in 2019
Both Fed Chairman Jerome Powell and ECB President Mario Draghi speak publicly this week
After a torrid week for stocks the changing economic outlook will be a topic for Group of 20 leaders when they gather in Argentina especially given their warnings in March about the damage from protectionism
Nathalie Errard senior vice president and head of Europe and NATO Affairs at Airbus said on a panel in Hamburg that even if the U S and China remain the focal point for protectionist measures her company won t remain untouched
You have to be aware there is price to pay on growth and traffic she said You need to look at the global supply chain as well If there are tariffs on our U S suppliers it s not good for margins It s a complex world I m afraid
Last week the OECD downgraded its global outlook and the MSCI All Country World Index dropped almost 3 percent On Friday the Dutch statistics office said its measure of global trade fell 1 1 percent in September
Factors related to protectionism financial market volatility and vulnerabilities in emerging markets are creating headwinds that are becoming increasingly noticeable ECB chief economist Peter Praet said in Frankfurt on Monday
The latest souring of confidence in Germany Europe s biggest economy means the business climate index is now at its lowest since March 2017 A swift and strong rebound is becoming increasingly unlikely after the nation s third quarter contraction said ING s Carsten Brzeski
In its Japan report IHS Markit said the underlying trend is skewed to the downside and noted easing global growth momentum
The trend has got economists rethinking what central banks might do next year Barclays LON BARC expects the ECB to announce new round of long term loans to banks as early as December to prevent a tightening in lending conditions and keep money flowing into the economy HSBC sees such loans being announced next year
Morgan Stanley NYSE MS analysts see the Fed pausing in mid 2019 confronted with a deceleration in economic growth to just 1 percent That compares with 3 5 percent in the last three months
This is a market in the U S that had an enormous amount of adrenaline shot into it by fiscal stimulus said Andrew Sheets Morgan Stanley s chief cross asset strategist Next year that kinda pulls back so you re going to see quite sharp levels of deceleration |
JPM | Mainlanders in Hong Kong worry as anti China sentiment swells | By Julie Zhu HONG KONG Reuters As anti government protests simmer in Hong Kong some demonstrators are increasingly focusing their anger on mainland Chinese in the city hurling abuse and in some cases beating them More than one million mainland Chinese live and work in Hong Kong according to official figures many of them in the city s bustling finance industry that serves as an entry point into China for global investors Some of these mainlanders as they are called say they are looking to relocate while others say they dare not go out at the weekends when the protests regularly escalate A video of an attack on a mainland Chinese JPMorgan NYSE JPM banker this month has gone viral prompting widespread outrage and further unnerving Chinese citizens JPMorgan did not respond to a Reuters request for comment It feels so depressing to live in a city where you feel the locals don t really welcome you said a former investment banker surnamed Chen a mainland born woman who now works for a Chinese private equity company in the city And there is no end in sight to the unrest I certainly don t want to build my family and raise my kids in such a broken torn apart city said the woman in her 30s who has lived in Hong Kong for nearly 10 years but has now asked her boss if she can relocate to Beijing Mainlanders are sometimes identified by their surnames but usually by their accent or their use of the Mandarin language Cantonese is the main language spoken in Hong Kong while Mandarin is used on the mainland Tensions have long existed between Hong Kong people and mainland Chinese who many in the territory blame for pushing up property prices and clogging the former British colony s streets and shopping malls 51 million mainland tourists visited the city in 2018 nearly seven times its population of 7 4 million While many older Hong Kong residents or their parents are migrants from China the anger is mostly aimed at those who still identify themselves as mainlanders As protesters push back against what they see as Beijing s growing attempts to tighten its grip over Hong Kong a groundswell of anti China sentiment has emerged Activists have taken aim at some of China s largest banks during protests smashing windows spray painting anti China slogans on shuttered branches and trashing ATM machines A Chinese partner surnamed Li at a global law firm who has been living in Hong Kong for more than 10 years said a salesman at a shopping mall in the bustling district of Causeway Bay scared his two young children by shouting at them when they asked to buy a toy in Mandarin NEW NORMAL A Chinese banker at a Wall Street bank who is in his 30s and has lived in the city for about 10 years said he has several friends who are considering moving to Beijing Shanghai or Shenzhen for their children s education The banker who like all the people interviewed by Reuters declined to be identified due to the sensitivity of the issue said while he is getting used to the new normal in Hong Kong many of his China based clients have avoided travel to the territory since the protests escalated in June out of fear for their safety He however has no plans to leave as he believes Hong Kong is still a better place to live than China and more important in terms of his career Many mainland Chinese move to Hong Kong instead of returning to mainland China after studying and working overseas mostly thanks to the city s high degree of autonomy and wide ranging freedoms that don t exist on the mainland A senior mainland Chinese investment professional who planned to settle permanently in the city when he moved from the U S over a decade ago said he is now looking for an exit as months of protest darken the city s gloom Society will be more divided more confrontations between locals and mainlanders are expected and the city s uniqueness and core values will be further eroded by Beijing said the investor in his 50s I don t know how we can find a solution to end this crisis I am quite pessimistic about the long term prospects for the city One senior mainland Chinese executive at a large North American insurance firm said however he plans to remain in the city so long as the protests do not pose a threat to his family He plans to offer internships to more Hong Kong youths to help address their anger and frustrations More internships will be a very small contribution to help them to help society But that s the right thing to do Be the change you want to see in the city
Removes garble in 6th paragraph |
JPM | Citi to Slash Foreign Exchange Platforms by Two Thirds FT Says | Bloomberg Citigroup Inc NYSE C plans to cut the number of foreign exchange platforms it supports by two thirds the Financial Times reported citing people with knowledge of the matter
The multinational investment bank wants to reduce the number of platforms used to connect with customers to 15 from 45 by the first quarter of 2020 the newspaper said Citigroup has sent a survey to all the providers the FT said
The move may save Citi 5 million to 10 million a year from cutting links to third party platforms that offer competing bids from other banks the newspaper reported Citigroup spokeswoman Shirley Lam declined to comment to queries from Bloomberg
