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JPM | Is JPMorgan Intrepid Value Fund A JIVAX A Strong Mutual Fund Pick Right Now | Large Cap Value fund seekers should consider taking a look at JPMorgan NYSE JPM Intrepid Value Fund A JIVAX JIVAX bears a Zacks Mutual Fund Rank of 1 Strong Buy which is based on nine forecasting factors like size cost and past performance
Objective
Large Cap Value mutual funds invest in stocks with a market capitalization of 10 billion or more but whose share prices do not reflect their intrinsic value this value investing strategy often leads to low P E ratios and high dividend yields though growth levels are often curtailed The high growth opportunity of these funds are slowed even further as large cap securities are generally in stable industries with low to moderate growth prospects Therefore Large Cap Value funds are usually more appealing to investors who are interested in a stable income stream
History of Fund Manager
J P Morgan is responsible for JIVAX and the company is based out of Boston MA Since JPMorgan Intrepid Value Fund A made its debut in June of 2005 JIVAX has garnered more than 76 91 million in assets The fund is currently managed by a team of investment professionals
Performance
Investors naturally seek funds with strong performance This fund in particular has delivered a 5 year annualized total return of 7 37 and it sits in the middle third among its category peers Investors who prefer analyzing shorter time frames should look at its 3 year annualized total return of 11 51 which places it in the top third during this time frame
When looking at a fund s performance it is also important to note the standard deviation of the returns The lower the standard deviation the less volatility the fund experiences Compared to the category average of 9 22 the standard deviation of JIVAX over the past three years is 12 21 Over the past 5 years the standard deviation of the fund is 12 6 compared to the category average of 9 58 This makes the fund more volatile than its peers over the past half decade
Risk Factors
Investors should always remember the downsides to a potential investment and this segment carries some risks one should be aware of In the most recent bear market JIVAX lost 53 11 and underperformed comparable funds by 2 47 This means that the fund could possibly be a worse choice than its peers during a down market environment
Investors should not forget about beta an important way to measure a mutual fund s risk compared to the market as a whole JIVAX has a 5 year beta of 1 06 which means it is likely to be more volatile than the market average Alpha is an additional metric to take into consideration since it represents a portfolio s performance on a risk adjusted basis relative to a benchmark which in this case is the S P 500 JIVAX has generated a negative alpha over the past five years of 4 33 demonstrating that managers in this portfolio find it difficult to pick securities that generate better than benchmark returns
Holdings
Investigating the equity holdings of a mutual fund is also a valuable exercise This can show us how the manager is applying their stated methodology as well as if there are any inherent biases in their approach For this particular fund the focus is primarily on equities that are traded in the United States
This fund is currently holding about 77 88 stock in stocks with an average market capitalization of 80 29 billion The fund has the heaviest exposure to the following market sectors Finance Technology Other Turnover is 68 which means on average the fund makes more traders than comparable funds in a given year Expenses
Costs are increasingly important for mutual fund investing and particularly as competition heats up in this market And all things being equal a lower cost product will outperform its otherwise identical counterpart so taking a closer look at these metrics is key for investors In terms of fees JIVAX is a load fund It has an expense ratio of 0 82 compared to the category average of 0 99 JIVAX is actually cheaper than its peers when you consider factors like cost
Investors should also note that the minimum initial investment for the product is 1 000 and that each subsequent investment needs to be at 50
Bottom Line
Overall JPMorgan Intrepid Value Fund A JIVAX has a high Zacks Mutual Fund rank similar performance average downside risk and lower fees compared to its peers
Your research on the Large Cap Value segment doesn t have to stop here You can check out all the great mutual fund tools we have to offer by going to to see the additional features we offer as well for additional information If you want to check out our stock reports as well make sure to go to Zacks com to see all of the great tools we have to offer including our time tested Zacks Rank |
JPM | BTC Jumps Toward 9 000 In Best Performing Month Since 2017 | Bitcoin jumped as much as 10 on Monday to almost breaching 9 000 as it extended the best one month rally since before the token s historic surge in 2017
The largest cryptocurrency climbed as much as 10 Monday from levels late Friday and was trading at 8 826 up 8 8 as of 9 09 a m in New York Rival coins were also stronger at the start of the week Litecoin added more than 12 while Ether the second largest digital token rose 6 8
Bitcoin s stellar run takes it to the highest level since May 2018
Crypto proponents are taking encouragement from a string of recent headlines showing greater interest in the space from mainstream firms AT T Inc NYSE T said last week it will permit customers to pay bills with Bitcoin or Bitcoin cash That followed news that Fidelity Investments was finalizing plans to buy and sell the digital asset for institutional customers
Easier to spend means a greater use case said Mati Greenspan senior market analyst at trading platform eToro in Tel Aviv Greenspan said the overall customer base could reach critical mass and the technology goes from underground to mainstream
The best known digital token is up almost 70 this month despite concerns from JPMorgan Chase Co NYSE JPM strategists that its price may have surged beyond its intrinsic value a concept that not all investors agree applies to a digital currency
Bitcoin s run this year follows a painful downtrend that lasted the majority of last year and saw the digital currency tumble more than 70 Bulls are betting the run could continue as more institutions start to build out their own cryptocurrencies or launch projects using the underlying blockchain technology
It takes two to tango The more merchants that accept crypto encourages more people to adopt it and use it said David Tawil president of crypto hedge fund ProChain Capital That s major
But the crypto meltdown is still fresh on many investors minds and not everyone is betting digital assets will become as widely accepted as enthusiasts hope There are signs the rally is running too hot wrote Bloomberg Intelligence analyst Mike McGlone in a note Crypto transactions for instance have been lagging the broader rally indicating caution for additional price increases he said
This is still the thawing out from the crypto winter that was said Tawil There still may be another pullback before we get to fundamentals truly taking over and speculators and frauds being expunged
Original post |
MS | Zara s Treasure Trove Stores Not So Good for Online Shoppers | Bloomberg The shift to internet shopping isn t playing to the strengths of Zara as it s exposing issues with the fashion retailer s fit product quality and online service according to Credit Suisse SIX CSGN analyst Simon Irwin
Comments about Zara products are poor and declining on consumer review websites Trustpilot and Sitejabber the analyst wrote in a note previewing owner Inditex MC ITX SA s first half results on Sept 12
We believe the treasure trove nature of a Zara shop is still a better experience off line Irwin wrote While online is driving like for like sales growth that can have a negative impact on gross margin he also said
The broker estimates that the Web will represent about 10 percent of Inditex s sales this year up from 2 4 percent in 2013 It also expects 2018 to be the sixth consecutive year of Ebit margin decline
Inditex shares had their worst week in seven years last week falling 8 7 percent after Morgan Stanley NYSE MS published a scathing report saying the retailer has gone from great to good
Credit Suisse lowered its price target to 24 euros from 25 euros and maintained its underperform recommendation |
MS | Zara owner Inditex to sell all its brands online by 2020 | MADRID Reuters Inditex MC ITX the world s largest clothing retailer and owner of the Zara chain said on Tuesday it would sell products from all its brands on the Internet around the world by 2020 including in markets where it does not have any stores Faced with younger online only merchants like Boohoo com and Missguided the Spanish company which pioneered the fast fashion concept in the 1980s is developing new technologies pairing up with tech firms and testing new ways of handling stock Chief Executive Pablo Isla told reporters in Milan that a system whereby online customer orders could be covered with store inventory would be extended to all 96 countries where it has physical stores Inditex sells brands including Pull Bear Massimo Dutti Bershka Stradivarius Oysho and Uterque across its network of almost 7 500 physical shops It operates online in 49 markets We want to make our fashion collections available to all our customers wherever they are in the world Isla said quoted in a statement Even in those markets which do not currently have our bricks and mortar stores Online sales jumped 41 percent in 2017 to reach 10 percent of group net sales although this left it behind some rivals Sweden s H M makes close to 12 percent of sales online
Inditex stock plunged more than 5 percent on the Madrid bourse last week after Morgan Stanley NYSE MS cut its recommendation to underweight citing sensitivity to currency movements and shifts in sales channels |
MS | How Much Worse Can the Emerging Market Slump Get | Bloomberg Emerging market assets have further scope to fall thanks to investors who have been reluctant so far to cut their positions on what s been one of the most popular trades of recent years
Fund manager positions are one of the reasons keeping Morgan Stanley s James Lord bearish even after the MSCI Emerging Market Currencies Index fell to a fresh one year low The pressure on developing nations Wednesday rotated into equities with Hong Kong s benchmark down almost 1 percent and Jakarta s and Manila s sliding nearly 2 percent
We stick to a bearish view across credit rates and FX and hold short positions across most of the high beta space including Indonesia and Malaysia which are two countries we expect investors to increasingly focus on Lord and fellow Morgan Stanley NYSE MS strategists wrote in a report Tuesday
Five years on from the taper tantrum when worries about a rollback in U S Federal Reserve stimulus hit riskier assets emerging economies are beset by the Fed s accelerating destruction of liquidity as it normalizes policy That s sent funding costs up around the world casting a pall over countries that have enjoyed faster growth than in developed nations
Real money positioning is not yet clean and broader external funding challenges are high the Morgan Stanley analysts concluded using a term for non leveraged institutional investors such as mutual and pension funds
The worst hit nations have been those with the weakest fundamentals South Africa s rand led global declines Tuesday as data showed its economy fell into a recession Turkey s lira slid amid concern the nation s central bank will underwhelm investors at its policy meeting next week while the Argentine peso slumped to a record and Indonesia s rupiah sank to the lowest in two decades even after the central bank intensified its fight to protect it
Read more on how these emerging markets hold key to sell off
JPMorgan Chase Co NYSE JPM analysis suggests that while investors have largely cut back on their local currency bond holdings in emerging markets there s scope for further pullback in stocks and fixed income denominated in dollars and other developed country currencies
EM local currency bond managers appear to have been mostly responsible for the recent EM correction JPMorgan strategists including Nikolaos Panigirtzoglou wrote in a note Friday Their analysis showed that active bond fund managers abruptly unwound their positions in local emerging debt last month after building up overweight positions in July The reversal was so big that it probably amounted to capitulation they wrote
Equity managers on the other hand are far from capitulation territory having also shifted into an overweight position in July according to JPMorgan
Active EM equity and hard currency bond fund managers continued to exhibit rather elevated betas during August suggesting that the EM equity and hard currency bond universes are more vulnerable in the event of re escalation in the U S China trade conflict into September the JPMorgan team concluded
For Khiem Do co head of Asian multi asset strategy at Baring Asset Management there s likely to be more turmoil in the absence of the Fed pulling back on the speed of its policy tightening And that looks unlikely bond markets indicate
If the Fed were to pause this would be fantastic news for emerging markets he said in a Bloomberg TV interview from Hong Kong But the Fed is likely going to hike rates again in September December we re not sure they may pause As soon as they pause that would be a massive relief for emerging markets |
MS | China August exports seen strong despite U S tariffs shrinking orders Reuters poll | BEIJING Reuters Official Chinese data this week is expected to show export growth remained strong in August despite rapidly escalating U S tariffs and signs of shrinking export orders a Reuters poll showed But import growth while still solid is expected to downshift from July adding to concerns about slowing domestic demand in the world s second largest economy that has prompted Beijing to shift toward policy easing Even with U S tariffs targeting 50 billion of Chinese exports going into effect for their first full month in August Chinese shipments likely still rose 10 1 percent on year according to median estimates from 26 economists That would mark a slight decline from 12 2 percent in July but would still be the fifth month in a row of double digit gains even as U S trade tensions flared More sweeping U S measures are on the way with President Donald Trump s administration expected to impose duties on another 200 billion of Chinese imports this month Some analysts believe Chinese exporters are continuing to rush out shipments ahead of further U S tariffs buoying the headline growth readings while some companies like steel mills are diversifying and selling more products to other countries Other economists have noted that disruptions in supply chains and prices are likely to be more company specific initially and will take some time to be reflected in broader economy data and corporate earnings reports But official and private manufacturing surveys show global demand for Chinese goods is clearly on a softening trend with export orders shrinking for the last few months in a row In a further tip that China s supply chains are starting to feel the pinch companies in some of its North Asian neighbors such as Japan are reporting weaker Chinese orders business surveys showed China s imports likely rose 18 7 percent in August on year slowing from July s surprisingly high 27 3 percent growth and at odds with a decline suggested in the official factory survey Its overall trade surplus is expected to have expanded to 31 79 billion in August from 28 05 billion the previous month SURPLUS WITH U S A KEY FOCUS The trade surplus with the United States a key point of contention for Trump will be closely dissected Trump s advisers have pointed to weakening in China s economy and its tumbling stock markets as signs that Washington has the upper hand in the trade war So Saturday s data will be closely watched by all sides for signs of an impact from tariffs on 100 billion in two way trade that went into effect on July 6 China s exports to the U S rose 11 2 percent in July while its imports rose 11 1 percent China s surplus with the U S swelled to a record 28 93 billion in June and any further increase could further inflame the bitter dispute with Washington Trump s threat to potential slap 25 percent tariffs on another 200 billion in Chinese exports this month would mark a serious escalation which economists at Morgan Stanley NYSE MS expect would push China to introduce more measures to support its economic growth including boosting credit growth China has threatened tariffs on another 60 billion of U S imports at rates ranging from 5 percent to 25 percent but it is running out of room to retaliate on a dollar for dollar basis We expect that if implemented this latest set of tariffs would likely trigger a meaningful policy response from China which has already embarked on a path of defensive easing the Morgan Stanley economists wrote in a report
Morgan Stanley estimates the final impact of the tariffs after considering the policy response will reduce China s GDP growth by 0 2 percentage point with a 0 1 percentage point decline for U S GDP growth |
MS | Little Relief in Sight as Emerging Stocks Slide Near Bear Market | Bloomberg The rout in emerging markets showed few signs of abating even as some of the worst hit currencies took a breather as an index of stocks slipped toward bear territory and a basket of currencies traded near its lowest since May 2017
The MSCI Emerging Markets Index of shares extended its slide to 19 7 percent from a January peak Among the worst hit stock markets were Saudi Arabia and Indonesia where benchmark indexes tumbled by the most in about two years The Argentina peso and Turkish lira which have led global losses this year eked out gains as the nations took measures to curb the damage
The declines added to concern that investor anxiety is beginning to infect markets whose economies are more robust than others The negative tone was set Tuesday by a U S manufacturing report that boosted the odds of further Federal Reserve rate increases and a strengthening dollar and South African data showing the economy entered into a recession in the second quarter
It s no longer just about EM fundamentals Sameer Goel the head of macro strategy for Asia at Deutsche Bank AG DE DBKGn in Singapore said in a Bloomberg TV interview with David Ingles It s increasingly about contagion which largely happens because of cross holdings and the pressure of redemptions
READ JPMorgan NYSE JPM BlackRock Warn of Contagion Pummeling Emerging Markets
Analysis
Emerging Stocks Are Close to Falling Into a Bear Market Chart
Contagion or Not These Emerging Markets Hold Key to Selloff
2018 s Only Winning EM Currency Is Close to Joining Losers Club
Algebris Says Emerging Market Pain Isn t Over Amid Contagion
Here s How You ll Know the Sharks Have Left EM Waters Macro Man
Deutsche Bank Says These Four Events Could Stave Off EM Collapse
Commentary
We re not yet ready to enter into these markets said Meenal Patel EMEA head of FX commodities rates at JPMorgan Private Bank in London The market is very much focused on those currencies with large amounts of external debt
September is unlikely to provide much relief to emerging markets James Lord and his colleagues at Morgan Stanley NYSE MS in London wrote in a note staying short on currencies from Brazil Mexico South Africa Russia Indonesia India and the Philippines against the dollar euro and yen
It has to get a lot worse before it gets better said Kay Van Petersen global macro strategist at Saxo Capital Markets When you get full contagion everything gets thrown out and we re not there yet
Latin America
ARGENTINA
Merval Index increased 4 2 percent to 28 783 69
Peso gained 1 3 percent to 38 40 per dollar
IMF Director Christine Lagarde is said to have promised to expedite funds to government Argentine journalist Marcelo Bonelli reported
Argentine Default Risk Jumps to Highest Since May 2016 Chart
BRAZIL
Ibovespa advanced 0 7 percent to 75 266 69
Real gained 0 8 percent to 4 1276 per dollar
10 year local bond yield declined six basis points to 12 51 percent
Two major pollsters frustrated expectations for fresh voter data by suspending or canceling poll releases
Market friendly presidential candidate Geraldo Alckmin accused of illegal campaign finance Jota reports citing lawsuit
MEXICO
Mexbol index dipped 0 7 percent to 48 564 01
Peso advanced 0 2 percent to 19 3643 per dollar
10 year local bond yield gained two basis points to 8 037 percent highest on record
Uncertainty about trade deal s future remains high pressuring peso on top of unfavorable macro environment Commerzbank DE CBKG said
Nafta Talks Restart as Trump Congressional Clock Boost Pressure
Click for market news on ANDES
EMEA
TURKEY
Borsa Istanbul 100 Index dipped 0 4 percent to 92 790 99
Lira gained 1 2 percent to 6 5913 per dollar
If the central bank fails to deliver an adequate amount of monetary tightening next week that may spur further lira weakness said Phoenix Kalen a strategist at Societe Generale PA SOGN SA in London
President Recep Tayyip Erdogan said no invitation for a bilateral talk with Donald Trump at UN summit in New York later this month
SOUTH AFRICA
FTSE JSE Africa All Share Index dipped 1 4 percent to 57 102 13
Rand declined 0 6 percent to 15 4354 per dollar weakest in more than two years
9 year local bond yield gained gained one basis point to 9 227 percent highest in more than eight years
The rand is one of the most traded currencies in emerging markets so its vulnerability lies there more than anything else Finance Minister Nhlanhla Nene told Bloomberg
Ruling party said it s concerned about losing support after economy plunged into a recession last quarter
Stock outlook in second half may be brighter said Patrice Rassou head of equities at Sanlam Investment Management in Cape Town
South Africa Targets Structural Reform to Revive Lagging Economy
RUSSIA
MOEX Russia Index dipped 0 3 percent to 2 329 78
Ruble declined 0 2 percent to 68 2125 per dollar
10 year local bond yield advanced nine basis points to 8 89 percent highest in about 21 months
Government axed bond sale amid market volatility
Russian Rate Hike in Play as Ruble Revs Up Inflation at Last
Click for market news on POLAND and HUNGARY
Asia
CHINA
Shanghai Composite Index fell 1 7 percent to 2 704 34
Offshore yuan was little changed at 6 8470 per dollar
10 year local bond yield gained two basis points to 3 635 percent
Donald Trump may proceed with tariffs after public comment period ends Thursday said White House Press Secretary Sarah Sanders
U S trade deficit with China climbed to a record
Investors See Bargains in Depressed China Convertible Bonds
China ETFs See Most Inflows Since 2015 as Stocks Top Value Chart
PBOC Is Said to Have Drained Short Term Liquidity in August
INDIA
Sensex Index dipped 0 4 percent to 38 018 31
Rupee declined 0 3 percent to 71 763 per dollar weakest on record
10 year local bond yield fell one basis point to 8 0522 percent
Nation probably overestimated manufacturing output while calculating economic growth that topped 8 percent last quarter according to a member of the central bank s rate setting panel
Central bank has room to spend up to 30 billion to protect currency according to Nomura Holdings
Rupee Woes to Deepen as India Braces for External Headwinds
Click for more on markets in ASIA |
JPM | Brexit showdown British lawmakers bid to block PM leaving EU with no deal | By Elizabeth Piper Kylie MacLellan and William James LONDON Reuters British lawmakers on Tuesday began a bid to stop Boris Johnson pursuing what they cast as a calamitous no deal Brexit a challenge that a senior government source said would prompt the prime minister to press for a snap election on Oct 14 More than three years after the United Kingdom voted to leave the European Union in a referendum the outcome of the Brexit crisis remains uncertain with a range of options from a turbulent no deal exit to abandoning the entire endeavor Johnson implicitly warned lawmakers on Monday that he would seek an election if they tied his hands in talks to negotiate a last minute divorce deal ruling out ever countenancing a further delay to Brexit scheduled for Oct 31 That sets up an historic showdown between prime minister and parliament in a country once touted as a confident pillar of Western economic and political stability Sterling flirted with some of its lowest levels since 1985 An alliance of opposition lawmakers and rebels in Johnson s Conservative Party put forward a motion on parliament s first day back from its summer break to launch their attempt to block a no deal exit They are confident of victory Johnson cast the challenge as an attempt to force Britain to surrender to the EU just as he hopes to secure concessions on the terms of the divorce a step he said he would never accept It means running up the white flag Johnson told parliament It would enable our friends in Brussels to dictate the terms of the negotiation Just as Johnson began speaking he lost his working majority in parliament when one of his own Conservative lawmakers Phillip Lee crossed the floor of the House of Commons to join the pro EU Liberal Democrats READY TO FIGHT In the eye of the Brexit maelstrom it was unclear if opposition parties would support any move to call an election which requires the support of two thirds of the 650 seat House of Commons If an election is called I am absolutely ready to fight it Labour Party leader Jeremy Corbyn said after a meeting with leaders of other opposition parties while adding that his priority was to prevent a no deal Brexit The pound which has gyrated to the twists and turns of Brexit since the 2016 referendum and is highly sensitive to the prospect of a no deal exit fell as low as 1 1959 Barring a minutes long flash crash in October 2016 sterling has not regularly traded at such low levels since 1985 Fears of an abrupt no deal Brexit were rising elsewhere The European Commission said such a scenario was a very distinct possibility and French Foreign Minister Jean Yves Le Drian said it was the most likely scenario U S Vice President Mike Pence used a visit to Ireland on Tuesday to urge the European Union to negotiate in good faith with Britain The 2016 Brexit referendum showed a United Kingdom divided about much more than the European Union and has fueled soul searching about everything from secession and immigration to capitalism empire and modern Britishness It has also triggered civil war inside both of Britain s main political parties as dozens of lawmakers put what they see as the United Kingdom s fate above that of party loyalty As Johnson played Brexit chess with lawmakers opponents cast his tactics as undemocratic including an order to suspend parliament for more than a month beginning next week That has been followed by his threat to kick rebels out of the ruling party some of them former ministers who left the cabinet just weeks ago WE HAVE THE NUMBERS I think we will have the numbers said one of the rebels Conservative former finance minister Philip Hammond Prime Minister Johnson has always intended that there will be an election The rebel alliance planned to put forward an emergency motion for a vote on Tuesday allowing its members to seize control of the parliamentary agenda the following day to try to pass legislation that would force Johnson to seek a three month delay to Britain s EU exit Johnson raised the stakes however effectively turning it into a confidence vote by making clear that if the government were defeated it would hold a vote on Wednesday to approve an early election most likely to be held on Oct 14 The prime minister s mood is determined his spokesman said He wants to get on with delivering on the result of the referendum and the UK leaving the EU on October 31st ideally with a deal His spokesman cast the rebel bill as a blueprint for legislative purgatory While Johnson said he did not want a snap election a senior government source said lawmakers should be aware that it would be a consequence of their decision to vote against the government on Tuesday I don t want an election You don t want an election Let s get on with the people s agenda Johnson said on Monday at a hastily organized appearance outside Number 10 Downing Street Rebels say the government really wants an election but is trying to blame lawmakers for triggering one The U S investment bank JPMorgan NYSE JPM said an election would make a no deal Brexit more likely GRAPHIC Parliament s active sitting days GRAPHIC Process of a no confidence vote
GRAPHIC Plummeting pound |
JPM | The U S China Endgame Is Getting Harder to Visualize | Bloomberg Want to receive this post in your inbox every day Sign up for the Terms of Trade newsletter and follow Bloomberg Economics on Twitter for more
The economic fallout of President Donald Trump s trade war is becoming easier to see The endgame not so much
U S financial markets are sputtering the outlook for U S farm exports is worsening and a key gauge of American manufacturing just unexpectedly contracted for the first time in three years The next victim of tariffs on Chinese goods may be consumer spending which accounts for about 70 of America s economic activity
As Americans face the prospect of higher prices it seems like a good moment to take a hard look at what exactly Trump is demanding from China He often says he s using tariffs to fight for farmers and factory workers But the dispute at its core is over something much more difficult to achieve than convincing Beijing to buy some soybeans or incentivizing a U S factory to leave China for Vietnam
Last week the U S Trade Representative offered a timely reminder of what it argues are the key Chinese violations at the heart of Trump s trade war In a little noticed World Trade Organization legal brief filed in the midst of the latest volley of import taxes USTR listed the following alleged Chinese abuses
Using foreign ownership restrictions including joint venture requirements and foreign equity limitations to require or pressure technology transfer from foreign companies Technology regulation that forces foreign companies seeking to license technologies to Chinese entities to do so on non market based terms that favor Chinese recipients Investing in and acquiring foreign companies and assets by Chinese companies to obtain cutting edge technologies and intellectual property and generate the transfer of technology to Chinese companies Conducting and supporting unauthorized intrusions into and theft from the computer networks of foreign companies to access their sensitive commercial information and trade secrets China denies it s a bad actor and even filed its own WTO complaint this week against the U S tariffs saying it will defend the rules of the international trade system If and when Trump is able to forge a deal with Xi Jinping even a small one that can be sold as a big win its impact will ultimately be judged on whether it fulfills USTR s four key objectives For the moment the prospect of such a result is getting harder and harder to see
Charting the Trade War
Hopes of finishing a monster Asia Pacific trade pact by year s end may be headed for disappointment again After seven years talks have been mired in disagreements around how to regulate e commerce and labor migration among other issues Now under the weight of trade war pressures regional trade spats and a global economic slowdown a November deadline is looking less realistic
Today s Must Reads
Storm tracker A gauge of the U S export outlook has plunged to the most dire spot on Bloomberg s Trade Tracker as the economic fallout from the trade war widens Recession course The U K may be headed for its first recession since the financial crisis after Brexit uncertainty hobbled the nation s services industries more than expected Early frost The Bank of Canada is expected to open the door further to interest rate cuts amid worries U S China tensions will curb a relatively robust expansion at home Consumer drivers JPMorgan Chase NYSE JPM says global retail sales rose 4 8 last quarter buoyed by still tight labor markets But a factory slump may change that Brexit divisions U K Prime Minister Boris Johnson began moves to trigger a snap election after a humiliating defeat for his EU exit strategy left his ruling party in tatters Economic Analysis
Car wars Trump can t withhold auto tariff report conservative group says in lawsuit Rubber match Lowered anti dumping duties on imports of certain off the road tires from China were upheld by the U S Court of International Trade Coming Up
Sept 6 France trade balance Sept 8 China trade balance Sept 9 Germany Taiwan U K trade balancesLike Terms of Trade
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JPM | Scor CEO sets three year growth targets to reassure shareholders | By Inti Landauro
PARIS Reuters French reinsurer Scor s PA SCOR CEO Denis Kessler who opposed a takeover by rival Covea last year on Wednesday unveiled growth targets for 2019 2021 as he sought to allay investor concerns over his strategy for the group
In a new strategic plan dubbed Quantum Leap the seventh since he took over in 2002 Kessler forecast gross written premiums would grow organically by an annual average of 4 to 7
Kessler who is also chairman said he sought a return on equity at or above 800 basis points above the 5 year risk free rate
Over the plan s period Scor will continue to combine growth profitability and solvency to create value benefiting to all stakeholders he said
The CEO s previous strategic plan for 2016 2019 had set the same targets for growth and return on equity Both objectives were broadly met
Scor s share price rose 1 7 percent in early trading outperforming the CAC 40 index but by lunchtime were hovering only fractionally above their opening price of 36 59 euros
JPMorgan NYSE JPM which rates the shares overweight said the headline targets were in line with its expectations
We believe they continue to underpin a healthy organic growth outlook over the coming years the investment bank said in a research note
Kessler 67 has had to face down investor disquiet over his ability to generate shareholder returns after he opposed an 8 2 billion euro 9 14 billion takeover bid by unlisted rival Covea in September 2018
Activist fund CIAM asked fellow shareholders to remove Kessler from the board The fund said the rejection of Covea s bid and a subsequent lawsuit filed by Scor against Covea for breach of trust were detrimental to shareholder interests
In April though three quarters of shareholders voted for Kessler to remain CEO while about 54 approved his pay package
He is expected to reveal a succession plan in late 2020 with his current and final term due to end in mid 2021
Scor also said it would invest 250 million euros to implement the plan mainly n technological upgrades |
JPM | StockBeat Europe s Hottest Fast Fashion Stock Is No Sob Story | By Geoffrey Smith
Investing com Shares in U K online fast fashion chain Boohoo com LON BOOH leaped 14 to a new all time high Thursday after the company raised its guidance for the current financial year
Ahead of its scheduled half year update the company said it now expects sales to grow by between 33 and 38 in the 12 months through next February It had previously guided for sales growth of 25 30
It also upheld its guidance that its EBITDA margin would stay at around 10 this year banishing fears that the need to invest in rapid upscaling would eat into profits as it has done among some of its rivals
The shares rose as high as 285 95 pence before retreating to 277 36 by 4 30 AM ET 0830 GMT still a gain of 14 on the day They re now up 58 so far this year with only German rival Zalando DE ZALG which had fallen much more sharply at the end of 2018 performing better in the fashion space
The latest upgrade to Boohoo s forecasts comes only weeks after its latest acquisitions which bolstered a growing reputation for snapping up brands on the cheap It bought the online business of Karen Millen and Coast out of insolvency proceedings last month in what could be a significant departure upmarket for a company that has previously concentrated on low cost items for the younger audience
Further afield Europe s markets rose for a fifth day out of the last six supported by hopes of trade d tente between the U S and China after the Chinese Commerce Ministry said they would meet for talks in early October The U S side said only the talks would take place in the coming weeks
The benchmark Euro STOXX 600 was up 0 5 at 385 24 its highest since early August It s now up 5 5 from the depths it plumbed after the escalation of the trade war at the start of last month
The German DAX was the biggest beneficiary with exporters and cyclical goods pushing it to a 0 8 gain That was despite a bigger than expected drop in manufacturing orders in July that puts Europe s biggest economy on track for a second straight quarter of contraction in the third quarter
The rally in Italy also continued the FTSE MIB adding 0 4 as the new government of Giuseppe Conte was sworn in In both Germany and Italy chipmakers were the biggest gainers after a sectoral upgrade from JPMorgan NYSE JPM on Wednesday Infineon SIX IFXGn rose 4 3 while STMicroelectronics PA STM was up 4 0
The U K FTSE 100 was the only major index in negative territory reflecting further gains in sterling after the House of Commons voted to block a No Deal Brexit on Oct 31 The bill is likely pass into law by Friday according to the Press Association but that won t end the political uncertainty as Prime Minister Boris Johnson continues to press for a General Election |
JPM | JPMorgan Rises 3 | Investing com JPMorgan NYSE JPM rose by 3 13 to trade at 113 31 by 10 08 14 08 GMT on Thursday on the NYSE exchange
The volume of JPMorgan shares traded since the start of the session was 3 18M JPMorgan has traded in a range of 111 22 to 113 33 on the day
The stock has traded at 113 3100 at its highest and 104 8400 at its lowest during the past seven days |
JPM | Yes Gold Is Being Manipulated But To What Extent | Another Day Another Banking Scandal
Last week the European Commission announced that it s fining five big banks for rigging the international foreign exchange forex market As many as 11 world currencies including the euro British pound Japanese yen and U S dollar were allegedly manipulated by traders working at Barclays LON BARC the Royal Bank of Scotland LON RBS Citigroup NYSE C JPMorgan NYSE JPM and Japan s MUFG Bank
Altogether the fines come out to a whopping 1 07 billion euros 1 2 billion
According to the press release dated May 16 the infringements took place between December 2007 and January 2013 Traders working on behalf of the offending banks secretly shared sensitive trading information This enabled the traders who were direct competitors to make informed market decisions on whether to sell or buy the currencies they had in their portfolios and when
Financial services is already the least trusted sector among seven others worldwide according to the 2019 Edelman Trust Barometer News of the coordinated forex rigging which follows other high profile scandals such as the Libor scandal Wells Fargo NYSE WFC fake account scandal gold fixing scandal which I ll get to later among many more is unlikely to improve public sentiment
As I ve said before I believe that strong distrust in traditional financial services especially among millennials greatly contributed to early bitcoin adoption With bitcoin there s no third party risk Transactions are peer to peer Users of the digital coin find this sort of freedom very attractive and because it s built on top of blockchain technology price manipulation is much more difficult to pull off
That s not to say that bitcoin hasn t been or isn t still being manipulated There are those who argue that the cryptocurrency s meteoric rise to nearly 20 000 in late 2017 was at least in part due to coordinated price manipulation And early Friday morning its price dramatically lost as much as 1 702 its worst intraday drop since January 2018 after breaching 8 300 on Thursday
Bitcoin Seen As A Threat To Global Fiat Currencies
None of this should come as a surprise to anyone who s been paying attention of course I ve seen and heard the aggressive stance bankers have taken against bitcoin and other cryptocurrencies as I m sure you have
Quite simply banks don t want the competition If you recall JPMorgan CEO Jamie Dimon called people who buy bitcoin stupid and said he d fire any trader caught trading it And then in an amazing about face his bank announced in February the rollout of its own digital coin the JPM Coin
Also consider the comments made by Agust n Carstens general manager of the Bank of International Settlements BIS The BIS in case you re unfamiliar is often called the central bank of central banks That s because it provides banking services to as many as 60 financial institutions from all over the world including heavyweights such as the Federal Reserve Bank of England BoE European Central Bank ECB and Bank of Japan BoJ Its influence on global monetary and financial policy in other words is monolithic
Ever since bitcoin hit 4 000 or so General Manager Carstens has been on a global PR campaign to stop its momentum because again it s seen as a threat to sovereign currencies As recently as November of last year he laid out 10 reasons why central banks should discourage the use of digital coins
Among them Cryptocurrencies are highly conducive to illegal activities
Anyone else see the irony Fiat currencies are still very much used to conduct illegal activities despite the enactment of anti money laundering AML and know your customer KYC laws In November 2017 Jennifer Fowler deputy assistant secretary for the Office of Terrorist Financing and Financial Crimes TFFC testified before the Senate Judiciary Committee that the U S dollar continues to be a popular and persistent method of illicit commerce and money laundering and that although virtual currencies are also used the volume is small compared to the volume of illicit activity through traditional financial services
The BIS doesn t stop at bitcoin though It s also put gold in its crosshairs
Gold Suppression It s Not A Question Of IF But To WHAT EXTENT
First of all let me say that gold price suppression fixing rigging manipulating or however else you want to think about it is not just a conspiracy theory It s a well documented phenomenon with real actors and real ramifications In 2014 Barclays was fined nearly 44 million for failing to prevent traders from manipulating the London gold fix Late last year a former JPMorgan trader pleaded guilty to manipulating the U S metals markets Remember the gold futures flash crash of 2014
The best people to speak to about this subject are the folks at the Gold Anti Trust Action Committee or GATA For 20 years now Chris Powell and others at GATA have made it their mission to expose collusion by international financial institutions to control the price and supply of gold
Last week I had the chance to sit down with Chris GATA s secretary treasurer I asked him how institutions manage to manipulate the price of gold on such a global scale
It s done largely in the futures markets Chris told me It s also done in the London over the counter OTC market The mechanisms are gold swaps and leases between central banks and bullion banks and through the sale of futures contracts
