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MS | Market rate rise may thwart Fed s balance sheet plan | By Richard Leong
NEW YORK Reuters The rise of a key U S overnight interest rate has raised speculation that higher bank borrowing costs will force the Federal Reserve to stop shrinking its balance sheet sooner than planned
The federal funds interest rate or what banks charge each other to borrow excess reserves overnight crept up last week after the U S central bank lowered what it pays banks on excess reserves
That narrowing gap between the federal funds rate and the interest on excess reserves or IOER has stoked a debate over whether the Fed s reduction of its massive bond holdings which started in October 2017 has made it more expensive for banks to borrow excess reserves to meet regulatory requirements or fund their daily needs analysts said
It s a signal that perhaps they are closer to their balance sheet bottom than they had previously thought said Steven Blitz chief U S economist at TS Lombard in New York
The spread between the daily average or effective fed funds rate and IOER contracted to a mere 0 03 percentage point last week
The move which surprised some traders and analysts occurred after the Fed raised the top end of its fed funds target by a quarter point to 2 00 percent and IOER by 0 20 of a percentage point to 1 95 percent on June 13
Meanwhile the amount of excess reserves currently at 1 9 trillion is projected to decline to 1 7 trillion by year end and to 1 2 trillion at the end of 2019
Weeks earlier the Fed hinted at tweaking the rate differential to discourage banks from borrowing reserves at the lower fed funds rate and profiting on the higher IOER by leaving the reserves at the central bank The tweak s goal is to encourage banks to lend rather than playing the rate arbitrage
While excess reserves appear ample 90 percent of them are controlled by just 5 percent of banks Morgan Stanley NYSE MS analysts estimate
So most U S banks do not have much in the way of excess reserves and more of these banks will likely have to resort to borrowing in the fed funds market increasing the demand for reserves they wrote in a note on Monday
Graphic U S Fed s policy rates
SHRINKING FED BOND HOLDINGS
Since October 2017 the Fed began to scale back the reinvestment of maturing Treasuries and agency mortgage backed securities it amassed during three rounds of quantitative easing to combat the recession triggered by the 2007 2009 global credit crisis
The central bank s balance sheet has shrunk to 4 3 trillion from 4 5 trillion in September 2017 just before the start of its normalization program
A total of 395 billion in bonds are expected to exit the Fed s balance sheet in 2018 and another 470 billion in 2019 TD Securities analysts said
On this current path the Fed s bond holdings and other assets would fall to 3 trillion by early 2021 according to the New York Fed s latest forecast from April That is a far cry from a projected 2 trillion back in 2015
If interbank borrowing costs remain stubbornly high and disrupt broader economic activity policymakers may have to consider whether to abort the normalization plan early
We believe that by early 2019 the Fed will need to seriously consider quantifying the equilibrium level of excess reserves in order to prevent bank liquidity stress due to reserve drain TD strategists Priya Misra and Gennadiy Goldberg wrote in a recent research note This could result in an earlier end of portfolio run off compared with market expectations of end 2021
Graphic Excess reserves at the Fed vs required reserves
MORE RESERVES NEEDED
A large Fed balance sheet is not without cost
Some analysts have criticized this approach in funding the growing national debt and subsidizing the housing market through the central bank s holding of mortgage backed securities
Other analysts argue that an earlier end to balance sheet normalization may be necessary to support the banking system especially for smaller banks whose need for reserves appear on the rise
Moreover a larger balance sheet is simply required for the growth in money demand since the last recession they note
Our view is that a much larger balance sheet is appropriate said Lou Crandall chief economist at Wrightson ICAP LON NXGN in New York It s not flagging strained conditions It may be flagging us about the optimal level of reserves
William Dudley the recently departed head of the New York Fed downplayed the tight gap between IOER and the effective fed funds rate
I was always more in the camp that demand for reserves is going to be higher in the new environment because of changes in regulation like the liquidity coverage ratio that increases the demand for high quality assets Dudley told reporters on a conference call on June 15
It may be too early for the Fed to slow the shrinkage of its balance sheet
Still if the spread between IOER and the fed funds rate stays compressed it will likely to keep the issue of early termination of balance sheet normalization on the front burner Citi analysts recently wrote to clients
Additonal reporting by Jonathan Spicer Editing by Daniel Bases and Dan Grebler |
JPM | StockBeat Deutsche Bank Calls Time on Its Wall Street Dreams | By Geoffrey Smith
Shares in Deutsche Bank DE DBKGn hit a two month high on Monday after it announced a sweeping overhaul at the weekend that will shrink its balance sheet by over 20 and its workforce by a quarter
The bank is calling time on a 20 year campaign to be one of the world s dominant investment banks a destructively ambitious folly that has resulted in wholesale destruction of shareholder value while enriching a succession of top managers and traders
The shares were up 2 5 on a morning when much of Europe is down and they re now up over 20 since details of the plans began to leak out in June The DAX index meanwhile was down 0 2 while the STOXX 600 was effectively flat
The announcement marks a shift in gear for Germany s largest bank which has for years been reluctant to cut a unit which has constantly struggled to cover its costs and which has been the source of a series of expensive scandals that have cost it billions in legal settlements
The restructuring is even bigger than advance leaks had suggested the bank will carve out some of the 72 billion of its 347 billion euros in risk weighted assets into a unit that will be wound down by 2022 The bank expects the capital release unit a euphemism for bad bank to release 5 billion euros for shareholders from 2022 but is asking them to do without dividends for the next two years
When the restructuring is complete Deutsche Bank will be a much more conservative institute focused on servicing the needs of corporate Germany a vision that CEO Christian Sewing called a return to the bank s roots The derisked bank will need to hold less capital but will still struggle to make much of a profit given the fundamentals of the German banking market Management only expects a return on tangible equity of 8 by 2022 compared to an original 10 target already next year
The reality is that the bank can t simply turn the clock back When it began its pursuit of world domination in the 1990s it had significant equity stakes in a long list of domestic companies that gave it unparalleled influence in their boardrooms In today s more globalized world where finance is more often than not a commodity like any other DAX companies have plenty of other options and aren t afraid to use them the bank was largely sidelined in the asset swap between Germany s two biggest energy companies RWE and E On last year Most importantly with the European Central Bank about to cut interest rates below zero its key lending business will struggle to generate much in profit for years to come
The shares may be up this morning but they are still down over 90 from their peak The legacy of its ill judged ambition is that the market now values it at barely 5 of JPMorgan Chase Co NYSE JPM against which it once aspired to measure itself |
JPM | Libra TON and JPMorgan Coin Compared Are They Heroes or Villains | Since the beginning of 2018 rumors and then news about some large players entering the blockchain industry mesmerized the crypto community Presently the projects promoted by JPMorgan Chase NYSE JPM Facebook NASDAQ FB and Telegram are at the testnet level but the companies have disclosed more accurate information about them The differences among the three projects are enormous their aims business models technology etc Some similarities exist nevertheless However with diversified feelings toward these projects the community pointed out the challenges that they have introduced to the industry This time the proposal for a new cryptocurrency is not coming from an adventurous startup or some willing genial techie but from leading companies in their sectors which could deploy massive firepower in terms of financial resources customers or business relationships