Citigroup and JPMorgan Chase NYSE JPM Co are the two biggest foreign exchange traders by market share due to their technology and client networks according to a 2018 study by Greenwich Associates With currency volatility having slumped over the past decade banks have invested heavily in electronic trading to reduce costs
For every connection you make you need connectivity to make sure the latency of pricing isn t hampered said Wong Joo Seng chief executive officer of Singapore based currency platform provider Spark Systems Pte The banks I think will have to rationalize the number of platforms they re plugged into FX isn t really a growing pie after all
Currency trading platforms are provided by companies including Saxo Bank and CMC Markets Plc Bloomberg LP the parent of Bloomberg News operates FXGO
You may see other providers following especially when the big FX players aren t making much money in FX any more said Nick Twidale Sydney based director and co founder of X Chainge which provides foreign exchange related technologies |
JPM | Bond Market Signals Doubt Fed Has Shut Door on Further Rate Cuts | Bloomberg Explore what s moving the global economy in the new season of the Stephanomics podcast Subscribe via Pocket Cast or iTunes
The bond market isn t convinced that the Federal Reserve is done lowering rates even after policy makers signaled a pause unless the economic outlook changes materially
Overnight swap rates fully priced out a December rate easing in the minutes following the central bank s decision to cut for a third straight meeting citing the implications of global developments But they still see another reduction by November 2020 and Treasury yields fell across the curve led by longer maturities
The reaction intensifies the focus on key U S data in the days ahead as investors try to divine the Fed s path starting with Friday s figures on the labor market and manufacturing Fed Chairman Jerome Powell said monetary policy is in a good place But the market s reaction reflects a darker take on the economic outlook according to Conning s Rich Sega
The rally in Treasuries and move lower in yields after the press conference means the market is reading the data that the economy is slowing and remains pessimistic said Sega global chief investment strategist at Conning which manages about 171 billion
Powell s Assessment
Benchmark 10 year Treasury yields dropped nearly 7 basis points on Wednesday and gained 1 basis point to 1 78 in Asia on Thursday The yield curve flattened and the Bloomberg Dollar Index extended declines
In his press conference Powell noted that the risks around trade tensions and Brexit show signs of improvement
Chris Rands a portfolio manager at Nikko Asset Management in Sydney agrees with Powell s assessment about the economy arguing that bond markets have been too aggressive in pricing in more cuts He sees Treasury yields climbing to 2 in three to six months
They re hitting the targets they are after with U S unemployment at the lowest in 50 years said Rands That s nirvana
The Fed decision came after the Commerce Department reported better than expected economic growth in the third quarter driven by consumer spending
Fleeting Optimism
Some analysts and fund managers suspect the brightening prospects may prove fleeting In Wells Fargo s view cooling growth and simmering trade friction mean that policy makers will have to cut rates again in January despite pausing in December
This is mostly predicated on a further slowdown in U S growth and a potential for the fragile trade peace between the U S and China to break down said strategist Erik Nelson We do not think the worst of the downside risks for the Fed have passed yet
For Julio Callegari a fixed income money manager at JPMorgan NYSE JPM Asset Management any Treasury sell offs is a chance to accumulate
If we see a widening it s more of an opportunity to buy Callegari The next step is still a cut for 2020 |
JPM | JPMorgan Has Solution for Powell That Will Free Up Banks Cash | Bloomberg The Federal Reserve could design a permanent tool that would unlock a significant fraction of cash currently held by larger banks and prevent funding stresses according to analysts at JPMorgan Chase NYSE JPM Co
Strategists led by Joshua Younger said in a note to clients Thursday that the central bank could create a standing repurchase agreement facility that would be accessible by all depository institutions and include it as a source of liquidity for resolution planning This would free up cash that is currently held by the banks for regulatory purposes and allow reserves to be more evenly distributed through the banking system
JPMorgan America s largest bank and one of the biggest players in the repo market was among those that blamed post financial crisis bank regulations as one of the factors behind September s turmoil in funding markets Chief Executive Officer Jamie Dimon told analysts on Oct 15 that while the bank had the cash regulation prevented it from using it to calm the repo market
That upheaval briefly sent the rate on overnight repurchase agreements spiraling to around 10 and raised questions about the Fed s ability to control its main policy lever the fed funds rate The spike prompted the Fed to step in with temporary repo market operations that are expected to run through January and to boost bank reserves through the purchase of Treasury bills
The U S central bank has been studying the idea of a standing repo facility for some time Chairman Jerome Powell said at a news conference after Wednesday s Federal Open Market Committee meeting that there are some technical things the central bank can look at that would make the liquidity move more freely without compromising the soundness of the system
Even with the steps taken so far by the Fed the market remains susceptible to upward pressures in repo rates On Thursday with month end financing needs and Treasury auction settlements added into the mix rates were above the recently lowered central bank target for fed funds And the Fed s most recent term operations have all been oversubscribed suggesting thirst for liquidity from the central bank
The banks inability to police the repo market in September wasn t a lack of access to cash but restrictions in their ability to deploy it Younger and his colleagues wrote |
JPM | Banks will seek to stop money leaving Lebanon when doors reopen sources | By Samia Nakhoul and Lisa Barrington
BEIRUT Reuters Lebanon s banks will seek to prevent capital flight when they open on Friday but without imposing formal capital controls after a two week closure due to nationwide protests which led the prime minister to resign banking sources told Reuters
Analysts and bankers have cited widespread concern about a rush by depositors to withdraw their savings or transfer them abroad when the banks reopen
The central bank has pledged not to impose capital controls when banks re open measures that could deter the currency inflows and investment Lebanon badly needs to weather its most severe economic pressures since the 1975 90 civil war
But seven banking sources said on Thursday that while Governor Riad Salameh was sticking to that policy commercial banks would only be allowing transfers abroad in cases such as payments to children for healthcare or loan payments
Salameh was leaving it to commercial banks to decide on individual policies that could make it harder move funds overseas and convert them into foreign currency and less attractive to withdraw savings