GATA s Robert Lambourne reported on this in March of this year As you can see in the chart below gold rallied between November 2018 and February when it peaked at around 1 343 an ounce Ordinarily you could expect inventory in the bullion backed SPDR Gold Shares ETF NYSE GLD to continue to climb at least until then But that s not at all what happened Three weeks before the price of gold peaked the holdings in the GLD curiously began to fall and by March 4 the ETF had lost approximately 57 8 metric tonnes And because the GLD is the largest gold ETF in the world its value stands at 30 2 billion as of this week such selling will naturally impact the price of gold Sure enough the yellow metal soon fell below 1 300 What gives
The answer to that question may lie in the BIS monthly statement of account for February According to Robert s reporting the BIS was still actively trading gold swaps which it uses to gain access to the metal held by commercial banks Specifically the bank placed as much as 56 metric tonnes of gold swaps into the market in February
If you ask me that amount is remarkably close to the 57 8 tonnes that fled the SPDR Gold Shares NYSE GLD in the first quarter of this year
Hard to believe This is only scratching the surface I ll let Chris Powell be the one to elaborate but it will have to wait until a Frank Talk later this week Trust me when I say this is an interview you don t want to miss Make sure you re subscribed to Frank Talk so you can be one of the first to read it
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MS | Japan stocks to rise in 2018 underpinned by corporate profits U S economy Reuters Poll | By Ayai Tomisawa TOKYO Reuters Japanese stocks are forecast to rise 5 percent over the rest of this year with stronger corporate profits expected to underpin sentiment but selling by foreign investors could cap the upside a Reuters poll found In recent weeks Sino U S trade frictions and a selloff in emerging market currencies have heightened risk aversion pushing Japanese stocks to one month lows as investors flocked to the safe haven yen A stronger yen cuts Japanese manufacturers profits made abroad when repatriated But an easing in U S Mexico trade tensions over the North American Free Trade Agreement NAFTA provided relief to the market this week Although lingering trade frictions could limit the upside Japanese stocks will move up steadily toward the end of the year but then flatline according to median estimates from 26 analysts and fund managers polled by Reuters in the past week The Nikkei share average is expected to trade at 24 000 at year end up 5 percent from Thursday s close of 22 869 50 the median forecast showed It is also seen trading at 24 000 at mid 2019 and end 2019 Forecasts for end 2018 ranged from 22 000 to 26 000 They were 19 000 to 27 500 for mid 2019 In the previous poll in June forecasts ranged from 21 000 to 26 000 for end December 2018 U S Federal Reserve Chairman Jerome Powell last week emphasized the central bank s push to raise interest rates despite Trump s criticism of higher borrowing costs We can expect a strong U S economy and the dollar yen rate is higher than what most Japanese companies have expected this fiscal year An expected Fed rate hike will likely prop up the dollar against the yen said Jun Kitazawa an equity strategist at Miki Securities who forecast the Nikkei to trade at 24 000 at year end and 25 000 in mid 2019 Despite stronger Japanese corporate earnings outlook Japanese stocks price to earnings ratio has fallen to around 13 times making them attractive However analysts say foreign investors massive sell off in Japanese equities on concerns about a global trade war could possibly offset some of these positive factors Companies earnings have been better than expected but foreigners have sold around a net 8 trillion yen since the beginning of the year said Toru Ibayashi executive director of Wealth Management at UBS Securities So it shows how the market is being supported by the Bank Of Japan s buying of exchange traded funds Exchange data this week showed foreign investors have sold a net 8 03 trillion yen in Japanese cash equities and futures since the beginning of the year Ibayashi expects the Nikkei to trade at 22 000 at end 2018 and 24 000 at mid 2019 EARNINGS Companies reported an increase of 19 percent in their pretax profits for the April June period while analysts expect their annual pretax profits to rise 11 4 percent for the fiscal year ending March 2019 according to Daiwa Securities Daiwa expects companies to raise their conservative outlooks when they report mid term results later this year For now most companies base their dollar yen rate assumptions at an average of 107 108 yen this fiscal year The dollar traded at about 111 25 yen on Thursday The midterm earnings season this fall will likely serve as a tailwind to Japanese equities The market may start posting gains in November said Hiroyuki Nakai an executive fellow at Tokai Tokyo Research Center Nakai expects the Nikkei to trade at 24 500 in end 2018 Market participants also said a strong Japanese economy and upbeat capital spending could lift investors risk stance Japan s economy grew 1 9 percent on an annualized basis in April June helped by strong household and business spending data showed earlier this month Capital expenditure rose 1 3 percent marking the biggest gain since October December 2016 Japanese companies managers are eager to invest Machine tool investment data also shows that domestic demand is intact said Norihiro Fujito chief investment strategist at Mitsubishi UFJ Morgan Stanley NYSE MS Securities But he warned that Japanese manufacturers could be hit by falling demand from China Fujito said the Nikkei could try 23 500 before year end but sees the benchmark index falling to 22 000 next year Negative risks include a slowdown in consumption in the wake of a planned tax hike and emerging market weakness which could offset the U S economic boost Japan plans to hike sales taxes to 10 percent from 8 percent in 2019 Additional polling by Indradip Ghosh Editing by Jonathan Cable and Sam Holmes |
MS | China s Factories Show Resilience Amid Trump Tariff Danger | Bloomberg China s official factory gauge unexpectedly strengthened this month signaling some resilience as the economy braces for an escalation of the trade war with the U S
The manufacturing purchasing managers index stood at 51 3 in August versus 51 2 in July and exceeded the forecast of 51 in a Bloomberg survey of economists The non manufacturing PMI covering services and construction also rose to 54 2 the statistics bureau said Friday compared with 54 in July Levels above 50 indicate improvement
With the U S already raising tariffs on 50 billion of Chinese goods such strength may prove difficult to sustain and levies on another 200 billion may be imposed as soon as next week That said government measures to ensure the supply of credit and stoke investment in infrastructure may be already brightening the outlook among businesses at home
The nation s pro growth measures have taken effect to stabilize sentiment said Ding Shuang chief economist for Greater China and North Asia at Standard Chartered who accurately forecast the PMI this month Ding cited more proactive fiscal policy tax cuts expedited bond sales and better credit access for smaller companies
The onshore yuan climbed 0 15 percent to 6 8339 to the dollar as of 10 51 after the People s Bank of China set a stronger than expected daily reference rate The Shanghai Composite Index dropped 0 5 percent while the Hang Seng Index declined 1 2 percent
China announced Thursday that it will exempt foreign institutions from paying some taxes on interest gains in the onshore bond market as part of efforts to support the economy The exemption announced after a State Council meeting presided over by Premier Li Keqiang covered corporate income and value added taxes for a period tentatively set at three years
The reading for smaller manufacturers rose to 50 in August after remaining in the deterioration zone for three months highlighting that central bank policies to support that vital part of the economy may be helping to underpin confidence The reading for larger companies edged lower for a third month though was still at a robust level of 52 1
Steady production and new domestic orders outweighed weaker new export orders Morgan Stanley NYSE MS economists including Jenny Zheng wrote in a note The economy could remain on a path of soft landing as defensive easing measures could boost infrastructure investment and cushion potential impact from trade tensions
The official PMI result runs counter to some leading data as collated by Bloomberg Economics deck of early indicators That showed output weakening again in August as demand from key trading partners softened and sentiment among stock investors worsened
This quarter and the next three are going to be pretty weak said Andrew Polk co founder of research firm Trivium China in Beijing Infrastructure investment is just so low it s going to be a real challenge for them to get that unstuck There s not enough shovel ready projects so they can dump in all the bond financing for local governments That money s not going to be deployed very quickly
External Demand
Risks to external demand from the trade tensions appeared in the data highlighting the uncertainties for Chinese factories President Donald Trump wants to move ahead with a plan to impose tariffs on 200 billion in Chinese imports as soon as a public comment period concludes next week
New export orders dropped to 49 4 the lowest level since February when the Chinese New Year disrupted production |
MS | Bruised bankers seek consolation prizes after shelved Aramco IPO | By Saeed Azhar Hadeel Al Sayegh and Clara Denina DUBAI LONDON Reuters Investment banks which lost out on big payouts for the work on the shelved listing of oil giant Aramco are lining up for a raft of other projects as Saudi Arabia pursues reforms Banks including JPMorgan N JPM and Morgan Stanley N MS worked for months to prepare what would have been the biggest ever stock market debut But the plan to sell 5 percent of the company for a targeted 100 billion was pulled The bankers were paid retainer fees but were expecting around 200 million would be shared among all the banks involved when the deal was done Now they are pinning their hopes on other projects from a privatization program that is part of Riyadh s economic reform plan to loosen its reliance on oil Without the funds from the Aramco sale the government is looking to raise money in other ways creating new opportunities for the banks bankers say Teams from JP Morgan and Morgan Stanley that worked on the IPO have been shifted to advise on Aramco planned acquisition of up to 70 billion in petrochemicals firm Saudi Basic Industries SABIC SE 2010 three people familiar with the details of the transaction told Reuters HSBC L HSBA which was also an adviser on the Aramco IPO is expected to play a role in putting together the debt to fund that purchase they said One of the sources said the issue could exceed the 2016 sovereign bond issue of 17 5 billion which was a record for the kingdom Aramco said earlier this month it was in very early stage discussions with the kingdom s Public Investment Fund PIF to acquire the stake in SABIC but has not said how it will finance the deal Spokespeople for JP Morgan Morgan Stanley and HSBC declined to comment on their role in the Sabic deal None of those banks have confirmed they were involved in the Aramco IPO Other deals are expected to be forthcoming The PIF sovereign wealth fund has had to reconsider its budget in the last three months after finding out that they wouldn t be getting 100 billion from the Aramco IPO right away said a banker in Saudi Arabia So there s been a flurry of activity as they look to raise cash in other ways A lot of these are smaller deals 1 billion here and there but all geared toward financing their commitments for big infrastructure projects without slowing down their timelines The banker did not give details of the other deals PIF officials did not respond to a Reuters request for comment After Reuters reported last week that the Aramco deal had been shelved Energy Minister Khalid al Falih said the government was committed to conducting the IPO at an unspecified date in the future BANKERS WARY The bankers are nevertheless wary after the Aramco experience It highlighted the hurdles of doing business in a country governed by an absolute monarchy where public protest and political parties are banned It also added to uncertainty after scores of top royals ministers and businessmen were rounded up in an anti corruption campaign last November The preparation for the listing was launched by Crown Prince Mohammed bin Salman two years ago and some bankers had flown to the kingdom hundreds of times to work in the Dhahran camp a gated compound for the oil group s residents A different source said Aramco had demanded it deal only with the very top bankers Another person familiar with the Aramco deal said he had made more than 20 trips to Dhahran over 18 months but with little to show for it He said his team would give the same presentation each time without getting much feedback Bankers also say the fees are modest in comparison to those paid by other countries The deal flow is huge but there s a worry that the fees coming from these projects are low said a Gulf based banker who spoke on conditions of anonymity Saudi Arabia is lower than Hong Kong and Dubai when it comes to fees he said It s all substandard Typical fees for banks doing IPOs in more developed markets are around 1 percent of the overall deal while estimates from bankers and analysts for an Aramco IPO was 0 2 percent The 35 banks who worked on Chinese internet giant Alibaba s 21 8 billion float led by six main underwriters pocketed an estimated 300 million among them according to Thomson Reuters data PLENTY OF DEALS Still the rewards from a privatization that analysts expect to generate 9 billion to 11 billion by 2020 are too big for bankers to ignore HSBC is already advising Saudi International Petrochemical Company on a potential merger with Sahara Petrochemical which is being advised by Morgan Stanley according to disclosures from March U S bank Citigroup N C obtained a license to conduct capital markets business in Saudi Arabia last year after an absence of almost 13 years Moelis is preparing to apply for an advisory license in Saudi Arabia and U S boutique investment bank Evercore opened an office in Dubai in 2017 The government is also trying to make it easier to do deals changing the law to allow alternatives to traditional debt finance There are plenty of deals to be made from bigger players looking to consolidate their market position and buy out competitors said Mohammed Fahmi the Dubai based co Head of EFG Hermes Investment Banking
Good stories will continue to see a following |
MS | Exclusive Brazilian leftist meets investors to tame fears of PT return to power | By Lisandra Paraguassu BRASILIA Reuters Fernando Haddad the Workers Party vice presidential candidate who could be catapulted to Brazil s presidency if Luiz Inacio Lula da Silva is barred from running has quietly met with major investors to tame fears of a leftist return to power Haddad an economist told Reuters he has met with several investment firms and banks in recent weeks an echo of Lula s move toward the center in 2002 when he won his first term after pledging to follow orthodox economic policies Haddad did not provide details about the meetings However several market sources and PT members who took part said he met with senior executives of JP Morgan Morgan Stanley NYSE MS Itau UBS BTG Pactual XP Investimentos and Guide Investimentos in the past few weeks He plans to meet with top executives of Credit Suisse SIX CSGN and senior officials at Brazil s national banking federation Febraban in the coming days according to PT members who accompanied him to the meetings The press offices of those firms did not immediately reply to requests for comment Other candidates on competing presidential tickets have met with financial firms but Haddad s making the pilgrimage to Sao Paulo s business center recently was unexpected as Lula insists he is the victim of a right wing conspiracy of elites to block his returning to power and shifting the country back on a leftward course Haddad said he and Lula agree that Brazil faces serious tax credit and fiscal problems but both thought the reforms to labor laws and government spending made under President Michel Temer were counterproductive because they had not sparked growth A former mayor of Sao Paulo Haddad said he supports inflation targeting floating exchange rates and budget surpluses However he provided no details on the means or targets the PT would employ if returned to power Lula s continued dominance in election polls has rattled markets with Brazil s currency now trading near record lows Since he was found guilty of graft Lula s rhetoric has skewed far to the left of the pragmatic centrist political image he cultivated while in power The former union leader held office from 2003 2010 Haddad showed that he is far more open to dialogue than we were expecting said an investment firm economist who met with him recently He sold a moderate image that could calm the market but there remain the same old fears of the PT The main worry is that Haddad lacks a strong PT base despite being chosen by Lula to fill his spot on the ticket if he is barred The party shifted left after Lula s handpicked successor Dilma Rousseff was impeached raising concerns Haddad cannot tame its militant factions HADDAD VS BOLSONARO October s election is the most unpredictable since Brazil s return to democracy three decades ago The country s top electoral court is expected to bar Lula from running within days as his corruption conviction upheld on appeal disqualifies him under a clean slate law Lula 72 says he is innocent and was singled out in corruption investigations so he could not regain the presidency and reverse Temer s reforms which included loosening labor laws and creating a 20 year government spending cap The same polls that show Lula way ahead also indicate that if barred he could likely transfer enough of his support to Haddad to push him into a second round runoff Haddad 55 would likely face far right candidate Jair Bolsonaro 63 who is ahead in the polls when Lula s name is excluded and who named a well known investment banker to head his economic team Five analysts and economists from different firms who met with Haddad told Reuters they were soothed by his pragmatic talk but that the market remains divided between Bolsonaro and Haddad when it comes to who can jumpstart the globe s eighth largest economy The Bolsonaro economic team s talk of mass privatizations pleases market players but the candidate s lengthy statist voting record during nearly three decades in congress and unpredictability are increasingly generating anxiety and doubt That benefits Haddad and market sources who met with him where impressed by his talk of a pragmatic economic approach and willingness to entertain different ideas Our evaluation was that Haddad is much more reasonable than the PT as whole said one analyst Another plus for Haddad market sources said was that even amid the political upheaval of recent years the PT would be more prepared to engage in the political horse trading required to govern as opposed to Bolsonaro a member of Social Liberal Party a fringe party with virtually no coalition Samuel Pessoa an economist and researcher with the Getulio Vargas Foundation in Sao Paulo who is a member of the PT s traditional rival PSDB has known Haddad since the pair studied economics together He said Haddad is not an adventurer when it comes to policy and that he would not morph into a member of the PT s more militant and leftwing factions But Pessoa said he shared the same concerns analysts expressed
The PT right now is very bitter spiteful and authoritarian Pessoa said Haddad is going to have to work with the more reasonable people within the party |
MS | Ford to cut car models as part of restructuring The Times | Reuters U S automaker Ford Motor Co N F plans to drop production of some of its automobile models as part of a planned operational restructuring announced earlier this year sources told The Times The British newspaper reported that Ford planned to end production of Mondeo Galaxy and S Max models and focus on more lucrative sport utility vehicles Ford also plans to cut its number of dealerships the Times said In July Ford s chief executive officer Jim Hackett said the company planned to spend around 11 billion on a restructuring of its European business Ford lost 73 million in Europe between April and June and faces additional challenges from Britain s plans to leave the European Union the Times said Analysts at Morgan Stanley NYSE MS said Ford could lay off as many as 12 percent of its more than 200 000 workers and that the layoffs would largely be concentrated in Europe The Times said Ford s internal restructuring deliberations would last several more months and may result in folding its European business into a joint venture with a rival |
MS | Sydney Mortgages Signal Australia s Central Bank On Hold to 2020 | Bloomberg A surprise interest rate hike for Australian mortgage holders should further delay a Reserve Bank policy tightening that markets have already pushed out to 2020
Westpac Banking Corp s decision to raise borrowing costs last week will likely be repeated by other major lenders as typically occurs in Australia That would further sideline the RBA already on hold for two years at a record low 1 5 percent and set to remain there at Tuesday s policy meeting On top of that weak investment data suggest the economy may have hit a soft patch
We see economic growth slowing further over 2018 said Daniel Blake a strategist at Morgan Stanley NYSE MS in Sydney ahead of gross domestic product data due Wednesday That will be predominately driven by a weaker consumer as flat real wages a slowing jobs pulse and falling house prices weigh on spending
Westpac s move to lift its key mortgage rate by 14 basis points should add a further impetus to falling house prices in Sydney and Melbourne already fueled by tighter lending standards amid eye watering valuations The bank cited higher funding costs offshore as the U S Federal Reserve raises rates and the Aussie dollar slides for increasing the burden on borrowers already struggling with record household debt and stagnant wages
While bank bill rates have come down the price to borrow large amounts in the U S dollar market is at the highest level in about four years said Martin Whetton an interest rate strategist at Australia New Zealand Banking Group Ltd in Sydney That market remains one of the main global sources for bank funding
The central bank is relying on faster economic growth to increase hiring and boost wages setting the stage for faster inflation and a return to more normalized rate settings While it s likely to be content with softer house prices in the nation s biggest cities after they soared in the five years through 2017 it s wary about the potential impact on consumption from households feeling poorer as the value of their property declines
Westpac s rate move outside of an RBA tightening underscores the tenuous grip of policy makers on borrowing costs which tend to be decided in markets
Furthermore an unexpected drop in business investment in the second quarter falling 2 5 percent versus an expected 0 6 percent gain suggests the economy might have decelerated slightly Indeed the economy is in its longest stretch of sub 2 5 percent investment growth in records dating back 30 years
Annual economic growth probably slowed to 2 8 percent in the three months through June from 3 1 percent in the first quarter economists predicted ahead of this week s data |
JPM | Price Analysis 28 08 BTC ETH XRP BCH LTC BNB EOS BSV XLM XMR | In the past few weeks both Bitcoin and gold have attracted investors who have flocked to safe haven assets due to trade wars and an uncertain geopolitical environment While traditional investors prefer investing in gold the discovery of fake kilogram gold bars in the vault of JP Morgan Chase NYSE JPM points to a forgery crisis While gold owners need an expert to confirm the authenticity of their holding Bitcoin node operators do not need any which is a huge advantage
The government has confiscated gold holdings of the public in the past hence there is a possibility that it can do it again if the economic situation worsens However decentralized digital currencies are not controlled by any government hence they offer greater protection of personal wealth compared to any other asset class during upheavals After the recent anti government protests in Hong Kong businesses and individuals have switched to digital currencies which shows how it is being preferred over fiat currencies |
JPM | Europe cheers Italy pact bond bulls pause for breath | By Marc Jones LONDON Reuters Signs that Italy s latest political drama was over and hopeful noises from Beijing in the trade war pushed Europe s share markets higher on Thursday and paused the relentless steamrollering of global bond yields There was still plenty for bearish investors to chew on however A sudden rush from Argentina to restructure its debt thrust emerging market risk back into the spotlight global recession worries simmered and the pound was groggy after another Brexit related tumble Nevertheless European shares rose nearly 1 early on led by a 1 7 jump in Italy where the government s bond market borrowing costs also rallied to record lows That was after the country s 5 Star Movement and opposition Democratic Party said they would try to form a coalition setting aside years of hostility to avert a snap election and the economic uncertainty that comes with it The two sides still need to agree on a shared policy platform and a team of ministers but 5 Star chief Luigi Di Maio and his PD counterpart Nicola Zingaretti said they had pledged to find common ground for the good of the country We love Italy and we consider it worthwhile to try this experience Zingaretti told reporters Speaking shortly afterwards Di Maio said We made commitments to the Italians and come what may we want to fulfil them There was little reaction from the euro but there was barely any currency market action generally The Japanese yen was a touch higher heading for its biggest monthly rise since May while sterling was flirting with a January 2017 low of 1 2015 against the dollar after Prime Minister Boris Johnson s plan on Wednesday to suspend Britain s parliament increased no deal Brexit nerves China s yuan had dipped for an 11th straight session although a firmer than expected central bank fixing helped stem deeper losses and against a basket of currencies the dollar was steady around 98 190 On the latest trade war development China said it and the United States were discussing the next round of face to face trade talks in September and voiced hopes that U S President Donald Trump would cancel plans for additional trade tariffs In the latest tit for tat escalation of the trade war between the world s two largest economies Trump last Friday announced additional duties of 5 on targeted Chinese imports worth about 550 billion to be imposed in stages from Sept 1 to mid December The announcement came hours after China had unveiled retaliatory tariffs on 75 billion worth of U S goods The most important thing at the moment is to create necessary conditions for both sides to continue negotiations China s commerce ministry spokesman Gao Feng told reporters HOW LOW CAN YOU GO The comments had come after a choppy Asian session MSCI s broadest index of Asia Pacific shares outside Japan fell 0 15 Singapore shares hit eight month lows and Japan s Nikkei ended fractionally lower Bond markets around the world were also still grappling with recession worries Yields on 30 year U S Treasuries and 10 year German bunds had both hit record lows 1 905 percent and minus 0 716 percent respectively Inversion also remains a prominent feature across the U S yield curve where long dated yields are below short dated ones a reliable indicator ahead of U S recessions in the past The 10 year Japanese government bond yield had dipped 1 basis point to minus 0 285 overnight too which is just above its record low of minus 0 300 touched in 2016 Falls in global bond yields reflect growing concerns that long term global growth is slowing down on U S China tensions and worries over subsequent global supply chain disruptions said Tomoo Kinoshita global market strategist at Invesco Asset Management in Tokyo Stock markets on the other hand are supported in the near term by hopes of more stimulus notably from the Federal Reserve and the European Central Bank he said The two major central banks are expected to cut rates next month while many investors believe the Bank of Japan could join the fray if market sentiment weakens further Graphic S P dividend yield vs 30 yr U S Treasury link ARGENTINA RESTRUCTURING Precious metal investors were still on a quest to buy safer assets Gold rose as high as 1 543 per ounce near six year highs of 1 556 1 set earlier in the week while silver rose 1 2 to 18 55 per ounce which is just shy of a 2017 peak of 18 65 an ounce Also reflecting nervousness the Merrill Lynch move index a gauge of investors expectations on how volatile U S bonds will be has risen back near three year highs marked earlier this month The MSCI emerging market currency index was also at its lowest levels since mid November having fallen 0 9 so far this week and set for its biggest monthly fall in more than seven years The latest hit came in Argentina as it said it wanted to restructure a large chunk of its bonds by extending their maturities and to re profile the maturities of debt owed to the IMF under a 57 billion standby agreement The battered peso took another hammering on Wednesday even though the central bank intervened heavily in the foreign exchange market for a second consecutive day Argentine assets have been slammed since business friendly President Mauricio Macri was trounced in primary elections by centre left Peronist challenger Alberto Fernandez
President Macri instructed me to solve the short term problem to guarantee electoral stability but also in the medium and long term so as not to leave a problem for the person who follows be it he or another candidate Argentina s Treasury Minister Hernan Lacunza said |
JPM | Shares in sub prime lender Amigo plunge as loan growth slows | By Noor Zainab Hussain
Reuters Shares in Amigo Holdings L AMGO fell almost 50 to a record low on Thursday after the British subprime lender reported a rise in first quarter impairments and costs and warned of slower annual growth in its loan book
Amigo s shares were trading at 74 9 pence at 1046 GMT In June last year the company had priced its shares at 275 pence in its stock market debut
Amigo which issues loans typically guaranteed by a borrower s family or friends said a change in economic outlook and the potential for regulatory change had led it to take a more cautious approach to lending with increased provisioning
We are therefore resetting expectations for the current financial year the company said in a statement with broadly flat loan book growth marking a significant departure from the previous low teens net loans growth forecast for the medium term
Sub prime lenders have seen rapid growth in Britain since the 2008 financial crisis as banks pared riskier lending But the high interest rates charged for loans made to more vulnerable borrowers has fueled a public and political backlash and put pressure on regulators to tighten supervision
Lawmakers have called for an interest rate cap on all forms of credit calling companies Amigo and Provident Financial L PFG legal loan sharks
Bournemouth based Amigo offers guaranteed loans of up to 10 000 pounds 12 277 to borrowers with weak credit histories at an average annual percentage rate of 49 9
In short it is not a pretty update with a material miss on impairments and operating costs as well as the new CEO Hamish Paton taking out the red pen to current year guidance Goodbody analysts said Paton was appointed in July
DARK DAYS AHEAD
FTSE 250 lender Amigo reported an impairment to revenue ratio of 30 5 for the quarter ended June 30 from 25 4 a year earlier
Amigo said the reasons for the increase in impairments included operational challenges within collections the impact of a higher number of loan applications and more cautious accounting assumptions around the economy
The market was already worried about regulation becoming tighter for the guarantor loans market and today s update from Amigo makes matters even worse suggesting it has some very dark days ahead said Russ Mould investment director at AJ Bell
The cost to income ratio increased to 23 4 hurt by a rise in investments and a provision for complaints
RBC and JPMorgan NYSE JPM analysts cut their target price on the stock on Thursday |
JPM | U S weekly jobless claims increase slightly | WASHINGTON Reuters The number of Americans filing applications for unemployment benefits rose moderately pointing to sustained labor market strength despite slowing economic growth
Initial claims for state unemployment benefits increased 4 000 to a seasonally adjusted 215 000 for the week ended Aug 24 the Labor Department said on Thursday Data for the prior week was revised to show 2 000 more applications received than previously reported
Last week s increase in claims was in line with economists expectations The Labor Department said only claims for the Virgin Islands were estimated last week
The four week moving average of initial claims considered a better measure of labor market trends as it irons out week to week volatility slipped 500 to 214 500 last week
Layoffs have remained low despite a protracted trade war between the United States and China which is crimping economic growth by undercutting business investment and manufacturing
But the pace of job growth has been slowing since 2018 The government estimated last week that the economy created 501 000 fewer jobs in the 12 months through March 2019 than previously reported the biggest downward revision in the level of employment in a decade
According to economists at JPMorgan NYSE JPM this meant that job growth over that period averaged around 170 000 per month instead of 210 000 The government will publish the revised payrolls data next February
Still the pace of employment gains remains well above the roughly 100 000 jobs needed per month to keep up with growth in the working age population Sustained labor market strength is supporting the economy through strong consumer spending
For now that is helping to calm concerns of a recession which were fanned by a sell off on Wall Street and an inversion of the U S Treasury yield curve
Thursday s claims report also showed the number of people receiving benefits after an initial week of aid increased 22 000 to 1 70 million for the week ended Aug 17 The four week moving average of the so called continuing claims dipped 250 to 1 70 million
The continuing claims data covered the week of the household survey from which August s unemployment rate will be calculated The four week average of continuing claims was little changed between the July and August survey periods suggesting the jobless rate could hold steady at 3 7 |
MS | Bond Market Moves Signal Pending Inflation | It certainly feels as though something changed last week something fairly significant and where for so long markets lacked any sign of a pulse the idea that we are now facing a period of elevated implied volatility has knocked us all a bit for six
It just seems so fitting that we start a new chapter at the Federal Reserve and as the page turns the macro backdrop is evolving before our very eyes We ve finally closed out on Janet Yellen s tenure at the helm of the Federal Reserve in which she was predominantly tasked with making the handover from Quantitative Easing EA to one of hiking the fed funds rate and eventually unwinding the balance sheet as smooth as possible While Yellen has her critics in spades and while her policies have been largely aimed at reducing financial market volatility in terms of setting monetary policy to bolster the US and global economy I d debate she has done an excellent job Take a step back and understand that Bernanke s mission was fighting deflation not just in the US but on a global platform and we see the evolution of both Bernanke and Yellen s approach to monetary policy has in turn created a platform for Jay Powell to focus on his objectives to effectively reduce the Fed s balance sheet target financial risks while shifting the fed funds rate ever towards its longer term equilibrium rate
So a new chapter is upon us and the markets are already speaking out and it feels that given the moves in the long end of the US bond market as well many other developed markets the world has finally bought into the notion that inflation is coming There is so much attention on the 10 Year Treasury which closed Friday s trading session up a further seven basis points bp at 2 84 However importantly the US 30 Year Treasury had an even bigger sell off on the day closing 8bp at 3 07 and for those who really want to focus on the fixed income markets should look at the 10 s vs 30 s yield curve see below For the very reason that if this steepens further from here then it should only solidify the belief that inflation is headed back towards the Fed s target and that the Fed are currently too far behind the curve
Equity markets will struggle as market participants question this evolution in macro backdrop and a steeper Treasury curve spells warning signs for USD bears and it s therefore no surprise to see the USD finding buyers across all G10 currencies on Friday and notably against the AUD with AUD USD falling 1 3 and emerging markets
We have seen the growing confidence in US inflation expectations where we can see US five year inflation expectations starting in five year time pushing to a multi year high of 2 25 The Fed will have noticed that 100 But it s also important to understand that nominal bond yields have been moving higher far more aggressively than inflation expectations and subsequently we see US 5 and 10 year real or inflation adjusted sitting at multi year highs of 55bp and 70bp respectively This is a big deal for financial markets especially for emerging markets which are going to take a hit if we see a further continuation of higher real yields and potential USD strength We have to watch how the Hang Seng H Shares CSI 300 all trade this coming week as all three markets printed bearish outside week reversals i e price traded above the prior week s high and closed below the prior week s low So any further downside in these indices should be respected where after such a strong run since 7 December the bears have wrestled back control and support levels are being taken out one by one
The focus on Friday was on the non farm payrolls where the combination of solid job creation of 200 000 jobs were created in December with wages increasing at 2 9 the highest level since May 2009 although the disappointing aspect was the 10bp rise in the U6 underemployment rate to 8 2 from 8 1 Perhaps the most important variable on Friday though was the unwinding of short volatility structures and as the S P 500 headed ever lower we saw the VIX index or S P 500 implied volatility move into 17 31 and closing up 28 on the day and almost 60 on the week For the derivative traders out there we can also look at the implied volatility of the S P 500 implied volatility or what is known as the VVIX effectively a derivative of a derivative and see this pushing into 125 27 on the week the highest level since 2015 This is interesting as there is a belief that higher volatility could be here to stay for a while longer and that is a new phenomenon with the institutional trade of 2017 being selling volatility of any spikes above 14 A new Fed a new backdrop by which traders need to operate in I like what I am seeing
It leads us then to understand the genuine reasoning behind why the S P 500 fell 2 1 and what was the biggest one day sell off since September 2016 with the index losing 511 billion in market value with 96 of stocks lower on the day That reasoning being that the systematic rules based funds many of whom will use implied or realised volatility vols in their risk models have dumped stock As vols spiked they unwound equity positions rapidly as their model dictates There is talk source Morgan Stanley NYSE MS that volatility targeting annuity funds could have to sell a further 30 billion of stock this week and another 40 billion should realised volatility not retreat lower The fact that systematic funds were offloading stock also seems to explain the lack of any real buying of other safe haven assets although to be fair when higher bond yields are the backbone of the concern it s hard to feel we will see too much buying of gold although we have seen good buying of CHF and JPY certainly against other currencies than USDs
I like short GBP CHF this coming week
The fact there we have now heard from the over two thirds of the S P 500 and certainly the bulk of the mega index weights should make us question what is the new inspiration and what effectively stabilizes risk from here So in effect US markets have hit an air pocket of sorts The S P 500 also printed a bearish outside week reversal and is just holding the November trend support so the bulls will absolutely want to see this hold on Monday The German DAX is another index on the radar given we saw a firm close through 12 900 which has been a floor in the market for so long losing a sizable 4 2 on the week and I see risks that we could see a period where the 9 day RSI Relative Strength Index could stay below 30 for an extended period After being bullish risk assets for some time recent price action and the currently technical set up suggests the risks to global equities seem elevated to the downside
S P 500 daily
Another interesting aspect has been the relative outperformance of the ASX 200 with the Aussie market closing up 1 2 last week Contrast this to the S P 500 which fell 3 9 the worst week since early 2016 and there are reasons to feel this outperformance could continue in the week ahead That said we should play catch up of sorts with Aussie SPI Futures closing 65 points lower on Friday and our call for the ASX 200 open sits at 6056 and a 1 1 fall seems in store unless something punchy comes out in the news flow tonight Based on their ADRs American Depository Receipt and without pricing in any of the weekend news BHP should 1 lower with CBA also likely to face stronger downside pressure ahead of Wednesday earnings Clearly not a great day to be long bond proxies such as REITs
However given the broad based sector falls in Europe and the US it s hard to see too many hiding places on the open but let s not forget it s a huge week locally with the start of 1H18 earnings in play with expectations somewhat elevated given the ratio of downgrades upgrades guidance in the recent confession session We also have the small affair of the RBA meeting tomorrow while RBA governor Lowe speaks on Thursday at 20 00 aedt while the Statement on Monetary Policy is due on Friday With the plethora of event risk due amid the unfolding dynamic of rising real yields and a steeper yield curve one has to have noticed the AUD USD having an almost textbook rejection of the September and January double top at 0 8125 with rallies in the pair due to be sold given the prevailing trend although long EUR AUD is also on the radar for a break of the December highs |