This element radically changes the rules and the size of the game with implications that would potentially affect both the evolution of cryptos and the global economy as a whole Are these new incoming blockchains the superheroes who will bring cryptos to the world or are they what some might say the villain blockchains |
JPM | ANZ Citi and Deutsche cartel case heads for bigger courtroom in Australia | SYDNEY Reuters A criminal cartel case against Australia and New Zealand Banking Group AX ANZ and the local units of Citigroup N C and Deutsche Bank DE DBKGn was adjourned on Tuesday for further legal arguments ahead of a possible trial
Australian authorities filed charges last year against the firms and six senior bankers over the sale of A 3 billion 2 1 billion in ANZ shares in 2015 and subsequent trading by the underwriters
The case is being closely followed by brokers and banks around the globe because it could have major implications for the underwriting business and lead to increased scrutiny from regulators worldwide
It was standing room only as lawyers crammed into a tiny courtroom in Sydney for the brief procedural hearing setting dates in September when lawyers for the banks and bankers will press to be allowed to cross examine prosecution witnesses
We re going to need a bigger courtroom Magistrate Jennifer Atkinson said before fixing the case for its next mention on Sept 3 and two days of arguments on Sept 25 and 27
None of the accused executives were present and it is not clear if or when the matter will proceed to trial Prosecution lawyer Shanaka Jayasuriya said in court that he would oppose his witnesses being cross examined without elaborating
The government accuses the banks of forming a criminal cartel to either directly or indirectly restrict the supply of ANZ shares or maintain the price of ANZ shares according to court documents
The banks and bankers are all defending the charges ANZ did not immediately respond to a Reuters request for comment on Tuesday Citigroup had no commend but has previously said it had operated successfully in Australia in this manner for decades
Deutsche referred to a previous statement saying it will vigorously defend the charges and its staff
JPMorgan N JPM which underwrote the capital raising along with Citigroup and Deutsche Bank has not been charged A representative declined to comment
If convicted the companies could face penalties of up to A 10 million or triple the benefit of the conduct The individuals charged could face 10 years in jail
ANZ Australia s third largest bank is also facing civil charges over the same share issue by the country s corporate watchdog though that case was paused in June pending the outcome of the criminal matter |
JPM | StockBeat Square Soars as Raymond James Abandons Bearish Outlook | Investing com Square NYSE SQ surged Tuesday after Raymond James upgraded its outlook on the stock abandoning its bearish outlook on payments company citing a more balanced risk reward profile
Raymond James upgraded its rating on Square NYSE SQ to market perform from underperform sending its shares more than 6 higher The stock is up about 40 this year
The positive upgrade from the brokerage marked a pivot from its bearish outlook earlier in the year when it downgraded Square NYSE SQ to underperform predicting a lack of growth opportunities for the fintech company
But the headwinds facing the company are now baked into the Square s shares which trade below its peers
There are concerns that the magnitude of the top line beats would likely wane and more importantly the deceleration in second quarter organic growth could catch some investors by surprise Raymond James said But following the company s smallest revenue beat in recent memory in 1Q a 2Q guide that came in below expectations and a now well telegraphed margin cadence the negative catalysts have mostly played out and the stock has lagged peers
The brokerage also hailed the company s business to business seller card offering which was gaining traction and could provide enough momentum to exceed expectations in second half of the year
Raymond James is not alone in its praise for the company s B2B seller card offering with JPMorgan NYSE JPM saying last month it believes Square NYSE SQ can keep delivering the growth required to maintain its lofty valuation partly driven by its business debit card
The card allows businesses to access its sales revenue immediately without the need to wait for bank transfers
The card allows businesses to access its sales revenue immediately without teh need to wait for bank transfers |
MS | Why The Earnings Streak Will Continue For Morgan Stanley MS | Looking for a stock that might be in a good position to beat earnings at its next report Consider Morgan Stanley NYSE MS a firm in the Financial Investment Bank industry which could be a great candidate for another beat This company has seen a nice streak of beating earnings estimates especially when looking at the previous two reports In fact in these reports MS has beaten estimates by at least 10 in both cases suggesting it has a nice short term history of crushing expectations Earnings in FocusTwo quarters ago MS expected to post earnings of 76 cents per share while it actually produced earnings of 87 cents per share a beat of 14 5 Meanwhile for the most recent quarter the company looked to deliver earnings of 81 cents per share when it actually saw earnings of 93 per share instead representing a 14 8 positive surprise Morgan Stanley Price and EPS Surprise Thanks in part to this history recent estimates have been moving higher for Morgan Stanley In fact the for MS is positive which is a great sign of a coming beat After all the Zacks Earnings ESP compares the most accurate estimate to the broad consensus looking to find stocks that have seen big revisions as of late suggesting that analysts have recently become more bullish on the company s earnings prospects This is the case for MS as the firm currently has a Zacks Earnings ESP of 1 49 so another beat could be around the corner This is particularly true when you consider that MS has a great Zacks Rank 2 Buy which can be a harbinger of outperformance and a signal for a strong earnings profile You can see When you add this solid Zacks Rank to a positive Earnings ESP of the time so it seems pretty likely that MS could see another beat at its next report especially if recent trends are any guide Investor Alert Breakthroughs Pending A medical advance is now at the flashpoint between theory and realization Billions of dollars in research have poured into it Companies are already generating substantial revenue and even more wondrous products are in the pipeline Cures for a variety of deadly diseases are in sight and so are big potential profits for early investors Zacks names 5 stocks to buy now |
JPM | Cheapest U S ETF Launch Ever JPMorgan s Strategy In Focus | 1 00 JPMorgan NYSE JPM s BetaBuilder ETFs BBUS BBSA 4 20 ETF Strategies and Future Growth Plans for JPMorgan 12 20 JPMorgan s Activley Managed Bond ETFs JPST 16 45 What Is ETF Distribution 22 50 Episode Roundup In this episode of ETF Spotlight I talk with Jillian DelSignore Executive Director and Head of ETF Distribution at JPMorgan Asset Management Jillian is also co founder and global co president of
We start with JPMorgan s recent launches the JPMorgan BetaBuilders U S Equity ETF and the JPMorgan BetaBuilders 1 5 Year U S Aggregate Bond ETF that are the cheapest products in their respective classes
BBUS provides diversified access to U S large and mid cap stocks at a cost of just 0 02 making it the cheapest ever ETF listed in the U S and BBSA with an expense ratio of 5 basis points is the cheapest short term bond ETF
JPMorgan is one of the largest asset and wealth managers in the world with 1 7 trillion under management but the company made a late entry in the ETF industry JPMorgan Asset Management launched its first ETF the JPMorgan Diversified Return Global Equity ETF in June 2014 followed by the JPMorgan Diversified Return International Equity ETF BO JPIN in November 2014
The bank made a big push last year with BetaBuilders suite of low cost ETFs changing its focus from relatively expensive specialized products earlier
JP Morgan had some of the most successful ETF launches last year like the JPMorgan BetaBuilders Japan ETF that has gathered over 3 3 billion in assets The company is the 10th largest US ETF issuer now with 34 ETFs and more than 20 billion in AUM across equity fixed income and alternatives categories Many of these products are cheapest in their respective classes Jillian explains how they have leveraged their expertise and success in asset management to bring a full range of active strategic beta and passive ETF options to investors
The JPMorgan Ultra Short Income ETF with over 5 billion in assets is one of the most popular actively managed bond ETFs It aims to deliver current income while managing risk The JPMorgan U S Aggregate Bond ETF which made its debut in December last year is the cheapest actively managed bond ETF