He is not officially declaring capital controls but left it to the banks to do it a senior banker told Reuters
On Friday transfers abroad will be for critical and fundamental matters one of the sources said adding that they will reconsider the situation on Monday
The sources said banks will decide on a customer by customer basis who will be able to transfer money out
The banks have been holding crisis meetings with Salameh over the situation Salameh told Reuters on Monday there would be no capital controls and no haircut when banks reopen
After protests subsided on Wednesday the Association of Banks in Lebanon said the banks would reopen as previously announced on Friday to provide for pressing and fundamental needs including salary payments
The association hopes that all bank customers understand the current situation and respond positively to serve their own interests and the interests of the country during this exceptional period it said in a statement on Thursday
Three of the sources said banks will also likely offer incentives including better interest rates and different maturity dates and try to verbally persuade people to keep their money put three of the banking sources said
A week ago ratings agency S P placed Lebanon s country ratings on creditwatch negative over concerns about declining currency inflows
It also said that despite reasonably high levels of gross foreign exchange reserves including gold of almost 50 billion the imposition of soft capital controls raised questions about the monetary regime S P also said it understood that banks have imposed restrictions on U S dollar withdrawals
As a net importer with a currency pegged to the dollar Lebanon needs steady financial inflows Inflows from the large Lebanese diaspora have kept the economy afloat for decades
The techniques are not entirely new
As political and economic pressures have built in Lebanon in the two years since Prime Minister Saad al Hariri last submitted his resignation which proved only temporary Lebanese have encountered procedural obstacles and discouragement from banks when trying to convert pound deposits into dollars or move funds abroad Incentives included raising interest rates and making sure term deposits are held to maturity
Some banks already stopped dispensing dollars through ATMs during the protests and banks have been replenishing ATMs more regularly as they have often run out of cash during the bank closures
Banks might also decide that transfers abroad will have to be done by cheque which takes longer than an electronic transfer three sources said
Lebanon has a debt to GDP ratio of around 150 the third highest in the world
A stagnant local economy and a slowdown in cash injections from Lebanese abroad have put pressure on the central bank s foreign currency reserves in recent years Recent months have seen the emergence of a parallel exchange market for dollars
The build up of economic and political pressure has made dollars harder to come by and weakened the pound against the dollar on the parallel exchange market with a discount to the official two decade old peg around 20
Giyas Gokkent of JPMorgan NYSE JPM Securities said any capital flight and a run on the banks would be a significant concern
But the reason Lebanon has been resilient in the past still holds and that is when you compare any reasonable assumption for outflows the central bank s reserves are much larger and are sufficient to cover that at least in the near term |
JPM | Momentum ETFs To Buy As US China Adopt Peacemaking Tone | The month of August has witnessed neck snapping volatility in US China trade ties While the month started on a hostile note the end seems to be quite assuaging at least for now Let s see what has happened so far in the month on the trade front
Ups and Downs in the US China Trade Ties
The month was mostly about tit for tat tariffs between the superpowers the United States and China China levied a round of retaliatory tariffs on U S goods worth 75 billion in the range of which is set The move by China came after the U S government announced on Aug 1 that it is levying a 10 tariff on 300 billion worth of Chinese goods Though Washington delayed some of those tariffs on Aug 13 saying it will be enacted in two tranches the announcement prompted China to retaliate read
After U S markets closed on Aug 23 Trump said he would raise tariffs on 250 billion in Chinese exports to and that the tariffs kicking in next week will now be 15 rather than 10 The first lot of those tariffs will be introduced in September read
However signs of abating tensions were noticed at the end of the month with China saying it won t immediately react to the latest U S tariff increases China is also mulling over in September All these caused a lot of volatility in the market VelocityShares 1x Long VSTOXX Futures ETN has gained about 24 2 in the past month read
Markets Charged Up
No wonder markets are hyped up on possibilities of reconciliation U S China relations have been volatile recently but for now there is a sense that and that has coaxed some traders back into the market said David Madden market analyst at CMC Markets UK as quoted on MarketWatch
Dow Jones Industrial Average gained 326 15 points on Aug 30 Overall SPDR S P 500 ETF NYSE SPY ASX SPY and SPDR Dow Jones Industrial Average NYSE DIA ETF TSXV DIA added about 1 3 each and Invesco QQQ Trust gained more than 1 5
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JPM | Citi And Deutsche Bank s Australian Cartel Case Moves Ahead | One of the Australia s biggest white collar crime prosecutions involving Australia and New Zealand Banking Group OTC ANZBY and the local units of Citigroup NYSE C and Deutsche Bank NYSE DB finally showed progress The news was reported by Reuters Lawyers and representatives of the banks met at the Sydney courtroom for a small administrative hearing ahead of legal argument scheduled to be held later this month Following this the magistrate shifted hearings to a larger room as the court would need to make room for 20 barristers an unusually large number in Australia even for large cases Also the lawyers from both sides are required to submit briefs of evidence to each other a week before scheduled hearings on Sep 25 and Sep 27 If found guilty the banks could face penalties of A 10 million or triple the benefit of the conduct The individuals charged could face 10 years in prison Brief on the CaseIn August 2015 Citigroup Deutsche Bank and JPMorgan NYSE JPM were the underwriters for the institutional placement of nearly 80 8 million shares of ANZ Bank which was conducted to raise capital for meeting regulatory requirements However Citigroup and Deutsche Bank as part of their underwriting commitment created a cartel arrangement They thus reached an understanding for the disposal of 25 5 million shares that the banks absorbed as part of the placement These shares represented less than 1 of ANZ Bank s outstanding shares at that time Having investigated the matter for over two years the Australian Competition and Consumer Commission ACCC had put forth the allegations in June 2018 The regulator laid criminal charges against Citigroup s former Australia head Stephen Roberts its present local head of capital markets John McLean and the bank s London based head of foreign exchange trading Itay Tuchman Further Deutsche Bank s former local chief Michael Ormaechea and former local capital markets head Michael Richardson were sued Also ANZ Bank s treasurer Rick Moscati had been charged for cartel offences JPMorgan was found to be clean by the ACCC and thus faced no charges Currently Deutsche Bank Citigroup and JPMorgan carry a Zacks Rank 3 Hold while ANZ has a Zacks Rank 4 Sell You can see Legalizing THIS Could Be Even Bigger than MarijuanaAmericans spend an estimated 150 billion in this industry every year more than twice as much as they spend on marijuana Now that 8 states have fully legalized it with several more states following close behind Zacks has identified 5 stocks that could soar in response to the powerful demand One industry insider described the future as mind blowing and early investors can still get in ahead of the surge |