MS | India ETFs In Focus On Union Budget Release | India s finance minister delivered his government s fifth and last union budget on Feb 1 The budget s primary talking points were in line with expectations
Modi s state election victories in 2017 were mainly driven by urban voter population Considering Modi s re election campaign in 2019 the budget was primarily focused on improving the conditions of rural areas and the farmer population read
Into the Headlines
Jaitley has promised to make the living conditions of farmers better Given that around of India s rural population depends on agriculture for their livelihood and that the sector contributes around to India s GDP it is expected to majorly impact the Indian economy The budget seeks to generate 50 returns over cost of production for farmers by increasing the price at which the government buys the produce from farmers
It has also announced that it plans to spend 218 1 billion INR 14 000 billion on rural infrastructure in turn creating jobs and adding to the welfare of rural population Agriculture focused companies could benefit from this move The agricultural and rural landscape were in some kind of distress and provision of over Rs14 34 lakh crore to be spent on rural infrastructure should also add to the employment generation especially in the farm sector per Assocham Sandeep Jajodia
The equity markets were not that convinced as the much anticipated reduction in corporate tax rate was not present Although the tax rate is to fall to 25 from 30 for companies with annual revenues of less than 39 million INR 2 5 billion it wasn t a major factor driving markets Per a Bloomberg the smallest company in the Nifty 50 benchmark index has annual revenues of INR 64 billion
In another shock to investors Jaitley announced the return of the long term capital gains tax Stocks and bonds sold after a one year period will be subject to a 10 charge on profits Multiple analysts believe that this might have a negative impact on the country s economic scenario as it will take a toll on foreign investments
In a blow to crypto Jaitley announced a clampdown on cryptocurrency in Budget 2018 The government does not recognize cryptocurrency as legal tender or coin and will take all measures to eliminate the use of these cryptoassets in financing illegitimate activities or as part of the payments system Jaitley said This potentially added to Bitcoin s troubles in an already poor start to 2018
Economic Scenario
Coming to the economic data points India s GDP grew 6 3 year over year in the July September quarter of 2017 compared with a three year low of 5 7 in the previous quarter However Morgan Stanley NYSE MS is very optimistic about the Indian economy going forward as it published a new research report stating that the Indian economy is expected to grow an average 7 3 between 2020 and 2022
Let us now discuss a few ETFs focused on providing exposure to the emerging market nation see
iShares MSCI India ETF
This fund provides exposure to large and mid sized Indian equities
It has AUM of 5 8 billion and charges a fee of 68 basis points a year Financials Computer Software and Consumer Discretionary are the top three sectors of the fund with 23 6 13 9 and 12 4 allocation respectively as of Jan 31 2018 Housing Development Finance Co Reliance Industries Ltd and Infosys Ltd are the top three holdings of the fund with 9 5 8 0 and 6 4 allocation respectively as of Jan 31 2018 The fund has returned 29 3 in a year INDA has a Zacks ETF Rank 1 Strong Buy with a Medium risk outlook
WisdomTree India Earnings Fund V EPI
This fund provides exposure to Indian equities in multiple capitalization segments
It has AUM of 1 8 billion and charges a fee of 84 basis points a year Financials Energy and Information Technology are the top three sectors of the fund with 23 7 18 6 and 17 9 allocation respectively as of Feb 1 2018 Reliance Industries Ltd Infosys Ltd and Housing Development Finance Co are the top three holdings of the fund with 8 9 7 8 and 6 4 allocation respectively as of Feb 1 2018 The fund has returned 32 7 in a year EPI has a Zacks ETF Rank 1 with a Medium risk outlook
iShares India 50 ETF JK INDY
This fund provides exposure to large cap Indian equities
It has AUM of 1 3 billion and charges a fee of 93 basis points a year Banks Computer Software and Refineries Marketing are the top three sectors of the fund with 27 0 11 2 and 10 4 allocation respectively as of Jan 31 2018 Reliance Industries Ltd Housing Development Finance Co and ITC Ltd are the top three holdings of the fund with 7 8 7 4 and 5 4 allocation respectively as of Jan 31 2018 The fund has returned 29 7 in a year INDY has a Zacks ETF Rank 1 with a Medium risk outlook
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 | Here s Why Teva Pharma Stock Is Soaring Today | Shares of Teva Pharmaceuticals NYSE TEVA gained more than 10 in early morning trading Thursday after news emerged Wednesday that Warren Buffett s Berkshire Hathaway took a massive stake in the struggling drugmaker during the fourth quarter
Berkshire disclosed the holding worth about 358 million in the famous conglomerate s latest quarterly filing Shares of Teva were down nearly 50 over the past year before Buffett s firm announced its stake
The purchase indicates that Teva s recent slump has dragged the stock into the value territory that Buffett typically targets The generic drug giant has faced significant headwinds lately but Berkshire could be well positioned to benefit from the company s planned turnaround
Nevertheless a quick glance at Teva s current fundamental situation suggests that this turnaround may be easier said than done The firm s core business has been hammered by a lower U S generic drug prices and increased competition causing management to take out massive loans to protect from its shrinking profit margins
After losing half of its value in 2016 Teva initiated a strategic shift meant to address its new debt issues and identify its strongest businesses Reports from last summer indicated that the company was looking to ramp up asset sales putting several of its global brands including its respiratory treatment assets and the Iceland based drugmaker Medis on the chopping block
But Teva s commitment to solving its looming debt crisis was not enough for investors in 2017 and the stock shed another 50 over the course of a difficult year
We believe that Teva s disappointing generic business performance will take more time to improve given a combination of the generic industry s intensifying secular challenges and Teva s own difficulty in executing on its pipeline wrote Morgan Stanley NYSE MS analyst David Risinger in August
Teva is currently sporting a Zacks Rank 4 Sell But the stock does hold an A grade for Value in our Style Scores system and these attractive valuation metrics likely inspired Buffett and Berkshire to make a play on the stock
Want more analysis from this author Make sure to follow on Twitter
The Hottest Tech Mega Trend of All
Last year it generated 8 billion in global revenues By 2020 it s predicted to blast through the roof to 47 billion Famed investor Mark Cuban says it will produce the world s first trillionaires but that should still leave plenty of money for regular investors who make the right trades early |
JPM | Why Is JP Morgan JPM Up 5 9 Since Last Earnings Report | A month has gone by since the last earnings report for JPMorgan Chase JPM Shares have added about 5 9 in that time frame outperforming the S P 500
Will the recent positive trend continue leading up to its next earnings release or is JP Morgan due for a pullback Before we dive into how investors and analysts have reacted as of late let s take a quick look at the most recent earnings report in order to get a better handle on the important catalysts JPMorgan Q1 Earnings Beat on Higher Rates Debt UnderwritingHigher rates and improved investment banking performance drove JPMorgan s first quarter 2019 earnings of 2 65 per share which outpaced the Zacks Consensus Estimate of 2 32 Also the figure was up 12 from the prior year quarter Investment banking fees recorded 9 growth with 12 rise in advisory fees and 21 increase in debt underwriting income partially offset by 23 decline in equity underwriting fees Decent loan growth driven largely by rise in wholesale and credit card loans and higher interest rates supported net interest income Among other positives credit card sales volume was up 10 and merchant processing volume grew 13 Further Commercial Banking average core balances jumped 2 and Asset Management average loan balances were up 10 As expected both equity trading income down 14 and fixed income trading revenues 18 down recorded a fall Further home lending business revenues declined 11 year over year mainly due to lower net servicing revenues Operating expenses increased in the reported quarter Also provision for credit losses recorded a rise The overall performance of JPMorgan s business segments in terms of net income generation was decent All segments except Corporate Investment Bank and Asset Wealth Management reported rise in net income on a year over year basis Net income increased 5 to 9 2 billion Investment Banking Higher Rates Aid Revenues Costs RiseNet revenues as reported were 29 1 billion up 4 from the year ago quarter Rising rates improving balance sheet and higher investment banking fees growth were the main reasons for the increase These positives were partially offset by lower Markets revenues and mortgage banking fees Also the top line beat the Zacks Consensus Estimate of 28 billion Non interest expenses on managed basis were 16 4 billion up 2 from the year ago quarter The rise was primarily due to investments in business and auto loan depreciation Credit Quality DeterioratesProvision for credit losses was 1 5 billion up 28 year over year The increase was mainly due to reserve builds in wholesale loan portfolios Also net charge offs grew 2 year over year to 1 4 billion However as of Mar 31 2019 non performing assets were 5 6 billion down 12 from Mar 31 2018 Strong Capital PositionTier 1 capital ratio estimated was 13 8 as of first quarter end compared with 13 5 on Mar 31 2018 Tier 1 common equity capital ratio estimated was 12 1 as of Mar 31 2019 up from 11 8 Total capital ratio was 15 7 estimated at the end of the year compared with 15 3 on Mar 31 2018 Book value per share was 71 78 as of Mar 31 2019 compared with 67 59 on Mar 31 2018 Tangible book value per common share came in at 57 62 at the end of March compared with 54 05 a year ago 2019 OutlookManagement projects NII to be more than 58 billion driven by higher interest rates and expected loan and deposit growth Operating expenses to be approximately 66 billion up 2 7 billion from 2018 level This additional spending includes 600 million of new technology investments and 1 6 billion for marketing front office hiring new branches and a new headquarters building Net charge offs are expected to be 5 5 billion up from 4 9 billion recorded in 2018
How Have Estimates Been Moving Since Then
It turns out fresh estimates have trended upward during the past month
VGM Scores
At this time JP Morgan has a poor Growth Score of F however its Momentum Score is doing a lot better with a B However the stock was allocated a grade of F on the value side putting it in the bottom 20 quintile for this investment strategy
Overall the stock has an aggregate VGM Score of F If you aren t focused on one strategy this score is the one you should be interested in
Outlook
Estimates have been trending upward for the stock and the magnitude of these revisions looks promising It comes with little surprise JP Morgan has a Zacks Rank 2 Buy We expect an above average return from the stock in the next few months |
JPM | Banking Index Squeezed Into Corner Yen Advances | VIX rallied to challenge the weekly Cycle top before closing beneath Long term support resistance at 16 36 The Cycles Model suggests Cyclical strength may dominate through mid May possibly longer
MarketWatch A spike in Wall Street s most popular volatility gauge is inspiring some unpleasant d j vu for stock market traders though there is no guarantee the move presages a sharper equity selloff
The Cboe Volatility Index VIX 16 02 known by its ticker VIX jumped 6 45 points over the first two days of this week the largest two day rise since the period ending on Dec 24 according to Dow Jones Data Group when it climbed by more than seven points as a stock market selloff accelerated taking the S P 500 SPX 0 37 to the brink of bear market territory and marking the lowest point of the fourth quarter downturn
SPX challenges Short term support
SPX broke down through Short term support at 2867 28 but managed to close above it Friday s bounce managed to retrace 50 of the decline since the beginning of the week Point 5 in the Orthodox Broadening Top formation may have been put in A sell signal may be generated beneath Short term support Point 6 lies beneath the December 26 low
BusinessInsider All it took was one word to rescue the stock market from disaster constructive
And equities certainly needed saving after President Donald Trump said ahead of the opening bell that there was no need to rush trade talks with China He added that soon another 325 billion worth of Chinese goods would be hit with fresh tariffs
NDX makes a reversal
NDX made a lower high in the prior week before it began its decline on Monday The Orthodox Broadening Top appears to be the primary formation Cyclical strength indeed ran out as expected and may not reappear until the end of May A sell signal awaits beneath Short term support at 7518 31
Fortune We were just wrapping a dinner panel in San Francisco to promote the upcoming Fortune Global Sustainability Forum in China s Yunnan province this fall when news emerged that another round of U S tariffs against its trade adversary would shortly take effect
That trade talks were faltering the ones for which the Artist of the Deal previously set a March 31st deadline for completion was of intense interest to the panelists Deutsche Bank s Priscilla Lu and Andrew Chung a venture capitalist with 1955 Capital in Silicon Valley Both invest in China Both see a challenging road ahead given the inevitability of China s growth and continued tensions between the two economic superpowers
High Yield Bond Index tests long term support
The High Yield Bond Index continued its decline testing term support at 201 30 A sell signal has been confirmed Point 6 may be the Cycle Bottom at 161 47 The Cycles Model warns the decline may have legs
Bloomberg As demand for one of Wall Street s hottest fixed income products cools money managers are divided over whether it s time to bow out or go bargain hunting
Collateralized loan obligations are one of the few assets classes that have largely resisted spread tightening in 2019 After reaching about 141 basis points over the London interbank offered rate at the end of last year the average pickup for new issue AAA rated tranches has remained in a tight range ever since In contrast yields on high grade corporate bonds have tightened 39 basis points while those on top rated commercial mortgage securities have narrowed 28 basis points according to data compiled by Bloomberg and JPMorgan Chase Co NYSE JPM
Treasuries resume the rally
The 10 year Treasury Note Index rallied above Short term support at 123 79 It remains on a buy signal with a potential target at the Cycle Top resistance at 127 83 The Cycles Model suggests the rally may continue through mid June
CNBC U S government debt yields ticked lower on Friday after American tariffs on 200 billion worth of Chinese imports rose to 25 a development some investors viewed as a sign that trade relations between Washington and Beijing won t be remedied soon
At around 10 55 a m ET the yield on the benchmark 10 year Treasury note which moves inversely to price was lower at around 2 433 while the yield on the 2 year Treasury note was also lower at around 2 235 The yield on the 3 month bill hovered at 2 431
The euro trend is still driven by weekly Short term resistance
The euro attempted another bounce but was stopped by weekly Short term resistance at 112 43 It may be capable of a breakout to Long term resistance in the next two weeks
Nasdaq The euro firmed on Friday and is poised for a second consecutive week of gains on growing fears that any escalation in the trade conflict between the United States and China would force U S policymakers to cut interest rates
U S President Donald Trump s tariff increase to 25 from10 on 200 billion of Chinese goods kicked in on Friday and Beijing said it would strike back The two sides are pursuing last ditch talks to try to salvage a trade deal urn newsml reuters com nL3N22M1D4
While U S and Chinese officials return to the negotiating table later on Friday investors have quietly ratcheted up bets of a U S interest rate cut with markets now roughly expecting one rate hike by the end of 2019
Euro Stoxx makes a new retracement high
Note StockCharts com is not displaying the Euro Stoxx 50 Index at this time
The EuroStoxx 50 SPDR launched higher from mid Cycle support at 37 78 in a final burst of strength that may expire this weekend A sell signal awaits beneath Short term support at 37 30 The Cycles Model suggests 3 or more weeks of decline may lie ahead
CNBC European stocks closed higher on average Friday despite the U S hiking duties on 200 billion worth of Chinese products
The pan European STOXX 600 climbed provisionally 0 4 higher with the export heavy German DAX index rising by 0 85 All but three sectors closed in positive territory with only the autos sector with its heavy exposure to China edging below the flatline
Washington increased tariffs on Chinese goods from 10 to 25 overnight China immediately said it would retaliate though did not specify how But European investors have not been spooked by this latest chapter in ongoing trade tensions between the two economic superpowers
The yen advances briskly
The yen advanced above all critical resistance area while it reinstated the buy signal The Cycles Model suggests a rally in strength through the end of May possibly longer
Reuters The U S dollar ticked up against the safe haven Japanese yen on Friday as hopes rose for a U S China compromise on trade
Traders optimism could also be seen in the Australian dollar a proxy for Chinese economic prospects which was 0 14 higher at 0 700 But there was a cautious tone to the investor optimism and moves across currencies were muted
Against a basket of six rival currencies the dollar was 0 04 weaker at 97 331 Against the yen the dollar was last up 0 13 at 109 89
Risk has actually traded remarkably resiliently said Alan Ruskin global head of currency strategy at Deutsche Bank DE DBKGn Earlier this week there were some fairly sizeable risk off moves particularly in dollar yen but there has been no real follow through today
Nikkei makes an Island Reversal
The NIKK gapped down on Monday beneath Long term support at 21875 40 The concern that the island may have been formed by an exhaustion gap proved correct The Nikkei challenged Intermediate term support at 21273 03 but closed above it It may be considered to be on a sell signal
Reuters Japan s Nikkei rebounded on Friday morning snapping a four day losing streak as investors waited for the outcome of U S China trade talks while Panasonic tumbled 4 percent on a weaker than expected profit forecast
The Nikkei share average rose 0 6 percent to 21 522 89 in midmorning trade after four losing sessions The benchmark index has shed 4 3 percent since reaching a 2019 high on April 24
U S dollar has a quiet week
USD had a surprisingly quiet week considering all that happened in the rest of the markets The Cycles Model suggests that any residual strength may evaporate over the weekend or early next week It appears that Dollar weakness may prevail over the next two months or longer
YahooFinance Speculators cut their net long bets on the U S dollar in the latest week according to calculations by Reuters and Commodity Futures Trading Commission data released on Friday
The value of the net long dollar position was 38 08 billion in the week ended May 7 down from 38 88 billion the prior week
To be long a currency means traders believe it will rise in value while being short points to a bearish bias The speculative market has been long on the dollar since mid June last year
Gold rallies from mid Cycle support
GOLD bounced from mid Cycle support at 1277 25 but stopped at Short term resistance at 1293 11 Another week of strength came and went without retesting round number resistance at 1300 00 There may yet be another attempt this week The neckline has been repositioned for a new sell signal beneath it
Reuters Gold prices rose on Friday and were set to post a weekly rise as the United States raised tariffs on Chinese goods exacerbating fears of a global economic slowdown while palladium surged more than 5 on technical buying and short covering
The United States intensified a tariff war with China on Friday by hiking levies on 200 billion worth of Chinese goods U S President Donald Trump said on Friday he was in no hurry to sign a trade deal with China
The escalation in the U S China trade dispute has weighed on stock markets worldwide and boosted demand for assets viewed as safer
Gold is up today and will be up in the short term until there is a concrete resolution to the continuing trade tensions between the United States and China said Rob Lutts chief investment officer at Cabot Wealth Management
Crude challenges combination support
Crude declined on Monday to a new low challenging Long term support at 60 75 and Short term support at 61 17 but closed above both Confirmation of a sell signal lies beneath Long term support The ensuing decline may last another month once supports are broken
OilPrice Crude oil prices inched higher after the Energy Information Administration today reported a draw in U S crude oil inventories of 4 million barrels for the week to May 3
This compared to a hefty 9 9 million barrel inventory build last week which pressured prices substantially adding to already significant pressure from rising production in the U S and elsewhere that countered concern about lost Iranian supply
In gasoline inventories the EIA reported an estimated fall of 600 000 barrels for last week after a 900 000 barrel increase two weeks ago Production in the week to May 3 averaged 10 1 million bpd versus 9 9 million bpd in the previous week
Shanghai Index had an awful week despite intervention
The Shanghai Index plunged beneath Intermediate term support at 2932 17 but closed above it this week after a 101 point bounce on Friday While there may be a consolidation during options week the longer term direction is down The Cycles Model suggests the decline may last through the end of June
Bloomberg Chinese state backed funds were active in buying domestic equities on Friday after they had slumped in the wake of the Trump administration imposing the biggest hit yet to China s exports to the U S
State funds jumped in after the lunch break when the Shanghai Composite Index dropped 0 4 after being up as much as 2 6 in the morning session according to two people familiar with the matter That helps explain the sharp V in intraday trading one of them said asking not to be named discussing private information
By the close the Shanghai Composite was back up 3 1 By contrast Japanese shares which had also risen in the Asian morning session closed down in the wake of the escalation in tensions between the world s two largest economies
The Banking Index squeezed into a corner
BKX fell 4 this week before a Friday rally granted a reprieve from the decline The Cycles Model suggests a Master Cycle low may still come next week Caution is the byword A breakdown in the Diamond formation may lead to a substantial decline
Zacks Amid widespread global investigation by U S British Swiss and European Union EU regulators into the alleged foreign exchange market manipulation seven major global banks are likely to be imposed with fines in the coming weeks by EU antitrust regulators Reuters reported Banks have been accused for rigging prices in the 5 1 trillion a day foreign exchange market
Though the EU has been sluggish in its investigation global major banks have already faced up to 10 billion in penalties by the U S U K and Swiss regulators Notably after two years of penalizing the financial firms for collusion of Libor and Euribor rates the EU is nearing conclusion of its six year long investigation for rigging prices
ZeroHedge Ask any banker or analyst what the difference is between a junk bond and a loan and you ll most likely get a blank start in response starting with the size of the loan market which is now virtually identical to that of the high yield bond market continuing through the standardization of loan terms the growth of secondary trading and all the way through to protections granted to loan investors which in an age of exclusively covenant lite issuance no longer exist and one can argue that at least superficially a loan is effectively the same as a junk bond And yet there is one critical difference between the two junk bonds are securities while loans aren t
That difference however may not be true for much longer As Bloomberg reports a group suing JPMorgan Chase and other banks over a loan that went sour four years ago is alleging the underwriters engaged in securities fraud If successful the article contends correctly the lawsuit will radically transform the 1 2 trillion leveraged lending market because should the plaintiff ultimately prevail in arguing that loans are de facto securities it would dramatically alter how American companies raise debt according to two industry groups that filed a brief supporting the defendants argument last week |
JPM | JP Morgan JPM Upgraded To Buy Here s Why | Investors might want to bet on JPMorgan Chase JPM as it has been recently upgraded to a Zacks Rank 2 Buy This rating change essentially reflects an upward trend in earnings estimates one of the most powerful forces impacting stock prices
A company s changing earnings picture is at the core of the Zacks rating The system tracks the Zacks Consensus Estimate the consensus measure of EPS estimates from the sell side analysts covering the stock for the current and following years
Individual investors often find it hard to make decisions based on rating upgrades by Wall Street analysts since these are mostly driven by subjective factors that are hard to see and measure in real time In these situations the Zacks rating system comes in handy because of the power of a changing earnings picture in determining near term stock price movements
Therefore the Zacks rating upgrade for JP Morgan basically reflects positivity about its earnings outlook that could translate into buying pressure and an increase in its stock price
Most Powerful Force Impacting Stock Prices
The change in a company s future earnings potential as reflected in earnings estimate revisions has proven to be strongly correlated with the near term price movement of its stock The influence of institutional investors has a partial contribution to this relationship as these big professionals use earnings and earnings estimates to calculate the fair value of a company s shares An increase or decrease in earnings estimates in their valuation models simply results in higher or lower fair value for a stock and institutional investors typically buy or sell it Their transaction of large amounts of shares then leads to price movement for the stock
Fundamentally speaking rising earnings estimates and the consequent rating upgrade for JP Morgan imply an improvement in the company s underlying business Investors should show their appreciation for this improving business trend by pushing the stock higher
Harnessing the Power of Earnings Estimate Revisions
As empirical research shows a strong correlation between trends in earnings estimate revisions and near term stock movements tracking such revisions for making an investment decision could be truly rewarding Here is where the tried and tested Zacks Rank stock rating system plays an important role as it effectively harnesses the power of earnings estimate revisions
The Zacks Rank stock rating system which uses four factors related to earnings estimates to classify stocks into five groups ranging from Zacks Rank 1 Strong Buy to Zacks Rank 5 Strong Sell has an impressive externally audited track record with Zacks Rank 1 stocks generating an average annual return of 25 since 1988 You can see the complete list of today s Zacks 1 Rank Strong Buy stocks here
Earnings Estimate Revisions for JP Morgan
For the fiscal year ending December 2019 this biggest U S bank by assets is expected to earn 10 per share which is a change of 11 1 from the year ago reported number
Analysts have been steadily raising their estimates for JP Morgan Over the past three months the Zacks Consensus Estimate for the company has increased 0 6
Bottom Line
Unlike the overly optimistic Wall Street analysts whose rating systems tend to be weighted toward favorable recommendations the Zacks rating system maintains an equal proportion of buy and sell ratings for its entire universe of more than 4000 stocks at any point in time Irrespective of market conditions only the top 5 of the Zacks covered stocks get a Strong Buy rating and the next 15 get a Buy rating So the placement of a stock in the top 20 of the Zacks covered stocks indicates its superior earnings estimate revision feature making it a solid candidate for producing market beating returns in the near term
You can learn more about the Zacks Rank here
The upgrade of JP Morgan to a Zacks Rank 2 positions it in the top 20 of the Zacks covered stocks in terms of estimate revisions implying that the stock might move higher in the near term |
MS | US economic growth in the 2nd quarter gets revised higher remains strongest since 2014 | The US economy grew even faster than previously reported in the second quarter according to a Commerce Department report released on Wednesday Gross Domestic Product the value of every good and service produced domestically rose at an annual rate of 4 2 revised up from 4 1 in the advance estimate This was still the fastest pace of growth in nearly four years The upward revision showed that business investments were stronger than had been estimated The US economy in the second quarter grew even faster than had been estimated according to a report from the Commerce Department on Wednesday GDP the value of every good and service produced domestically rose at an annual rate of 4 2 the fastest since Q3 2014 The advance estimate released in July had penciled in growth at 4 1 Wednesday s upward revision based on more complete data showed that business investment and inventories contributed more to growth than previously thought The April June period was the first full quarter with the tax cuts signed by President Donald Trump in effect Consumer spending rebounded from the first quarter As usual it was the biggest contributor to growth although the revised data showed it was slightly weaker than first reported personal consumption increased 3 8 versus 4 prior Spending on vehicles and healthcare was revised lower Expectations for growth in the third quarter vary widely The Atlanta Federal Reserve s GDPNow forecasting model estimates that the economy will grow at a 4 6 clip in the third quarter But the New York Fed s Nowcast model has growth at just 1 96 Many economists are doubtful that the economy can sustain a 4 growth rate partly because of a yearslong slowdown in productivity |
MS | China trade fears end European shares recovery | By Helen Reid LONDON Reuters European shares fell back on Thursday tracking a decline in Asian trading as weakness in Chinese markets eclipsed optimism that a NAFTA deal could be struck by Friday s deadline The pan European STOXX 600 STOXX extended early losses to 0 5 percent by 0830 GMT while Germany s DAX GDAXI which is sensitive to China due to its prominence as a German export market dropped 0 9 percent Chinese stocks fell after a Reuters poll showed activity in the factory sector likely slowed for the third straight month in August amid uncertainty over an escalating trade war with the United States In Europe trade sensitive mining stocks SXPP tumbled 1 3 percent and autos SXAP fell 0 7 percent It s a balancing act with on the one hand relatively positive momentum behind NAFTA but when the focus turns to China and trade war it doesn t seem like an end is in sight because any escalation plays to Trump s rhetoric of how he s protecting U S prosperity and jobs said Gary Waite portfolio manager at Walker Crips Investment Management Earnings reports caused some sharp moves in individual stocks Shares in Europe s largest property company Unibail Rodamco Westfield AS URW fell 5 percent even though the company reported a boost to profits from its acquisition of Australian shopping centre giant Westfield Traders said a Morgan Stanley NYSE MS note weighed on the stock after analysts at the U S bank downgraded their view on the European property industry to in line from attractive For almost every property stock in Europe we expect a lower total return profile compared to what it has been delivering Morgan Stanley analysts wrote They also said rising inflation and bond yields would increase differentiation in the sector and leverage would become more of a focus UK commercial property firm Intu L INTUP fell 3 6 percent after Morgan Stanley cut the stock to underweight from equal weight and peer Hammerson L HMSO fell 4 1 percent Klepierre PA LOIM lost 3 8 percent after a Morgan Stanley downgrade Real estate SX86P was Europe s worst performing sector down 1 3 percent Shares in Swedish radiation therapy gear maker Elekta ST EKTAb fell 6 6 percent after it reported an unexpected drop in first quarter operating profit Bouygues PA BOUY was a rare gainer up 3 1 percent after the French conglomerate stuck to its full year outlook for rising profitability as its telecoms division improved The prospect of Bouygues Telecom gaining market share sent shares in rival Iliad PA ILD a telecoms disrupter offering cut price contracts tumbling 6 4 percent Bringing up the rear was Swiss asset manager GAM S GAMH which sank a further 8 1 percent hitting its lowest in more than nine years and taking its year to date losses to 51 percent GAM shares have sold off sharply since the firm suspended a top director and suspended then liquidated some bond funds Overall in Europe escalating trade disputes have driven cyclical mining and autos sectors down this year while healthcare and technology take the lead
With the second quarter earnings season drawing to a close companies in the MSCI Europe index MIPO00000PEU have delivered 10 9 percent year on year earnings growth in euro terms |
JPM | Pension World Reels From Financial Vandalism of Falling Yields | Bloomberg A once unthinkable collapse in global bond yields is forcing pension funds to buy bonds that offer negative returns putting the financial security of future retirees in jeopardy
U S institutions managing trillions of dollars in retirement savings including the California Public Employees Retirement System have been ratcheting down return expectations Japan s Government Pension Investment Fund the world s largest has warned that money managers risk losses across asset classes In Europe pension funds may be forced to cut benefits in part thanks to the decline in rates
Investors were already taking on more credit risk to make up for dwindling income elsewhere with some chasing less liquid markets like private debt Now negative yields on over a quarter of investment grade bonds with more monetary easing to come are increasing the urgency for portfolio managers to find new sources of returns
The true madness is pension funds being forced to invest in assets which will be guaranteed to lose such as in the case of long dated inflation linked gilts at real yields of 3 said Mark Dowding chief investment officer at BlueBay Asset Management which has pension fund mandates It is financial vandalism and the government and central banks need to wake up to this
Pension funds invest in a variety of assets but most including defined benefit plans use low risk assets such as government bonds as the benchmark discount rate While that means they have profited from the fixed income rally falling yields have also driven up future liabilities in turn threatening their ability to meet oncoming obligations
Ben Meng chief investment officer of Calpers said earlier this year that the expected return over the next 10 years would be 6 1 down from a previous target of 7 Scott Minerd chief investment officer of Guggenheim Partners warns that the Federal Reserve s policy easing is contributing to a likely government bond bubble and that very narrow credit spreads have greater potential to widen
Ten year yields are negative across higher rated European government bond markets while Germany s entire curve fell below zero Similar rates are also sub zero in Japan while they ve recently hit record lows in Australia and New Zealand In the U S 30 year Treasury rates hit an all time low of 1 91 this month
Dire Situation
Peter Borgdorff at Dutch fund PFZW blamed that ever lower interest rate for its coverage ratio that stood at 94 8 at the end of July
The financial situation of PFZW is starting to get dire Borgdorff wrote in his blog A pension reduction in the year 2021 has been threatening for some time But if we have a coverage ratio at the end of this year that is lower than around 94 we should already reduce pensions even next year
The plunge in yields risks spawning a vicious circle for the industry The squeeze on returns tends to widen funding gaps forcing managers or employers to inject more cash into the plans That s money which could have otherwise been used to fuel business or consumption so economic growth may take a hit boosting calls for even more monetary easing
Shrinking Assets
The overall impact is that lower yields can induce households or companies that act as plan sponsors to save even more for the future said Nikolaos Panigirtzoglou a strategist at JPMorgan Chase NYSE JPM Co in a recent note In our conversations with clients the experiments of central banks with negative rates are viewed more as a policy mistake rather than stimulus
Pension assets dropped 4 in 2018 to 27 6 trillion according to the Organisation for Economic Co operation and Development While gains on stocks have helped plug funding gaps it s no secret that income starved managers have dived into less liquid assets
Cases are legion One of the Nordic region s largest pension funds is reducing its stock of government bonds for alternative assets which could include real estate and private equity A scheme for the retired clergy in England is shifting allocations to private credit A fund for U K railworkers meanwhile is looking to boost exposure to private debt to as much as 40 within a private investment strategy totaling 4 5 billion pounds 5 5 billion across two funds
Chris Iggo chief investment officer for fixed income at AXA Investment Managers frets over the fallout from this extended era of ultra low yields
In 2008 most people in the markets had no idea about the leveraged web of instruments that were ultimately linked to the housing market in the U S he wrote in a note referring to the subprime debt crisis We should be worried about lower and lower bond yields They may cause some as yet not fully understood tensions in the financial system with structural implications |
JPM | JPMorgan considers sale of 1 billion AARP credit card portfolio Bloomberg | Reuters JPMorgan Chase Co N JPM is looking to sell the credit card portfolio it built through a partnership with the nonprofit AARP Bloomberg reported on Tuesday citing people familiar with the matter
The sale would include about 1 billion in credit card receivables according to the report
Alliance Data Systems Corp N ADS is among those interested in the portfolio Bloomberg reported
JPMorgan Alliance Data and AARP were not immediately available for comment |
JPM | U S consumer confidence falls but only slightly despite trade fight | By Lucia Mutikani WASHINGTON Reuters U S consumer confidence fell less than expected in August with households still upbeat about the labor market despite an escalation in trade tensions which has cast a shadow over the longest economic expansion in history While the survey from the Conference Board on Tuesday did not change expectations that the Federal Reserve will cut interest rates again next month it further reduced the chances of an aggressive easing to counter the effects of the U S China trade war including tighter financial conditions Fed Chair Jerome Powell told a conference of central bankers last week that the economy was in a favorable place but reiterated that the U S central bank would act as appropriate to keep the economic expansion now in its 11th year on track The Fed lowered its short term interest rate by 25 basis points last month for the first time since 2008 citing trade tensions and slowing global growth Financial markets have fully priced in another quarter percentage point cut at the Fed s Sept 17 18 policy meeting The consumer remains confident despite the ongoing trade war between the U S and China and this bodes well for the economic outlook in the second half of the year said Chris Rupkey chief economist at MUFG in New York Consumers may have even seen July s rate cut as good medicine for the economy which will help keep the economy on the sustainable growth path The Conference Board said its consumer confidence index slipped to a reading of 135 1 this month from a slightly upwardly revised 135 8 in July The index was previously reported at 135 7 in July Economists polled by Reuters had forecast it dropping to 129 5 in August The survey s present situation measure rose to 177 2 the highest reading since November 2000 from 170 9 in July The Conference Board however cautioned that if the trade conflict persists it could potentially dampen consumers optimism regarding the short term economic outlook Consumers expectations based on their short term outlook for income business and labor market conditions slipped to a reading of 107 0 this month from 112 4 in July President Donald Trump on Friday announced a new round of tariffs on Chinese imports hours after Beijing unveiled retaliatory tariffs on 75 billion worth of U S goods On Monday the two economic powerhouses sought to ease tensions with Beijing calling for calm and Trump predicting a deal The Conference Board survey s findings are in stark contrast with a University of Michigan survey which showed consumer sentiment dropping to a seven month low in early August and a measure of current conditions hitting its lowest level since late 2016 According to the University of Michigan monetary and trade policies had heightened consumers uncertainty about their future financial prospects The Conference Board survey places more emphasis on the labor market while the stock market has a huge influence on the University of Michigan survey The dollar was little changed against a basket of currencies while U S Treasury prices rose Stocks on Wall Street were lower SOLID LABOR MARKET 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 jumped to 39 4 in August from 33 1 in July That measure closely correlates to the unemployment rate in the Labor Department s employment report This could signal a drop in the unemployment rate in August said Sal Guatieri a senior economist at BMO Capital Markets in Toronto So despite growing worries businesses don t appear to be cutting staff or even slowing the pace of hiring all that much The unemployment rate is at 3 7 Other data on Tuesday showed house price inflation continuing to slow which together with lower borrowing costs could provide a jolt to the housing market which has been mired in weakness since last year The S P CoreLogic Case Shiller house price index for 20 metro areas increased 2 1 from a year ago in June the smallest gain since August 2012 after a 2 4 rise in May The moderation in house price appreciation was also corroborated by another report from the Federal Housing Finance Agency FHFA showing its house price index increased a seasonally adjusted 4 8 in June from a year ago the smallest rise since January 2015 after rising 5 2 in May House prices increased 1 0 in the second quarter The FHFA s index is calculated by using purchase prices of houses financed with mortgages sold to or guaranteed by mortgage finance companies Fannie Mae and Freddie Mac