We have seen a lot of investor interest in actively managed bond ETFs because fixed income landscape is generally difficult to navigate Further many actively managed bond funds have managed to outperform the broader indexes unlike actively managed stock funds Out of 10 JPM s fixed income ETFs eight are actively managed Jillian explains why active management is important in fixed income
Tune into the podcast to learn more about JPMorgan s ETF lineup and future growth plans
Jillian also talks about her role as head of ETF distribution and her work with Women in ETFs an organization that has grown immensely since its founding about five years back
Please visit if you want to learn more about these ETFs Make sure to be on the lookout for the next edition of ETF Spotlight If you have any comments or questions please email
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MS | Bitfinex chief strategy officer departs | By Anna Irrera NEW YORK Reuters Bitfinex Chief Strategy Officer Phil Potter is leaving the cryptocurrency trading platform the executive and the exchange told Reuters on Friday Potter will be replaced in the interim by Chief Executive JL van der Velde the company said As Bitfinex pivots away from the U S I felt that as a U S person it was time for me to rethink my position as a member of the executive team Potter said in a statement He referred to new opportunities in the days ahead but did not elaborate Owned by a British Virgin Islands company Bitfinex is the fourth largest cryptocurrency exchange in the world by trading volume It enables traders to buy and sell virtual currencies such as bitcoin and ether The exchange shares management with Tether a company that issues a cryptocurrency that is pegged to the U S dollar Tether critics have raised concerns over the past year about whether it actually holds 1 in reserve for every token issued as it claimed Earlier this month a University of Texas research paper alleged Tether s token could have been used to manipulate bitcoin s price last year during its meteoric rise Bitfinex has denied these claims This week a Washington based law firm co founded by former FBI director Louis J Freeh said in a report released by Tether the company had enough U S dollar reserves as of June 1 to back its virtual coins in circulation The report was not a full audit Global regulators have ramped up their scrutiny of cryptocurrency markets following a rally in prices last year The U S Commodity Futures Trading Commission and the Department of Justice are reportedly investigating whether the price of bitcoin is being manipulated In December the CFTC sent a subpoena to Tether and Bitfinex
Potter an American who once worked at Morgan Stanley NYSE MS was one of three main Bitfinex managers including the CEO and a chief financial officer based in Europe |
MS | Take Five World markets themes for the week ahead | LONDON Reuters Following are five big themes likely to dominate thinking of investors and traders in the coming week and the Reuters stories related to them 1 Trade winds in China As the trade war rhetoric starts to turn into action China s markets are on the defensive The yuan has fallen to its lowest against the dollar since early 2018 stocks just had their biggest weekly decline in five months and cash rates are rising with the 14 day repo rate hitting a two month high as firms locked in funding to cover the end of the quarter The question is What might authorities do At present they are trying to keep markets flush to make sure the economic wheels keep turning the central bank injected a net 340 billion yuan 52 3 billion in the past week including 200 billion yuan via its one year medium term lending facility Banks reserve ratios are also likely to be cut further These policy easing expectations are partly driving the yuan s slide but investors are wondering now how far the weakness could go A weak yuan might help offset the trade impact Yet a rapid currency fall aside from provoking more ire in Washington could feed on itself by fuelling further outflows of money from China as happened after the August 2015 devaluation It would also be bad news for other emerging markets such a Taiwan Mexico and South Korea that compete with China in export markets China eyes reserve cuts other policy measures to aid small firms EXPLAINER What can Beijing do if China U S trade row worsens Slowdown default risks to prompt China reserve cut sources 2 CONSUMED BY TRADE Increasingly hostile trade war rhetoric mixing in with tit for tat tariffs increases risks for investors and consumers concerned about their portfolios and prices they pay for imported goods U S consumer confidence however is expected to remain at a lofty level in June as corporate profits remain healthy The report due on June 26 is forecast by a Reuters poll of economists to hold steady at 128 just off an 18 year high hit in May Economists point out the amount of tariffs being threatened is overall quite small in the context of a 20 trillion U S economy In the case of China U S trade Beijing exports more than it imports meaning it will run out of products it can tax well before Washington does But try explaining that to people buying a TV to watch the World Cup UPDATE 5 Washington s capricious trade actions will hurt US workers China warns Reuters BRIEF US May Consumer Confidence Index 128 0 vs April 125 6 Conference Board 2 HERE S LOOKING AT EU The migration debate is overshadowing the official agenda for the June 28 29 EU summit which means chances are slim of market moving reforms being finalised Nonetheless up for discussion will be blueprints for strengthening the ESM bailout fund a common euro zone budget and the banking union project to boost trust in the bloc s financial sector The summit may also debate plans to further ease debt restructurings in Europe As for country specific issues Italy and Britain will be in focus the summit will mark the first EU airing for Italian Prime Minister Giuseppe Conte For Britain meanwhile hopes are ebbing the event will break a deadlock on how to exit the EU as Prime Minister Theresa May is struggling to find a proposal on post Brexit customs arrangements to take into the negotiations The weekend marks the second anniversary of the Brexit referendum and the clock is ticking down to the scheduled exit date of March 29 2019 Sterling down 8 percent since mid April is enjoying a brief reprieve thanks to an unexpectedly hawkish Bank of England meeting on Thursday but remains on course for its worst quarter since the Brexit vote FACTBOX Plans to strengthen euro zone bailout fund ESM FACTBOX Plans to complete the EU banking union May faces down pro EU rebel lawmakers to win Brexit vote Merkel Macron back euro zone budget in new chapter for bloc 4 SOFTLY SOFTLY Flash euro zone inflation figures are expected to show exactly why the ECB s retreat from crisis era stimulus measures will be glacial Economists anticipate a 1 3 percent annual rise in consumer prices in June short of the ECB s target of below but close to 2 pct over the medium term The ECB will end its 2 4 trillion euro bond buying program in December but signaled that negative interest rates are here to stay for some time That means Mario Draghi s 8 year term as ECB president could end in October 2019 without his ever having presided over a rate rise Since the ECB policy decision and Draghi s press conference on June 14 the euro has fallen as much as 2 6 pct and came close to breaking below 1 15 for the first time in almost a year Morgan Stanley NYSE MS and others have lowered their euro forecasts and weak inflation data could see another test of 1 15 ECB to end bond buying but pushes out first rate hike ECB s baby tightening steps contrast with Fed strides and rightly so McGeever ECB patient and gradual with rate hikes Draghi says 5 SYNCHARITIRIA ELLADA CONGRATULATIONS GREECE Having received three bailouts since 2010 Greece has taken a big step forward the euro zone has agreed to extend bond maturities and defer interest on a major part of its loans to Athens along with a big cash injection This makes Greece s debt load more sustainable smoothing its path for the time after it exits the bailout in August Markets have reacted accordingly with five and 10 year bond yields falling 23 and 16 bps respectively the latter at a four week low GR5YT RR GR10YT RR This is good news for a euro zone facing the risk of another crisis this time in Italy For Greece the question now is when it can start borrowing on markets again It sold bonds last year for the first time in three years and wants to raise another 4 5 billion euros in 2018 including its first 10 year issue in a decade The prospect of a new Greek issue is also tantalizing fund managers and investment bankers But Greece has no immediate need for cash and the selloff in Italian debt has made issuance harder for southern European borrowers Still syndicate bankers reckon Athens should be able to grab a window of opportunity sometime before the August lull Greece gets debt relief from euro zone Greece says Eurogroup debt deal positive debt now viable Greece plans more bond issues to shore up post bailout future For graphic on Chinese yuan falls further click For graphic on U S Consumer Confidence click For graphic on the fall and rise of sterling since Brexit vote click For graphic on Euro since ECB decision click