JPM | US REIT ETF BBRE Hits New 52 Week High | For investors looking for momentum JPMorgan NYSE JPM BetaBuilders MSCI US REIT ETF is probably a suitable pick The fund just hit a 52 week high up roughly 29 from its 52 week low of 69 49 share But does it have more gains in store Let s take a look at the fund and its near term outlook to gain insight into where it might be headed BBRE in FocusBBRE tracks the U S equity REIT market and invests at least 80 of its assets in securities included in the MSCI US REIT Index BBRE is charging 11 bps in fees The fund has amassed 639 5 million in AUM Why the Move The Federal Reserve has cut interest rate for the first time since 2008 at the FOMC meeting in July 2019 When interest rate drops mortgage rates fall making real estate or refinancing mortgages more affordable This in turn results in higher real estate sales Further escalating Sino US trade war tensions uncertainty in market conditions due to geo political tensions slowdown in the global economy and Brexit woes are making investors jittery adding to the lure of these funds This is because these funds act as a safe haven in times of market turmoil offering higher returns due to their outsized yields More Gains Ahead Currently BBRE has a Zacks Rank 3 Hold making it hard to get a handle on the fund s future returns However it seems that BBRE might remain strong given a Want key ETF info delivered straight to your inbox Zacks free Fund Newsletter will brief you on top news and analysis as well as top performing ETFs each week |
MS | Gold Prices Surge on Safe Haven Demand Weaker Dollar | Investing com Gold prices surged on Friday as American officials dashed hopes for an imminent solution to trade tensions between China and the U S and the dollar suffered from dovish comments from the Federal Reserve and a bearish call from Morgan Stanley NYSE MS
At 10 49 AM ET 15 49 GMT gold futures for December delivery on the Comex division of the New York Mercantile Exchange jumped 22 50 or 1 85 to 1 221 70 a troy ounce
U S China Trade Deal Hopes Fade
Recent hopes that trade tension between China and the U S may be receding on reports of continuing talks ahead of U S President Donald Trump and Chinese President Xi Jinping at the G20 summit later this month began to fade as officials deemed a deal to be unlikely
A senior Trump administration official told Reuters on Thursday that China s written response to U S demands for trade reforms received earlier this week was unlikely to trigger a breakthrough deal
U S Trade Representative Robert Lighthizer on Thursday denied a report that he had told some industry executives that another round of tariffs on Chinese imports had been put on hold as the two nations pursue talks
The plan for the tariffs has not changed at all Any reports to the contrary are incorrect a spokesperson for Lighthizer s office said in a statement
Disappointment saw traders adopt a risk off sentiment on Friday pulling out of equities and into the safe haven precious metal
Dollar Drop Boosts Gold After Dovish Fed Comments Bearish Broker Call
Meanwhile the U S U S dollar index which tracks the greenback against a basket of six major currencies dropped 0 40 to 96 40 by 10 51 AM ET 15 51 GMT
A stronger greenback makes the dollar denominated precious metal more expensive for holders of foreign currencies
Losses in the dollar deepened as Morgan Stanley called a dollar peak on Friday while a Fed policy maker suggested the central bank was near its target
In a bearish stance on the dollar Morgan Stanley commented that weaker equity and credit prices were reasons to pare U S currency exposures
Fed Vice Chairman Richard Clarida told CNBC on Friday that the rates were currently near neutral levels suggesting that the time for a pause could be forthcoming
The remarks followed on the back of a similar message on Wednesday from Fed Chairman Jerome Powell who warned of slowing demand abroad fading fiscal stimulus at home and the lagged economic impact of the Fed s past rate increases suggesting that a pause in tightening may well come in 2019
Chicago Fed President Charles Evans is scheduled to speak on the economy and monetary policy at 11 30 AM ET 16 30 GMT
In other metals trading silver futures jumped 2 82 at 14 345 a troy ounce by 10 51 AM ET 15 51 GMT
Palladium futures rose 1 71 to 1 156 80 an ounce while sister metal platinum edged forward 0 39 at 848 60
In base metals copper traded up 0 58 to 2 765 a pound |
MS | Europe 5G network buildout to trigger deals won t bust capex budgets | By Douglas Busvine BARCELONA Reuters The launch of fifth generation mobile services across Europe looks set to trigger a wave of infrastructure deals as telecoms companies seek ways to upgrade their networks without busting their strained capital budgets The region lags the United States and parts of Asia on rolling out 5G services such as providing wireless broadband to the home and powering connected factories But with Britain and Italy having already held 5G spectrum auctions and Germany s and France s to come next year operators are laying fiber optic cables and looking to densify their networks to guarantee the super fast data speeds and low reaction times or latency that 5G services will need What they aren t doing is raising capital investment telecoms bosses told the Morgan Stanley NYSE MS European Technology Media and Telecoms conference in Barcelona this week Instead many are preparing their portfolios of mobile towers for sale or partnerships with infrastructure specialists that would run them in exchange for fees That would raise money for the telcos buying them time until 5G starts to generate new revenue streams and enabling them to keep paying the chunky dividends that attract investors 5G may be the trigger for deals said Tobias Martinez Gimeno the CEO of Spain s Cellnex which already has tower portfolios in France Spain Italy and the Netherlands and is keen to move into new markets like Germany Deutsche Telekom DE DTEGn the market leader in Europe s largest economy is folding its Dutch and Austrian assets into its towers unit which runs 28 000 base stations and is willing to consider a sale CEO Tim Hoettges says Vodafone LON VOD already has a towers joint venture in Britain and could increase the utilization of assets such as the 58 000 masts it has in Europe by encouraging rival operators to use them or selling a stake to an operator CEO Nick Read said in Barcelona STEADY GROWTH For investors tower operators offer an interesting proposition because their business can be expected to offer predictable revenue growth on the back of rising data volumes Those cash flows can support higher financial leverage and as a result potential returns That makes tower deals potentially attractive to telcos enabling them to realize a capital gain on their