The increase in housing demand coming from lower mortgage rates doesn t seem to have been enough to prevent house price appreciation from slowing said Daniel Silver an economist at JPMorgan NYSE JPM in New York |
JPM | Rupee Loses Its Mojo in Another Ugly August for India s Currency | Bloomberg The rupee s resilience in the face economic headwinds has come to an end with India s currency losing its year to date gains in the space of just one month
The country s massive domestic market is now dragging on the rupee as growth at home slows foreigners pull cash from local equities and the currency increasingly tracks moves in the yuan as the trade war heats up
Even though India is directly less vulnerable to U S China tensions it can t remain completely insulated to the wider risk aversion said Dushyant Padmanabhan a forex strategist at Nomura Holdings Inc in Singapore The economic slowdown and capital outflows don t bode well for the rupee he said
The rupee is set for its worst monthly loss in six years and some analysts warn of more pain to come JPMorgan Chase NYSE JPM Co expects it to approach the record low hit last October by year end while Nomura forecasts the currency to finish 2019 at 72 5 per dollar That s weaker than the median estimate of 71 in a Bloomberg survey
Here are some of the reasons behind the currency s rapid reversal
Growth Slowdown
Demand for everything from cars to cookies has waned as India s lingering shadow banking crisis weighs on private consumption which accounts for almost 60 of the gross domestic product And the increasingly bitter trade war has complicated the government s task of re igniting Asia s third largest economy
Not surprisingly data due Friday will likely to show that gross domestic product slowed in the June quarter to 5 7
Fundamentals remain challenging for the rupee and it will keep depreciating given the global and local headwinds said Ashish Vaidya head of trading at DBS Bank Ltd in Mumbai India no longer enjoys a premium over other emerging markets he said
Equity Outflows
Foreigners have pulled 3 8 billion from local shares since July as a tax on the super rich announced in the budget last month combined with the risk off mood triggered by the trade conflict
While the government scrapped the levy Friday to prevent a vicious cycle of capital outflows and a weakening currency the withdrawals have persisted this week
Large outflows have fueled the rupee s weakness and the size of the drop has caught a lot of people by surprise said Mitul Kotecha senior emerging markets strategist at TD Securities in Singapore
China Angle
Rupee s fortunes are also getting linked to the moves in the yuan according to JPMorgan which has moved away from its call of rupee outperformance against the more trade oriented currencies like the Korean won
If the CNY continues to depreciate against the USD as we expect we believe the rupee will depreciate virtually lockstep with the CNY analysts including Sajid Chinoy and Jonathan Cavenagh wrote in a recent note
August Wall
Weak fundamentals aside the currency is also in a seasonally weak month The rupee has slid an average 2 3 in August over the past nine years data compiled by Bloomberg show Yet this time the losses are much larger than usual and have erased gains accumulated in June and July |
JPM | Exclusive Fake branded bars slip dirty gold into world markets | By Peter Hobson LONDON Reuters A forgery crisis is quietly roiling the world s gold industry Gold bars fraudulently stamped with the logos of major refineries are being inserted into the global market to launder smuggled or illegal gold refining and banking executives tell Reuters The fakes are hard to detect making them an ideal fund runner for narcotics dealers or warlords In the last three years bars worth at least 50 million stamped with Swiss refinery logos but not actually produced by those facilities have been identified by all four of Switzerland s leading gold refiners and found in the vaults of JPMorgan Chase Co NYSE JPM one of the major banks at the heart of the market in bullion said senior executives at gold refineries banks and other industry sources Four of the executives said at least 1 000 of the bars of a standard size known as a kilobar for their weight have been found That is a small share of output from the gold industry which produces roughly 2 million to 2 5 million such bars each year But the forgeries are sophisticated so thousands more may have gone undetected according to the head of Switzerland s biggest refinery The latest fake bars are highly professionally done said Michael Mesaric the chief executive of refinery Valcambi He said maybe a couple of thousand have been found but the likelihood is that there are way way way more still in circulation And it still exists and it still works Fake gold bars blocks of cheaper metal plated with gold are relatively common in the gold industry and often easy to detect The counterfeits in these cases are subtler The gold is real and very high purity with only the markings faked Fake branded bars are a relatively new way to flout global measures to block conflict minerals and prevent money laundering Such forgeries pose a problem for international refiners financiers and regulators as they attempt to purge the world of illicit trade in bullion High gold prices have triggered a boom in informal and illegal mining since the mid 2000s Without the stamp of a prestigious refinery such gold would be forced into underground networks or priced at a discount By pirating Swiss and other major brands metal that has been mined or processed in places that would not otherwise be legal or acceptable in the West for example in parts of Africa Venezuela or North Korea can be injected into the market channeling funds to criminals or regimes that are sanctioned It is not clear who is making the bars found so far but executives and bankers told Reuters they think most originate in China the world s largest gold producer and importer and have entered the market via dealers and trading houses in Hong Kong Japan and Thailand Once accepted by a mainstream gold dealer in these places they can quickly spread into supply chains worldwide Word of the forged bars began to circulate quietly in gold industry circles after the first half of 2017 when J P Morgan one of five banks which finalize trades in the 10 trillion a year London gold market found that its vaults contained at least two gold kilobars stamped with the same identification number 10 people familiar with the matter told Reuters Reuters couldn t determine exactly where the vaults were J P Morgan declined to directly address questions about the fraudulent bullion or comment on any of the details in this story It s our standard practice to immediately alert the appropriate authorities and refineries should we discover mismarked gold kilobars during routine checks and procedures the bank said in a statement Fortunately we have yet to have an incident resulting in a loss to the firm or a client The Shanghai Gold Exchange which regulates China s gold market said in a statement it was not aware of counterfeit bars being made in or transported through China The Shanghai Gold Exchange has established a thorough delivery and storage system The process for gold material to enter the warehouse is strictly managed and in compliance with the regulations it said When others who store and trade such gold found forged bars they returned them to the refiner concerned some of whom have operations in Asia Bars returned to Switzerland have been reported by refiners to the Swiss authorities who impounded them refiners said Swiss Customs said 655 forged bars were reported in 2017 and 2018 to local prosecutors in Ticino a region bordering Italy that contains three of Switzerland s four large refineries In all cases the marking of the 1 kg bars were fake a Customs official said by email without commenting further The public prosecutor in Ticino confirmed it had received three reports of gold bars with suspect serial numbers but said it could not disclose more information The police in Neuchatel where Switzerland s other large refinery is located said neither it nor local prosecutors there had received reports of any forged bars Switzerland s Attorney General said its office was not concerned with the topic at present Refinery executives said forged bars had also been reported in other countries Chart gold prices since 2000 HANDY FORMAT Kilobars are small around the size and thickness of a cellphone unlike the roughly 12 5 kilo gold ingots typically stored in the vaults of the world s central banks Kilobars are the most common form of gold in circulation around the world passing fluidly between banks refineries dealers and individuals The identifying features stamped onto a bar s surface include the logo of the refinery that made it its purity weight and a unique identification number Each one is worth around 50 000 at current prices In parts of Southeast Asia it s not uncommon for individuals to use gold instead of cash for big purchases such as real estate bankers and analysts said It s the only investment tool that goes from institutional investors like banks to the public and back again said an executive at a Swiss refinery In China almost all exports of gold are banned as part of the country s strict longstanding controls on capital movements That market analysts say has spurred demand among well to do Chinese who want to send money out of the country to find ways to smuggle it An estimated 400 to 600 tonnes of gold are snuck every year across the border from mainland China to Hong Kong in car boots and delivery vans most of it in kilobars said Cameron Alexander head of precious metals research at consultants GFMS Refinitiv which conducts detailed studies of global gold flows Hong Kong Customs said it had received no complaints in the past decade about kilobars with forged trademarks Japan also has a long established problem of gold smuggling in which the forged brands could be put to use refinery executives said Swiss brands are not the only ones to have been pirated but are the most targeted due to their global reach executives said Switzerland s four largest refineries Valcambi PAMP Argor Heraeus and Metalor process around 2 000 2 500 tonnes of gold a year worth around 100 billion Their trademarks are among the most common and trusted in the industry PAMP and Metalor declined to comment on the record Argor said there was always a risk brands would be counterfeited and recommended people buy bars only from trusted distributors For recipients the pirated bars pose a compliance threat Anyone who holds such metal including jewelers banks and electronics firms risks inadvertently violating global rules designed to keep metal of unknown or criminal origin out of circulation The rules aim to staunch gold supplies that fund conflict terrorism or organized crime damage the environment or undermine national governments Governments in America and Europe are legislating to force banks and manufacturers of items such as jewelry and electronics to take more responsibility for their mineral suppliers For example a clause in the Dodd Frank Act adopted by the United States obliges U S companies to disclose whether gold they use has come from countries in central Africa where it could have been mined to fund conflict Richard Hayes chief executive of the Perth Mint in Australia one of the world s largest refiners said his company had not encountered fraudulently branded Perth Mint kilobars But given the experience of other refiners he has no doubt they are circulating It s a wonderful way of laundering conflict gold he said The gold is genuine but it s not ethically sourced They look completely genuine they assay correctly and they weigh correctly as well The perfect appearance makes the bars highly effective Because gold is completely fungible Hayes said you can bleed it into genuine production It s very very hard to control J P Morgan supplies gold from major refiners for many of the world s biggest banks jewelers and investors and the discovery of the forged bars in its vaults triggered a full review of the gold it held market sources said One said this sweep unearthed around 50 fraudulently branded bars Another said it found several hundred J P Morgan did not comment People in the industry familiar with the matter said the number of forged bars and their high quality meant their production must be well organized An analysis of the bars movements suggested they had been made in Asia probably China they said But the gold in them could have been melted and re melted after being mined anywhere J P Morgan responded to its discovery by deciding to stop buying any gold in Asia that had not come freshly made from a small clutch of refineries it trusted five people familiar with the decision said J P Morgan declined to comment Other banks have also restricted gold purchases in Asia 15 people in the industry said Anything that has even the chance of being iffy they are not going to be involved in said Alexander the analyst at GFMS Refinitiv Reuters approached five large banks that trade gold in Asia several of which have vaulting facilities HSBC declined to comment in detail but a spokesman said it only bought bars directly from a small group of refiners accredited like the Swiss by the London Bullion Market Association LBMA It said it had found no counterfeits UBS did not comment on counterfeit bars but said it only sells gold processed by LBMA accredited refiners Standard Chartered LON STAN declined comment saying this is not an issue that affects us ANZ said it buys previously cast bars from a select group of counterparties and its policy which had not been changed by the counterfeits was to re melt and recast them before selling them on No one from ICBC Standard was available to comment THREE NINES The number of fake bars being found has dropped since 2017 But refiners say the forgeries are becoming increasingly sophisticated so the problem may have grown In 2017 Valcambi s Mesaric said hundreds of bars were found stamped with the same identification number The bars markings also had spelling errors flaws in logo images or print that was too deep or shallow other refiners said Today the forgeries are more precisely made using what appears to be sophisticated machinery Mesaric said There can still be giveaways such as indentations from a robotic gripper or repeated imperfections in a cast mould But these are easy to miss The most reliable way to identify the fakes is to test their purity Gold is available on world markets in varying levels of purity For professionally produced kilobars the most common standard is 99 99 known in the trade as four nines An analysis of three counterfeit branded bars by one Swiss refinery showed that two of them were 99 98 pure and the third 99 90 Though short of legitimate professional standards even that level of purity is difficult to achieve and takes advanced equipment to detect Swiss Customs said of the 655 bars reported to local prosecutors in Ticino the purity fell slightly below 99 99 in some cases The level of counterfeit is becoming really good Even for us it is hard to tell said a Swiss refinery executive who spoke on condition of anonymity They are however slightly less pure because the people doing the counterfeits don t have the equipment we have TAMPER PROOF INK MICROSURFACE SCANS The refineries are responding to the problem with technology Metalor this year began to put spots of tamper proof ink on its bars Like the security features on banknotes these display different features when viewed under certain light or through filters PAMP and Valcambi perform a microsurface scan of their bars and supply machines or phone apps that can scan each one and verify whether their surfaces match the refinery s records Argor said its bars had various security features but declined to elaborate for security reasons The LBMA which accredits global refineries to vouch for the quality of their output is drawing up standards for security features It has also proposed a global database containing information about every kilobar produced as a way of cross checking the products to add an extra layer of security Any security feature can be duplicated that s on the bar itself said the LBMA s chief executive Ruth Crowell
But most of the refiners security features have only been introduced recently and no database is planned until 2020 at the earliest Edited by Sara Ledwith |
JPM | Bitcoin Fixes This Thousands of Fake Gold Bars Dilute Market Supply | Bitcoin s BTC utility over gold has returned to the spotlight after news emerged of hundreds of fake bars infiltrating the precious metals market
As Reuters reported on Aug 28 the gold industry is currently facing a forgery crisis with fake kilogram bars found in the vaults of major banks such as JPMorgan Chase NYSE JPM |
JPM | Wells Fargo Might Refund Fees Wrongly Charged To Some Clients | Wells Fargo Company NYSE WFC NYSE C might refund fees wrongly charged to some customers on account of confusion about the types of transactions counted toward the minimum usage of debit cards that would have waived service fees However the bank considers guidelines on how to get a waiver through debit card usage to be confusing to customers It is currently reviewing past disclosures to consumers per its quarterly filing Post 2016 sales scandal disclosure Wells Fargo has been committed on rebuilding trust and thus undertook numerous actions focused on identifying potential financial harm and customer remediation The company stated in the filing that it is involved in early talks with the U S Justice Department and SEC to complete investigations related to sales practices with no assurance as to the outcome after announcing the negotiations in February It is reviewing practices concerning the origination servicing and collection of consumer automobile loans including matters related to certain insurance products Further the bank is in process to provide remediation to affected customers for policies placed between Oct 15 2005 and Sep 30 2016 Also Wells Fargo is conducting a review of fee calculations within certain fiduciary and custody accounts in its investment and fiduciary services business which is part of the wealth management business It has identified certain instances of incorrect fees being applied to certain assets and accounts resulting in both overcharges and undercharges to customers In the same filing Wells Fargo disclosed that it has raised the high end of potential losses in excess of the company s accrual to 3 1 billion compared with 2 7 billion as of Dec 31 2018 Wells Fargo s efforts to control costs through consolidating its operations processes improvement through technology and outsourcing of certain operations seems impressive Further sudden exit of CEO Tim Sloan and the board s decision to hand over the reins of the bank to someone from outside might help clear its name from past scandals Shares of Wells Fargo have lost 9 1 over the past six months against 2 8 growth recorded by the Currently the stock carries a Zacks Rank 3 Hold You can see Stocks to ConsiderCitigroup Inc NYSE C has witnessed 2 4 upward estimate revision over the past 30 days Also the company s shares have risen nearly 6 in the past six months It has a Zacks Rank 2 Buy at present JPMorgan Chase s NYSE JPM estimates have been revised 3 3 upward for current year earnings over the past 30 days Also the company s shares have risen nearly 6 in the past six months It carries a Zacks Rank 2 The Zacks Consensus Estimate for Community Bank System s NYSE C current year earnings has been revised 1 9 upward over the past 60 days Also the company s shares have risen nearly 6 in the past six months It currently carries a Zacks Rank of 2 Will you retire a millionaire One out of every six people retires a multimillionaire Get smart tips you can do today to become one of them in a new Special Report 7 Things You Can Do Now to Retire a Multimillionaire |
JPM | Looking For Gains Buy These 4 Small Cap Growth Funds Now | The U S economy advanced north of 3 in the first quarter of 2019 putting an end to speculation about a slowdown in the world s largest economy Further this comes at a time the International Monetary Fund IMF has cautioned of a global economic downturn Moreover Fed Chief Jerome Powell indicated at the end of the Fed s latest policy meeting that the central bank would continue its patient rate hike approach in 2019 Small cap funds comprise equity securities of small cap companies These businesses by virtue of their nature are primarily based in the United States and therefore have less exposure to global macroeconomic issues Moreover these funds also generate better gains against mid cap and large cap funds as they have higher growth potential Such conditions call for investing in small cap mutual funds U S GDP Surpasses Estimates in Q1Per the latest reports from the Bureau of Economic Analysis on Apr 26 the U S economy advanced at its fastest pace in past four years in the first quarter of 2019 U S GDP increased at 3 2 in the first quarter of 2019 surpassing the consensus estimate of 2 1 The figure is also higher than the 2 2 growth recorded in the last quarter of 2018 This is also the first time since 2018 that first quarter GDP has surpassed the 3 level Further exports increased while imports declined in the period Meanwhile inventories increased from 96 8 billion to 128 4 billion in the first quarter of this year Impending Global Recession On Apr 9 the IMF slashed its forecast for global economic growth for the third time in the past six months The international lending agency expects the global economy to advance 3 3 in 2019 0 2 lower than its estimate from January IMF also believes that the ongoing trade war between the United States and China would prove to be a major headwind for the global economy If the latest updates are to go by President Donald Trump is set to slap an additional round of tariffs on Chinese goods This comes after months of unsuccessful negotiations between both the countries The global body is of the view that a failure to reach an agreement and the resultant tariff barriers would result in higher costs of imported intermediate and capital goods and higher final goods prices for consumers 4 Best Funds to Buy NowGiven such bullish circumstances we have highlighted four small cap growth mutual funds carrying a Zacks Mutual Fund Rank 1 Strong Buy or 2 Buy and are poised to gain from such factors Moreover these funds have encouraging first quarter and year to date YTD returns Additionally the minimum initial investment is within 5000 We expect these funds to outperform their peers in the future Remember the goal of the Zacks Mutual Fund Rank is to guide investors to identify potential winners and losers Unlike most of the fund rating systems the Zacks Mutual Fund Rank is not just focused on past performance but also on the likely future success of the fund The question here is why should investors consider mutual funds Reduced transaction costs and diversification of portfolio without several commission charges that are associated with stock purchases are primarily why one should be parking money in mutual funds read more Dreyfus The Boston Company Small Cap Growth Fund Class I seeks long term capital growth The fund invests the majority of its assets in equity securities of small cap American companies Its advisor considers those companies as smallcap whose market capitalization is less than or equal to the total market capitalization of the largest company in the Russell 2000 Growth Index This Zacks sector Small Cap Growth product has a history of positive total returns for more than 10 years To see how this fund performed compared in its category and other 1 and 2 Ranked Mutual Funds SSETX has a Zacks Mutual Fund Rank 1 an annual expense ratio of 1 00 which is below the category average of 1 20 The fund has three and five year returns of 22 6 and 13 7 respectively Hartford Small Cap Growth HLS IA fund invests a large chunk of its assets in common stocks of small cap companies that are expected to have impressive growth potential by the fund s sub adviser Wellington Management HISCX focuses on those small cap companies that are included on the S P SmallCap 600 and the Russell 2000 indices This Zacks sector Small Cap Growth product has a history of positive total returns for more than 10 years To see how this fund performed compared in its category and other 1 and 2 Ranked Mutual Funds HISCX has a Zacks Mutual Fund Rank 2 and an annual expense ratio of 0 66 which is below the category average of 1 20 The fund has three and five year returns of 15 6 and 10 2 respectively JPMorgan NYSE JPM Small Cap Growth Fund A invests a huge part of its assets in securities issued by small cap companies These are companies with market capitalization equivalent to those listed on the Russell 2000 Growth index stocks and below 4 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JPM | JP Morgan s Jamie Dimon Warns Again On UST | JP Morgan s CEO Jamie Dimon climbed back up on the bond bear It was one year ago May 7 2018 when he went on BloombergTV and caused a substantial market stir when he said 4 No one would want to buy UST s what with inflation raging and the Federal Reserve forced into an overly aggressive stance by virtue of the huge American economic boom Dimon reasoned Add the structural demand problems on top of that and it was a recipe for a bond massacre
Coming from the leader of one of the biggest Wall Street banks telling the world to prepare for the 10 year UST yields at 4 just to start it was a major piece of news Inflation hysteria personified
The 10s were at 2 95 last year when Dimon put out his warning This was several weeks before the events of May 29 a global monetary disruption obviously Mr Dimon did not anticipate Yields on the 10s today are 2 45
No matter Appearing again on Bloomberg yesterday the big bank chief reiterated that interest rates are in his belief way too low His words appeared in the media just as the Treasury announced a very poor 10 year UST auction For this one auction Dimon s warning was we are told validated
The bear narrative has or had been revived brushed off and sent running all over the media for one day especially at Bloomberg
The U S Treasury on Wednesday saw the weakest demand for its benchmark 10 year note in a decade illustrating the diminishing appetite among some investors to accept current yields
Extraordinarily low is how JPMorgan Chase Co NYSE JPM Chief Executive Officer Jamie Dimon described the current level 2 45 percent in London trading Thursday in an interview with Bloomberg Television on Wednesday Large scale asset purchases by central banks had to have an effect on the 10 year he said
It s the same question these very confused people keep asking who is it that keeps buying all these US Treasuries
Um JP Morgan
That very bank filed its first quarter 10 Q with the SEC a week ago These filings aren t as detailed as they should be but there is enough information in them to get a general sense of what s on their balance sheet asset side What you find is surprise surprise a whole lot more UST s and the like
What s reported here taken from the 10 Q s is what the bank says are the total assets being measured at fair value on a recurring basis That can mean the bank is simply adding assets to this list that were already classified elsewhere on another basis It s highly unlikely however leaving us to reasonably infer a bunch of buying activity in JPM s various books
According to the bank s statements in Q1 2018 before Dimon s original 4 alarm JP Morgan was measuring 42 5 billion in UST s and Government Agency debt at fair value By the end of last year following a whole bunch of chaos and turmoil around the globe an increasing sense of economic uncertainty if not worse JP Morgan reported nearly 60 billion in the same assets An increase of about 17 billion or nearly 40
As of the latest filing for the end of Q1 2019 the bank reported another 43 5 billion of the same debt instruments primarily UST s bringing the total to over 102 billion That s up 74 from Q4 and way more than double what was measured at fair value in the same quarter the year before
The total amount of all debt instruments being valued this way rose in the same period too indicating JPM was expanding its footprint in these parts of the credit markets even though its CEO was warning about credit markets And as more credit was added the proportion of UST s in the overall mix rose substantially
In Q1 2018 18 5 of all debt instruments being measured at fair value were UST s and similar agency debt By Q4 well after Dimon s warning 22 2 As of the latest quarter 29 0
Again it may be that JPM is doing something else in its statements reclassifying instruments it has already held elsewhere I don t believe that is the case
Rather it seems perfectly reasonable given the data the bank publishes for itself as well as what actually happened in the interim to conclude JP Morgan was one of the biggest buyers and holders of UST s and the like over the past year
If that is the correct interpretation of this one bank s balance sheet presentation then it certainly was not alone among its banking peers While so many bank Economists and other CEO s were out in the public declaring an end to the 30 year bond bull the banks they worked for were so very bullish on bonds in action in opposition to all those mainstream words
If Jamie Dimon s own bank is actually doing the opposite of what he says in his public proclamations and contrary warnings why is he trying so hard to be so out of step so as to end up so firmly on Jay Powell s side Instead of constantly and uncritically repeating his Bill Gross impersonations almost cheering them perhaps someone in one of these media interviews might ask him that very question |
MS | Exclusive Saudi king tipped the scale against Aramco IPO plans | LONDON Reuters The king spoke and a 2 trillion dream went up in smoke For the past two years Saudi Arabia has prepared to place up to 5 percent of its national oil company on the stock market Officials talked up the Saudi Aramco initial public offering IPO with international exchanges global banks and U S President Donald Trump The planned listing was to be the cornerstone of the kingdom s promised economic overhaul and at a targeted 100 billion the biggest IPO ever It was the brainchild of 32 year old Crown Prince Mohammed bin Salman heir apparent of the world s largest oil exporter But after months of setbacks the international and domestic legs of the IPO were pulled The reason the prince s father King Salman stepped in to shelve it three sources with ties to government insiders told Reuters The decision came after the king met with family members bankers and senior oil executives including a former Aramco CEO said one of the sources who requested anonymity Those consultations took place during Ramadan which ended in the middle of June The king s interlocutors told him that the IPO far from helping the kingdom would undermine it Their main concern was that an IPO would bring full public disclosure of Aramco s financial details the sources said In late June the king sent a message to his diwan or administrative office demanding that the IPO be called off the three sources said The king s decision is final a second source said Whenever he says no there is no budging the source said After Reuters reported last week that the deal had been shelved Energy Minister Khalid al Falih said the government was committed to conducting the IPO at an unspecified date in the future A senior Saudi official referred Reuters to that statement and repeated that the government Aramco s shareholder was working toward an IPO when conditions were right We are surprised that despite this statement that the Government continues actively to plan for the IPO Reuters persists in asking questions alleging that plans are halted Aramco s shareholder is the Government of Saudi Arabia His majesty King Salman has delegated management of the IPO to His Royal Highness the Crown Prince and a Committee which includes the Ministers for Energy Finance and Economy Therefore decisions around the nature and timing of the IPO will be decided by the Committee for the Government s approval the official said In a country ruled for decades by the Al Saud dynasty it is not surprising that the king ultimately decides But the shelving of the Aramco IPO is a major blow to the prince s Vision 2030 reform program which aims to fundamentally transform Saudi Arabia s oil dependent state driven economy It suggests the king is keeping the new unilateral power of the young prince accrued soon after his father s accession to the throne in January 2015 in check It also raises doubts about Riyadh s management of the IPO process and commitment to making the economy more transparent some investors say TAKING THE REINS While King Salman has the final say on policy he has given great authority to his son who is known as MbS After assuming powers as defense minister and chief of the royal court in January 2015 MbS launched a war in Yemen adopted a more assertive stance toward arch rival Iran and implemented a diplomatic and trade boycott of Qatar Taking the reins of a powerful new economic council he set out to tighten state spending grow the private sector and win foreign investment The king also allowed him to push through high profile social reforms including ending a ban on women driving and opening cinemas in the deeply conservative Muslim country MbS entered the line of succession in April 2015 replacing an uncle as deputy crown prince Two years later he was elevated to crown prince in a palace coup that removed his cousin Prince Mohammed bin Nayef the interior minister The king has intervened at times Most notably when MbS gave the impression last year that Riyadh endorsed the Trump administration s still nebulous Middle East peace plan including U S recognition of Jerusalem as Israel s capital the king made a public correction At the Arab League summit in April he reaffirmed Riyadh s commitment to the Arab and Muslim identity of Jerusalem following an uproar in the Islamic world The king is obsessed with the idea of how history will judge him Will he be the king who sold Aramco who sold Palestine the second source said GRINDING TO A HALT It is not clear exactly which of the IPO arguments prompted King Salman to make the decisive call on Aramco But industry experts and sources previously told Reuters that preparations had been slowing for months for at least two reasons scepticism about MbS s public declaration in 2016 that the sale would give the whole company a value of 2 trillion valuation and concern about the legal risks and tough disclosure requirements associated with a foreign listing By April Aramco stopped paying some of the banks working on the deal their retainer fee three banking sources told Reuters This is usually a fixed fee to ensure advisors do not lose out completely if the deal falters An Aramco official declined to comment Then while the king was deliberating in mid June the banks including JP Morgan and Morgan Stanley NYSE MS were invited to pitch for something different They were instead asked to present proposals for Aramco s acquisition of a stake in petrochemicals giant SABIC from the sovereign wealth fund PIF a banking source said That was an initial sign that plans for the listing were stalling and that Riyadh was looking to raise funds elsewhere the banking sources said The senior Saudi official said that Aramco s interest in acquiring a stake in SABIC was in line with its objective of being the world s leading energy and integrated chemicals business and did not alter the government s intent to list Aramco Transferring SABIC s ownership from the PIF to Saudi Aramco will enable PIF to boost strategies and governance and enhance PIF s investment portfolio the official said Such a strategic acquisition would necessarily have an impact on the timeline but not the intent of an IPO of Aramco Spokeswomen for JPMorgan NYSE JPM and Morgan Stanley declined to comment on whether their banks have any role in the SABIC deal BLOW TO AGENDA Saudi Arabia can still generate cash from alternative sources and move ahead with other reforms But MbS had promised the listing would help create a culture of openness in the secretive kingdom As well as raising concerns about that commitment to transparency the shelved IPO contributes to a sense of unpredictability after scores of top royals ministers and businessmen were rounded up in an anti corruption campaign last November The sources said that even though the king s decision was a blow to the prince s agenda he is still the favorite son and heir with a major influence on policy Rather they say it suggests the king wants to show that he will be the deciding voice for the foreseeable future
I m not sure that I would see it as an undermining of the rule of the crown prince It s much more likely ensuring that he doesn t go off the deep end said James Dorsey a senior fellow at Singapore s S Rajaratnam School of International Studies RSIS |
MS | Ares Management top holder exits Bloomberg | A 12M share block trade of Ares Management NYSE ARES in July through Morgan Stanley NYSE MS at 20 70 each was for the Abu Dhabi Investment Authority reports Bloomberg As of March 8 Abu Dhabi held 17M shares a 17 stake in Ares The country has since sold those other 5M shares according to the story Now read |
MS | Ex Temasek Executive Warns Debt Deal Won t Fix Noble Group | Bloomberg Noble Group Ltd s foes aren t going away Less than 24 hours after the commodity trader won shareholder approval for its 3 5 billion debt for equity deal long standing critic Michael Dee said the revamped company will struggle to recover and shouldn t be allowed to list shares in Singapore
I really don t believe that we re going to be in any different situation Dee a former senior managing director at Singapore state investment firm Temasek Holdings Pte said in a Bloomberg Television interview on Tuesday The interest rate on the debt is way too high for a commodity trader he said
Noble Group took a major step toward restructuring on Monday as shareholders backed the deal paving the way for the trader to seek approval from senior creditors as well as from courts in England and Bermuda for schemes of arrangement Along with Iceberg Research Dee s been one of the company s most vocal adversaries as it lost billions defaulted and faced criticism of its accounts which it s rejected Dee has also been critical of Singapore s regulators who ve stood by their actions as the crisis unfolded
The hedge funds backing the restructuring are going to exit stage left right front and center top and bottom they re not long term holders they re making a trade Dee told Haidi Lun and Rishaad Salamat What will happen after this is that there ll be a lot of hype a lot of people will come out and try to push the line that this is going to be a New Noble very successful that it is going to go back up to its great grandeur and glory It s not
A spokesperson for Noble Group declined to comment on the remarks from Dee who s also a former regional chief executive officer at Morgan Stanley NYSE MS
Bonds Gain
The restructuring circular outlined New Noble s planned borrowings including up to 1 7 billion in bonds in addition to trade finance Interest rates on the bonds ranged from 5 to 10 percent with some rising over time Some have payable in kind terms while others are pay if you can in cash or payable in kind That means unpaid interest would become part of the principal it said
Dee highlighted the notes terms It s very telling that in the new debt they re going to issue they re going to have a PIK structure he said
Under the plan 70 percent of the equity in a revamped company will go to creditors 10 percent to management and the rest to shareholders while the debt burden will be halved On Tuesday Noble Group s shares initially rallied then sank 13 percent while its 2018 bonds touched a five month high
I have to call a spade a spade Dee said on the regulators role overseeing Noble Group This has been a complete catastrophic meltdown
In the city state Singapore Exchange Ltd has front line responsibility for maintaining fair orderly and transparent markets backed by up the de facto central bank the Monetary Authority of Singapore Both have defended their roles as Noble Group imploded most recently in remarks in response to comments from retail investors who ve lost money
SGX s Actions
As Noble s troubles mounted SGX said it s had frequent contact with the company queried it for more detail on results and requested that Noble appoint an independent financial adviser to assess the debt for equity plan A spokesperson has said the exchange is committed to holding issuers and professionals responsible for their actions and opinions and if there s any evidence of wrongdoing it ll be referred to the appropriate authorities
More than 86 percent of senior creditors back the rescue and Chairman Paul Brough told the shareholder meeting the restructuring should be complete in two to three months In a statement Brough said it s critical the restructuring be wrapped up as soon as possible to enable the group to operate with a sustainable capital structure and to capitalize on opportunities in Asia
Noble also faces opposition from Iceberg Research the group that first published critiques of the accounting in 2015 claiming profits were overstated Led by a former employee Arnaud Vagner Iceberg is now trying to organize a fresh legal challenge to the restructuring Dee said he has no relationship with Iceberg with the two arriving at similar findings independently
Noble Group has consistently rejected Iceberg s claims and it s pursuing a lawsuit against Vagner At the shareholder meeting Chief Financial Officer Paul Jackaman said the company was ready to defend itself vigorously against potential legal challenges
There should be a full forensic accounting done to determine Am I right or is the company right Is Iceberg right or is the management right Dee said Let s find out let s actually do that with somebody who s truly independent
Updates to add details on planned borrowings in 6th 7th paragraphs |
JPM | As U S watchdog retreats mortgage firms reprise cozy marketing arrangements | By Katanga Johnson and Michelle Price
WASHINGTON Reuters U S mortgage firms are getting back into joint marketing and advertising arrangements reviving a controversial practice that was effectively banned in the aftermath of the 2007 2008 subprime mortgage crisis