For graphic on Greek 10 yr bond yield since 2010 click |
MS | China to Unleash 108 Billion in Reserves Cut for Most Banks | Bloomberg China s central bank will cut the amount of cash some lenders must hold as reserves unlocking about 700 billion yuan 108 billion of liquidity as it seeks to control leverage and support smaller companies
The required reserve ratio for some banks will drop by 0 5 percentage point effective July 5 the People s Bank of China said on its website That s the day before the U S and China are scheduled to impose tariffs on each other and the cut should help companies affected by deteriorating relations between the world s two largest economies
Such a reduction had been widely expected especially after China s cabinet said on Wednesday that it would use monetary policy tools including cutting reserve ratios for some banks to boost credit supply to smaller companies Sunday s cut probably won t be the last Analysts expect the bank to further ease policy going forward to help cope with a slowing economy and offset the effects of a crackdown on shadow banking
While the PBOC reiterated its neutral stance we think that the move is one step further toward more accommodative monetary policy which is only fitting given softening growth and mounting trade tensions Wei Yao China economist at Societe Generale PA SOGN SA in Paris wrote in a note She expects further cuts in the reserve rate ratios lower rates on liquidity instruments and a lower interest rate corridor in the second half of the year
Supporting SMEs
The aim is to support small and micro enterprises and to further promote the debt to equity swap program according to the central bank The cut will apply to major state run commercial banks joint stock commercial lenders postal banks city commercial lenders rural banks and foreign banks
The PBOC designed the cut to do two different things according to the statement The 500 billion yuan unlocked for the nation s five biggest state run banks and 12 joint stock commercial lenders will be channeled to debt to equity swaps which can reduce companies debt burdens and help cleaning up banks balance sheets The 200 billion yuan freed for smaller lenders such as the postal bank and city commercial lenders will be used to support funding for smaller businesses
Targeted precise change
The move will help push forward the steady progress of structural deleveraging and strengthen support to the weak links of small and micro businesses It is a targeted and precise fine tuning the central bank said in a separate statement The PBOC will keep implementing prudent and neutral monetary policy and create a favorable monetary and financial environment for high quality development and supply side reform
The RRR cut this time doesn t change the PBOC s prudent policy stance The decision fits the current economic and liquidity situations said Wen Bin a researcher at China Minsheng Banking Corp in Beijing It is also an innovative move and addresses structural problems as the central bank ordered the lenders to use the money unleashed to push forward debt to equity swaps and support small and micro sized businesses This can help relieve financial burdens for some companies while reducing leverage
The funds unlocked from the reserve ratio cut shouldn t be used to support so called zombie companies the PBOC said
Risk containment
The central bank s support of debt to equity may reflect its intent to contain credit risk and prevent a significant impact on domestic business confidence Morgan Stanley NYSE MS economists led by China Chief Economist Robin Xing wrote in a note The next steps could include open market cash injections and further RRR cuts Xing wrote
The central bank is adjusting monetary policy at a time when China s economy is showing signs of slowing amid an ongoing campaign to clean up the financial sector and worsening trade tensions with the U S The change will also help ease a funding squeeze for lenders which have to repay money borrowed from the central bank s medium term lending facility and put aside cash for both the July tax season and upcoming quarterly regulatory checks
One month interbank borrowing costs or Shibor climbed to the highest level since early April last week as liquidity tightens before the regulatory and tax season
Beats expectations
The size of the liquidity being unleashed has beat expectations and it s larger than the previous two cuts this year said Ming Ming head of fixed income research at Citic Securities Co in Beijing It s almost a universal cut as it covers almost all lenders
The move will ease liquidity shortages currently seen in the implementation of debt to equity programs and it shows that policy makers still don t want to send a signal of across the board easing Ming said The central bank may have predicted rising debt risks in the near future so it decided to set up such an arrangement he said
Updates third and fourth paragraphs |
MS | Bottom is in for long dated Treasurys Morgan Stanley | 3 12 percent was it says Morgan Stanley NYSE MS s global head of interest rate strategy Matthew Hornbach advising clients to just go straight long the 10 year Treasury note Since hitting that 3 12 peak a couple of weeks back the 10 year yield has pulled back to 2 88 as of this morning and Hornbach sees more declines ahead The main risk to the trade A quick resolution to trade tensions Hornbach s view of course is at odds with most of Wall Street including that of the Morgan Stanley CEO who expects yields to continue to climb this year ETFs TLT TBT TMV TBF EDV TMF TTT ZROZ VGLT TLH UBT SPTL DLBS VUSTX TYBS DLBLNow read |
MS | China to Unleash 108 Billion in Reserve Cut for Some Banks | Bloomberg China s central bank will cut the amount of cash some lenders must hold as reserves unlocking about 700 billion yuan 108 billion of liquidity as it seeks to control leverage and support smaller companies
The required reserve ratio for some banks will drop by 0 5 percentage point effective July 5 the People s Bank of China said on its website That s the day before the U S and China are scheduled to impose tariffs on each other
Such a reduction had been widely expected especially after China s cabinet said on Wednesday that it would use monetary policy tools including cutting reserve ratios for some banks to boost credit supply to smaller companies Sunday s cut probably won t be the last Analysts expect the bank to further ease policy going forward to help cope with a slowing economy and offset the effects of a crackdown on shadow banking
While the PBOC reiterated its neutral stance we think that the move is one step further toward more accommodative monetary policy which is only fitting given softening growth and mounting trade tensions Wei Yao China economist at Societe Generale PA SOGN SA in Paris wrote in a note She expects further cuts in the reserve rate ratios lower rates on liquidity instruments and a lower interest rate corridor in the second half of the year
The yuan continued to slide on Monday The benchmark Shanghai stock index is on the brink of a bear market after tumbling almost 20 percent from its recent high and closed Monday down 1 1 percent
Supporting SMEs
The aim is to support small and micro enterprises and to further promote the debt to equity swap program according to the central bank The cut will apply to major state run commercial banks joint stock commercial lenders postal banks city commercial lenders rural banks and foreign banks
The PBOC designed the cut to do two different things according to the statement The 500 billion yuan unlocked for the nation s five biggest state run banks and 12 joint stock commercial lenders will be channeled to debt to equity swaps which can reduce companies debt burdens and help cleaning up banks balance sheets The 200 billion yuan freed for smaller lenders such as the postal bank and city commercial lenders will be used to support funding for smaller businesses
The PBOC announced more details on how it will boost credit for small companies on Monday It will add another 150 billion yuan in its targeted relending quota a scheme in which banks can obtain relatively cheap funding from the PBOC to loan out to small companies and rural businesses The interest rate for SME relending loans will be lowered by 0 5 percentage point the central bank said in a statement