physical assets at a time when they are struggling to eke out revenue growth in Europe s mature markets Potential new entrants to the European towers market are taking a close look such as Crown Castle NYSE CCI a U S real estate investment trust that runs 40 000 towers in the United States and Puerto Rico With a market capitalization of 46 billion Crown Castle is worth more than France s biggest telco Orange Crown Castle is very interested in gaining exposure to developed markets in Western Europe where it sees a favorable trade off between risk and reward compared with emerging markets finance chief Daniel Schlanger told the conference That includes towers and so called smallcells or wireless transmitters hooked up to base stations by fiber optic cables added Schlanger Ensuring that more than one operator s smallcells are connected to nodes along such backhaul cables can make their economics attractive he said CAPPING CAPEX Telcos are also looking at ways of sharing infrastructure to limit the cost of 5G investments In Germany for example Telefonica MC TEF Deutschland has struck a deal to connect 5 000 of its base stations to Deutsche Telekom s fiber optic network That will enable the German market No 3 to look at offering 5G fixed wireless broadband following the launch of such a product by U S market leader Verizon NYSE VZ in four cities last month The technology covers the final stretch to the home with a short range wireless link and is cheaper than laying an underground fiber We ve looked at the Verizon case and it s feasible CEO Markus Haas said adding a pilot project in the city of Hamburg had been very encouraging Asked whether he planned to raise investments to cover 5G network investments Haas said he was comfortable with existing guidance that Telefonica Deutschland s capex would be stable in the years to come Orange CFO Ramon Fernandez for his part expects capex to peak at 7 4 billion euros this year as part of an understanding with the French government to improve networks in exchange for the favorable terms under which 5G spectrum was allocated
This story corrects paragraph 3 to show French auction has not happened but is next year |
MS | Furious Traders Slam Crypto Exchange for Fiddling With Contracts | Bloomberg An unorthodox move by one of the world s biggest cryptocurrency exchanges to change the terms on 135 million of derivative contracts has infuriated some traders and saddled several with losses underscoring the risks of using unregulated virtual currency platforms
The episode at Hong Kong based OKEx which claims to handle more than 1 billion of crypto trades daily involved futures on Bitcoin Cash the virtual currency that split into two last week In a decision that traders described as unusual if not unprecedented OKEx forced the early settlement of its Bitcoin Cash contracts without warning on Nov 14 just as prices were tumbling
The move blindsided traders including Qiao Changhe who said his fund lost 700 000 because its hedging position on OKEx was abruptly closed at a level that didn t reflect prevailing market prices
Qiao a former energy futures trader who now runs Cayman Islands registered Consensus Technologies said he would reduce his 5 million fund s use of OKEx because of the way it handled the Bitcoin Cash settlement Four other traders who asked not to be named discussing private information also said they would scale back or end their relationships with the exchange One of them filed a complaint with Hong Kong s Securities and Futures Commission An SFC spokesman declined to comment
OKEx is losing its credibility Qiao said The futures contract became something nonsense not something we could use to hedge
In a series of statements after the early settlement OKEx apologized for the inconvenience it may cause but said the decision was taken to protect customers from the volatility associated with the Bitcoin Cash split
The exchange said it acted without notifying clients to reduce the risk of market manipulation After considering various scenarios we decided that an early settlement was the most fair and rational decision to maintain an orderly market Andy Cheung head of operations at OKEx said in a response to questions from Bloomberg
Crypto traders who spoke with Bloomberg said OKEx was the only exchange they knew of that forced early settlement of Bitcoin Cash contracts
It may not be illegal but it is very unusual said Andrew Sullivan a former managing director for sales trading at Haitong International Securities Group
The controversy is one of many to emerge from the nascent world of cryptocurrency exchanges which proliferated over the past two years as wild swings in Bitcoin and its ilk vaulted digital assets into the public consciousness The trading venues most of which operate with little to no regulation have been dogged by everything from market manipulation to trading outages and cyberthefts
A lack of confidence in crypto exchanges is one reason many institutional investors are proceeding cautiously as they weigh whether to add exposure to digital assets The slow pace of mainstream adoption has contributed to deep losses in virtual currencies this year erasing about 650 billion from the value of digital assets tracked by CoinMarketCap com
OKEx which was founded by Star Xu the entrepreneur behind Chinese crypto exchange OKCoin has been criticized by traders before In August the exchange imposed losses on clients after it was unable to cover the shortfall from a massive wrong way bet by one of its users While the decision complied with OKEx s longstanding socialized clawback policy the episode left many questioning the exchange s ability to manage risk
In the latest incident traders found several reasons to fault OKEx on top of the exchange s decision to force early settlement of its Bitcoin Cash futures
Before the contracts were terminated OKEx announced a change to the composition of the underlying index replacing one of its price sources The move occurred during live trading and triggered a significant repricing of the contracts according to Amber AI a crypto market making firm founded by former Morgan Stanley NYSE MS trader Tiantian Kullander
On Nov 15 a day after the Bitcoin Cash futures settled a technical malfunction at OKEx left traders unable to execute orders for more than two hours during a time of heightened market volatility Amber AI said in a blog post on Monday titled OKEX It s Time to Pay the Piper The firm called for regulation and transparency at OKEx in order to promote and maintain a healthy and fair trading environment |
MS | Corporate America s Debt Boom Looks Like a Bust for the Economy | Bloomberg Despite strong incentives in the Republican tax plan for American executives to expand invest and ultimately boost the U S economy s growth potential a lot of the debt companies are issuing appears to be motivated by something else
Non financial corporate debt stands at 45 6 percent of gross domestic product near the highest in post war record keeping Non residential investment a broad category in the national accounts that includes everything from office buildings to software has been bouncing around the 13 percent of GDP range since 2012
You would think that companies want to add to productivity capacity but we really haven t seen it said Priya Misra head of global rates strategy at TD Securities USA If they view the economy as in the late stages of the expansion then there isn t a lot of confidence about the outlook and it is easier to buy back stock