Such arrangements involve mortgage originators and title insurers hungry for sales leads paying a real estate broker or homebuilder to promote their services and products or to rent a desk in their offices
They were effectively banned by the Obama administration under the Consumer Financial Protection Bureau s then director Richard Cordray He brought more than two dozen enforcement actions including against big banks like JPMorgan Chase NYSE JPM and Wells Fargo NYSE WFC Co alleging the arrangements violated federal laws that bar kickbacks or referral fees that could increase the cost of buying a home
In interviews nearly two dozen lawyers consultants and mortgage executives told Reuters that the CFPB s sharp pullback under the Trump administration has emboldened the industry to get back into these arrangements
I have seen a significant jump in the number of banks mortgage lenders and title companies who have gotten back into co marketing advertising arrangements because the regulatory environment has shifted said Marx Sterbcow a mortgage lawyer and managing attorney at New Orleans based Sterbcow Law Group
Cordray aggressively enforced the 1974 Real Estate Settlement Procedures Act RESPA which bars giving or receiving anything of value in exchange for referrals for homebuying services such as mortgages title insurance and appraisals
While co marketing arrangements are not illegal under RESPA Cordray found many were used to disguise an illegal referral fee as compensation for marketing or advertising services
My view is about the same as it was when I was at the bureau A lot of arrangements are questionable at best but probably illegal Cordray told Reuters
Republicans said Cordray overstepped the law and note that the courts did not always back his interpretation After taking over as acting head of the CFPB Mick Mulvaney said the agency would not take such an aggressive stance
He pulled two high profile RESPA suits Cordray had been fighting in court against mortgage lender PHH Corp and law firm Borders Borders Under Cordray the CFPB initially lost those suits but Mulvaney departed from the bureau s usual practice by choosing not to fight those rulings Mulvaney also closed Cordray s three year RESPA probe of online real estate giant Zillow s O ZG co marketing program
Overall CFPB enforcement actions have fallen by around half under the Trump administration a Reuters analysis found All of those moves together sent industry the message that the agency wouldn t be aggressively pursuing RESPA enforcement as it had been in the past said Richard Horn partner at Garris Horn in Arizona and a former CFPB lawyer
Online CFPB complaints and industry chat rooms reveal frustration among industry executives who claim competitors are unfairly exploiting the more relaxed regulatory environment
I know that the CFPB is now essentially gutted and will probably ignore my complaint but I challenge you to do the right thing said one anonymous complaint claiming a RESPA violation
The CFPB declined to comment but Kathy Kraninger the new CFPB director told Reuters in April the agency is reviewing RESPA enforcement and may publish new recommendations
TRUMP WIN
Because the marketing arrangements are private there is no data on their use although Reuters identified dozens online
Mark Meyer chief executive of mortgage services consultancy MLinc said he had added around 75 new clients looking for help drafting co marketing agreements since January 2018 compared with no new clients the previous year He added that the Trump administration has been a win for mortgage firms
Industry executives say these arrangements help homebuyers by guaranteeing them a pre approved rate that allows them to expedite a purchase But consumer groups say they can result in borrowers being steered toward more expensive mortgages
Consumers are often robbed of the experience to shop around by pledging their business to one provider on the spot often unknowingly agreeing to pay higher fees said Linda Jun counsel at Americans for Financial Reform
CFPB research from 2015 found that almost half of mortgage borrowers fail to shop around costing them several thousand dollars over the life of a loan A third of borrowers said they relied on their real estate agent for mortgage information
The agency s overhaul has coincided with a period of intense competition in the U S mortgage market due to falling home sales This competitive pressure has also made such arrangements more attractive
Several industry executives however said firms had been uncomfortable getting back into such arrangements until the regulatory risk had abated
The risk of compliance was so great under Cordray that lenders had to wear both a belt and a pair of suspenders said Josh Weinberg who oversees compliance at New Jersey based lender First Choice Loan Services
Now there s a loosening up on some of the risk in marketing services agreements We are more willing to consider them especially with the recent changes at the bureau |
JPM | JPMorgan Falls 3 | Investing com JPMorgan NYSE JPM fell by 3 04 to trade at 105 45 by 15 52 19 52 GMT on Friday on the NYSE exchange
The volume of JPMorgan shares traded since the start of the session was 10 10M JPMorgan has traded in a range of 105 40 to 108 77 on the day
The stock has traded at 109 7500 at its highest and 104 3400 at its lowest during the past seven days |
JPM | 3 Things Under the Radar This Week | Investing com Here s a look at three things that were under the radar this week
1 Falling RV Sales Signaling Economy About to Hit Reverse
With doubts growing over whether the current inversions in the Treasury yield curve signal an impending recession some have wheeled out an alternative indicator that is flashing recession falling recreational vehicle sales
Domestic shipments of RVs to dealers have slumped 20 in 2019 compared to the same period last year after dropping 4 in 2018 according to the Recreational Vehicle Industry Association
When it comes to flagging recessions RV sales may not be the first indictor many turn to But the measure has played a key role in helping economists gauge a key driver of the economy the U S consumer
Cyclical products like RVs tend to benefit from a favorable economic backdrop but are usually among the first to be abandoned when economic growth is under threat The little known recession indictor also has history on its side
The last three U S recessions have been preceded by a sharp decline in shipments according to Michael Hicks a Ball State University economist who tracks the industry Manufacturing nearly two thirds of RVs in the U S and shipping to dealers across the country Elkhart Indiana is where economists look when gauging demand And the impact of a slowing RV market is starting to show in Elkhart with unemployment rising to 3 in June up from 2 1 in April
Like most of the current bumps in the global economy the U S China trade war has been blamed for the weakness in RV demand pushing up vehicle prices RV manufacturers like Thor Industries have underscored the weakness in the broader market Its sales dropped 23 in its fiscal third quarter with CEO Demiris Jahmal Williams describing the downturn as the worst ever Retail sales of RVs this year and the next could be down mid to high single digits Baird analyst Craig Kennison estimated
2 Just a Correction
Yield curve inversions have spooked the stock market but investors shouldn t look to abandon ship just yet JPMorgan Chase NYSE JPM said this week
While it still expects a correction to stocks in August that correction won t be as long as the one seen this past May and tactical buyers could look for shares to pick up in September JPMorgan said
The bank is taking the inversion of the 10 year and 2 year Treasury yield curve into account for its equity strategy but noted the inversion wasn t a guaranteed signal of a recession
There is typically a significant lead lag between the curve inversion and the actual market peak recession it said Looking at the past 6 episodes yield curve inversion preceded recessions by as much as 17 months on average and the peaks of the equity market for the cycle by around 11 months
Furthermore if one were to look at what were the forward equity returns from the shape of the curve which is perfectly flat such as current the next 12 months equity performance was historically outright positive averaging around 10 JPMorgan added
3 It May Be Time for Income Stocks
After three years of Wall Street riding high growth stocks up particularly in the tech sector investors may want to think about moving into income according to Franklin Templeton
D uring recent bouts of market volatility we ve seen signs that many growth focused investors may be starting to view things a bit differently analysts said in a note As U S China trade frictions continue and global economic growth shows signs of slowing the market seems to be more interested in stable companies with a proven track record of consistent dividend growth
They suggested three criteria for picking income stocks
First look for long term performers with rising dividends rather than high yielding dividend stocks
Second find dividend growers that are leaders in their respective markets
Third cast a wider net as banks have resumed paying dividends since the financial crisis and tech companies are paying income as well |
JPM | Time to Buy Equities Again Is Fast Approaching Says JPMorgan | Bloomberg The stock market is starting to look good again to JPMorgan Chase NYSE JPM Co
After August s sell off the time to buy stocks is approaching strategists led by Mislav Matejka wrote in a note Tuesday saying equities will move higher starting with an up trend in September Benchmarks including the S P 500 Index the Stoxx Europe 600 Index and the MSCI Asia Pacific Index are poised for their biggest monthly declines since May
While we have been advocating a consolidation call during August we continue to expect that the pullback will not extend for longer than the May one did and still believe that the market will advance into year end the JPMorgan strategists wrote
An escalation in the trade war between the U S and China this month has stoked investor concern about the outlook for the global economy hurting equities worldwide Major asset managers including Legal General and Manulife Investment Management have taken profit on their risk assets and entered a wait and see mode
JPMorgan sees a string of positive catalysts that could lift equities out of the doldrums such as the restart of the European Central Bank s quantitative easing program the potential for a second and bigger rate cut by the Federal Reserve along with signs that activity may have bottomed out and improving technical indicators
The New York based firm s bullish outlook clashes with that of UBS Global Wealth Management which has gone underweight on equities for the fist time since the euro area crisis The Swiss asset manager cut its stock positioning relative to high grade bonds to reduce its exposure to trade wars and political uncertainty Global Chief Investment Officer Mark Haefele wrote in an Aug 25 note to investors
Positive earnings delivery JPMorgan stresses is a key way to ensure that market pullbacks don t become extended Consensus profit projections are rather conservative according to the strategists who noted that an outright earnings contraction was historically experienced only during recessions
It is too early to expect the next U S recession and one should be constructive on equities they wrote |
JPM | Vanguard Takes ETF Fee War A Step Forward | Vanguard has been hitting headlines this year with back to back fee cut news In late February it slashed fees on 10 of its exchange traded funds Eight of the 10 Vanguard ETFs that underwent fee cuts then were international focused and fee reductions ranged from one to two basis points read
In late April Vanguard including eight of its 10 largest ETFs The list includes some of the high profile funds of Vanguard namely Vanguard Total Stock Market ETF AX VTI and Vanguard S P 500 ETF the third and fourth largest funds respectively per an article published on etf com VTI and VOO now cost 0 03 each down from 0 04
These Vanguard funds will now join the group formed by Schwab U S Broad Market ETF KL SCHB Schwab U S Large Cap ETF iShares Core S P Total U S Stock Market ETF SPDR Portfolio Large Cap ETF and SPDR Portfolio Total Stock Market ETF all of which charge 0 3 a piece
These apart Vanguard announced lower fees on The ETFs that underwent a fee cut to 0 04 from 0 05 include Vanguard Growth ETF BE VUG Vanguard Value ETF HN VTV Vanguard Large Cap ETF and Vanguard Mid Cap ETF V VO Vanguard Extended Market ETF saw its annual fee being lowered to 0 07 from 0 08 while the Vanguard High Dividend Yield ETF is charging 0 06 down from 0 08
Fee Cut A Solid Trend
Social Finance Inc an online lender also known as SoFi recently hit headlines by launching two ETFs that waived off managed fees for at least the first year of operation read
Then J P Morgan launched the JPMorgan NYSE JPM BetaBuilders U S Equity ETF BBUS which offers exposure to large and mid cap U S equities with a fee of 0 02 J P Morgan intends to make the broad U S stock market fund cheaper than that of Vanguard Schwab and BlackRock s iShares
Then came a negative fee ETF Salt Financial s Salt Low truBeta US Market Fund LSLT which plans to pay 0 05 of assets to people for their investment in it till April 2020 or till the fund crosses the 100 million level whichever comes earlier After that threshold the fund will charge 29 bps in fees read
Against this backdrop it is expected that Vanguard will leave no stone unturned to garner market share Below we highlight the Vanguard funds that underwent a fee cut in the latest round
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JPM | Here s Why Citigroup Stock Is An Attractive Investment Option | Performance of major banks in first quarter 2019 was quite impressive Loan growth rising fee income controlled expenses and rise in interest rates supporting margins boosted investors confidence in banking stocks Therefore some of these stocks can be profitable additions to your portfolio supported by robust fundamentals and encouraging long term prospects Thus this is the right time to add a few banking stocks to your portfolio Today we bring one such stock Citigroup NYSE C that continues to depict robust fundamentals and improving prospects This bank appears to be a solid bet right now due to its sound organic growth strategies Also the company witnessed prudent expense management along with increasing loan and deposit balances over the last few years Further this Zacks Rank 2 Buy stock has appreciated more than 3 over the past year as against the 0 6 decline registered by the
In addition the Zacks Consensus Estimate for its current year earnings has been revised 2 4 upward over the past 30 days Why Citigroup is a Must BuyRevenue Strength With improvement in the interest rate scenario following the rate hikes and steady loan growth strain on net interest revenues continues to ease In 2018 and first quarter 2019 uptrend in NIR was witnessed after a declining trend that prevailed for years Notably management continues to expect the net interest revenue percentage to improve or remain stable in 2019 Therefore such a positive trend will aid overall revenue growth Moreover the company s projected sales growth of 1 7 for 2019 ensures continuation of the upward revenue trend Earnings Per Share Growth Over the past three to five years Citigroup witnessed earnings per share EPS growth of 5 1 Notably the company also delivered an average positive earnings surprise of 4 74 over the trailing four quarters Furthermore earnings momentum is likely to continue in the near term as indicated by the company s projected EPS growth rate of 14 3 for the current year Prudent Expense Management The New York based lender has been successful in reducing expenses at a CAGR of 6 6 over the last five years ended 2018 Expenses dipped as the impact of higher volume related expenses and ongoing investments were more than offset by efficiency savings and the wind down of legacy assets Notably the declining trend continued into first quarter 2019 as well Such cost management initiatives will support the bank s bottom line growth Impressive Capital Deployment The company s 2018 capital plan received the Fed s approval following which the company raised its quarterly dividend to 45 cents per share up 40 6 from the current payout of July 2018 Moreover it has a share repurchase program of up to 22 billion in place These activities reflect its capital strength and commitment toward rewarding shareholders Stock seems Undervalued Citigroup seems undervalued when compared with the broader industry Its current price to earnings F1 and price book ratios are lower than the respective industry averages Other Stocks to ConsiderFirst Business Financial Services Inc NASDAQ FBIZ has been witnessing upward estimate revisions for the past 30 days Moreover this Zacks 1 Strong Buy Ranked stock has rallied more than 14 in the past six months You can see JPMorgan NYSE JPM has been witnessing upward estimate revisions for the past 30 days Also the company s shares have gained nearly 4 2 in six months time At present it carries a Zacks Rank of 2 1st Source Corporation NYSE C has been witnessing upward estimate revisions for the past 30 days Additionally the stock has jumped around 1 7 over the past six months It currently carries a Zacks Rank 2 Will you retire a millionaire One out of every six people retires a multimillionaire Get smart tips you can do today to become one of them in a new Special Report 7 Things You Can Do Now to Retire a Multimillionaire |
MS | It s Too Early to Call an End to the Dollar Rally JPMorgan Says | Bloomberg It s still too early to call an end to this year dollar s rally according to J P Morgan Asset Management
The greenback has gained more than 6 percent from this year s low in February thanks to an expanding U S economy and haven bids and there may still be some upside left Tai Hui a global market strategist at the asset manager in Hong Kong wrote in emailed comments
It may be premature to call this the end of the USD rally Hui said The greenback has been on a rapid ascent in recent months due to reduced risk appetite and outperformance in U S economic growth and equity performance
J P Morgan Asset joins hedge fund giant Man Group Plc in forecasting further strength in the greenback this year as escalating U S China trade tensions fuel demand for the currency The Bloomberg Dollar Spot Index climbed to a 13 month high last week as the trade dispute and financial turmoil in Turkey led to a selloff in emerging market assets
The dollar dropped for a fourth day on Tuesday as President Donald Trump was said to have complained about the Federal Reserve s interest rate increases while accusing Europe and China of currency manipulation
While this week s retreat will probably prove temporary at some point the dollar is likely to run out of steam Hui said
Speculative positioning is at its highest since 2017 he wrote This doesn t imply imminent correction but this technical factor does suggest limited room for more appreciation
At the same time the U S economy is running a sizable current account deficit which needs the dollar to weaken to rebalance he said
Morgan Stanley NYSE MS and Wells Fargo NYSE WFC Co also argue the currency is nearing its peak as U S economic growth slows just as other major central banks begin to unwind their ultra loose monetary policy |
MS | Australia s AMP appoints Credit Suisse private banker De Ferrari as CEO | By Paulina Duran SYDNEY Reuters Australia s AMP Ltd AX AMP has hired Credit Suisse s head of private banking in Asia Pacific as chief executive to repair its reputation following four bruising months since a powerful financial sector inquiry revealed board level misconduct at the firm Francesco De Ferrari NYSE RACE will start at the country s largest listed wealth manager on December 1 with a one off payment of A 17 7 million 12 95 million on top of a salary package worth up to A 8 3 million AMP said in a statement on Wednesday Interim CEO Mike Wilkins who took over the reins of the 169 year old firm after the inquiry s revelations triggered the departure of its CEO chairwoman and several other executives said De Ferrari would lead a growth strategy for the company We have designed a remuneration structure to drive the recovery of AMP and recognize the degree of challenge in the task ahead Wilkins said AMP s share price has tanked since mid April when the inquiry heard AMP had charged thousands of customers for financial advice it never gave then doctored a supposedly independent report to the corporate regulator about it exposing serious flaws in its governance and culture nL4N1TN1HO AMP shares were 1 9 percent lower in Wednesday morning trading compared with the broader market AXJO that was down 0 6 percent But since the shares began trading ex dividend on Wednesday the 5 Australian cent decline compared to the 24 5 cent dividend implied investors supported the appointment It is a good start said Morgan Stanley NYSE MS analyst Daniel Toohey referring to De Ferrari s appointment He is relatively unknown so it s too early to judge but AMP needs a cultural shift and he comes left of field and that seems positive Toohey said The revelations by the inquiry called the Royal Commission triggered the resignation of AMP s former CEO Craig Meller and of Chairwoman Catherine Brenner who was replaced by ex Commonwealth Bank AX CBA CEO David Murray De Ferrari who was also chief executive of Southeast Asia and frontier markets for Credit Suisse S CSGN said he was committed to changing the company and restoring its reputation While 2018 has clearly been a challenging year for the business I m confident we can earn back trust which will underpin the recovery of business performance De Ferrari said in the AMP statement AMP is currently facing multiple class action lawsuits pursuant to findings of the inquiry which has said it may also recommend criminal charges Credit Suisse said it would replace De Ferrari with Francois Monnet and Benjamin Cavalli who would run the second biggest Swiss bank s private banking business in North Asia from Hong Kong and South Asia from Singapore respectively Under Francesco s leadership we have built a highly successful onshore and offshore private banking business model and expanded its footprint across the region beyond established key wealth management hubs to capture the opportunities in both mature and emerging wealth markets said Credit Suisse Asia Pacific CEO Helman Sitohang in a statement
1 1 3669 Australian dollars |
MS | Exclusive Aramco IPO halted oil giant disbands advisers sources | By Clara Denina Alex Lawler and Marwa Rashad LONDON RIYADH Reuters Saudi Arabia has called off plans for the domestic and international listing of state oil giant Aramco billed as the biggest stock flotation in history four senior industry sources said on Wednesday Financial advisers working on the planned listing have been disbanded as Saudi Arabia shifts its attention to a proposed acquisition of a strategic stake in local petrochemicals maker Saudi Basic Industries Corp two of the sources said nL8N1UE4VF The decision to call off the IPO was taken some time ago but no one can disclose this so statements are gradually going that way first delay then calling off a Saudi source familiar with the IPO plans said The message we have been given is that the IPO has been called off for the foreseeable future said a second source a senior financial adviser Even the local float on the Tadawul Stock Exchange has been shelved that person said Early on Thursday Saudi Arabia s energy minister issued a denial that the IPO had been called off The government remains committed to the initial public offering of Saudi Aramco in accordance with the appropriate circumstances and appropriate time chosen by the Government Khalid al Falih said in a statement Falih said Riyadh had taken measures to prepare for the listing and the timing would depend on factors including favorable market conditions The proposed listing of the national champion was a central part of Crown Prince Mohammed bin Salman s reform drive aimed at restructuring the kingdom s economy and reducing its dependence on oil revenue The prince announced the plan to sell about 5 percent of Aramco in 2016 via a local and an international listing predicting the sale would value the whole company at 2 trillion or more Several industry experts questioned whether a valuation that high was realistic which hindered the process of preparing the IPO for the advisors A third industry source said the IPO had been called off for the time being but that it could be revived in future if appropriate It has been postponed until further notice the source said Stock exchanges in financial centers including London New York and Hong Kong have been vying to host the international tranche of the share sale An army of bankers and lawyers have competed to win advisory roles in the IPO seen as a gateway to a host of other deals they expect to flow from the kingdom s wide privatization program International banks JPMorgan NYSE JPM Morgan Stanley NYSE MS and HSBC were working as global coordinators boutique investment banks Moelis Co and Evercore were chosen as independent advisers and law firm White Case as legal adviser sources had previously told Reuters More banks were expected to be named but no bookrunners were formally appointed despite banks pitching for the deal Lawyers bankers and auditors are all essential in the drafting the prospectus a formal document that provides essential details on the company Aramco had a budget which it used to pay advisers until the end of June This has not been renewed one of sources said The advisers have been put on standby a fourth source a senior oil industry official said
Sources have previously told Reuters that in addition to the valuations disagreements among Saudi officials and their advisers over which international listing venue to be chosen had slowed the IPO preparations |
MS | U S economy expected to slow damaged by trade war Reuters poll | By Hari Kishan and Manjul Paul BENGALURU Reuters U S economic growth will slow steadily in coming quarters after touching a four year high in April June according to a Reuters poll of economists who expect President Donald Trump s trade war to inflict damage Boosted in part by 1 5 trillion of tax cuts passed late last year the U S economy expanded at an annualized rate of 4 1 percent in the second quarter its strongest performance in nearly four years But the latest poll of more than 100 economists taken Aug 13 21 showed they expect the U S economy to lose momentum and to end next year growing at less than half that rate The U S economy was forecast to grow 3 percent in the current quarter and 2 7 percent in the next a slight upgrade from the previous poll But the short term boost to growth from tax cuts was expected to wane Economists trimmed their growth projections across most quarters next year leaving the outlook broadly unchanged and vulnerable to the trade conflict with China The trade measures taken by the U S so far and the retaliation by foreign governments will probably slow down the economy only marginally noted Philip Marey senior U S strategist at Rabobank However that could change in the case of a global trade war in which a range of foreign countries take protectionist measures aimed at the U S which is after all the party that is trying to change the status quo Nearly two thirds of 56 economists who answered an extra question said they have considered the impact of Trump s expanding trade war in their U S growth predictions That was a nearly identical proportion to a poll of economists covering the euro zone published on Wednesday ECILT EU The remaining 20 said the trade dispute has had no influence on their forecasts but underscored the downside risk if trade tensions deepen At this time with what we know and believe will occur we acknowledge that risk to the outlook is to the downside with the trade disputes That said we have not substantially lowered our U S GDP growth outlook Further deterioration and eventual performance could certainly change our outlook however said Sam Bullard senior economist at Wells Fargo NYSE WFC While Trump has said these trade tariffs will benefit the U S economy no economist polled by Reuters shared that view All the tariffs imposed and the retaliatory measures until now have been largely confined to Chinese industrial machinery electronic components and other intermediate goods and has had only a limited impact on the U S economy However the next round of tariffs planned for late September are aimed at consumer products and likely to have a negative impact on the overall economy as consumer spending contributes to over two thirds of U S gross domestic product While the consensus suggests a slowdown in the world s largest economy starting next year only one of over 100 economists polled predicted an outright recession in 2020 The poll gave a one in three chance of a U S recession in the next two years a slight downgrade from a 35 percent probability of that happening in the previous poll But bond markets are telling a different story The U S yield curve as measured by the gap between two and 10 year Treasury notes is now just 23 basis points the flattest since just before the last financial crisis That suggests a yield curve inversion where the spread goes negative and which has accurately predicted five of the past six recessions is coming soon Despite the threat from trade tensions the Federal Reserve is still forecast to raise interest rates by 25 basis points in September and once more in December taking the fed funds rate to 2 25 to 2 50 percent by the end of 2018 For next year though economists forecast only two rate increases compared with three suggested by the U S central bank s own dot plot projections Minutes released on Wednesday from the Fed s latest policy meeting held July 31 Aug 1 hinted further removal of policy accommodation was likely to come soon should strong data continue to support current economic projections The dollar snapped a five day losing streak as traders took the minutes as a signal rates will rise next month Like economists in the latest poll Fed officials also discussed the possible damage of trade conflict on consumer spending and business investment The fading impulse from fiscal policy and impacts from trade uncertainty are a 2019 story and the Fed will be focused on how its outlook is tracking today and how financial conditions are evolving noted economists at Morgan Stanley NYSE MS
Feeling no pain from its actions thus far monetary policymakers are inclined to continue hiking Polling by Mumal Rathore and Sujith Pai editing by Chizu Nomiyama Larry King |
MS | Jackson Hole History Suggests Market Calm to Follow Powell s Debut | Bloomberg Federal Reserve Chairman Jerome Powell s debut address to the Wyoming gathering of central bankers this week will do little to shake financial markets if history is any guide
That s according to analysts at Cornerstone Macro LLC who reviewed the reaction of investors to past gatherings in Jackson Hole
The reality is that from a market perspective recent Jackson Hole symposia have been fairly boring analysts at Cornerstone led by Roberto Perli a former Fed economist said in a report published on Wednesday
Neither the Standard Poor s 500 Index nor the ten year Treasury yield moved much in the aftermath of speeches by Fed Chairs Ben Bernanke and Janet Yellen they found The exception was 2011 when Bernanke fleshed out plans to reinvest maturing bonds into longer dated debt in a plan known as Operation Twist
The Cornerstone analysis concluded the limited fallout related to Bernanke and Yellen preferring to use the central bank s policy meetings rather than the Grand Teton National Park as the place to communicate major decisions Yellen skipped 2015 s symposium which is organized by the Kansas City Fed
An improvement in Fed communications over recent decades also meant chairs had less need to correct market expectations Perli s team said in the report
Looking at this week Cornerstone said Powell hasn t shown any tendency to deviate from the collegial approach to setting policy and that there doesn t seem to be a need for him to adjust market expectations
The symposium will very likely generate interesting ideas and spur a lively debate among academics and policy makers but as a base case shouldn t result in any deviation from the policy trajectory the market already priced in Perli and colleagues said
Minutes of the Fed s July 31 Aug 1 meeting which were published on Wednesday left little doubt that Powell plans to raise the U S benchmark lending rate next month
At Morgan Stanley NYSE MS Hans Redeker global head of foreign exchange strategy is advising clients to still pay close attention In a report to clients released on Thursday he estimated that the S P 500 rallied nine out of twelve times for an average gain of 0 6 percent from the past 12 meetings and that 10 year Treasuries rose more than two year notes on nine occasions
Investors should be attentive to Jackson Hole said Redeker Investors will be looking for signals to gauge whether Powell will use this as an opportunity to convey potential policy |
JPM | Argentina Bonds Eyeing Lows on Flurry of Negative Headlines | Bloomberg After a brief respite at the end of last week Argentina s debt is getting hammered again
The nation s offshore notes approached new lows on Monday close to wiping out the small rebound from late last week after the country was downgraded deeper into junk territory by two of the three biggest ratings companies and the Economy Minister Nicolas Dujovne resigned
The extra yield investors demand to own Argentine bonds over U S Treasuries widened 205 basis points to 18 58 percentage points according to a JPMorgan NYSE JPM index while 100 year securities fell 4 7 cents to 47 4 cents on the dollar approaching last week s record low The upfront cost to protect Argentina s debt for five years using credit default swaps rose to 52 from 47 on Friday Local markets are closed on Monday for a holiday
You re going to see plenty more volatility between now and the end of October said Graham Stock a senior emerging market sovereign strategist at BlueBay Asset Management in London Measures taken by President Mauricio Macri last week won t be enough to help him in the Oct 27 election and he risks pursuing too populist an economic agenda in the lead up to the vote Stock said
Macri s measures to support the economy include freezing fuel prices for 90 days increasing the minimum salary and modifying taxes paid by workers
Default Risk
Despite a two day respite at the end of last week the nation s credit default swaps still imply a 86 chance of a default in the next five years amid expectations the populist opposition will win October s election The brutal slump in the peso made the country s large pile of debt much harder to repay As of March 31 Argentina had 33 7 billion in foreign currency debt payments due by year end the vast majority in short term Treasury bills
In an interview on Bloomberg TV Alejo Czerwonko an emerging markets strategist at UBS Wealth Management said a surprise in the first round for Macri would bolster assets but that it was very unlikely Argentines vote in presidential elections on Oct 27 and the next government would take over on Dec 10
The sharp market sell off was prompted by a surprise result in the Aug 11 primary election showing opposition candidate Alberto Fernandez with a commanding lead over Macri
A delegation from the International Monetary Fund is expected to arrive in Buenos Aires this week for meetings with the government and the opposition ahead of a decision on whether to disburse about 5 billion of additional funds next month The nation s reserves fell 3 9 billion last week to 62 4 billion the lowest since December aggravating concerns about the country s finances
Opposition Leader
In several interviews with local newspapers on Sunday Fernandez spoke about what he considered successful debt talks during his time as cabinet chief that led to a restructuring of bonds and the need to negotiate with bondholders While he didn t say he would necessarily push for a restructuring he said that no one knows better than us the damage caused by default On Monday his economic adviser Guillermo Nielsen said Fernandez has no plans to restructure the country s debt
While he added some clarity on his views he did not shed any light on future cabinet members which would be necessary to understand his economic policies more concretely Citigroup Inc NYSE C strategists led by Dirk Willer wrote on a report on Monday
Late last week Fitch Ratings cut Argentina s long term issuer rating to CCC from B putting the South American nation on par with Zambia and the Republic of Congo S P followed lowering the country s sovereign rating to B from B and slapping a negative outlook on it
Uncertainty continues on the private sector s predisposition to roll over government debt and hold pesos while depreciation stresses the government s high financing needs S P analyst Lisa Schineller wrote in a statement accompanying the downgrade Fitch s said the deterioration in the macroeconomic environment increases the likelihood of a sovereign default or restructuring of some kind
Adds Nielsen comment on 10th paragraph |
JPM | JPMorgan metals trader pleads guilty to spoofing resigns from bank | By Jonathan Stempel
NEW YORK Reuters A JPMorgan Chase NYSE JPM Co precious metals trader pleaded guilty to spoofing or placing bogus trade offers on Tuesday when he also resigned as an executive director at the bank
The guilty plea and resignation of Christian Trunz 34 of London were announced by the U S Department of Justice
Trunz admitted in the federal court in Brooklyn New York to having from July 2007 to August 2016 at JPMorgan and another bank placed thousands of orders for gold platinum and palladium futures contracts that he never intended to complete
While the Justice Department did not identify the banks by name in court papers Trunz had worked for JPMorgan since at least 2008 according to the Financial Industry Regulatory Authority s BrokerCheck database
Lawyers for Trunz did not immediately respond to requests for comment A spokeswoman for JPMorgan declined to comment
Trunz s plea followed a guilty plea to spoofing last October by another JPMorgan trader John Edmonds in a Connecticut federal court
The Justice Department said Trunz who worked in New York London and Singapore learned about spoofing from more senior traders and engaged in the practice with the consent of his immediate supervisors
U S prosecutors have charged several other traders with spoofing and their probe into the practice is continuing JPMorgan said in a Feb 26 regulatory filing that it was cooperating with the probe
Trunz pleaded guilty to one count of spoofing and one count of conspiracy to engage in spoofing His sentencing is scheduled for Feb 19 2020 Edmonds has yet to be sentenced
The case is U S v Trunz U S District Court Eastern District of New York No 19 cr 00375 |
JPM | Why JPMorgan Chase JPM Is A Top Dividend Stock For Your Portfolio | All investors love getting big returns from their portfolio whether it s through stocks bonds ETFs or other types of securities However when you re an income investor your primary focus is generating consistent cash flow from each of your liquid investments
Cash flow can come from bond interest interest from other types of investments and of course dividends A dividend is that coveted distribution of a company s earnings paid out to shareholders and investors often view it by its dividend yield a metric that measures the dividend as a percent of the current stock price Many academic studies show that dividends account for significant portions of long term returns with dividend contributions exceeding one third of total returns in many cases
JPMorgan Chase in Focus
Based in New York JPMorgan Chase JPM is in the Finance sector and so far this year shares have seen a price change of 18 95 The biggest U S bank by assets is paying out a dividend of 0 8 per share at the moment with a dividend yield of 2 76 compared to the Banks Major Regional industry s yield of 2 8 and the S P 500 s yield of 1 89
Taking a look at the company s dividend growth its current annualized dividend of 3 20 is up 29 from last year Over the last 5 years JPMorgan Chase has increased its dividend 5 times on a year over year basis for an average annual increase of 13 81 Looking ahead future dividend growth will be dependent on earnings growth and payout ratio which is the proportion of a company s annual earnings per share that it pays out as a dividend JP Morgan s current payout ratio is 35 This means it paid out 35 of its trailing 12 month EPS as dividend
JPM is expecting earnings to expand this fiscal year as well The Zacks Consensus Estimate for 2019 is 10 per share which represents a year over year growth rate of 11 11
Bottom Line
Investors like dividends for a variety of different reasons from tax advantages and decreasing overall portfolio risk to considerably improving stock investing profits However not all companies offer a quarterly payout
Big established firms that have more secure profits are often seen as the best dividend options but it s fairly uncommon to see high growth businesses or tech start ups offer their stockholders a dividend Income investors have to be mindful of the fact that high yielding stocks tend to struggle during periods of rising interest rates That said they can take comfort from the fact that JPM is not only an attractive dividend play but also represents a compelling investment opportunity with a Zacks Rank of 2 Buy |
MS | How Emerging Market Investors Are Playing Turkey s Crisis | Bloomberg As emerging markets take a battering from Turkey s turmoil sending stocks and bonds toward their lowest this year traders are positioning themselves to ride out the pain
Traders pushed down the value of emerging market assets Monday as Turkish assets sank The carnage in Turkey added to an already fragile landscape amid tensions between the U S and other major economies such as Russia and China While some investors say bargains are already emerging others bet the best option is to sell stocks and bonds and put their money into cash
Here s what analysts and investors are saying
Kevin Daly a money manager at Aberdeen Standard Investments in London
The almost 800 billion investment group sold some emerging market holdings on Monday to increase its cash positions
Daly sees few signs the Turkish rout will end soon and says emerging markets as a whole could be in for further pain
Playing a market like this is difficult he said There aren t any obvious safe zones
Nader Naeimi the Sydney based firm s head of dynamic markets at AMP Capital Investors Ltd
AMP increased its exposure to the yen dollar and Swiss franc because they re havens during tumultuous times
He s short the Russian ruble Indonesian rupiah and Philippines peso and says the risk of a market meltdown is high
EM currencies might be attractive again if they fall another 10 percent he said For now the only equities he s interested in are China s given the nation s current account surplus and ability to loosen fiscal and monetary conditions if it wants to
Jan Dehn head of research at Ashmore in London
The selloff has left emerging markets replete with opportunity
While Turkish assets probably haven t bottomed yet it is time to buy stocks bonds and currencies elsewhere he said