By requesting banks use the liquidity to support debt to equity swaps the PBOC has broadened the scope of its targeted RRR reductions While two previous cuts were aimed at helping smaller firms the main beneficiaries of the debt to equity swaps will be larger companies in traditional industries like coal iron and other metals according to Wen Bin a researcher at China Minsheng Banking Corp in Beijing Many of those are state owned enterprises
The swap program was introduced in 2016 to assist highly leveraged companies by encouraging banks and private investors to replace their claims on loans with equity holdings It s seen little progress 102 companies had signed up for swaps worth about 1 6 trillion yuan by the end of 2017 but only around 20 percent of those had been executed according to China International Capital Corporation
Targeted precise change
The move will help push forward the steady progress of structural deleveraging and strengthen support to the weak links of small and micro businesses It is a targeted and precise fine tuning the central bank said in a separate statement The PBOC will keep implementing prudent and neutral monetary policy and create a favorable monetary and financial environment for high quality development and supply side reform
The funds unlocked from the reserve ratio cut shouldn t be used to support so called zombie companies the PBOC said
Risk containment
The central bank s support of debt to equity may reflect its intent to contain credit risk and prevent a significant impact on domestic business confidence Morgan Stanley NYSE MS economists led by China Chief Economist Robin Xing wrote in a note The next steps could include open market cash injections and further RRR cuts Xing wrote
The central bank is adjusting monetary policy at a time when China s economy is showing signs of slowing amid an ongoing campaign to clean up the financial sector and worsening trade tensions with the U S The change will also help ease a funding squeeze for lenders which have to repay money borrowed from the central bank s medium term lending facility and put aside cash for both the July tax season and upcoming quarterly regulatory checks
One month interbank borrowing costs or Shibor climbed to the highest level since early April last week as liquidity tightens before the regulatory and tax season
Beats expectations
The size of the liquidity being unleashed has beat expectations and it s larger than the previous two cuts this year said Ming Ming head of fixed income research at Citic Securities Co in Beijing It s almost a universal cut as it covers almost all lenders
The move will ease liquidity shortages currently seen in the implementation of debt to equity programs and it shows that policy makers still don t want to send a signal of across the board easing Ming said The central bank may have predicted rising debt risks in the near future so it decided to set up such an arrangement he said
Updates with markets in fifth paragraph and more policy details in eighth paragraph |
JPM | JPMorgan Asset Buys Treasuries Italy Debt on Inflation View | Bloomberg JPMorgan NYSE JPM Asset Management is buying Treasuries and Italian bonds in a bet slowing inflation and trade war tensions will convince major central banks to keep cutting interest rates
The 1 7 trillion money manager is snapping up U S five and 10 year notes as it predicts the Federal Reserve will lower its benchmark rate by a combined 75 basis points through year end Shorter maturity Italian bonds are attractive as the European Central Bank is set to resume quantitative easing said Seamus Mac Gorain head of global rates in London
The dovish backdrop comes from inflation but the trade war makes the cuts far more immediate Mac Gorain said in an interview We don t really need to see any further escalation in the trade war for central banks to cut
Bonds are rallying around the world as slowing growth drives down inflation and enhances the value of fixed income assets The Fed said last month it was ready to lower rates due to increasing global uncertainties while the European Central Bank has been edging closer to adding monetary stimulus as manufacturing slumps Economists are expecting the Bank of Japan will also increase accommodation
Treasury 10 year yields will probably fall to 1 75 by the end of December as the Fed makes a succession of rate cuts starting with one this month Mac Gorain said U S benchmark notes yielded 1 94 in early London trading Friday having dropped from as high as 3 26 in October
One of the questions we ask ourselves is Is the Fed going to get back to zero in the cycle It is possible they could do but I think it s not clear as yet It really depends on how the economy evolves
Italy Attractive
JPMorgan has turned constructive on shorter maturity Italian bonds including five year securities in a bet they will be boosted as the ECB resumes debt purchases
We expect QE to come in the coming months and that s very very supportive for Italy in particular Mac Gorain said The most likely date for QE to restart is September he said
Italy s two year yields dropped below zero this week for the first time since May last year while 10 year yields slid to 1 56 on Thursday the lowest since October 2016 Even after their recent declines however they remain among the highest in the euro area
Here are some of Mac Gorain s other investment views
Spanish Rally
We could easily go to zero in 10 year Spanish yields in the coming months
The first big driver is the fact that negative yields are here for an extended period the second is QE
QE is more positive for the slightly riskier issuers and also for the longer duration bonds
NOTE Spain 10 year yields slid to a record low 0 204 on Wednesday
ECB Succession
If Christine Lagarde is confirmed she ll be a very good appointment
She s always been pragmatic and also she s talked about the European policy makers using policy more proactively to boost growth
READ Lagarde to Succeed Draghi as ECB Chief as Economy Weakens
Trade War
Our central expectation is that it will be a prolonged drag on growth that it will push global growth below trend
We have to acknowledge there have been many unpredictable developments in the trade war this year and there could be more to come
Adds Treasury yields in fifth paragraph comments on trade war at end of story |
JPM | Here s What Market Strategists Are Watching in U S Job Data | Bloomberg Friday s U S June jobs report could prove significant for markets as the Federal Reserve gauges whether to cut interest rates for the first time in more than a decade
One quirk of this jobs report It comes on a summer Friday after the U S Independence Day holiday July 4 so market activity could dissipate quickly after the numbers come out if trading desks have less staffing than usual The median forecast is for a nonfarm payroll NFP gain of 160 000 after a soft 75 000 in May Average hourly earnings are seen rising 0 3 on the month after a 0 2 climb in May
Here s a roundup of views
Hannah Anderson global market strategist at JPMorgan NYSE JPM Asset Management in Hong Kong
Expects a gain between 100 000 and 200 000 About 150 000 doesn t necessarily spell forthcoming aggressive policy easing
If we get an employment report that s as weak as last month s it makes it more likely they ll cut sooner rather than later
Second quarter GDP in late July will likely be more critical for the Fed s month end decision than payrolls
Shane Oliver chief economist at AMP Capital Investors Ltd in Sydney
Markets are basically hoping for and largely positioned for a 50 basis point cut in July but a payroll gain around consensus means probably just a 25 basis point move
A sub 100 000 reading is needed for confidence in a half point cut
Gain of 160 000 or more would send bond yields and the dollar up while both would drop if it s 100 000 or fewer
Equities could rise unless payrolls are quite weak such as with a decline
Chris Weston head of research at Pepperstone Group in Melbourne
Payrolls could cause a sell off in bonds but we d need to see a huge number and far in excess of the consensus of 160 000
This is a world looking to buy any pull backs in bonds and funds have been pushed further out the curve in a bid for yield
Vishnu Varathan head of economics strategy at Mizuho Bank Ltd in Singapore
If numbers fall short of rebounding back to 150 000 180 000 then markets will be convinced of a July cut he said
If payrolls are on the stronger side of the 100 000 to 200 000 range there could be some flattening of the two year 10 year yield curve led by shorter end yields edging up he said
Masanari Takada cross asset and quantitative strategist at Nomura Holdings Inc in Tokyo
Macro oriented traders could turn bullish on stocks and thereby draw out even more buying by commodity trading advisors