It s difficult to trace the uses of money raised from debt through the various accounts in the economy But one worry is that rising corporate borrowing isn t sustainable if the trend is more about transferring cash to owners rather than investing in assets or innovations that can produce more cash to pay future bills
When we think about business cycles and what ends them you can always follow the leverage said Ellen Zentner chief U S economist at Morgan Stanley Co NYSE MS It is not a household issue this time it is going to be corporate
One corner of the corporate debt markets that s ringing alarms is leveraged lending or credits to highly indebted companies
Globally new issuance hit a record 788 billion last year the International Monetary Fund said in a recent blog post with the US market accounting for more than 70 percent of the total Credit quality and investor protections have deteriorated and some of the transactions are arranged specifically to extract cash for shareholders while loading a company s balance sheet with debt That can reduce management s flexibility in an economic downturn and forecasters expect U S growth to slow over the next two years
A widening group of financial market regulators and investors are questioning whether the corporate debt bubble is sustainable especially leveraged lending
The Office of Financial Research the U S Treasury s financial market watchdog said rapid growth in leveraged lending is a concern in their annual report to Congress released Nov 15 Last month the Fed s senior supervisor in charge of risk surveillance warned banks of weakness in risk management
Financial Engineering
Tobias Adrian the IMF s financial stability chief and his team warned in the blog post that a lot of the debt issuance looks like financial engineering rather than investments in assets that will pay for the debt in the future
More than half of this year s total involves money borrowed to fund mergers and acquisitions and leveraged buyouts LBOs pay dividends and buy back shares from investors in other words for financial risk taking rather than plain vanilla productive investment he wrote Nov 15
Debt financed U S merger activity totals 717 billion year to date already ahead of any year of the past five except 2016 when it totaled 861 billion Total deal count is 495 this year higher than any other year of the past five except for 2017 which which was 547 That in itself is a poor response to the tax stimulus said Michael Gapen chief U S economist at Barclays LON BARC Plc
Capital investment decisions are multi year processes that take time to plan build and execute he said
Given that the stimulus is a little less than a year old it may take more time for investment spending s share of GDP to rise Still mergers share buybacks and dividends all reveal a preference in the corporate suite for now Gapen said You grow by gaining market share and trying to control input costs and preserving margins because basically your forecast for revenue growth isn t strong he said
Essentially that s a preliminary thumbs down vote that the stimulus from the tax cuts will raise the potential for the economy to grow and that s the problem with the debt bubble he said Debt service is going up while the economy isn t generating more dollars to pay for it
Mergers and acquisitions don t necessarily create new productive assets either In some ways they are a long run forecast by companies that market share is better bought than obtained through growth or innovation |
MS | Is impact investing too good to be true | By Beth Pinsker NEW YORK Reuters There is more to socially responsible investing than just avoiding stocks that are against your principles whether it be guns or tobacco or bad environmental practices Today s version of impact investing directs huge sums of capital into proactive initiatives not as philanthropy but as enterprises that will provide returns One of the key organizations involved in this is the Global Impact Investing Network GIIN a nonprofit based in New York whose members include 280 organizations from 43 countries in an industry that collectively manages about 228 billion in assets The group just held its latest conference in Paris at the end of October drawing 1 300 participants from 80 countries The gathering attracted large institutional investors such as pension funds and foundations insurance giants such as Prudential LON PRU big global banks like JPMorgan Chase Co NYSE JPM and Morgan Stanley NYSE MS along with family offices fund managers and venture capitalists Reuters spoke with Amit Bouri the chief executive officer of GIIN about the future of impact investing Q How does impact investing differ from what is known as ESG investing for environment social and governance A The responsible investing movement started in 1970s with a focus on using investment for good by divesting from things you considered harmful It started with the anti apartheid movement then firearms and tobacco Impact investing incorporates values into investing to achieve positive social or environmental results It s not just about avoiding or about mitigating risk but it is also about addressing inequality climate change increased access to financial services and healthcare and housing for poor people We often see these as being complementary Many who focus on ESG now want to add impact to their portfolios Q Are there impact options for individual investors or do you have to be a big institution or financial firm A There are products at retail level today but limited There is more available to wealthier people who get more sophisticated financial services There s an increasing desire among people to have purpose and impact at the heart of their economic life It s how they consume products they want fair trade or organic It s also how they make employment choices people want their companies to represent their values That s now starting to translate into investing Q Many people assume that impact investing means sacrificing returns What does your data show A When people hear about impact there s a very natural reaction Is this too good to be true We ask the investors in our network if they are meeting their financial objectives and also the impact expectations Over 90 percent of investors say they are meeting or exceeding their financial return expectations The same holds true for impact expectations So far investors are able to achieve both Also for the members we ve tracked over five years their compound annual growth rate is 13 percent Q How do you measure success in impact investing A Our vision for the world is where every investor is taking into account social and environmental impact that this becomes the new normal Right now impact is getting a lot of traction with a broad set of mainstream investors We can see a real possibility of it moving from the exception to the rule
The story corrects to say the assets are for the whole industry not just the members in the second paragraph |
JPM | Gold Falls as Bond Yields Hit Highs on Receding Tail Risks | Investing com Gold prices fell on Monday as risk appetite returned to markets in the wake of positive noises from both Washington and Beijing over their planned phase 1 trade agreement while the European Union finally ended the risk of a disorderly Brexit at the end of the month
The recent breakthrough in Brexit and more meaningfully the truce between the U S and China on trade have led to a significant reduction in tail risk JPMorgan NYSE JPM analysts led by Natasha Kaneva wrote in a weekly note to clients