Turkey s problems are entirely self inflicted and will not suddenly appear in say Poland or Uruguay
Hans Redeker global head of foreign exchange strategy at Morgan Stanley NYSE MS in London
Investors should short South Africa s currency against Japan s yen targeting an 8 percent strengthening of the latter to 7 1 per rand from 7 67
With ongoing weakness in Turkey investors will have to add hedges in EM they said South African government bonds remain the top OW duration in the foreign portfolio This means foreigners have to buy USDZAR to hedge their bond position and reduce overall EMFX beta risks
Nicholas Ferres chief investment officer at Vantage Point Asset Management in Singapore
The hedge fund has added exposure where there s been an emotional overreaction he said
Ferres is betting on a rebound in the currencies and stocks of India and Indonesia and says the dollar s strength is well advanced |
MS | European shares edge up ignoring emerging market losses | By Julien Ponthus LONDON Reuters European shares edged up on Wednesday ignoring heavy losses overnight on emerging markets as the Turkish currency crisis seemed to ease and the lira recovered from record lows At 0805 GMT the pan European STOXX 600 STOXX was up 0 1 percent with most major indexes trading higher Risk on sentiment returned and traders were once again in the mood for buying overnight said Jasper Lawler head of research at London Capital Group Corporate earnings triggered some share price moves Danish wind turbine maker Vestas CO VWS jumped 7 4 percent after reporting better than expected second quarter operating profits and launching a 200 million euro 226 7 million share buy back We expect a positive reaction given the solid order intake and sharp margin beat along with stable pricing UBS analysts wrote ahead of the open as they maintained their buy rating on the stock Also in Denmark audio maker CO WDH William Demant fell 8 8 percent after it published a trading update that Bernstein analysts said lifted its guidance perhaps less than consensus would have hoped for In the UK Admiral L ADML rose to the top of the FTSE 100 FTSE gaining 4 1 percent after posting a 9 percent rise in first half pre tax profit helped by demand for its insurance products Hikma Pharma L HIK posted the best performance of mid sized listed firms up 8 5 percent after raising its outlook Brokers recommendations also affected early trading Amundi rose 3 5 percent after Morgan Stanley NYSE MS upgraded the French asset manager to overweight Atlantia MI ATL which owns Autostrade per l Italia was down 5 4 percent after Italy s transport minister called for senior managers to resign The company operated the bridge that collapsed in the port city of Genoa
Shares in Air France KLM PA AIRF were up 1 4 percent after reports its board was likely to appoint Air Canada s AC TO chief operating officer Benjamin Smith as its new boss |
MS | BOJ may be stealth tapering in stock markets analysts say | By Tomo Uetake TOKYO Reuters Japan s central bank appears to be growing more comfortable with larger declines in the country s stock prices a sign it may have begun in the share market what analysts describe as stealth tapering of its massive monetary stimulus The Bank of Japan refrained from buying stocks on two days this week when the Topix TOPX index was down more than 0 4 percent by midday a departure from a previous pattern in which it bought exchange traded funds ETFs on days when the index fell more than 0 2 percent The BOJ already has a precedent of stealth tapering in its bond buying and similar moves in its stock market operations come after it said last month it would make its asset purchases more flexible That change met stiff resistance from some BOJ board members highlighting the massive internal challenges it faces in maintaining radical stimulus policies At its July 31 decision the BOJ said it may increase or decrease its stock buying depending on market conditions The tweak is part of a wider shift to make its reflationist monetary policy which includes large asset purchases in financial markets more flexible as it seeks to lift Japan s stubbornly low consumer prices Since the last meeting the BOJ bought ETFs on only two days Aug 10 and 13 when the Topix fell 0 6 percent and 1 7 percent in morning trade respectively For a graphic on BOJ s buying in Japanese shares click It did not step into the market on Wednesday and Thursday this week when the Topix declines in the morning session were 0 43 and 0 42 percent respectively This is not so much an alert as a red hot warning that it is going to whittle down its purchase bit by bit said Shingo Ide chief equity strategist at NLI Research Institute I would say that is the whole purpose of putting that line in the statement It also refrained from buying in when the drop in the Topix was between 0 2 to 0 4 percent earlier this month In debt markets the BOJ has reduced its bond buying over the past two years despite statements that it aims to increase its government bond holdings by 80 trillion yen 722 billion a year For a graphic on BOJ s JGB buying click The BOJ dabbled in changing its unwritten policy on stock market support in April and May allowing greater price declines without buying though it switched back to its old script in late May However not everyone sees signs that stealth tapering has begun Even if it doesn t buy when the market is down 0 4 percent it s still possible that the BOJ will have bought 6 trillion yen by the end of the year said Norihiro Fujito chief investment strategist at Mitsubishi UFJ Morgan Stanley NYSE MS Securities BOJ bought nearly 3 5 trillion yen of stocks in the first half of this year more than a half of its annual target of 6 trillion yen meaning it needs to buy less in the second half If the BOJ is really reducing buying that is going to have a considerable impact I suspect the BOJ will try to reduce it gradually he said While a small reduction in market intervention is unlikely to have a tangible impact on inflation it could reduce support for Japanese share prices and marginally strengthen the yen Since 2013m the BOJ has bought almost 20 trillion yen of Japanese stocks making it by far the biggest buyer of Japanese stocks But that has raised concerns among market participants that the BOJ s ownership of Japanese companies may become too big a factor that many investors say prompted the BOJ to make its latest policy modification |
MS | Nvidia Expects Lower Revenue Due to Demand from Crypto Miners Stock Price Falls 5 | Nvidia s stock price fell on Friday after the US chip maker on Thursday revenue forecasts below Wall Street experts expectations The company pointed that the bearish trend in the cryptocurrency market lowered demand for its chips used by crypto miners which negatively influences the sales Revenue from crypto products declined to 18 million for the second quarter way below the figure recorded in the previous quarter at 289 million According to Morgan Stanley NYSE MS the indicator will be basically zero from here
Nvidia chief financial officer Colette Kress in |
JPM | JPMorgan to brief clients on volatility in equity markets | Reuters JPMorgan Chase Co N JPM plans to host a conference call for clients on Tuesday to address recent market moves after last week s inversion of the U S Treasury yield curve and a sharp sell off on global stock markets
In the wake of a rather violent decline in yields inversion of the curve and volatility in equity markets we consider the role of poor liquidity and systematic flows in exacerbating these market moves an invitation from JPMorgan Cross Asset Derivatives Strategy said
It plans to discuss systematic flows and liquidity dynamics in equities to what extent is high frequency trading to blame for drops in market depth and convexity hedging in interest rate markets the invitation shows
Yields for 2 year and 10 year U S Treasuries inverted for the first time on Wednesday since June 2007 in a sign of investor concern that the world s biggest economy could be heading for recession
President Donald Trump held a conference call on Wednesday with the chief executives of the three largest Wall Street banks as financial markets were in turmoil one source with direct knowledge of the matter said on Friday |
JPM | JPMorgan Says Stocks Can Reach New Highs Despite Yield Inversion | Bloomberg Don t fret too much about the yield curve inversion says JPMorgan Chase NYSE JPM Co Stocks can still climb to new records
Equities around the world plunged last week after the key U S 2 year and 10 year yield curve briefly flipped for the first time since 2007 spurring fears of an economic downturn But this correction is likely to be short lived and U S stocks will recover as soon as early September say JPMorgan strategists led by Mislav Matejka as stimulus from major central banks outweighs worries about a slowdown
Even if the well known harbinger of recession proves correct JPMorgan says investors should still have time to reap further gains before the mood sours since past yield curve inversions have preceded economic downturns by as long as 17 months on average and stock market peaks by about 11 months The return in equities averaged about 10 in the 12 months following a flat yield curve according to JPMorgan
We continue to think that post the August correction equities will make new all time highs into the first half of next year JPMorgan strategists including Matejka write in a note Having said that this development nevertheless increases the chances of a potential peak of the market for this cycle in summer 2020 as we previously outlined in our work
The analysts also point out that in the past the curve inversion was a sign of real policy rates becoming too high of a deteriorating labor market and tighter lending conditions However the current situation is the opposite with real rates barely exceeding zero
The curve inversion might be more an indicator of extreme market nervousness at present of increasing central banks action skewed bond ownership and of global search for yield rather than a sure sign that the U S is about to enter a recession according to the JPMorgan strategists |
MS | Stock investors rediscover defensives before trade war deadlines | By Danilo Masoni MILAN Reuters The risk of trade barriers and slowing global business activity has kept the European equity market in check this year That however has been a boon for shares in companies such as drug makers and consumer staples that are less dependent on the economic cycle and which investors say could provide a shelter should trade tensions between Washington and Beijing blow up After over a year of neglect fund managers began in the second quarter to pour money back into firms such as yoghurt maker Danone PA DANO food giant Nestle S NESN drugmakers Novartis S NOVN and Roche S ROG as well as tobacco giant BAT L BATS and the maker of Durex condoms Reckitt Benckiser L RB In some cases they have turned a blind eye to challenges facing some of these companies because their compelling valuations and resilience to any trade related economic downturn was an incentive to re engage Morgan Stanley NYSE MS estimates a full blown trade war would wipe 0 8 percentage points off global GDP growth We are slightly more invested in defensive sectors also in relation to the risk of a trade war said Jerome Schupp fund manager at Geneva based investment firm Prime Partners He said his firm had bought Danone shares a few months ago and had some drugmakers as strategic assets He added that they had invested in these companies betting on their growth potential and not purely because they are defensive Europe s equity market is barely in the black in 2018 but while sectors such as autos which are highly dependent on global trade have been a drag defensives have filled the gap The move started when U S President Donald Trump said in March he would introduce import tariffs on steel and aluminum stoking fears of a global trade war It then continued at the start of the summer in the run up to a series of key deadlines for the United States to decide on planned protectionist moves Investors in European equity have become familiar with the theme of a return of leadership of defensive stocks wrote Kepler Cheuvreux strategist Christopher Potts last week when he upgraded European personal household sector to overweight A key date on investors radars is Sept 5 when a comment period on Trump s plan to tax 200 billion of Chinese imports expires paving the way for a decision in the following weeks Analysts also expect Washington to decide on possible auto import tariffs in October These deadlines are fuelling expectations there will be no exception this year to August being a traditionally turbulent month for markets The defensive bias should remain apparent through August into September Potts said Graphic on defensives vs cyclicals HIGH PROFILE POKER GAME Defensives have been a very popular trade during the long years of easy monetary policy in Europe that squeezed rates to zero boosting their appeal as cash flow machines paying steady dividends to their shareholders But when in the second half of 2016 an economic recovery in Europe gathered pace defensives started to lose ground to stocks more tied to the business cycle Their decline continued throughout the euroboom year of 2017 but the tide appeared to turn once again when Trump kicked off the trade war Much of how the revival will pan out will depend on whether the United States and China will be able to find an agreement or there is a trade war escalation Is Trump just playing this very clever high profile poker game with the Chinese Will he back down and reach some sort of compromise said David Hussey portfolio manager at Manulife Asset Management He said stocks like Reckitt which he described as a textbook example of the fortunes of income paying companies or tobacco firms were interesting investments earlier this year because of cheap valuations They ve tobacco firms been awful performers for a variety of reasons But when you get to valuations which assume the business disappears in 10 to 12 years that s just not realistic he said The defensive stocks rally this year has filled a valuation gap versus cyclicals and fund managers such as Hussey and Schupp but also Federico Trabucco at Kairos Parnters in Milan say they are ready to tweak their holdings in turbulent markets Some strategists recommend that clients keep some extra cash ready While defensives have legs to gain further in a less valuation oriented move a big rebound in cyclicals cannot be ruled out depending on the trade talks outcome Beyond the tariff noise however the global economy continues to tick along well and corporate earnings growth is stellar in the United States and strong in Europe
I ve lifted my exposure to defensives as a tactical move But if the trade clouds clear in September October you must be ready to turn around your portfolio said Trabucco |
MS | Ruble Dives the Most Since the Oil Crash in 2015 | Bloomberg The ruble is suffering its worst weekly slump since the 2015 oil crash as some of Wall Street s biggest banks warn investors to steer clear of Russian assets amid mounting risks of crippling sanctions from the U S
Morgan Stanley NYSE MS turned bearish and UBS Group AG closed its recommendation to buy the Russian currency with analysts at both banks saying in notes published on Thursday that the risks outweigh the reward for owning the ruble Diana Amoa a money manager at JPMorgan NYSE JPM Asset Management puts the likelihood of curbs on Russian sovereign debt at as high as 50 percent
The ruble is down 6 3 percent this week as contagion from the crisis in Turkey compounded tensions with the U S Russia s currency traded 1 4 percent weaker at 67 5875 versus the dollar as of 6 41 p m in Moscow
A fresh batch of sanctions introduced this week added to mounting concerns that the U S is about to start ratcheting up the severity of its restrictions against Russia The worst case scenario is a bill introduced in Washington last week that seeks penalties on banking transactions and new Russian sovereign debt as punishment for meddling in the 2016 presidential elections
Geopolitics is what keeps us all up Amoa said in an interview with Bloomberg Television on Friday We ve seen a lot of sanctions coming through ahead of the mid term elections I think there is an incentive to send a strong message that the U S will not allow interference in their democratic processes
Amoa said she has reduced holdings of Russian assets because the tail risk from potential sanctions is just too large High foreign ownership of Russian sovereign debt means that sanctions would have a big impact on bond yields she said Foreigners held about 28 percent of the nation s outstanding ruble debt as of July 1 according to central bank data
Both Republicans and Democrats in Congress have called for tough measures against Russia in the wake of last month s summit between President Donald Trump and his counterpart Vladimir Putin Still the outlook for passage of the bill submitted last week remains uncertain particularly since the U S Treasury warned that sanctioning sovereign debt could cause instability in global markets
The U S is more likely to apply sanctions selectively to avoid collateral damage than to pass the bill in full according to Tilmann Kolb an analyst at UBS Pressure on Russia however is only likely to rise further in the near term he said in a note
No decision can be taken on the bill until the House returns from summer recess next month leaving a cloud of uncertainty over markets until then Analysts at Morgan Stanley said that could leave the Russian Finance Ministry struggling to find enough buyers for the equivalent of 3 billion it can still borrow this year of which 800 million would be swapped for sovereign bonds that are outstanding
The ruble remains highly sensitive to potential new legislation from the U S Morgan Stanley analysts including Hans Redeker said in a research note We think that political risk will weigh on sentiment and increase the ruble risk premium as we head into September |
JPM | Tame U S producer inflation supports case for another rate cut | By Lucia Mutikani
WASHINGTON Reuters U S producer prices increased moderately in July lifted by a rebound in the cost of energy products while underlying producer inflation retreated which could allow the Federal Reserve to cut interest rates again next month
The benign inflation report from the Labor Department on Friday could boost expectations for a half percentage point cut at the Fed s Sept 17 18 policy meeting President Donald Trump on Friday urged the U S central bank to lower rates by a full percentage point saying there was no inflation in our country
Financial markets have fully priced in a 25 basis point rate cut following a recent escalation in the bitter trade war between the United States and China which led to an inversion of the U S Treasury yield curve and raised the risk of a recession Fears about the trade war s impact on the economic expansion the longest on record prompted the Fed to lower its short term rate last week for the first time since 2008
Weak producer prices are a reflection of a dramatic slowdown in manufacturing due to the global trade war said Chris Rupkey chief economist at MUFG in New York We expect a second rate cut by the Federal Reserve in September as the manufacturing sector and world economies continue to slow
The producer price index for final demand rose 0 2 last month after nudging up 0 1 in June the government said In the 12 months through July the PPI increased 1 7 after advancing by the same margin in June Last month s increase in the PPI was in line with economists expectations
Excluding the volatile food energy and trade services components producer prices edged down 0 1 last month That was the first decline since October 2015 and followed an unchanged reading in June The so called core PPI increased 1 7 in the 12 months through July the smallest gain since January 2017 after rising 2 1 in June
The Fed which has a 2 inflation target tracks the core personal consumption expenditures PCE price index for monetary policy The core PCE price index increased 1 6 on a year on year basis in June and has undershot its target this year
Data next week is likely to show moderate gains in consumer prices in July according to a Reuters survey of economists
The dollar DXY slipped against a basket of currencies while U S Treasury prices rose slightly U S stocks fell as investors grappled with fresh trade related tensions
WEAK SERVICES COSTS
U S tariffs on Chinese goods so far have had a marginal impact on inflation as they have mostly been on capital goods
That could change after Trump announced last week an additional 10 tariff on 300 billion worth of Chinese imports starting Sept 1 The new tariffs would affect mostly consumer goods Trump said on Friday talks continued between the two countries but added I am not ready to make a deal
The next round of tariffs on Chinese imports could have a more notable impact on finished goods prices given that they will cover a much greater share of finished consumer goods with few alternatives said Andrew Hunter a senior U S economist at Capital Economics in London But it all depends on how aggressively the Chinese allow their currency to depreciate
China let its currency the yuan slide past the key 7 per dollar level on Monday for the first time since 2008
In July U S wholesale energy prices rebounded 2 3 after falling 3 1 in the prior month They were boosted by a 5 2 percent jump in gasoline prices Goods prices increased 0 4 last month reversing June s 0 4 decline
Energy prices accounted for more than 80 of the rebound in the cost of goods last month Wholesale food prices rose 0 2 in July after advancing 0 6 in June Core goods prices edged up 0 1 after being unchanged for three straight months
The cost of services fell 0 1 in July the first decrease since January after rising 0 4 in June Services were pulled down by a 4 3 drop in the cost of hotel and motel rooms
The cost of healthcare services edged up 0 1 last month after rising 0 2 in June The cost of doctor visits dropped 0 5 last month the most since January 2016 after being unchanged in June Hospital outpatient care prices surged 0 7 the largest increase since January 2018 But the cost of hospital inpatient care fell 0 2
Portfolio management fees rebounded 0 8 after falling 1 8 in June Those fees and healthcare costs feed into the core PCE price index leading economists to expect not much of a change in the inflation measure in July
The PPI signals that the medical care PCE price index will be soft in July likely coming out basically unchanged relative to June said Daniel Silver an economist at JPMorgan NYSE JPM in New York |
JPM | Japan s love of foreign insurance a yen headwind set to wane | By Hideyuki Sano
TOKYO Reuters Japan s craze for overseas insurance products driven by a need for better yield than the near zero ones at home has been a long standing headwind for the yen as domestic insurers bought foreign bonds
But demand is likely to cool as the authorities clamp down on aggressive marketing for these foreign currency denominated insurance products which will curb their sales and hence the selling of yen from Japan
That is bad news for Japanese policymakers who are concerned that a stronger yen hurts export competitiveness especially as the currency has strengthened 2 7 against the dollar so far this month on flight to safety flows boosted by an escalation in Sino U S tensions
Industry sources say a surge in demand for foreign currency denominated life and pension insurance since Japan s move to negative interest rates three years ago has seen at least 4 trillion yen 37 8 billion of such products being issued or one percent of the bloated Japanese insurance market
Japan s life insurers big players in the global financial markets thus hold foreign currency bonds as a hedge against the currency risk stemming from these products
Graphic Chasing higher yields
For instance Taiju Life Insurance the country s fifth largest private life insurer has been increasing holdings of foreign bonds by 350 billion yen a year in recent years
Such flows can exert downward pressure on the yen because by far the majority of other foreign bond investments by investors are currency hedged thus having a neutral effect on the Japanese currency
Some analysts say heavy demand for the U S and Australian dollar for these Japanese insurance products is likely to have helped to cap the yen in recent years
Together with foreign asset buying by the government s pension fund they are helping to curb the yen s strength said Yoshinori Shigemi global strategist at JPMorgan NYSE JPM Asset Management
But now the products are coming under more intense scrutiny due to a rise in complaints and many analysts think yen selling stemming from these products will likely slow
That would be a headache for policymakers as the yen considered a safe haven currency and hovering at seven month highs versus the dollar is likely to stay resilient with the trade war unresolved amid growing uncertainty about the global economy The yen tends to strengthen during times of economic stress as Japan is the world s largest creditor
The Life Insurance Association of Japan said the number of complaints from customers who bought such products at banks a major distribution channel for the product doubled in three years to 2018 19
The biggest complaint was that sales staff at banks did not fully explain risks including the possibility investors will not get back what they paid for if the yen strengthens sharply
The country s financial watchdog is also tightening its grip on foreign insurance products
We have been checking whether flyers insurers hand out to investors properly explain the risks We are also starting to enhance our product review said an official at the Financial Services Agency
Exactly how much insurers will slow sales of these products is not clear given that for some firms these have been the main drivers of their top line growth
Still complaints about the product are now coming not just from investors but also from rival financial institutions such as asset management firms
A lot of consumers have the impression that insurance is safe when in fact they are taking financial risks said JPMorgan Asset s Shigemi Foreign currency denominated insurance in a way is a bit like an oxymoron
1 105 9300 yen |
JPM | Draghi s parting gift to tie Lagarde s hands | By Balazs Koranyi
FRANKFURT Reuters The European Central Bank s imminent stimulus package is unlikely to cut record low borrowing costs much further but will tie its new president s hands for much of the next year giving her little leeway to act while the economy ails
With the bloc s vast manufacturing sector shrinking a global trade and currency war escalating and a hard Brexit looming large the ECB has already signaled more support for the euro zone economy hoping to arrest a dangerous downward spiral that could lead to a recession
But it faces two big problems the bloc s troubles are imported so largely outside the control of monetary policy and the bank s remaining instruments are of limited efficacy given record low borrowing costs
Indeed the widely flagged umpteenth round of ECB monetary easing since 2011 may wipe out the little firepower the central bank has left and undermine the credibility of its claim that it would one day be able to turn the money tap off
Germany can already borrow at minus 0 6 for ten years and interbank markets price 30 basis points of ECB deposit rate cuts to minus 0 7 in coming years putting them in the ballpark of the reversal rate at which more cuts become counterproductive
Still ECB President Mario Draghi who hands the helm to Christine Lagarde at the end of October seems keen to avoid any talk that the bank s firepower is limited suggesting that policymakers will combine several moderate steps into a package on Sept 12 to give markets the impression of a big move
The main goal of the package is to preserve the financial easing they already achieved Frederik Ducrozet a strategist at Pictet Wealth Management said It would be unacceptable for the ECB to admit that any new easing would be less effective because of diminishing returns
The package is likely to include a deposit rate cut and fresh asset purchases and possibly a multi tier deposit rate which would shield banks from some of the negative side effect of super low rates
The cut s potency is marginal given how low the rate already is And the ECB s balance sheet is already at 4 7 trillion euros indicating that asset buys would have to be massive and hence politically contentious to have a tangible impact
JPMorgan NYSE JPM estimates that to lift inflation expectations the ECB s easing package would have to equal about half of its combined measures since 2014 so 1 25 trillion euros of asset purchases and another 350 billion euros of ultra cheap loans to banks And even that might not be enough to put inflation back on target
A weaker euro would definitely help but that is hard to achieve when the Federal Reserve is also easing and the U S administration is grumbling about a strong dollar
Tiering would immediately help banks but it is the most difficult of the measures to reverse given its complexity and would thus tie the hands of Lagarde the longest
NO BIG FIRST IMPRESSION
Draghi s farewell package will consume much of the bank s remaining firepower making it difficult for Lagarde to make a big first impression the very thing Draghi did eight years ago when he cut rates at his very first meeting reversing an earlier misconceived hike
This is already almost as dovish as it gets ING economist Carsten Brzeski said
If you see the September package as mostly a confidence booster you also tie Lagarde s hands because the economy won t change significantly between September and her first meeting in December
The ECB also has no influence on the trade war between China and the U S and no impact on Brexit
Lagarde s room for maneuver on interest rates will also be mostly tied by the ECB s forward guidance which defines the rate path through mid 2020 and is also seen changing next month
The ECB could take an even more accommodative stance But every subsequent move comes at a cost would take significant preparatory work and could even involve a broader review of where the bank is heading
Buying bank bonds for example could make a quick impact helping lenders who transmit the ECB s easy policy to the real economy
But buying debt from institutions directly supervised by the ECB is politically and legally contentious raising questions about conflict of interest
It could also buy more private debt but the bank already got burnt buying corporate bonds leaving little appetite for more risk Stocks are also a possibility but may yield little and fuel accusations that the ECB is merely helping the rich
editing by John Stonestreet |
JPM | Bank of Japan now more likely to ease further economists say Reuters poll | By Kaori Kaneko TOKYO Reuters The chances the Bank of Japan eases further have increased according to over half of economists polled by Reuters after the central bank last month committed to expanding stimulus if a global slowdown derails the economic recovery here Should the Japanese currency strengthen to below 100 yen on the dollar which would hurt the nation s vital exporters that could also prompt the central bank to loosen policy further many analysts said The yen firmed to a seven month high this week Last month the BOJ said it would ease policy without hesitation if overseas risks prolong and threaten the economy s momentum to hit its price goal The BOJ shifted to a preemptive easing stance said Hiroshi Ugai chief economist at JPMorgan NYSE JPM Securities Japan The BOJ is now willing to ease in response to risks of weakening momentum rather than waiting for hard evidence indicating a loss of inflation momentum Asked if chances of the central bank easing further had increased after its July policy meeting 21 of 38 economists in the Aug 2 13 poll answered yes and 17 said no Figures out Friday showed Japan s economy expanded faster than expected growing at an annual pace of 1 8 in the second quarter on healthy consumer spending and business investment even though exports struggled Still the stronger yen and escalating U S China trade war have many experts worried Most economists polled 30 of 38 predicted the BOJ s next move will be to ease Share prices have fallen and yen has firmed on risk aversion recently due to the intensified U S China trade friction If that continues the BOJ will have to ease said Yusuke Kaniwa an economist at Hamagin Research Institute As for the timing of an easing move 12 economists predicted it would happen as early as September and ten forecast October Two expect in December while three think sometime in the first half of 2020 and two predict in 2021 or later Asked what easing steps the BOJ would take 24 said the central bank would tweak its forward guidance Currently it promises to keep very low rates to spring 2020 Fourteen economists forecast the BOJ would allow for greater fluctuation in the 10 year Japanese government bond yield Three predicted the bank would further lower its negative interest rates and two said it would both reduce its minus 0 1 interest rates and 10 year JGB yield target from around 0 As for how much of a yen spike might cause the BOJ to ease 25 of 37 economists predicted a level below 100 yen to the dollar while three said below 105 yen four thought beyond 103 yen and two said beyond 98 yen Over the past six years the central bank has been trying to spur inflation to 2 but economists said it would remain less than half that target for some time Medians in the poll said it would rise to 0 7 this fiscal year through March 2020 and the following fiscal year As for their outlook for economic growth the world s third largest economy is seen growing 0 5 this fiscal year after shrinking an annualized 2 3 in the fourth quarter because of October s planned sales tax hike
The economy will grow at the same pace in fiscal 2020 the poll showed Polling and reporting by Kaori Kaneko Additional polling by Khushboo Mittal in BENGALURU Editing by Malcolm Foster Shri Navaratnam |
JPM | Looking to Add Risk Try Canada as Profit Outlook Hits Record | Bloomberg Slowing global growth and the threat of a drawn out trade war between the two largest economies have impacted corporate profits across the world Not so in Canada where equity bulls have boosted their earnings expectations to a record high
Strategists are expecting profits for companies listed on the benchmark S P TSX Composite Index to climb to C 1 143 864 a share for 2019 thanks to the nation s expanding economy stronger commodity prices and a solid earnings season that s currently underway
And even as yield curves invert in Canada the U S and the U K triggering yet another global recession warning profit forecasts on Canada s benchmark index have risen at a faster pace than that of a gauge of developed market equities
The difference starts with the macro picture Samantha Azzarello global market strategist for JPMorgan NYSE JPM ETFs said in a phone interview Strength in the underlying economy which even took the Bank of Canada by surprise is feeding into the profit and sales outlook for Canadian companies
In the U S companies have slashed their forecasts at the fastest rate in four years according to data compiled by Bloomberg The overall macro growth is slowing and that concern has been feeding into analysts expectations for U S earnings Azzarello said You contrast that with Canada GDP growth is actually stronger than most people thought
Companies listed on Canada s benchmark index have beat estimates by about 6 on average the most in a year More than 80 of S P TSX companies have reported results according to Bloomberg data And about two thirds of those firms have posted profits that beat estimates including pipeline operator Enbridge Inc and mortgage lender Home Capital Group Inc
Business executives in Canada were also positive in the second quarter on the outlook for future sales despite concern about global trade headwinds according to the latest bank of Canada survey The composite gauge of sentiment turned positive after dropping to its lowest since 2016 earlier this year
Guidance provided by Canadian companies has been relatively good said Bruce Campbell founder of StoneCastle Investment Management Inc If you look on aggregate they all seem to think that things are going to be fairly good That s a function of the economy
The Risks
There s still some uncertainty that could hinder the growth in profits While most Canadian companies may not be directly impacted by the U S China trade war a slowdown in the economic growth south of the border will hit corporations up north
The U S is still our largest trading partner If they slow down so does Canada said Laura Lau senior portfolio manager at Brompton Corp We supply many U S companies in the supply chain
The slump in oil prices will also impact earnings The decline in oil prices is definitely going to weigh on profitability in the energy sector And energy is still the second largest sector whether you re looking at the TSX or MSCI Canada Azzarello said
There s also the revised North American Free Trade Agreement or USMCA that still needs approval from Congress That s a huge risk Azzarello said No one s talking about it just because we re all so focused on U S China trade and so is the U S but that s going to be on the docket at some point she added
Canadian banks have yet to report earnings Financials are the largest contributors to the S P TSX with a 31 weighting We do not expect Q3 results to resolve the conflict between the pessimism and optimism surrounding the macroeconomic environment said CIBC analyst Robert Sedran in an Aug 12 report We do expect to see growth of about 6 for the banks The best of a lacklustre year so far he noted
Royal Bank of Canada is the first to report results on Aug 21 and CIBC comes out the following day The rest of the Big Six report the week of Aug 26
Still strategists expect Canadian stocks to keep climbing albeit at a slower pace than the first half of the year The equity gauge has gained 14 so far in 2019 JPMorgan sees low to mid single digit returns in the second half while StoneCastle s Campbell sees a further climb from current levels while bracing for more volatility
Updates story to include yield curve inversions in the U S and U K in third paragraph |
JPM | JPMorgan Falls 3 | Investing com JPMorgan NYSE JPM fell by 3 24 to trade at 105 80 by 09 33 13 33 GMT on Wednesday on the NYSE exchange
The volume of JPMorgan shares traded since the start of the session was 865 81K JPMorgan has traded in a range of 105 80 to 106 57 on the day
The stock has traded at 110 5000 at its highest and 105 7600 at its lowest during the past seven days |
MS | Morgan Stanley Hires Crypto Expert From Rival as Crypto Race on Wall Street Intensifies | Morgan Stanley NYSE MS appointed Andrew Peel as head of digital asset markets The update comes from his LinkedIn NYSE LNKD profile where the new position is listed He leaves Credit Suisse SIX CSGN after twelve years with the bank where his latest job was vice president of sales and trading innovation although he spent the majority of his stay in the Delta One desk Peel will be traveling between London and Zurich for his new role which isn t that surprising given how a lot of financial services companies are limiting their exposure to the UK in the wake of Brexit
The hiring sparks speculation in the big Wall Street and Bitcoin debate A race for the best crypto trading desk appears to be forming with the main co |
MS | China s Yuan Is Set for Longest Weekly Losing Streak on Record | Bloomberg China s currency headed for an eighth weekly decline the longest run since the start of the country s modern foreign exchange rate regime in 1994
The yuan was down 0 46 percent at 6 8694 per dollar at 9 53 a m heading for a weekly loss of 0 81 percent The Shanghai Composite Index was little changed in line for a 3 8 percent loss this week Chinese equities are some of the worst performing in the world this year The country s markets have been rocked by the threat of a trade war with the U S which escalated Thursday as the Trump administration warned of more pain unless Beijing changes its economic system China has said it will retaliate to further U S action
Equity markets in Hong Kong and mainland China were relatively subdued early Friday though few stocks have escaped the carnage of recent months Hang Seng heavyweight Tencent Holdings Ltd has had a torrid run that s seen it decline 19 percent in less than two months The Chinese Internet giant which Morgan Stanley NYSE MS removed from its focus list on Thursday rose 1 4 percent Friday its first gain in seven sessions
The Hang Seng Index was little changed Friday morning and in line for a weekly loss of 3 8 percent The Hang Seng China Enterprises Index fell 0 3 percent extending its decline this week to 3 2 percent The yield on 10 year Chinese sovereign debt was steady at 3 48 percent |
JPM | Vitol Sees Further Slowdown in Oil Demand Growth Uptick in 2020 | Bloomberg Growth in global oil demand is slowing and won t exceed 650 000 barrels a day this year before picking up pace up in 2020 according to Vitol Group s chief executive officer
Oil markets are focused on the U S China trade war while slightly under pricing the risk of possible supply disruptions arising from geopolitical tensions in the Persian Gulf Vitol CEO Russell Hardy said in a Bloomberg TV interview in Abu Dhabi Weak demand in established markets is spurring Vitol to focus on emerging economies he said
We ve been continuously revising our expectations for growth down Hardy said Wednesday The world s biggest independent oil trader expects demand to increase by 600 000 to 650 000 barrels a day in 2019 and we re expecting about 800 000 barrels a day growth for next year Those numbers are a little bit down from when we first set them out They don t include NGLs
The International Energy Agency expects oil consumption to grow by about 1 2 million barrels a day this year but Wall Street has been turning more pessimistic JPMorgan Chase NYSE JPM Co sees growth of 800 000 barrels a day which would be the lowest growth rate since 2011 If demand rises by less than 600 000 barrels a day this year it would be the weakest since 2009 according to IEA data
Biggest Trader
Vitol is a little bit concerned about growth among industrialized nations over the next 10 to 15 years Hardy said Growth in the developing nations emerging markets is going to be more interesting for us as a trading company so we have to shift a little bit of our focus towards that
China s growth is moderating and the trade dispute between Washington and Beijing is taking a toll on demand he said
The market seems to be putting its weight behind economic slowdown and trade wars and slightly under pricing risk that supply could be interrupted Hardy said
Iran on Monday said it could cause further disruptions to shipping through the Strait of Hormuz The country has seized several vessels near the strait a bottleneck for a third of all seaborne oil shipments and has been accused of carrying out attacks on tankers in the area in May and June Oil prices rose after the incidents but have since edged into bear market territory |
JPM | JPMorgan Falls 3 | Investing com JPMorgan NYSE JPM fell by 3 19 to trade at 106 96 by 09 34 13 34 GMT on Wednesday on the NYSE exchange
The volume of JPMorgan shares traded since the start of the session was 833 63K JPMorgan has traded in a range of 106 86 to 108 07 on the day