On the other hand CTAs might start dismantling their long positions if macro traders were to become even more guarded We still have a bullish view on global stocks in July and think that the former of these two scenarios is the more likely one
Stephen Innes a managing partner at Vanguard Markets Pte in Singapore
Unless it comes in well beyond reach on both the headline and wages it will not make one iota of difference to the Fed
They need to make a credible policy stance around trying to ignite inflation and should go 50 basis points in July
Binay Chandgothia portfolio manager at Principal Global Investors in Hong Kong
If alongside decent growth in employment wage growth also recovers it will help push yields higher It will be slightly positive for equities as well though not as much as the impact on bond yields
A weak number will keep yields well bid and increase the probability of a 50 basis point rate cut later this month Equities may correct a little but the prospects of a faster Fed response will prevent a larger draw down
The only debate is whether the Fed can pivot to a 50 basis point rate cut and then stay on the sidelines to see the impact of such a cut for a few months
Shyam Devani senior technical strategist at Citigroup in Singapore
The inverted curve in the U S is unavoidable as it has been for a while now
U S 30 year yield is below the upper bound of the Fed Funds rate for the first time in more than 11 years I don t think this should or can be ignored
The NFP numbers today will either speed up the path to rate cuts or slow it down but not derail the journey
Dwyfor Evans head of Asia Pacific macro strategy at State Street Global Markets in Hong Kong
New highs in equities coupled with the inversion of the U S yield curve speaks of opposing forces in markets that should be ripe for an adjustment
Dovish global central banks are also opening up a large opportunity for EM both in equities and particularly highly rated sovereign bonds |
JPM | Wells Fargo fined in Ireland over regulatory reporting breaches | DUBLIN Reuters Wells Fargo Co s N WFC Irish subsidiary was fined 5 9 million euros on Friday for a prolonged series of regulatory reporting breaches the second largest fine ever handed down by Ireland s Central Bank The Central Bank said Wells Fargo Bank International Unlimited Company admitted to five breaches from 2014 to 2019 including a failure to accurately report its capital position that revealed serious and systemic weaknesses in its reporting capability A spokesperson for Wells Fargo said the bank took its regulatory obligations seriously and had made significant improvements to its systems and processes since the breaches occurred Wells Fargo the fourth largest U S bank by assets has been beset by a string of mis selling scandals in its home market prompting billions of dollars in fines and an unprecedented cap on its balance sheet by the Federal Reserve Its Irish incorporated business has branches in London and Frankfurt offering corporate lending across Europe according to the bank s website It had a turnover of 586 million in 2018 the central bank said It is a minimum requirement of being regulated by the Central Bank that firms submit accurate and timely regulatory returns Director of Enforcement Seana Cunningham said in a statement This enforcement action refers to failings in relation to both capital reporting and liquidity testing For that reason it is considered to be particularly serious The other breaches included a failure to properly document processes and procedures the lack of robust board and senior management oversight and a failure to comply with regulatory requirements in relation to liquidity testing Weak IT systems also necessitated an excessively high level of manual adjustments in the preparation of regulatory returns which the central bank said contributed to incorrect calculations Wells Fargo initially did not complete required remedial action in 2017 but has since taken the necessary steps to rectify the failings the regulator said That reduced the fine from the appropriate level of 8 4 million euros 9 46 million in line with central bank settlement procedures The 5 9 million euro fine is the second largest after a 21 million euro fine imposed on Irish lender Permanent TSP I IL0A for overcharging mortgage customers a central bank spokesman said
It was also the second reprimand for an Irish subsidiary of a major U S bank in the space of 10 days after JPMorgan Chase Co N JPM was fined 1 6 million euros 1 8 million for regulatory breaches in outsourcing |
JPM | Trump Spoke With Powell on May 20 Days After Criticizing Him | Bloomberg President Donald Trump spoke by phone with Federal Reserve Chairman Jerome Powell in May days after he hectored the central bank chief with a tweet asking him to match stimulus measures taken by China s government
The two men spoke for five minutes from 4 42 p m to 4 47 p m on May 20 according to Powell s May calendar posted online Friday by the Fed That evening Powell delivered a speech on the U S financial system at a conference sponsored by the Atlanta Fed
Fed spokesman David Skidmore declined to comment on the content of the call or who initiated it
Powell has been weathering a barrage of criticism and threats from the president for almost a year aimed mainly at getting the Fed to lower interest rates After raising its benchmark by 1 percentage point in 2018 the Fed has held it steady this year as the global economic outlook cooled and last month indicated that it s open to a cut The next rate setting meeting is July 30 31 in Washington
The president and Fed chief have spoken by phone at least three times since Trump nominated Powell for the job in November 2017 Trump previously called Powell on April 11 the same evening the Fed chair reassured Democratic lawmakers he would preserve the independence of the central bank from political pressure They also spoke March 8 as concerns that day about the U S job market helped send stocks to their biggest weekly drop of the year
Powell s calendar also shows a 45 minute meeting with JPMorgan Chase Co NYSE JPM Chief Executive Officer Jamie Dimon at the Fed on May 15
Powell met with several lawmakers during the month including Senate Minority Leader Chuck Schumer a Democrat and House Minority Leader Kevin McCarthy a Republican Others included Senators Mike Braun Shelley Moore Capito Mitt Romney Pat Toomey Marsha Blackburn and Bill Cassidy He also met representatives Rick Larsen Bill Posey and Tom Graves |
MS | Why It s Best To Hold On To Morgan Stanley MS Stock Now | Morgan Stanley s NYSE MS initiatives to cut down expenses should keep supporting its bottom line growth Also it remains focused on strengthening its product portfolio Moreover the company s price performance looks impressive Its shares have increased 23 9 in the past year outpacing the s growth of 14 3 However declining net interest income and slump in trading activities remain major concerns for the company Its Zacks Consensus Estimate for the current year earnings has also remained stable over the last 30 days As a result the stock currently carries a Zacks Rank 3 Hold Looking at the fundamentals the company is on track to reduce infrastructure expenses by 2017 through its cost saving initiative Project Streamline Moreover for the past few years the company has been taking a spate of initiatives to restructure its operations with the aim of lowering balance sheet risk and focusing on its less capital intensive businesses Its continued focus on strengthening its product portfolio is expected to support top line growth in the quarters ahead Given its solid liquidity position and earnings strength the company should be able to sustain improved capital deployments and continue enhancing shareholder value going forward However the company s net interest income has started to witness a decline since the beginning of 2017 Despite a favorable rate environment and improving economy the decline in net interest income is a result of significant increase in interest expenses Also a major portion of Morgan Stanley s revenues comes from trading activities and hence its performance is largely dependent on the overall performance of the capital markets Since the beginning of 2017 there has been a slowdown in client activity and low market volatility which has led to a decline in fixed income trading revenues If the slump in capital markets continues it will adversely affect the company s trading income Stocks to ConsiderA few better ranked stocks from the same space are Interactive Brokers Group Inc NASDAQ IBKR Stifel Financial Corporation NYSE SF and Raymond James Financial Inc NYSE RJF each carrying a Zacks Rank 2 Buy You can see Earnings estimates for Interactive Brokers have been revised 5 8 upward for 2017 over the past 60 days Its share price has risen 64 over the last six months Stifel Financial s earnings estimates have been revised upward by 1 8 for the current year in the past 60 days Also over the last six months its share price has increased 40 4 Raymond James has witnessed an upward earnings estimate revision of 1 4 for the current fiscal year over the past 60 days Also its share price has seen a 22 4 rise over the last six months Looking for Stocks with Skyrocketing Upside Zacks has just released a Special Report on the booming investment opportunities of legal marijuana Ignited by new referendums and legislation this industry is expected to blast from an already robust 6 7 billion to 20 2 billion in 2021 Early investors stand to make a killing but you have to be ready to act and know just where to look |