Given that Federal Reserve Chairman Jerome Powell has listed those as two of the biggest factors behind the uncertainty that has held the U S economy back this year progress on those fronts should logically reduce the need for further interest rate cuts from the central bank
Indeed the bond market appears to have reduced its expectations of Fed cuts substantially in response The two year Treasury yield is more than 25 basis points up from its low in September immediately after President Donald Trump s last big escalation of the trade dispute The two year note yield rose three basis points to 1 65 on Monday while the 10 year and 30 year yields rose by five basis points each
Higher yields on other havens put downward pressure on non interest bearing bullion and by 11 30 AM ET 1530 GMT gold futures for delivery on the Comex exchange were down or 0 8 to 1 493 75 a troy ounce Spot gold fell 0 9 to 1 491 82 an ounce
Silver futures also retreated losing 0 3 to 17 87 an ounce while platinum futures fell 1 0 to 924 30
With most people in the market still betting on a rate cut some have warned that there could be some sharp volatility if the Fed disappoints on Wednesday
Let s be very clear here we would not be at new highs in or we would not have hit these current levels of 3 000 in the S P were it not for complete central bank capitulation said Northman Trader s chief market strategist Sven Henrich Four rate cuts jawboning trade optimism all these valuations have to be justified at the end of the day You cannot lose one of these equations and so markets remain artificially inflated |
JPM | Hong Kong Bank Profits Seen Falling 67 in JPMorgan s Worst Case | Bloomberg Months of protests a worsening economy and a plunge in property prices could translate into severe pain for Hong Kong s banks and threatens to end the city s status as a safe haven for customers savings according to JPMorgan Chase NYSE JPM Co
A stress test performed by the U S bank projected that local lenders including Hang Seng Bank Co and Bank of East Asia Ltd could see earnings slump 24 to 45 next year and 39 to 67 in 2021 That would lead to significant deterioration in return on equity and core capital buffers analysts led by Jemmy Huang told clients in a note Monday
They downgraded Hang Seng Bank to underweight from neutral and said they are taking a cautious view of lenders in the city
The social unrest in Hong Kong has persisted for more than four months and shows no signs of moderation Huang wrote
While the Hong Kong government has laid out policy support including boosting loans to small businesses and cutting banks capital buffers to mitigate an economic downturn history suggests a sustainable rally would not come through until the underlying issues are resolved Huang said Hong Kong banks probably won t outperform the benchmark Hang Seng Index in the next six to 12 months he predicted
Hong Kong may report negative growth this year as the economy reels from the social unrest Financial Secretary Paul Chan wrote in a blog post on Sunday Once Asia s manufacturing powerhouse before the rise of mainland China Hong Kong s freewheeling consumer and finance led economy is vulnerable to a potential collapse in confidence triggered by the turmoil
Declines in residential prices retail and office rents threaten higher credit costs on mortgages and property loans while potential capital outflow and the monetary authority s intervention will hurt banks net interest margin Overseas loans trade finance and lending to wholesale and retail sectors also could be impacted JPMorgan said
Hang Seng Bank controlled HSBC Holdings Plc LON HSBA is likely to be hit the most among peers due to its higher leverage and concentration of Hong Kong dollar denominated portfolio the JPMorgan analysts said Shares of Hang Seng Bank have lost 6 this year while Bank of East Asia tumbled 23
BOC Hong Kong Holdings Ltd may fare better given its sufficient capital position to sustain dividend yields even under stress tests according to the note |
JPM | Mnuchin Open to Looser Rules Backed by Dimon to Ease Repo Stress | Bloomberg U S Treasury Secretary Steven Mnuchin is open to loosening financial crisis era regulations that have stiffened liquidity rules for big banks to relieve possible cash crunches in short term funding markets
Mnuchin said in an interview Tuesday that he had spoken to Jamie Dimon chief executive of JPMorgan Chase NYSE JPM Co and other banks about how to avoid liquidity problems
The banks have raised an issue around intra day liquidity and that is something that makes sense for regulators to look at Mnuchin said in Tel Aviv his first stop during an 11 day trip through the Middle East and India
There may be a way around current regulations that creates more intra day liquidity without raising risks according to Mnuchin
Turmoil last month that led the Fed to inject liquidity for the first time in a decade is largely a result of the technical issue of a corporate tax deadline draining money from the banking system Mnuchin said expressing a widely held view The dysfunction has kept the U S central bank pumping money to quell a surge in short term rates that was pushing up its policy benchmark rate The operations also eased the pain of hedge funds and broker dealers that need to finance their Treasury holdings
Repo glitches have cast a spotlight on how thoroughly the environment for short term funding has changed since the 2008 credit crisis according to bank executives traders and observers of the market They said that s even created a generational gap Big banks and regulators have seen so little repo market turmoil in recent years that they have lost some of their reflexes
Mnuchin said he believes the Fed has resolved the technical issues that caused the glitch and he doesn t expect them to happen again adding that any issues with regulations are separate
But banks say a strict liquidity requirement instituted after the financial crisis is also a contributing factor
To Big to Fail
Regulations introduced after 2008 oblige financial institutions to hold more cash and cash like assets as a buffer against times of stress Systemically important banks JPMorgan is the largest in the U S face year end reviews to determine how much more common equity they must carry
Dimon has said his firm had the cash and willingness to calm repo markets when they went haywire in September but regulations held it back
Instead the Fed began daily liquidity injections as market forces alone weren t able to calm the ructions Even as repo rates have since returned to more normal levels the Fed has also resumed purchases of Treasuries to bolster bank reserves
JPMorgan is building its case with analysts warning that money market stress is likely to get much worse despite the Fed s attempts to fix the problem Conviction is also lacking that the central bank has resolved the issues in the funding markets
It s a reasonable question Have we gone too far in the other direction in requiring the banks to maintain this excess liquidity for intra day operations Mnuchin said
Warren s Letter
However banks are unwilling to go negative with their accounts at the Fed citing regulatory burdens
President Donald Trump has repeatedly vowed to loosen the leash on Wall Street but some of regulators most meaningful efforts to revamp post crisis constraints on big banks have run into problems
Any further effort to loosen the rules is also likely to face push back Senator Elizabeth Warren already waded into the debate around last month s repo turmoil warning Mnuchin not to use the incident as a rationale for weakening post crisis regulations