The stock has traded at 116 8000 at its highest and 106 9300 at its lowest during the past seven days |
JPM | Asia stocks find solace in China trade surprise yuan s fix | By Wayne Cole
SYDNEY Reuters Asian shares were trying to piece together a rally on Thursday as Beijing reported surprisingly solid trade numbers while also limiting the fall in its yuan offering a brief respite from fears of a global currency war
Data showed Chinese exports rose 3 3 in July from a year earlier when analysts had looked for a fall of 2 Imports also declined by less than expected suggesting some resilience to the drawn out Sino U S tariff struggle
Beijing helped by fixing the yuan at a firmer level than many had feared even though it was beyond 7 per dollar level for the first time since the global financial crisis
Markets reacted by paring a little of their recent hefty losses MSCI s broadest index of Asia Pacific shares outside Japan bounced 0 9 though it was still down more than 7 over the past two weeks
Japan s Nikkei edged up 0 5 and away from seven month lows while Chinese blue chips rose 1 2 E Mini futures for the S P 500 firmed 0 5 and EUROSTOXX futures 1
Investors have increasingly come to fear the trade war will prove protracted enough to tip the world into recession and have piled into bonds and gold as a hedge
Financial markets are raising risks of recession said JPMorgan NYSE JPM economist Joseph Lupton
Equities continue to slide and volatility has spiked but the alarm bell is loudest in rates markets where the yield curve inverted the most since just before the start of the financial crisis
Yields on U S 30 year bonds dived as deep as 2 123 overnight not far from an all time low of 2 089 set in 2016 Ten year yields dropped further below three month rates an inversion that has reliably predicted recessions in the past
The latest spasm began when central banks in New Zealand India and Thailand surprised markets on Wednesday with aggressive easings while the Philippines is expected to cut later on Thursday
FED TO THE RESCUE
The decision by these APAC central banks to go hard and early has provided further fuel to concerns of a global recession said Rodrigo Catril a senior FX strategist at National Australia Bank This also means that the Fed will need to come to the rescue
Chicago Fed President Charles Evans signaled on Wednesday he was open to lower rates to bolster inflation and counter risks to economic growth from trade tensions
Futures moved to price in a 100 probability of a Fed easing in September and a near 24 chance of a half point cut Some 75 basis points of easing is implied by January with rates ultimately reaching 1
Dire data on German industrial output stoked concerns Europe might already be in recession and pushed bund yields deeper into negative territory
All of which fueled speculation that the major central banks would also have to take drastic action if only to prevent an export crimping rise in their currencies
The Bank of Japan would be under particular pressure as the yen has gained sharply from the flood to safe havens leaving it at 106 16 per dollar from 109 30 just a week ago
The euro has also bounced to 1 1208 from a two year trough of 1 1025 while the U S dollar index has backtracked to 97 542 from a recent peak of 98 932
New Zealand s dollar was still picking up the pieces after sliding as much as 2 6 on Wednesday when the country s central bank slashed rates by a steep 50 basis points and flagged the risk of negative rates
The kiwi was huddled at 0 6456 down 1 1 for the week
The rapid decline in yields helped lift gold above 1 500 for the first time since 2013 Spot gold was last at 1 500 30 per ounce having been as far as 1 510 on Wednesday The precious metal is up 16 since May
Oil prices regained some ground as talk that Saudi Arabia was weighing options to halt crude s descent helped offset a build in stockpiles and fears of slowing demand
Brent crude futures climbed 1 69 to 57 92 though that followed steep losses on Wednesday while U S crude rose 1 64 to 52 73 a barrel |
JPM | U S weekly jobless claims unexpectedly fall | By Lucia Mutikani WASHINGTON Reuters The number of Americans filing applications for unemployment benefits unexpectedly fell last week suggesting the labor market remains strong even as the economy is slowing The jobless claims report from the Labor Department on Thursday however does not fully account for the impact of the recent escalation in the bitter trade war between the United States and China which has led to an inversion of the U S Treasury yield curve and raised the risk of a recession Worries about the trade war s effect on the economic expansion the longest on record prompted the Federal Reserve to cut interest rates last week for the first time since 2008 Financial markets have fully priced in another rate cut next month Expectations for a 50 basis point cut at the Fed s Sept 17 18 policy meeting have also risen Initial claims have been sending a reasonably upbeat message about conditions in the labor market said Daniel Silver an economist at JPMorgan NYSE JPM in New York Today s report likely doesn t contain much information about the period since the recent escalations in trade tensions Initial claims for state unemployment benefits fell 8 000 to a seasonally adjusted 209 000 for the week ended Aug 3 the government said Economists polled by Reuters had forecast claims would be unchanged at 215 000 in the latest week Though equity market volatility and low bond yields are driving pessimism about the economic outlook we would have to see initial claims sustain a rise to the 250 000 level to become concerned about recession said John Ryding chief economist at RDQ Economics in New York U S stocks were trading higher partly due to unexpectedly better Chinese data and a steadying of the yuan which provided some relief to investors alarmed by the rise in U S China trade tensions The dollar DXY was little changed against a basket of currencies while U S Treasury prices fell INVENTORY ACCUMULATION SLOWING Last week s drop in claims pushed them to the lower end of their 193 000 244 000 range for this year The four week moving average of initial claims considered a better measure of labor market trends as it irons out week to week volatility edged up 250 to 212 250 last week Though hiring has slowed the pace of job gains remains well above the roughly 100 000 needed per month to keep up with growth in the working age population Nonfarm payrolls increased by 164 000 jobs in July down from 193 000 in June Job growth over the last three months averaged 140 000 per month the lowest in nearly two years compared to 223 000 in 2018 The moderation in employment growth partly reflects a shortage of workers While net employment growth depends on gross hiring as well as the pace of layoffs and the trend in payrolls gains may have moderated a bit major weakening in employment growth is invariably associated with an uptrend in claims said Jim O Sullivan chief U S economist at High Frequency Economics in White Plains New York The economy grew at a 2 1 annualized rate in the second quarter slowing from the first quarter s brisk 3 1 pace Growth is seen below a 2 0 rate in the July September quarter But economists expect the government will lower its second quarter GDP growth estimate to around a 1 8 rate later this month after a separate report from the Commerce Department on Thursday showed wholesale inventories were unchanged in June instead of rising 0 2 as reported last month The component of wholesale inventories that goes into the calculation of gross domestic product edged up 0 1 in June That suggested the pace of inventory accumulation was much slower than the government had assumed when it compiled its advance GDP report last month The government is scheduled to publish its second GDP estimate for the April June period on Aug 29 According to JPMorgan s Silver the June wholesale data implied inventories increased at a 66 billion rate in the second quarter instead of the 71 7 billion pace estimated in the advance GDP report That means inventories chopped 1 0 percentage point from GDP rather than the estimated 0 86 percentage point
Some of the slowdown in inventory accumulation reflects a surge in consumer spending in the second quarter Businesses are also carefully managing stock levels because of the darkening economic outlook |
JPM | Gains for Asian shares capped by fresh trade jitters China stocks fall | By Tomo Uetake
TOKYO Reuters Asian shares inched up on Friday helped by Wall Street s rally but fresh concerns about Sino U S trade ties capped gains in the region
Weighing on risk appetite was a report from Bloomberg that Washington is delaying a decision about licenses for U S firms to restart trade with Huawei Technologies HWT UL
That sent U S stock futures down as much as 0 6 in Asian trade
Pan European Euro Stoxx 50 futures fell 0 2 in late Asian trade indicating that European cash share markets will open a tad lower on Friday
MSCI s broadest index of Asia Pacific shares outside Japan was 0 2 higher but on track to lose 2 3 for the week
Japan s Nikkei average gained 0 4 while Australian stocks added 0 3 and South Korean shares climbed 1 1
Early gains by Chinese stocks were erased after data showed the country s producer prices fell for the first time in three years in July while a selloff in high profile tech firms dampened already fragile sentiment
The benchmark Shanghai Composite and the blue chip CSI300 were down 0 8 and 1 0 respectively while Hong Kong s Hang Seng eased 0 2
On Wall Street on Thursday the S P 500 surged 1 9 its largest one day gain in about two months while the Dow and the Nasdaq also advanced well more than 1 N
However optimism was dented by the Bloomberg report which added to concerns that deterioration in U S China relations could put additional strain on an already fragile global economy
The news about Huawei triggered the rise in the yen said Junichi Ishikawa senior foreign exchange strategist at IG Securities This is a reminder that the U S China trade dispute remains a risk and this risk is not receding
The yen strengthened as much as 0 4 against the dollar to 105 70 yen on worries triggered by the report on Huawei
U S data pointed to a robust labor market as the number of Americans filing applications for unemployment benefits unexpectedly fell last week allaying some worries about a recession and helping Treasury yields rise
Benchmark 10 year Treasury yield closed 2 4 basis points higher at 1 715 after hitting 1 595 on Wednesday which was its lowest level since October 2016 It last quoted at 1 698
But others remained anxious on the outlook
Worries about trade war and currency policies will keep market volatility elevated Rate cuts by various central banks this week underscored that the U S China confrontations are problems not just for the two economies but for the entire world said Yoshinori Shigemi global market strategist at JPMorgan NYSE JPM Asset Management
About a month ago I had a feeling the global economy could pick up later this year but now downside risks are deepening raising the chance of a recession
The offshore yuan was stable versus the dollar even after China s central bank set the yuan s daily midpoint at 7 0136 per dollar its weakest level since April 2 2008
The currency fetched 7 0505 per dollar in onshore trade while offshore yuan traded at 7 0767 steady on the day
But traders continued to pay close attention to U S China trade headlines to figure out Beijing and Washington s next moves in their bruising tariff tussle
The U S China trade war is very serious My hope is that the United States and China can find enough to agree on so that they can contain the push and shove that occurs when the emerging power meets the dominant power The alternative is not pleasant said veteran investor Dan Fuss vice chairman of Loomis Sayles
The dollar index which measures the greenback versus a basket of six major currencies was little changed at 97 541 but on track for its biggest weekly decline since late June
Sterling briefly hit its two year low against the euro overnight after the Financial Times reported that Prime Minister Boris Johnson was preparing to hold an election in the days following Brexit
The pound was last quoted at 92 21 pence per euro down 0 1 on the day and was traded against the dollar at 1 2138 steady on the day
In commodity markets oil prices on Friday gave up some the previous day s stellar gains but expectations of more production cuts by OPEC were expected the underpin prices
Brent crude retreated 0 1 to 57 32 per barrel and U S West Texas Intermediate WTI crude eased 0 1 to 52 50
Spot gold held near a more than six year peak touched Wednesday with rising 0 5 to 1 507 66 an ounce as investors continued to seek the safety of the precious metal |
JPM | Asian Markets In Green On Strong Start To U S Earnings Season | European equities look set to attempt to follow the trend from Asian markets on Monday morning by starting the week off in the green as risk sentiment increases following a strong start to the latest US earnings season JPMorgan NYSE JPM and Wells Fargo NYSE WFC set the tone late last week with strong earnings reports providing confidence to equity traders that corporate America is performing well amid robust economic conditions in the United States Further encouraging readings during the remainder of the earnings season should feed into the broader risk sentiment narrative and help improve investor confidence as long as the releases do not reveal any negative surprises China showing further signs of stabilizing
Adding to the risk appetite seen in early trade this week are China s March external trade figures which were released at the end of last week and helped ease some of the concern over a decline in the nation s economic momentum China s exports for the month surprised to the upside suggesting that global demand for trade remains intact and that the Chinese economy will find solid footing as a result
China s Q1 GDP as well as March s industrial production and retail sales data are all due for release on Wednesday These will be treated as tier one economic releases from China and the data should offer a further indication as to how the world s second largest economy is holding up Note that the IMF recently revised China s forecasted growth higher in contrast to the lower projections for global growth
Should the China stabilizing narrative gather momentum complemented by evidence of stimulus measures feeding into China s economy in the months ahead this should offer room for more gains in emerging market assets over the near term
Dollar steadies as markets await the latest US data
The United States is also slated to announce its March industrial production and retail sales data this week along with the latest Markit Purchasing Managers Index PMI Markets are expecting the US economy to showcase its resilience especially for retail sales which are hoping to rebound following February s slump
However any data announcement that undershoots market expectations will be seen as a threat that will weigh negatively on the Dollar Index
Given the Federal Reserve s already dovish tone further hints of a steeper slowdown in the US economy could hasten speculation of a Fed rate cut and may give dollar bears reason to break the greenback s recent resilience around the 97 mark
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MS | U S Led Infrastructure Aid to Counter China in Indo Pacific | Bloomberg The U S Japan and Australia agreed to invest in infrastructure projects in the Indo Pacific in a move that will be seen as a counter to China s rising influence in a region that stretches from the east coast of Africa through Australia to Hawaii in the Pacific Ocean
This trilateral partnership is in recognition that more support is needed to enhance peace and prosperity in the Indo Pacific region Australia Foreign Minister Julie Bishop said Tuesday in an emailed statement The pact will mobilize investment in energy transportation tourism and technology infrastructure according to the statement which didn t give any funding details
The announcement comes after U S President Donald Trump s National Security Strategy in December called for policies to answer rival powers infrastructure building efforts Chief among these is Chinese President Xi Jinping s Belt and Road Initiative a global plan to build or expand highways railways ports pipelines and power plants that Morgan Stanley NYSE MS forecasts could grow as large as 1 3 trillion over the next decade
U S infrastructure cooperation with Japan and Australia would dovetail with the Trump administration s evolving national security policies which have cast the U S as in long term strategic competition with China and Russia Beijing s BRI calls for half a trillion dollars in investment in infrastructure along trade routes to China which is expected to overtake the U S as the world s largest economy before 2030
Before visiting China in November Trump signed two deals with Japan pledging cooperation on infrastructure projects in the region
Secretary of State Michael Pompeo speaking Monday before a trip to Asia amid an escalating trade war with China said the U S believes in strategic partnerships not strategic dependency a veiled criticism of Beijing s efforts to woo countries with cheap financing for infrastructure projects
With American companies citizens around the world know that what you see is what you get honest contracts honest terms and no need for off the books nonsense Pompeo said Another advantage of the U S is that we will help them keep their people free from coercion or great power domination he said
Pompeo is likely to make announcements about the pact s funding arrangements during his visit to Asia which will include Malaysia Singapore and Indonesia according to Stephen Kirchner director of trade and investment program at the U S Studies Centre at the University of Sydney
This is designed to provide mechanism that will allow more private sector funding for the infrastructure projects that countries in this region need Kirchner said That will mean it will operate in different ways to established funds such as the World Bank and Asian Development Bank he said
In February Bishop said the three nations along with India had discussed opportunities to address the enormous need for infrastructure in the region which encompasses some of the world s poorest as well as fastest growing economies
India wasn t mentioned in Tuesday s announcement Instead the pact will be organized by the U S s Overseas Private Investment Corp the Japanese Bank for International Cooperation and Australia s Department of Foreign Affairs and Trade
This partnership represents our commitment to an Indo Pacific region that is free open and prosperous the three nations said in a joint statement issued on Monday according to Bishop The trilateral partnership will be formalized in due course Bishop said
Strained Ties
Australia s diplomatic relationship with China its most important trading partner has been strained since December when Prime Minister Malcolm Turnbull said Chinese meddling in the nation s government and media were a catalyst for new anti foreign interference laws which passed parliament last month
China lodged a formal protest with Australia in January after Turnbull s minister for international development Concetta Fierravanti Wells said the Belt and Road plan risked building useless buildings and roads to nowhere
Australian Trade Minister Steve Ciobo denied the new pact was designed to counter China and said he wasn t expecting a backlash from Beijing
Why would there be any Ciobo said in a Sky News interview on Tuesday The fact is that we demonstrate consistently that Australia is very focused on making sure we can help the least developed economies in our region
Updates with Pompeo comments in 6th paragraph |
MS | Trade worries slow euro zone economic growth in second quarter inflation up on energy | By Jan Strupczewski BRUSSELS Reuters Euro zone economic growth slowed further in the second quarter preliminary data showed on what economists said were concerns over a possible trade war with the United States Separately price growth accelerated due to higher energy prices European Union statistics office Eurostat reported although economists cautioned the uptick was unlikely to affect policy for now as energy effects are temporary Eurostat estimated that gross domestic product in the 19 countries sharing the euro expanded 0 3 percent quarter on quarter in the April June period and was 2 1 percent higher against the same period of 2017 Economists polled by Reuters had expected a 0 4 percent quarterly expansion and a 2 2 percent year on year rise Trade uncertainty seems to have already had a significant effect on the Eurozone economy in Q2 Bert Colijn a senior economist at ING bank said in a note to clients While the impact on real export growth has likely been small over the second quarter the confidence factor has been more important he said With lower confidence among businesses and consumers concerns have likely translated into somewhat weaker domestic demand growth In an economy in which capacity constraints abound and credit conditions remain favorable confidence is the likely factor keeping investment down he said The euro zone s second biggest economy France appeared to have been struggling with its own specific problems in the second quarter as strikes and higher taxes hit consumer spending but economists looked to the second half of the year for an upturn Eurostat estimated that headline consumer inflation accelerated to 2 1 percent year on year in July from 2 0 percent in June mainly because of a spike in the cost of energy which jumped to 9 4 percent year on year from 8 0 Core inflation which excludes energy costs as well as unprocessed food and which the European Central Bank looks at in policy decisions also rose to 1 3 percent year on year from 1 2 percent in June beating economists expectations An even narrower core inflation measure that economists pay attention to which excludes also the costs of alcohol and tobacco also rose to 1 1 percent from 0 9 percent in July again above expectations The ECB wants to keep headline inflation below but close to 2 percent over the medium term This is still weak and very much in line with ECB expectations As the energy effects are temporary the high inflation rate should be taken with a grain of salt from a policy perspective at the moment so will the ECB Colijn said Economists said the higher inflation numbers would not trigger any policy tightening by the ECB yet These numbers are unlikely to alter the view of the central bank said Daniele Antonucci economist at Morgan Stanley NYSE MS It has made clear that it is taking its time before changing its rates and balance sheet guidance again While Quantitative Easing should finish at year end we only see the first depo rate hike of 15 basis points to 0 25 percent in October 2019 Reinvestments should continue for a long time probably way past our 2019 forecast horizon he said
Separately Eurostat said unemployment in the euro zone was at 8 3 percent in June unchanged from a downwardly revised 8 3 percent in May The lowest unemployment rate in the euro zone was in Germany at 3 4 percent of the workforce but it by less than expected in July data showed reflecting a cooling economy |
MS | Global factory growth slowing China U S trade war biting | By Jonathan Cable and Marius Zaharia LONDON HONG KONG Reuters Factory growth stuttered across the world in July heightening concerns about the global economic outlook as an intensifying trade conflict between the United States and China sent shudders through trading partners Global economic activity remains solid but it has already passed its peak according to economists polled by Reuters last month They expect protectionist policies on trade which show no signs of abating to tap the brakes ECILT WRAP But slowing growth wilting confidence and trade war fears are not likely to deter major central banks moving away from their ultra loose monetary policies put in place during the last financial crisis Growth overall is still there and while there are risks it s holding up The big picture of a trade war and protectionism is that it is a slow death a death by a thousand paper cuts instead of anything sudden and shocking said Richard Kelly head of global strategy at TD Securities Growth is still resilient unemployment rates are low inflation and wages are rising that s the bigger picture and so they central banks have to keep tightening in the face of that he said Last month China and the United States imposed tit for tat tariffs on 34 billion of each other s goods and another round of tariffs on 16 billion is expected in August U S President Donald Trump s administration according to a source familiar with its plans is poised to propose 25 percent tariffs on a further 200 billion of imports up from an initial proposal of 10 percent Its threat of tariffs on the entire 500 billion or so worth of goods imported from China still stands Beijing has pledged equal retaliation although it only imports about 130 billion of U S goods World stocks fell and the dollar strengthened on Wednesday on fears of an imminent escalation in the U S China tariff war MKTS GLOB Morgan Stanley NYSE MS analysts estimate an 81 basis point impact on global growth in a scenario of 25 percent tariff hikes across all imports from China and Europe with U S growth slowing by 1 percentage point and China s by 1 5 points Despite lethargic expansion rates the European Central Bank last week reaffirmed plans to end its 2 6 trillion euro stimulus programme this year and the Bank of England is widely expected to raise borrowing costs on Thursday BOE INT On Tuesday the Bank of Japan pledged to keep its massive stimulus in place but made tweaks to reduce the adverse effects of its policies on markets and commercial banks as inflation remains stubbornly out of reach China has been cutting bank reserve requirements to ease the pain of its campaign to de risk the financial system for smaller companies and support growth It is also planning more spending on infrastructure to cushion the impact of trade tensions Nevertheless any fiscal and monetary measures would take time to filter through China s economy is on track to slow this quarter and next said Julian Evans Pritchard senior China economist at Capital Economics in Singapore In the United States growth is expected to cool slightly but remain strong enough for the Federal Reserve to stay on track for two rate hikes this year even if it is likely to hold rates steady this week ECILT US SIGNS OF SLOWDOWN European factory growth remained subdued in July with scant sign of a pick up anytime soon Manufacturers across Asia provided evidence of a loss of momentum across the region IHS Markit s July final euro zone manufacturing Purchasing Managers Index only nudged up to 55 1 from June s 18 month low of 54 9 unchanged from an initial reading and still comfortably above the 50 level that separates growth from contraction EUR PMIM Meanwhile British factories lost momentum and manufacturers were their most downbeat in nearly two years likely raising fresh questions about the actual need for a Bank of England interest rate hike on Thursday GB PMIM China s Caixin Markit Manufacturing PMI dropped to 50 8 from June s 51 0 broadly in line with an official survey on Tuesday The headline number remained above the 50 point mark for the 14th consecutive month but a reading on new export orders showed a marked contraction at 48 4 The data breakdown indicates that an uncertain demand outlook amidst the U S China trade tariffs weighed on both output and sentiment said Aakanksha Bhat Asia economist at HSBC in Hong Kong Similar surveys revealed slowing activity from Australia to Japan PMIs also showed a contraction in Malaysia a slowdown in Vietnam and Taiwan and only a modest pick up in Indonesia South Korea s exports showed slower than expected growth Growth in India s manufacturing industry also slowed last month according to a survey released showed just before the Reserve Bank of India raised interest rates The shipping container market in which the vast majority of finished manufacturing goods are imported and exported shows a similar gloomy picture the Harpex container index has fallen by 10 percent from the highest levels since 2011 that it hit in June
For a graphic on Harpex Container Index click |
MS | The Fed is struggling with one key sentence in its post meeting statement | The Federal Reserve is considering a key milestone in its public communication about the path of interest rates Wall Street economists think a language change is coming that will signal monetary policy is no longer loose meaning interest rates are no longer seen as particularly low This week s meeting may be too soon it s more likely such a shift will come in September when the Fed is next expected to raise interest rates This is how the internal debate at the US central bank was characterized in minutes to the Many officials noted that if gradual increases in the target range for the federal funds rate continued the federal funds rate could be at or above their estimates of its neutral level sometime next year In that regard participants discussed how the Committee s communications might evolve over coming meetings if the economy progressed about as anticipated in particular a number of them noted that it might soon be appropriate to modify the language in the post meeting statement indicating that the stance of monetary policy remains accommodative Ward McCarthy Jefferies chief financial economist says he does not expect any tweaks to come at this week s meeting which is also not expected to yield another interest rate hike How soon is soon We think that August 1 is too soon he writes in a research note However we cannot preclude the possibility that the FOMC alters the language in the August 1 policy statement to set the stage for the modification of the phrase the stance of monetary policy remains accommodative But McCarthy adds The most efficient change on August 1 would be to change the statement to the stance of monetary policy remains accommodative for now The Fed has raised interest rates several times since December 2015 to a range of 1 75 to 2 That may seem low historically but comes in the context of an employment recovery that has taken so many years to make up the ground lost during the Great Recession Morgan Stanley NYSE MS economist Ellen Zentner and her colleagues are on the same page on the likely timing of the Federal Open Market Committee s language shift We do expect that after raising rates at the September meeting the FOMC may look to adjust its assessment that the stance of policy remains accommodative but that reference is likely to remain unchanged in the August statement for now the bank s economists write in a research note The bulk of the changes we expect will be a mark to market in the section describing current economic conditions to reflect recent data |
JPM | JPMorgan Falls 3 | Investing com JPMorgan NYSE JPM fell by 3 05 to trade at 109 48 by 12 41 16 41 GMT on Monday on the NYSE exchange
The volume of JPMorgan shares traded since the start of the session was 5 38M JPMorgan has traded in a range of 109 47 to 110 98 on the day
The stock has traded at 117 1800 at its highest and 109 4100 at its lowest during the past seven days |
JPM | U S services sector slows orders hit three year low | By Lucia Mutikani
WASHINGTON Reuters U S services sector activity slowed in July as new orders dropped to their lowest level in three years suggesting the economy lost further momentum early in the third quarter
The report from the Institute for Supply Management ISM added to last week s data showing a slowdown in hiring and prolonged weakness in manufacturing in July
These reports together with an escalation in the trade war between the United States and China suggest the Federal Reserve will cut interest rates gain next month to sustain the 10 year economic expansion the longest in history The U S central bank last week cut its short term rate citing rising risks to the economy from trade tensions and weakening global growth
The trade war was already inflicting damage to the economy and now it has been ramped up said Jennifer Lee a senior economist at BMO Capital Markets in Toronto The Fed will step in again likely in October but possibly sooner but there is only so much already low rates can do
The ISM said its non manufacturing activity index fell 1 4 percentage points to a reading of 53 7 It was the second straight monthly decline in the index A reading above 50 indicates expansion in the sector which accounts for more than two thirds of U S economic activity
Economists polled by Reuters had forecast the services index would slip to a reading of 55 5 in July The ISM reported last week that factory activity slowed to a three year low in July noting that trade remains a significant issue
President Donald Trump on Thursday announced an additional 10 tariff on 300 billion worth of Chinese imports starting Sept 1 China let the yuan breach the key 7 per dollar level on Monday for the first time in more than a decade
The deterioration in the trade relations between the two economic giants pressured financial markets The dollar DXY dropped against a basket of currencies Stocks on Wall Street tumbled
Treasury prices rose with the gap between the three month Treasury bill rate and 10 year yields jumping nearly 27 basis points the widest since April 2007 This curve inversion between the two maturities has preceded every U S recession in the past 50 years
SLOWING ECONOMY
Economists said last month s slowdown in the services industry measure was consistent with slowing economic growth
Although today s reading is consistent with the deceleration that we have been anticipating for some time with the waning of fiscal stimulus and tighter financial conditions the weaker than expected reading hints that tepid growth in the trade exposed goods sector may be spilling into domestic demand said Jonathan Millar an economist at Barclays LON BARC
The economy grew at a 2 1 annualized rate in the second quarter down from a 3 1 pace in the January March quarter Growth estimates for the third quarter are around a 1 5 rate The economy is slowing largely as the stimulus from last year s 1 5 trillion tax cut fades
The ISM described the pace of growth in the services sector as continuing to cool off noting ongoing concerns related to tariffs and employment resources
The ISM s services sector measure of new orders fell to a reading of 54 1 last month its lowest since August 2016 from 55 8 in June A gauge of new export orders dropped to 53 5 in July from a reading of 55 5 in June
There was also a further deceleration in prices paid for materials and services pointing to benign inflation But a measure of services industry employment increased to a reading of 56 2 in July from 55 0 June This suggests job growth will likely remain solid even though the pace of hiring is slowing
The economy created 164 000 jobs in July pulling back from the 193 000 positions added in June the government reported on Friday
According to the ISM 13 non manufacturing industries reported growth in July including accommodation and food services utilities and professional The five industries reporting a decline included retail trade wholesale trade and educational services
The construction industry said tariffs continue to push costs higher and customers are looking for more discounts due to mortgage rate fluctuations Respondents in the public administration sector described demand as strong but also complained about pressures for skilled labor
While a separate survey from data firm Markit offered an upbeat assessment of the nonmanufacturing industry in July service providers were less optimistic about the future
With trade tensions escalating over the past few days since the end of July we think further weakening in business sentiment is likely although upcoming policy actions remain uncertain said Daniel Silver an economist at JPMorgan NYSE JPM in New York |
JPM | JPMorgan confirms winning bid to take majority stake in China fund JV | BEIJING Reuters JPMorgan N JPM confirmed it had won an auction to hold a majority equity stake in its Chinese asset management joint venture JV becoming the first foreign firm to move closer to taking control of an onshore funds business under new rules
The move comes against the backdrop of a rapid escalation in the U S China trade conflict with Washington designating Beijing a currency manipulator and U S President Donald Trump vowing to impose 10 tariffs on the remaining 300 billion of Chinese imports from Sept 1
A 2 percent stake in the JPMorgan China fund management JV China International Fund Management CIFM changed hands on Friday in an auction at the Shanghai United Assets and Equity Exchange a deal post on the exchange showed
The exchange did not identify the buyer in its filing on the day but sources with knowledge of the matter had told Reuters JPMorgan Asset Management Co was the sole bidder
JPMorgan held 49 of the JV before the latest deal which still needs regulatory approval
We are looking forward to the next steps to proceed with this acquisition working closely with our joint venture partners Dan Watkins Asia Pacific CEO of J P Morgan Asset Management said on Tuesday
Once completed the deal will be contingent on the approval of regulators in the U S and China
Under rule changes unveiled by China in 2017 foreign asset managers were allowed to own up to 51 of their Chinese mutual fund ventures Beijing later said foreign ownership caps would be removed by 2020 a year earlier than scheduled
The U S asset manager did not comment on how soon they expect to get regulatory approval or when they will be able to start operations as a majority owned fund manager in the world s second largest economy |
JPM | Hong Kong Assets Turn Toxic as Trade War and Protests Cloud Outlook | Bloomberg Investor anxiety is visible just about everywhere in Hong Kong s markets as recession warnings and escalating protests strain sentiment to breaking point
While most of the world recovered Tuesday from a yuan induced meltdown Hong Kong saw the biggest spike in interbank rates in more than a decade the longest stretch of equity declines since 1984 and the wildest stock swings in four years Bears reloaded on the local dollar in a way not seen since 2017 betting it will soon break through the weak end of its trading band
The threat from the trade war and weeks of local unrest is already showing in the property market as well as tourist numbers hotel occupancy and retail sales A weak yuan is another cause for concern as it will damp spending from mainland visitors and pressure earnings for firms that rely on China Profits for members of the Hang Seng Index are forecast to drop the most since the global financial crisis this year data compiled by Bloomberg show
There is risk off sentiment in general said Michael Liang chief investment officer at Foundation Asset Management HK Ltd Hong Kong s political risk is definitely a part of it Fewer people are willing to invest in the city s assets
In some of the Chinese government s strongest comments yet on the unrest that s gripped the Asian financial hub since June officials on Tuesday urged Hong Kong citizens to stand up to protesters That followed Monday s general strike that led to traffic chaos violence tear gas and flight cancellations in the most disruptive day since the protests started
The MSCI Hong Kong Index which unlike the more widely used Hang Seng Index doesn t include Chinese heavyweights is suffering its worst stretch of losses since 1984 That was the year U K Prime Minister Margaret Thatcher and Chinese Premier Zhao Ziyang signed the Sino British Joint Declaration in Beijing committing to some of the terms for the handover of Hong Kong in 1997
Hong Kong s currency while pegged to the greenback is also influenced by the yuan due to the city s close economic ties with China It fell the most in more than three and a half years Monday tracking losses across Asia The Hong Kong dollar s 12 month forward points briefly spiked to 163 Tuesday in a sign that some global hedge funds may betting against the currency That was highest level since early 2017
The moves are affecting local borrowing costs which underpin mortgages in one of the world s least affordable housing markets The rates are already facing pressure from tightening liquidity which sent some tenors to decade highs last month One month Hong Kong dollar interbank rates known as Hibor jumped the most since 2008 Tuesday
Rates have remained ultra low in Hong Kong since the financial crisis while a huge amount of cash sloshing around in the financial system has helped fuel rallies in the stock and property markets Now stocks are falling and data last week showed July home sales fell 32 in value from a year earlier while volume was down 21
And it could get worse market watchers have warned home prices and retail rents may fall in the short term because of recent political unrest A residential site was sold last month in a government tender for HK 11 842 1 511 per square foot the lowest price in more than two years A purchasing managers index fell to the lowest since March 2009 in July signaling a contraction for a 16th month
Hong Kong has a track record of resilience in the face of crises From Asia s financial implosion during the late 1990s to the SARS outbreak in 2003 and the global credit crunch of 2008 the city has always found a way to come out stronger
That doesn t mean a turnaround is near however The recent turmoil is making it almost impossible for investors to discern the outlook for Hong Kong assets
We don t advise investors to time the market said Tai Hui JPMorgan NYSE JPM Asset Management chief market strategist for the Asia Pacific region It is a very difficult exercise |
MS | What Economists Are Saying Ahead of Friday s U S GDP Report | Bloomberg White House economic adviser Lawrence Kudlow is expecting a very good number for second quarter U S growth while one economist has warned that the pace of expansion is close to a peak Either way analysts are largely projecting that the main number in Friday s report on gross domestic product will be a standout
The median estimate of economists surveyed by Bloomberg is for an annualized growth rate of 4 2 percent which would be the fastest since the third quarter of 2014 Projections range from 3 percent to 5 percent Here s what some of the forecasters say ahead of the Commerce Department figures due at 8 30 a m which will also include comprehensive revisions to historical GDP numbers
Morgan Stanley NYSE MS 4 7
The factors driving the headline print are trade related and will likely reverse in the second half of the year at least in part analysts led by Ellen Zentner wrote They estimate trade and inventories contributed about 2 2 percentage points to the pace of second quarter growth which is likely a reflection of stockpiling ahead of the implementation of trade tariffs They estimate final private domestic demand a clearer fundamental picture of the economy expanded at a much more modest 2 5 percent pace in the quarter
Wells Fargo NYSE WFC 4 7
Personal and corporate tax reform has proven beneficial to domestic demand with solid growth in consumer spending and business investment growth in recent months economist Sam Bullard wrote Net exports probably contributed 1 2 percentage point to growth which should fully reverse in the second half While the robust Q2 pace should not be sustained underlying economic fundamentals remain solid and support our outlook for U S real GDP to run around a 3 percent annualized rate for the remainder of the year Trade policy poses the main risk to the outlook