MS | Gladstone Commercial Acquires Office Portfolio For 37 6M | Gladstone Commercial Corporation NASDAQ GOOD recently shelled out 37 6 million to acquire office portfolio in Columbus OH and Salt Lake City UT The move is in sync with the company s efforts to strengthen its presence in solid U S secondary growth markets with credit worthy tenants The portfolio consists of two class A office buildings aggregating 204 587 square feet of space This portfolio is entirely leased with Morgan Stanley Smith Barney Financing LLC MSSBF being the anchor tenant leasing 92 of the space The weighted average lease term of the portfolio is 8 6 years Notably MSSBF is a major U S operating subsidiary of Morgan Stanley NYSE MS The three story 102 559 square foot office building in Columbus is 84 leased to MSSBF while the rest is occupied by privately owned commercial bank Congressional Bank It is situated near Columbus I 270 beltway loop in the Easton submarket On the other hand the three story 102 028 square foot office building in Salt Lake City is entirely leased to MSSBF This building is close to the I 15 Freeway and a light rail station Both properties are in locations with live work play amenities and are likely to enjoy decent demand from office tenants going forward In fact such locations reduce the distance between housing workplaces retail businesses and other amenities and destinations Hence properties in such locations enable companies to grab the attention of people who prefer to live work and play in the same area a trend that drove development in several other cities in the United States As such for Gladstone Commercial which is focused on acquiring owning and operating net leased industrial and office properties across the United States this acquisition is likely to be accretive to its earnings and drive long term growth Shares of Gladstone Commercial have outperformed the it belongs to year to date This Zacks Rank 3 Hold company s shares have gained 10 8 while the industry recorded growth of 4 3 during this time frame Better ranked stocks in the REIT space include Franklin Street Properties NYSE FSP Columbia Property Trust NYSE CXP and Select Income REIT NASDAQ SIR All three carry a Zacks Rank of 2 Buy You can see Franklin Street Properties Zacks Consensus Estimates for 2017 FFO per share remained unchanged at 1 05 over the past month Its share price has ascended 9 8 in three months time Columbia Property Trust s FFO per share estimates for the current year have moved up 2 7 to 1 15 in a month s time Its shares have gained 6 6 over the past three months Select Income REIT s FFO per share estimates for 2017 remained unchanged at 2 70 over the past month Its shares have rallied 10 2 in three months time Note All EPS numbers presented in this report represent funds from operations FFO per share FFO a widely used metric to gauge the performance of REITs is obtained after adding depreciation and amortization and other non cash expenses to net income Looking for Stocks with Skyrocketing Upside Zacks has just released a Special Report on the booming investment opportunities of legal marijuana Ignited by new referendums and legislation this industry is expected to blast from an already robust 6 7 billion to 20 2 billion in 2021 Early investors stand to make a killing but you have to be ready to act and know just where to look |
JPM | Company News For Mar 14 2019 | JPMorgan Chase Co NYSE JPM shares increased 0 3 following news that the bank will open 90 branches in new markets in 2019Shares of Aurora Cannabis Inc TO ACB jumped 13 9 following announcement that activist investor Nelson Peltz has joined the company as strategic advisorFiat Chrysler Automobiles N V NYSE FCAU shares declined 0 9 after the company agreed to recall 900 000 vehicles which failed to meet US federal emissions standardsShares of Cloudera Inc NYSE CLDR climbed 1 7 after the company reported fourth quarter 2018 revenues of 144 52 million beating the Zacks Consensus Estimate of 121 21 million |
JPM | Forget Free This ETF Will Pay You To Invest | Price wars in the ETF industry are heating up and investors are the biggest winners Salt Financial has taken the race to the bottom to a new level now It filed for the Salt Low truBeta US Market ETF LSLT which has an expense ratio of 29 basis points but will temporarily waive that fee and instead pay investors 5 for every 10 000 invested taking its expense ratio to 0 05
The waiver would be in place until April 30 2020 but if the ETF reaches 100 million in assets the rebate will be capped The fund will invest in about 100 US large and mid cap stocks with low volatility
Salt Financial a relatively new entrant in the ETF industry has just one ETF the Salt High TruBeta US Market ETF as of now with about 10 million in assets under management SLT provides exposure to high beta stocks for more aggressive equity allocations
Earlier this week JP Morgan launched two ETFs that are the cheapest in their respective classes The JPMorgan BetaBuilders U S Equity ETF BBUS that provides diversified exposure to US large and mid cap stocks charges just 2 basis points or 2 for every 10 000 invested making it cheaper than the iShares Core S P Total U S Stock Market ETF and the Vanguard S P 500 ETF
Last month online lender SoFi had filed for industry s first zero fee ETFs The SoFi 500 ETF SFY and the SoFi Next 500 ETF SFYX have an expense ratio of 19 basis points each that would be waived for the first year making them free to investors See
Last year Fidelity had launched four zero fee index funds Fidelity got a lot of publicity after free funds that gathered more than 3 billion within weeks of their launch but the interest has since waned
The ETF industry has become increasingly crowded and ultra competitive and it s not easy for a new ETF to gather assets We have seen a surge in ETF closures of late as many new ETFs fail to reach scale required to survive
Most investors do not want to consider a new ETF if an established product with a similar strategy is available at a reasonable price And financial advisors do not recommend them or use them in model portfolios Read
Bloomberg reported that Salt Financial s Tony Barchetto wrote in a to the Federal Trade Commission in January The most common gates that new funds face are based on assets under management liquidity or time since the fund launched The asset based gates range from about 25 million to upwards of 500 million or more per fund
Investors are becoming very cost sensitive and putting their dollars in the cheapest funds but they need to understand that free may not be really free Providers may treat these funds as loss leaders and hope to sell other higher fee products to customers who join their platforms
While expense ratios are very important in evaluating ETFs investors should also consider other factors And cost difference doesn t matter when it comes to a few basis points Ultra cheap highly liquid ETFs like ITOT IVV and VOO that charge just 3 4 basis points are as good as zero fee ETFs Read
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MS | Altice selling stakes in French Portuguese telecom towers to cut debt | PARIS Reuters Dutch based telecoms and cable group Altice plans to raise 2 5 billion euros 2 9 billion from selling stakes in its telecoms towers businesses in France and Portugal to reduce its debt the company said on Wednesday The group whose founder is billionaire Patrick Drahi is restructuring to revive its fortunes after growing rapidly in recent years through a series of acquisitions Its plan is to build up the towers businesses and boost revenues through the stake sales it said Altice said it had entered an exclusivity agreement with U S KKR to form a new French company called SFR TowerCo comprising 10 198 sites operated by Altice s French susbsidiary SFR The private equity firm will have a 49 9 percent stake That deal reported earlier by Reuters and expected to close in the fourth quarter of 2018 will also involve building 1 200 new towers which Altice said would generate 250 million euros in proceeds for SFR within four years Altice s Portuguese subsidiary will also sell a larger 75 percent chunk of a newly formed Portuguese towers business to be named Towers of Portugal TOP to Morgan Stanley NYSE MS Infrastructure Partners and Horizon Equity Partners That business has 2 961 sites and includes an agreement for 400 new towers Alain Weill chief executive of Altice Europe said proceeds from the agreements would go toward reducing the group s 31 billion euro debt pile in Europe Altice whose debt equals more than twice its annual revenues is finalizing a series of non core disposals including its entire operations in the Dominican Republic Weill did not rule out the newly formed towers businesses eventually being listed on the stock market The planned transaction values SFR TowerCo at an enterprise value of 3 6 billion euros These are promising businesses Weill told journalists adding however they had just been created and talk of a spin out was premature |