Warren a front runner in the race to challenge Trump in the 2020 U S presidential election sent a letter to the Treasury earlier this month seeking Mnuchin s views on what triggered the spike in rates for repurchase agreements and expressed concern about potential costs to businesses and consumers if strains persist |
JPM | U S consumer confidence slips housing stabilizing | By Lucia Mutikani WASHINGTON Reuters U S consumer confidence fell for a third straight month in October amid concerns about the short term outlook for business conditions and job prospects but remained at levels consistent with continued growth in consumer spending Other data on Tuesday suggested lower interest rates were lending some support to the struggling housing market Contracts to purchase previously owned homes jumped in September to their highest level in nearly two years and house prices increased solidly in August A stabilizing housing market could underpin consumer spending which is the economy s growth engine We see nothing in today s report to suggest consumers will pull the rug out from the economy with a reduction in their purchases that could slow the economy to a crawl said Chris Rupkey chief economist at MUFG in New York Consumer spending is likely to remain moderate going into 2020 The Conference Board said its consumer confidence index slipped to a reading of 125 9 this month from an upwardly revised 126 3 in September The index was previously reported at 125 1 in September It was 12 points lower than its reading in October last year Economists polled by Reuters had forecast it rising to 128 0 in October The survey s present situation measure based on consumers assessment of current business and labor market conditions increased to 172 3 this month from 170 6 in September But the expectations index drawn from consumers short term outlook for income business and labor market conditions declined to 94 9 from 96 8 last month The survey was published as officials from the Federal Reserve began a two day policy meeting The Fed is expected to cut interest rates for the third time on Wednesday The U S central bank cut rates in September after reducing borrowing costs in July for the first time since 2008 Consumer confidence has been declining largely blamed on a 15 month trade war between the United States and China which has thumped business sentiment leading to a decline in capital expenditure that has contributed to a downturn in manufacturing Still the confidence index remains relatively high In the past confidence declined steadily when the economy was headed toward recession said Ryan Sweet a senior economist at Moody s Analytics in West Chester Pennsylvania The index would need to be around 110 before it would send a stronger recession signal The dollar was trading lower against a basket of currencies while U S Treasury prices rose Stocks on Wall Street were mostly higher Consumer confidence interactive MIXED LABOR MARKET READINGS The Conference Board survey s so called labor market differential derived from data on respondents views on whether jobs are plentiful or hard to get increased to 35 1 in October from 33 5 in September That measure closely correlates to the unemployment rate in the Labor Department s employment report The share of consumers expecting more jobs in the months ahead fell to 16 9 this month from 17 6 in September while those anticipating fewer jobs rose to 17 8 from 15 4 Consumers buying plans were mixed in October Plans to buy a home increased but were little changed for major appliances This would suggest a limited rebound in retail sales in October after they dropped in September for the first time in seven months Consumer s intentions to buy a home were supported by a separate report on Tuesday from the National Association of Realtors showing its Pending Home Sales Index based on contracts signed last month advanced 1 5 to a reading of 108 7 the highest since December 2017 Economists surveyed by Reuters had forecast pending home sales rising 0 9 in September Pending home contracts become sales after a month or two and last month s increase suggested a rebound in existing home sales which declined 2 2 in September Pending home sales surged 3 9 in September from a year ago It looks like the drop in mortgage rates relative to late last year has helped boost activity in the housing market said Daniel Silver an economist at JPMorgan NYSE JPM in New York We think there will be additional increases in existing home sales in upcoming reports But a chronic shortage of homes for sale is constraining the housing market despite the lower mortgage rates Builders continue to complain that a lack of land and labor is making it difficult to break more ground especially on homes priced below 200 000 which are most sought after In September home purchase contracts increased 2 6 in the populous South Contracts rose 3 1 in the Midwest They declined 1 3 in the West and fell 0 4 in the Northeast Separately the S P CoreLogic Case Shiller national house price index increased 3 2 from a year ago in August after rising 3 1 in July That was the first year over year acceleration in the rate of home price growth since March 2018 Persistently low mortgage rates have seemingly ended what might have otherwise been a home price race to the bottom this late in our economic expansion said Ralph McLaughlin deputy chief economist at CoreLogic
USA ECONOMY HOMESALES interactive |
JPM | 4 Trade Ideas For JP Morgan Bonus Idea | Here is your Bonus Idea
JP Morgan NYSE JPM rose off of a December bottom retrenched in March and then continued to a top at the end of April The pullback from there found support in May and reversed It met resistance in July at the prior April high and reversed lower again It has found support the past few weeks at the prior support level building a channel But Friday it pushed lower again
The RSI is in the bearish zone with the MACD flat and negative avoiding a cross up The Bollinger Bands have shifted lower as well There is support at 104 65 and 102 before 101 and 99 then 92 25 Resistance above sits at 109 30 and 111 then 113 and 115 50 before 117 Short interest is low under 1 The company is expected to report earnings next on October 15th The stock pays a dividend with an annual yield of 3 02 and has been trading ex dividend since July 3rd
The August 30 Expiry options chain shows open interest centered on 108 on the put side but 112 on the call side The September options chain shows large open interest at the 5s biggest at 110 and 100 put and 110 and 115 on the call side The October options are the first to cover the earnings report and show open interest build from 100 to a peak at 110 on the put side and from 105 to a peak at 115 on the call side
JP Morgan Ticker JPM
Trade Idea 1 Sell the stock short on a move under 104 50 with a stop at 106 75
Trade Idea 2 Sell the stock short on a move under 104 50 and add a September 107 Call 2 54 while selling the September 100 Put 1 08 to fund some of the protection
Trade Idea 3 Buy the September 104 October 100 Put Diagonal for a 5 cent credit
Trade Idea 4 Buy the October 105 100 95 1 2 Put Spread for 55 cents
Disclaimer The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment I or my affiliates may hold positions or other interests in securities mentioned in the Blog please see my page for my full disclaimer
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