Natixis 4 4
We expect real GDP growth to increase at a hefty pace in Q2 after a trend like increase in the first quarter economist Joseph LaVorgna wrote With the trade debate heating up uncertainty is mounting on the near term outlook However available regional surveys for July either remained steady or surprised on the consensus to the upside This means that business confidence remains upbeat which is likely to translate into another quarter of solid GDP growth
Amherst Pierpont 4 7
As it turns out consumer spending did improve dramatically but the main driver of growth in the second quarter was likely a massive narrowing in the trade gap due primarily to a sharp increase in real exports economist Stephen Stanley wrote Domestic final demand was strong projected to rise 3 1 percent but unspectacular and perhaps more importantly largely sustainable
Bloomberg Economics 3 8
Second quarter growth will be robust to be sure and could potentially top 4 percent economists Carl Riccadonna and Tim Mahedy wrote However this reflects a number of one time idiosyncratic factors and should not be viewed as an indication of what is to come in the second half Growth in the second quarter will be elevated in response to residual seasonality that depressed first quarter activity It will also be lifted by a substantial narrowing of the trade deficit in the quarter which appears to be more a reflection of supply chain adjustments in anticipation of trade war escalation than any lasting improvement as a result of tariffs |
MS | Morgan Stanley Calls Dollar Peak Amid Wrong Bullish View | Bloomberg The dollar is going from peak to weak
That s the forecast from Morgan Stanley strategists who say the greenback is topping out and will face sustained pressure as early as next month
There are plenty of factors that could drive a selloff they say These include comments from President Donald Trump on currencies weaker U S economic survey indicators Chinese economic measures and potential tweaks to Bank of Japan policy
The USD has peaked and is due to reenter its secular downtrend soon Morgan Stanley strategists including Hans Redeker wrote in a note Thursday Markets are linking rising risk aversion with USD strength we think the consensus is wrong
The Bloomberg Dollar Spot Index is down 0 5 percent in July following a three month rally This year s gains have caught off guard some investors who had crowded into bearish positions after last year s 8 5 percent slump
Hedge funds and money managers have now swung the other way they re the most bullish on the greenback since February 2017 U S Commodity Futures Trading Commission data show
Morgan Stanley NYSE MS recommends going long the euro against the dollar with an entry point at 1 16 a target of 1 21 and a stop at 1 15 The bank also suggests selling the dollar at 111 40 yen with a target of 104 yen The greenback was at 1 1653 per euro and 111 01 yen in early London trading Friday
Updates index gain in fifth paragraph prices in seventh |
MS | Bankers weigh giant Aramco Sabic debt financing | By Sandrine Bradley LONDON LPC Bankers are discussing a potential jumbo financing of up to US 70bn to back oil giant Saudi Aramco s acquisition of a majority stake in Saudi Arabia Basic Industries Corp Sabic SE 2010 Aramco is aiming to buy a controlling stake in petrochemical outfit Sabic and could buy all of the 70 stake owned by the Public Investment Fund Saudi Arabia s top sovereign wealth fund Riyadh listed Sabic the world s fourth biggest petrochemicals company has a market capitalization of SR385 2bn US 103bn and a 70 stake would cost roughly US 70bn JP Morgan and Morgan Stanley NYSE MS have been picked to advise on the deal Reuters reported Bankers are having internal discussions about Aramco s potential need for external debt financing which could be loans or bonds Aramco has not yet sent a request for proposals to its lenders sources said Nothing has happened yet but all banks are looking at it one banker said The possibility and size of a potential debt deal depends whether vendor PIF will require certainty of funds for the acquisition which could mean that Aramco has to raise cash upfront rather than paying over a longer period Aramco may need to raise some upfront cash which might be paid in a number of agreed installments and might include a bridge loan the banker said Getting information on a potential deal could be difficult however as negotiations will be led from the top by Saudi Arabia s reforming crown prince Mohammed bin Salman We would like to get out and meet people to discuss this but I don t think anyone will be knowledgeable enough This is being led from the top by the crown prince I don t think people at the Aramco level even know what is going on he said Aramco declined to comment LENDERS KEEN A large potential debt financing could boost Middle Eastern lending which sank to only US 4 4bn in the second quarter the lowest quarterly total since the second quarter of 2004 and would attract appetite from local and international banks In early 2016 the crown prince said that he planned to sell shares in Aramco in an IPO planned for 2018 which was aiming to raise more than US 100bn for a new sovereign wealth fund The IPO has been delayed until at least 2019 which means that Aramco s relationship banks will be expected to provide any financing for the Sabic purchase at very low rates to land a role in the potential IPO The US investment banks all three Japanese banks all the French banks some of the German banks and a lot of Middle East banks including the Saudi banks will be willing to lend as much as possible a second banker said Banks that are unlikely to be involved in the potential IPO would be less keen to lend at low rates as banks return on capital remains under pressure If there is a deal it will be extremely cheap double digit pricing We wouldn t get any ancillary business so why would we lend so cheaply a third banker said The acquisition of the Sabic stake could also impact the timing of Aramco s planned IPO the state oil giant s chief executive Amin Nasser said earlier this month and could even remove the need to do the IPO PIF could receive up to US 70bn from the Sabic sale which would give sufficient funds to embark on ambitious infrastructure and development projects planned for the Kingdom SABIC REFINANCING Sabic which is rated A1 A A said in May that it expected to refinance nearly US 2bn of external debt by October A potential change of ownership is unlikely to alter these plans bankers said The company has a US 1bn bond which is due to mature on October 3 and has hired banks for an international bond offering The timing and terms of the issue have yet to be decided Sabic also had a US 1bn term loan that matured on July 18 and expects to use drawings on its existing US 2bn revolving credit facility to repay that loan until the US 2bn refinancing is completed Discussions are currently underway bankers said We are discussing various things with Sabic something may come It has not been really agreed what purpose the money will be used for a fourth banker said
The term loan was originally agreed in 2013 via a club syndicate and paid 50bp over Libor The five year revolving credit was put in place in December 2015 and pays 25bp over Libor |
MS | Japan retail sales pick up in positive sign for spending | By Stanley White TOKYO Reuters Japan s retail sales climbed more than expected in June due to increased spending on fuel appliances and cosmetics in a positive sign that households are growing more confident in the economy The 1 8 percent annual increase in retail sales in June was more than the median estimate for a 1 6 percent annual gain and follows a 0 6 percent annual increase in May The results for June showed retail sales have risen for eight consecutive months On a seasonally adjusted basis retail sales also gained 1 5 percent in June versus a 1 7 percent decline in the previous month data from the trade ministry showed on Monday Japan s economy is expected to bounce back in April June from the first quarter contraction that ended the longest growth run since the 1980s bubble economy However the gain in retail sales is unlikely to provide much comfort for the Bank of Japan which is struggling with low inflation and the side effects of its radical monetary easing program Consumer spending is improving gradually because the labor market is tight and people are getting their summer bonus payments said Shuji Tonouchi senior market economist at Mitsubishi UFJ Morgan Stanley NYSE MS Securities I m still worried about spending because there are many part time workers Prices are not rising so the BOJ will try to change its message about policy The jobless rate is at a 25 year low of 2 2 percent which many economists say should support consumer spending by putting upward pressure on wages There are risks that consumer sentiment could weaken if Japan becomes ensnared in a row with the United States over trade policy Washington is engaged in a heated dispute with China over its trade surplus and there are worries U S President Donald Trump s administration could ask Japan to take concrete steps to lower its trade surplus as well
The BOJ is likely to lower its inflation forecasts at a meeting ending Tuesday and could tweak its massive stimulus program to make its monetary policy more sustainable |
MS | Heineken Falls as Brazil Challenge to AB InBev Hits Margin | Bloomberg Heineken NV s AS HEIN attempt to challenge Anheuser Busch Inbev NV NYSE BUD in Brazil is squeezing the Dutch brewer s profit margin
The world s second largest brewer on Monday forecast a drop in profitability this year as it expands more quickly than expected in Latin America s biggest economy where its beer business is less profitable than elsewhere The shares fell as much as 5 6 percent in Amsterdam the most in almost three years
Heineken became Brazil s second biggest brewer last year when it bought Kirin Holdings Co s business there for about 2 2 billion real 590 million The Japanese company had stumbled amid competition with industry giant AB InBev and now Heineken is stepping up the fight with increased marketing causing a decline in its overall profitability even as it sells more beer
We weren t expecting these products to accelerate so fast in the first year Chief Financial Officer Laurence Debroux said in a phone interview
The company s roster of brands in Brazil now includes Schincariol in the mass market segment as well as more expensive Devassa and Eisenbahn lagers Kirin s Brazil unit wasn t profitable at the time of acquisition though it is now and margins should catch up to Heineken s average level in three to five years Debroux said
This should lead to low to mid single digit downgrade on a stock which had performed well Morgan Stanley NYSE MS analysts led by Olivier Nicolai wrote in a note to investors
The full year margin will shrink about 20 basis points Heineken said also pointing to currency headwinds Adjusted operating profit rose 1 3 percent to 1 75 billion euros 2 billion in the first half missing analysts estimates
Heineken had forecast its margin to improve 25 basis points this year in February lower than its target for past years Higher raw material costs and a currency headwind are also reasons the brewer gave for cutting its forecast Monday
AB InBev reported earnings below estimates last week as marketing spending on the soccer World Cup hurt second quarter profit growth
Heineken s beer volume rose 4 5 percent on an organic basis compared with the estimate of 3 1 percent
Updates with shares |
MS | Coal Goes From Boom to Bust This Summer on Ample Supply in China | Bloomberg What was meant to be a summer party for coal is quickly turning into something more of a hangover
Even with China s peak demand season in full swing as hot weather boosts air conditioning use benchmark spot prices are on course for their first monthly loss in three and futures on the Zhengzhou Commodity Exchange have tumbled below 600 yuan 87 89 a metric ton for the first time since May
Coal has retreated after a heat wave in May and June sent prices to nearly 700 yuan and spurred the world s largest user and producer to warn it may run short of power this summer But now as mine inspections end port inventories jump and higher hydropower supply restricts coal demand analysts from Morgan Stanley NYSE MS to Daiwa Securities Group Inc are predicting further weakness
Expectations that record coal burn at power plants would cause shortages and boost prices are going up in smoke said Zeng Hao an analyst at Shanxi Fenwei Energy Information Services Co
Thermal coal futures in Zhengzhou slumped 1 6 percent to close at 592 4 yuan a ton on Monday the lowest level since May 25 Spot prices at Qinhuangdao port have fallen about 5 percent this month to 646 yuan as of July 23 according to China Coal Resource
Heavy rainfall across China is contributing to coal s losses as it lowers temperatures and adds to competing hydropower supply according to a note from Morgan Stanley received Monday Prices are forecast to drop 5 percent this year analysts including Simon H Y Lee said
Daiwa Capital also highlighted that current prices are weaker than expected for the traditional peak season for demand when they cut their target for China Shenhua Energy Co by 19 percent and downgraded the stock to hold from outperform There s sufficient inventory at the ports and power plants analysts including Dennis Ip wrote
Adding further headwinds is the spontaneous combustion of stockpiles at some northern ports which are spurring traders to sell their holdings at lower prices amid safety concerns according to China Coal Resource and brokerage Shanghai Cifco Futures Co Last week inventories across mainland ports climbed 5 2 percent to the highest since November 2015 according to Shanghai Steelhome E Commerce Co
Prices will probably sink below 570 yuan in the second half of the year a level targeted by the government Li Xuegang vice general manager at China Coal Market website said earlier this month That s partly due to a series of measures announced by policy makers in May to cool prices including improving transport capacity and boosting output from efficient mines
We do not expect the coal price to see a large upside in August Daiwa analysts said in the note It may see a more significant decline in the low demand season of September to October
To contact Bloomberg News staff for this story Jing Yang in Shanghai at jyang251 bloomberg net
To contact the editors responsible for this story Ramsey Al Rikabi at ralrikabi bloomberg net Jasmine Ng Aaron Clark
2018 Bloomberg L P |
JPM | Six points Argentine markets watching gap as presidential primaries near | By Gabriel Burin
BUENOS AIRES Reuters Argentine voters go to the polls for primary elections next week with market friendly incumbent Mauricio Macri widely expected to come in behind the populist leaning opposition candidate The market reaction economists say depends how big the margin
A survey of 19 economists polled by Reuters indicated that left leaning Alberto Fernandez s six point lead over Macri would spook investors worried conservative Macri would be unable to overtake his rival in time for general elections in October
If center right Macri can stay within two points of his main rival however that would support the peso domestic stocks and bonds according to the median response from the local and international economists
Fernandez and his running mate militant populist ex President Cristina Fernandez de Kirchner are less favored by markets concerned they could usher in more interventionist policies The two are unrelated
If Fernandez wins the market will suffer volatility given the uncertainty about the economic team and policies said Paula G ndara head of analysis and strategy at Buenos Aires based financial services firm AdCap Argentina
Argentines will vote on Aug 11 in a primary election that while having little bearing on who will be the main candidates will give the first major temperature check on an election race that is a test of Macri s painful economic reforms
Macri backed by the International Monetary Fund has been pushing a tight economic program to rein in debt levels while hiking interest rates to bolster a weak peso currency that lost half its value against the dollar last year
Fernandez is a moderate Peronist who has tried to reassure markets he would not intervene heavily in markets
However recent comments by Fernandez on bringing down interest rates to help pay pensions weakening the peso and attacks on the IMF have rattled some investors
CURRENCY OUTLOOK
A strong showing by Macri would also boost the peso the poll compiled July 23 26 showed A Macri win in the first round of elections and a potential ballot would see the peso likely hit 48 5 per dollar by the end of the year the median forecast showed
A Fernandez win would see the currency drop sharply to 60 per dollar according to the economist polled The currency closed at 43 9 per dollar on Wednesday
The country risk index compiled by investment bank JP Morgan N JPM would also diverge depending on the results ending down at 600 points if Macri were to win or sharply higher at 1 200 points if he were to lose the economists said
This would have an impact on the country s ability to raise funds through debt issuance making it far more expensive to issue corporate or government bonds
The vast majority of economists said it was also unlikely a Fernandez government would push forward with reforms and fiscal austerity Macri however would likely stay on the path if reelected
In an eventual victory Macri will move forward with the necessary reforms said Esteban Domecq president of Invecq Economic Consultant adding it was unlikely markets would trust Fernandez to do the same
Siobhan Morden managing director of Amherst Pierpont Securities added some would be watching the key race for Buenos Aires governor between incumbent Mar a Eugenia Vidal a key Macri ally and former economy minister Axel Kicillof
The real hit to markets though would be if Fernandez received 45 of all of the votes cast in the primaries an amount that would allow him to take the presidency in the first round in October and avoid a run off
Vidal has to do well and Fernandez Fernandez can t get 45 of the vote or the markets will fall Morden said |
JPM | U S economy is adding plenty of jobs but not hours for workers | By Jason Lange
WASHINGTON Reuters The U S economy is adding lots of jobs but a drop in the number of hours at work points to a dimmer outlook for economic growth as businesses brace for an escalating trade war with China
Many economists think the economy only needs to add about 100 000 jobs a month to keep up with new entrants to the workforce So data released on Friday showing 164 000 jobs were added in July suggests the historically low jobless rate might fall further
That is as long as the economy doesn t go into a recession
The Labor Department s employment report for July showed an index of hours worked across the economy fell 0 2 in July The index which economists treat as an early indicator of economic growth has been cooling for much of this year
So far this reading might only point to slower growth rather than a sharp turn toward economic contraction The slowing is taking place in a gradual and unthreatening fashion said Michael Feroli an economist at JPMorgan NYSE JPM
But there are worrisome signs in the economy A significant part of the weakness in hours worked came from the manufacturing sector which is particularly exposed to an escalating trade war with China
President Donald Trump has raised tariffs on nearly half of China s imports to the United States and on Thursday he said he planned to slap a 10 tariff on the remainder starting in September The trade war has already led to Chinese retaliatory tariffs on U S exports and Beijing on Friday vowed to respond with more punitive measures if Trump pushed ahead with the new tariffs The trade tensions are weighing on the global economy as well
That is hitting American factories where the number of hours worked in July was actually smaller than the same month last year
GRAPHIC Manufacturing jobs
The trade war is happening at the same time that the main driver of the U S economy consumer spending has stayed strong This has helped the U S labor market continue to improve even among workers who have been slower to see the fruits of the recovery from America s 2007 2009 recession
In July the number of workers who couldn t get full time hours because of the economy fell below 4 000 for the first time since 2006 The number of unemployed Americans who have been looking for work at least 27 weeks fell to its lowest level since 2007
GRAPHIC Full employment |
JPM | Energy Precious Metals Weekly Review and Calendar Ahead | By Barani Krishnan
Investing com The U S may have some of the most sophisticated early detection systems in the world but there s nothing in the entire arsenal that can warn you of an upcoming presidential tweet and how to deal with it when it lands
President Donald Trump s tweet on new U S tariffs on China had the market destructive impact of an intercontinental ballistic missile when it landed on Thursday No one possibly except the president of course knew of the 140 character projectile that was coming And other than crash and burn their way through stocks and oil investors had no other plausible reaction
When the smog finally lifted U S West Texas Intermediate crude lost 8 marking its worst day since Feb 2015 U K Brent oil lost 7 2 its most since Sept 2015
But in the strangest of rebounds the market leapt in the next session itself to recover at least a third of the previous day s carnage Therefore net loss on the week was just under 1 for WTI and 2 5 for Brent While the recovery left none the wiser it reinforced what many suspected that volatility would only get worse this summer
Gold went in the opposite direction to its cousins in energy although the rally in U S futures of the yellow metal only began after Thursday s official session and during post settlement trade when Trump s tweet landed Consequently Friday s cumulative 1 8 gain was gold s biggest since February
Energy Review
What was so spectacularly different about Trump s tweet on Thursday compared with his past threats and action on China that warranted such a market implosion
In truth it wasn t as much substance or form as it was timing It has been a while since the president raised the possibility of slapping the balance of China s 300 billion of merchandise coming into the U S with a 10 tariff And really you only need a few weeks for Trump not to tweet about something for it to be regarded a while
What proved to be doom for the bulls and boom for the bears of course was Trump s timing of his latest missile on China trade It came on the heels of the Federal Reserve s now deemed widely disappointing rate cut accelerating oil s slide
Phil Flynn senior market analyst at the Price Futures Group in Chicago tried to decipher the trigger for the president s tweet
President Donald Trump sent a bold message but it s not really clear who it was directed to Flynn said
He added
Sure you might think it was China Yet it came just one day after the President criticized Fed Chairman Jerome Powell for not signaling a more aggressive rate cutting posture And with more Chinese tariffs that will help the President prove his point The ten year treasury yields plunged to the lowest since 2016
The Chinese vowed to fight back We won t accept any maximum pressure intimidation or blackmail Foreign Ministry spokeswoman Hua Chunying said
China once the top buyer of U S crude had slashed its purchases last year as the trade war dragged on However U S crude oil exports surged 260 000 bpd in June to a monthly record of 3 16 million as South Korea bought record volumes and China resumed purchases data from the U S Census Bureau showed
Still some questioned the direct impact of the new 10 tariff Given China has been taking very little U S crude year to date we see little scope for the tariffs to directly impact market fundamentals RoboResearch Commodities Strategis Ryan Fitzmaurice said in a note
The U S economy expanded by 2 1 in the second quarter government data showed on July 26 beating economists expectations but lower than first quarter growth
Despite that there is evidence that the 13 month old trade brawl was taking a toll
China this week reported slowing manufacturing activity in July U S data showed manufacturing activity also slipped last month to the lowest in nearly three years while construction spending fell in June as investment in private projects tumbled to the lowest level in 1 1 2 years
Prior to the Fed announcement oil prices were on a tear staging a five day rally after a strong seventh straight weekly draw in U S crude stockpiles After the Fed s 25 basis point cut some were expecting a 50 bp reduction oil was dragged down kicking and screaming particularly after Fed Chairman Powell described the cut as a mid cycle adjustment that most likely wouldn t be followed by more easing
Adding to the Fed decision the Wall Street Journal in a headline on Thursday declared that crude was in a bear market exacerbating the selloff The Journal cited some bearish predictions from Citigroup NYSE C and JPMorgan Chase NYSE JPM that projected supply growth of roughly one million barrels a day above demand in 2020 that could result in a surplus each quarter next year
Energy Calendar Ahead
Tuesday July 6
American Petroleum Institute weekly report on oil stockpiles
Wednesday July 7
EIA weekly report on oil stockpiles
Thursday July 8
EIA weekly report on natural gas stockpiles
Friday July 9
Baker Hughes weekly rig count
Precious Metals Review
Gold slumped in Thursday s official session in New York before a dramatic rebound in post settlement trade that continued into Friday as President Donald Trump s plan to hit China with additional tariffs triggered a strong safe haven bid for the yellow metal
Gold futures for December delivery traded on the Comex division of the New York Mercantile Exchange settled up 25 30 or 1 8 at 1 457 50 per ounce on the week
On Thursday gold prices hit 2 week lows on disappointment over what was deemed an inadequate U S rate cut Analysts had expected the Federal Reserve to announced a series of rate cuts to shield the U S economy from slowdown Such a Fed action would have also led to substantial weakening of the dollar But the central bank announced just a 25 basis point cut for now and and did not indicate more to come
Stating the labor market remains strong and economic activity has been rising at a moderate rate the Fed was clearly signaling to the market it should not overprice additional cuts Pinchas Cohen analyst at Investing com said referring to remarks by Fed Chair Jerome Powell
The U S dollar spiked to two year highs on the back of Powell s remarks denting demand for gold and other commodities which are priced in the greenback
A report released from the World Gold Council on Thursday confirmed a bullish backdrop for gold during the first half of 2019 with demand for the precious metal hitting a three year high largely due to record breaking central bank purchases It noted that the buying came from a diverse range of largely emerging countries
Precious Metals Calendar
Monday Aug 5
U K services PMI
ISM Non Manufacturing PMI
Tuesday Aug 6
New Zealand employment report
Reserve Bank of Australia interest rate decision
FOMC Member James Bullard speaks
Wednesday Aug 7
Reserve Bank of New Zealand interest rate decision
German industrial production
Thursday Aug 8
China trade balance
U S initial jobless claims
Friday Aug 9
Japan Prelim GDP data
RBA monetary policy statement
China Consumer price inflation
U K Prelim GDP
Canada employment report
U S PPI |
JPM | Markets Steady Ahead Of China Trade Data | Data seen mixed
The release of March s trade data out of China is unusually late today and markets are being held in limbo in the process Expectations are that exports would rise 7 3 y y after a 20 8 decline in February New Year related while imports are seen falling 1 3 y y after a 5 2 contraction the previous month Consequently the trade surplus is expected to widen to 7 05 billion from 4 08 billion AUD USD has been quiet in the run up to the data trading in a narrow 0 7116 0 7133 range It is currently at 0 7131
AUD USD Daily Chart
Source OANDA fxTrade
Singapore GDP growth below forecast
The Singapore economy grew less than economists had forecast in Q1 expanding 1 3 y y missing the estimate of 1 5 growth This was the slowest annualized growth since 2016 A 1 9 annual contraction in the manufacturing sector was countered by growth in the services and construction sector The government has predicted that growth in 2019 will slow to the midpoint of its 1 5 to 3 5 target range from 3 2 in 2018
In response to the weaker expectations the Monetary Authority of Singapore kept its policy unchanged at its semi annual meeting keeping the slope and the width of the Singapore dollar trading band as well as the level at which it is centred The MAS doesn t fix interest rates but uses the currency basket as its main tool of monetary policy
In response to the dovish undertones of the MAS move the Singapore dollar weakened across the board with USD SGD rising 0 14 to touch 1 3581 the highest in a month The FX pair is facing the 100 day moving average at 1 3592 which has capped prices since December 26
USD SGD Daily Chart
Source OANDA fxTrade
A slow finish to the week
The data calendar is relatively sparse today with German wholesale prices and Euro zone industrial production for March the only items on the European calendar The U S session features March export and import prices together with the Michigan consumer sentiment index for April This index is expected to slide to 98 0 from 98 4 in March which could further cloud the outlook for the US economy
Banking shares could be in the spotlight as Wells Fargo NYSE WFC and JPMorgan NYSE JPM announce first quarter earnings that will lead off the reporting season today
Original post |
JPM | Challenges Stack Up As JP Morgan Wells Fargo Citigroup Prepare To Report | Lower trading volume Falling mortgage rates An inverted Treasury yield curve A slowing U S and global economy The odds seem pretty stacked against big banks on multiple fronts as earnings season starts tomorrow
Making things even more challenging many U S big banks enter Q1 reporting time facing tough comparisons to a year ago and with less support from the 2017 U S tax reform legislation that gave many firms a boost early last year
The first results of all this turbulence land at Wall Street s front door on Friday morning when JP Morgan Chase NYSE JPM and Wells Fargo NYSE WFC report Q1 earnings before the opening bell Citigroup Inc NYSE C NYSE C steps to the plate Monday morning Other big banks also report next week
JP Morgan Wells Fargo and Citigroup are all expected to report slight drops in revenue from a year ago according to third party consensus estimates see more below Earnings per share are also expected to be down a touch for JP Morgan in Q1 analysts said Bank stocks trail the S P 500 SPX in performance so far this year see chart below
A common investor misconception is to think of the big U S banks as one entity responding to the same cues While sometimes the bank stocks move in sync on news developments it s also important to distinguish them because they re not a solid bloc For instance falling mortgage levels probably mean more for Wells Fargo than the other banks reporting Friday and Monday because WFC has a huge retail mortgage business
Meanwhile the global stock trading environment which might be a bit weak this year due in part to falling volatility could pose a bigger risk to JP Morgan Chase with its huge trading business If the economy is weakening that could hurt Citigroup with its credit card exposure
The investment banking businesses at JPM and WFC will probably get a close look from investors amid market talk that trading has been subdued in the Q1 vs a year ago when volatility was elevated The first quarter this year featured a government shutdown followed by a Fed pivot that pretty much killed volatility Briefing com noted That might have worked against banks from a trading standpoint Recent stock market volume has been pretty thin
Also Briefing com said the market closed last year in a tailspin which might have sent some traders and investors to the sidelines With the Securities Exchange Commission SEC closed for part of Q1 due to the government shutdown that might have hurt the underwriting business for banks though initial public offerings IPOs did start to pick up by the end of Q1
At the same time the China tariff battle Brexit and the inversion of the yield curve in late March all might have caused uncertainty in the business world perhaps limiting the market for banks services How all this plays out in earnings will soon become clear
Meanwhile mortgage rates have fallen significantly from recent highs near 5 with average 30 year mortgages at around 4 3 according to BankRate com While it s possible that lower rates might be giving the moribund housing market a little new life in quarters to come which could potentially help lenders the lower rates might also eat into some of the big banks profit margins Just a year ago rates were on the rise and there was a lot of hope for an improved mortgage business It might be interesting to hear what WFC executives have to say on this topic
Speaking of WFC executives the company recently announced the retirement of CEO Tim Sloan There s a lot of debate right now in the financial world about who WFC should consider as a replacement especially since the bank said it wants to hire an outsider Sometimes that can cause uncertainty because historically the big banks have tended to elevate insiders to the top position Perhaps we can get more clarity about the situation on WFC s earnings call tomorrow
The other thing that investors might want to stay tuned for especially on Friday is what bank CEOs have to say about the economy in general JP Morgan s Jamie Dimon is one financial leader whose comments often get a close read on earnings day so we ll wait and hear if he has anything to say about how he sees fundamentals shaping up in coming months
JPMorgan Chase Earnings and Options Activity
When JPMorgan Chase releases results it is expected to report adjusted EPS of 2 35 vs 2 37 in the prior year quarter on revenue of 28 47 billion according to third party consensus analyst estimates Revenue is expected to fall 0 2 year over year
Options traders have priced in about a 2 about 2 10 stock move in either direction around the upcoming earnings release according to the Market Maker Move indicator on the thinkorswim platform from TD Ameritrade Implied volatility was at the 22nd percentile as of this morning Weekly call options have been active at the 105 108 and 109 strikes and put activity has been concentrated at the 97 and 103 strikes
Note Call options represent the right but not the obligation to buy the underlying security at a predetermined price over a set period of time Put options represent the right but not the obligation to sell the underlying security at a predetermined price over a set period of time
Wells Fargo Earnings and Options Activity
Wells Fargo is expected to report adjusted EPS of 1 10 vs 0 96 in the prior year quarter on revenue of 20 99 billion according to third party consensus analyst estimates Revenue is expected to be down 4 3 year over year
Options traders have priced in a 2 6 1 24 stock move in either direction around the coming earnings release according to the Market Maker Move indicator on the thinkorswim platform Implied volatility was at the 34th percentile as of this morning
Weekly put activity has been higher in the 46 strike puts while call activity has been active at the 49 and 50 strike calls
Citigroup Earnings and Options Activity
Citigroup is expected to report adjusted EPS of 1 80 vs 1 68 in the prior year quarter on revenue of 18 65 billion according to third party consensus analyst estimates Revenue is expected to be down 1 2 year over year
Options traders have priced in a close to 3 1 95 stock move in either direction around the coming earnings release according to the Market Maker Move indicator on the thinkorswim platform Implied volatility was at the 32nd percentile as of this morning
Call activity for C has been higher in the 65 67 5 and 70 areas while put focus has been active from the 65 through 62 5 strikes
Figure 1 BANKS BEHIND As this year to date chart shows bank stocks candlestick are trailing the S P 500 purple line so far this year though they made a significant comeback over the last two weeks after heavy selling around the Fed meeting in late March Data source S P Dow Jones Indices Chart source The thinkorswim platform from TD Ameritrade For illustrative purposes only Past performance does not guarantee future results
TD Ameritrade commentary for educational purposes only Member SIPC Options involve risks and are not suitable for all investors Please read Characteristics and Risks of Standardized Options |
JPM | Markets Mixed Ahead Of Earnings Dollar Searches For Fresh Catalyst | Stocks in Asia were mostly mixed while European markets opened slightly lower on Friday as investors evaluated China s latest trade figures
Although China s exports rebounded in March rising over 14 0 year on year imports disappointed by shrinking 7 6 marking a fourth consecutive month of decline
With the trade figures illustrating a mixed picture of the second largest economy in the world investors are likely to adopt a guarded approach ahead of first quarter earnings releases from two of the biggest banks in the United States Investors may get a glimpse on how the fading impacts of tax cuts and the Federal Reserve s cautious shift on interest rates have impacted JPMorgan NYSE JPM and Wells Fargo NYSE WFC Should earnings from both banks disappoint risk sentiment for global equities may take a hit
Dollar Searches for new catalyst
The Dollar Index has surrendered much of its gains and is now trading below the 97 mark even as the latest US Producers Price Index exceeded market expectations while jobless claims surprisingly fell to their lowest levels since 1969
Coupled with the March US inflation data released earlier this week the data underscores the central bank s patience on US interest rates and this may remain unchanged for the rest of 2019
Markets have now dialled back expectations of a US rate cut by December to just below 50 percent from above 57 percent earlier this week With such odds being priced into the Greenback any data or event that tilts the balance of risks to either side could influence the Dollar s direction although which is the way forward remains uncertain for the time being Gold steadies after biggest drop in two weeks
Meanwhile markets are pushing the boundaries on risk sentiment as Gold fell by over 1 percent on Thursday before bouncing off the 1 290 mark Although the IMF s cut to its 2019 global growth forecast was a downer investors are hoping that a not too distant US China trade deal and a stabilizing Chinese economy may weaken headwinds currently felt by the global economy However should the outlook take a turn for the worse that could jolt risk off sentiment and rally support for the safe haven assets including Bullion
Oil set to post longest winning streak since 2016
Even as WTI futures have fallen below 64 bbl at the time of writing Oil prices remain on course for its longest run of weekly gains since 2016
The conflict in Libya and US sanctions on Venezuela and Iran are constraining Oil supplies even as OPEC producers press on with output cuts through June However uncertainties on the demand side risk derailing attempts by OPEC to rebalance as the International Energy Agency cautioned in its latest monthly report that it could lower global demand forecasts Should global growth weaken further that may result in Oil prices unravelling some of its year to date gains
Disclaimer This written visual material is comprised of personal opinions and ideas The content should not be construed as containing any type of investment advice and or a solicitation for any transactions It does not imply an obligation to purchase investment services nor does it guarantee or predict future performance FXTM its affiliates agents directors officers or employees do not guarantee the accuracy validity timeliness or completeness of any information or data made available and assume no liability for any loss arising from any investment based on the same
Risk Warning CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage 90 of retail investor accounts lose money when trading CFDs with this provider You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money |
JPM | Despite Feds Dovish Verbiage Bank Stocks Beat Earnings | The Federal Reserves recent dovish verbiage has broken down interest rates since last November With the 10 yr US Treasury yield falling 21 5 over the past 5 months You can see this illustrated below
These falling interest rates which were instigated by the Fed have had an adverse effect on bank stocks A significant portion of their income is driven from interest rates When rates drop so does interest income having an adverse effect on banks bottom line KBE a SPDR ETF tracking banking industry stocks shows a 7 88 loss over the last 52 weeks compared to the 9 gain that the S P 500 is exemplifying over the same time frame You can see below that the spread between bank stocks return and the S P 500 has grown in the past 52 weeks
This slump for bank stock might have come to an end with JP Morgan Chase and Wells Fargo kicking off earnings for banks on a strong note JP Morgan Chase NYSE JPM JPM beats earnings estimates by a tremendous amount surging the stock 5 in morning trading They reported an EPS of 2 65 beating the 2 35 estimate by 13 revenue was up 9 YoY and net income up 19 YoY Most of this growth was driven by the investment banking side of the business Debt underwriting fees was a significant driver for JPM with a large volume of businesses taking advantage of the cheap money that the Fed has extended to the economy through the credit markets Traditional investment banking has also seen growth with businesses rushing to go public and cash out before the cash in the market dries up With a record number of IPOs expect in 2019 IB segments for banks should see strong figures throughout this year Client sentiment for JP Morgan Chase has turned very positive leading us as investors to conclude that we could see strong growth numbers throughout the year JPM is currently sitting at a Zacks Ranking 4 Sell but with these positive results and sentiments EPS estimates should increase for the forthcoming quarter and push JPM to Zacks Rank 2 or 3 in the next day or two Wells Fargo Co Wells Fargo posted 1 20 EPS which was 11 above the estimated EPS of 1 08 The stock initially surged over 2 when the earnings were released but traded down 5 from its high today prompted by the earnings call There was no update on WFC s asset cap timeline which has been plaguing the company for the last year Unable to grow current operations has had an adverse effect on the stock s valuation The company also had slowed volume in deposits and loans though they were able to boast a growing bottom line WFC Zacks Rank 3 |
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