MS | Optimism a theme at Marine Money Week | The latest update on Marine Money Week is in from J Mintzmyer of Value Investor s Edge Minztmeyer says optimism has returned to the shipping sectors with several industry players in the crude tanker space cautiously optimistic including DHT Holdings NYSE DHT and International Seaways NASDAQ INSW A product tanker panel is about to convene which includes participants from Ardmore NYSE ASC d Amico Team Tankers and Chembulk are taking part of a product tanker panel but Scorpio Tankers NYSE STNG and its ultra bullish CEO Robert Bugbee are missing from the scene As part of the closing festivities analysts will be invited to share their top pick in the sector for the next year Participants include JPMorgan NYSE JPM Citi Morgan Stanley NYSE MS Jeffries and 4 others Mintzmyer has also been invited to share his idea with the group Related shipping and tanker stocks TNK STNG NM NVGS EURN NAP KEX GLNG SSW FRO CMRE NVGS DHT GNK DRYS DSX EGLE NAT ASC SALT EGLE SB NAT NMM KNOP PANL DAC SFL Now read |
MS | Morgan Stanley Says Hong Kong s Equity Selloff Is Far From Over | Bloomberg Don t bother buying the dip in Hong Kong stocks
That s the view of Morgan Stanley NYSE MS strategists who ve just slashed their 12 month target for the Hang Seng Index by about 10 percent to 27 200 points The new forecast implies a slump of 18 percent from the benchmark s January peak nearing a correction typically denoting a bear market The gauge closed at 29 696 points Wednesday
Rising interest rates a weaker yuan and worsening U S China trade relations are combining to threaten Asia s economic growth and corporate profits according to Morgan Stanley While the strategists cut their targets on six other gauges in the region Hong Kong looks especially vulnerable due to links with U S monetary policy and its companies reliance on China for earnings
We think the Hang Seng index is at risk of a further sharp drawdown near term strategists led by Jonathan Garner wrote in a note Wednesday Investors should focus in particular on this juncture at reducing exposure to the city s equities
The Hang Seng Index rose 0 8 percent Wednesday its first advance in five sessions marking a brief respite from a selloff that has erased all its gains for the year The yuan also snapped its steepest two day loss since 2015 after policymakers set the daily fixing at a much stronger level than expected |
MS | China U S trade war hits Daimler profit may sweep sector | By Edward Taylor FRANKFURT Reuters Germany s Daimler DE DAIGn cut its 2018 profit forecast and BMW DE BMWG said it was looking at strategic options because of a trade war between China and the United States sparking fears of a wave of earnings downgrades in the auto industry Daimler said late on Wednesday that import tariffs on cars exported from the United States to China would hurt sales of its Mercedes Benz cars resulting in slightly lower earnings before interest and taxes EBIT this year The luxury automaker one of the biggest global companies to cut its guidance and blame trade tensions previously saw 2018 EBIT rising slightly We do not believe Daimler will be the only OEM original equipment manufacturer to reduce guidance Other OEMs are also exposed to similar trends that Daimler cites in various degrees Morgan Stanley NYSE MS analysts said German rival BMW which also exports sport utility vehicles SUVs from the United States to China and Europe reaffirmed its profit forecasts for this year but said these depended on worldwide political conditions remaining largely unchanged Within the context of the current discussion concerning additional tariffs on international trade the company is evaluating various scenarios and possible strategic options it said in a statement on Thursday without elaborating Slower sales of SUVs from the Mercedes Benz plant in Alabama to China will result in a hit of around 250 million euros 289 million Evercore ISI analysts said At 1000 GMT Daimler shares were down 4 5 percent at 57 76 euros the biggest fall by a European blue chip stock while shares in BMW and Volkswagen DE VOWG p were down 2 6 and 3 1 percent respectively Daimler s profit warning comes as U S President Donald Trump is proposing to impose tariffs on imported vehicles on the grounds that trade imbalances on many products threaten U S national security He is separately threatening to impose tariffs on up to 200 billion of Chinese goods China has warned it will retaliate with levies on U S products potentially including the Mercedes Benz SUVs shipped to China from Alabama Stocks in a wide range of companies have see sawed in recent weeks as investors tried to assess the risk to corporate profits from the Trump administration s trade policy While the United States and China have not yet imposed new tariffs Daimler said it expected them and would not be able to recover the costs from customers Fewer than expected SUV sales and higher than expected costs not completely passed on to the customers must be assumed because of increased import tariffs for U S vehicles into the Chinese market it said in a regulatory filing Daimler s revised forecast came on the same day as reports that German automakers had backed a proposal that the European Union drop tariffs on vehicles to defuse trade tensions Beijing s proposed 25 percent tax on U S car factory exports will hit nearly 270 000 vehicles with German carmakers accounting for 7 billion of the 11 billion total BMW the largest vehicle exporter from the United States by value has its largest factory in Spartanburg South Carolina and faces a 965 million impact from tariffs with Daimler exposed to a 765 million hit Evercore ISI analysts have said Around 18 percent of all BMWs sold in China were exported from the United States last year and the carmaker has warned a further escalation of the trade row would be harmful for all stakeholders BMW this year stopped exporting the X3 from the United States to China amid escalating trade tensions moving production to a plant in Rosslyn South Africa and another in Shenyang China LOWER EMISSIONS PROFIT Daimler also said a new vehicle certification process based on stricter fuel efficiency test procedures would hit sales in the second half of the year and warned earnings at Mercedes Benz Vans unit would suffer because of a vehicle recall for diesel engined models Several carmakers including Volkswagen have said they face challenges adapting their vehicle fleets to meet the new Worldwide Harmonised Light Vehicle Test Procedure WLTP which is based on real driving data rather than theoretical scenarios Because the new regime gives higher carbon dioxide readings than the old system it will force some carmakers to delay road certification and sales or push vehicles into a higher tax bracket The elephant in the room at the moment is the response of national governments and manufacturers to the new WLTP emissions and fuel economy testing procedure which has the potential to cause significant tax increases in countries which have taxation regimes based on CO2 emissions analysts at LMC said this month Daimler now sees EBIT at Mercedes Benz Cars slightly below a year earlier compared with previous guidance for a slight rise It sees earnings at the vans division dropping significantly after German regulator KBA last month ordered the recall of Mercedes Benz Vito vans fitted with 1 6 liter diesel engines saying they breached emissions rules Daimler which has said it will appeal KBA s decision previously expected earnings at the vans business to decline only slightly Overall Daimler s EBIT will take a hit of about 763 million euros once costs of the recall the impact of WLTP certification and lower sales in Latin America are factored in to results Evercore ISI analysts said TRADING HIT Shares in South Korean automakers fell in Asian trade while Japanese peers also came under pressure Japanese and South Korean automakers for the most part do not ship vehicles made in the United States to China Most of the vehicles sold in China are made locally through their Chinese joint ventures along with imports from Asia But analysts said the U S trade spat with China raised concerns about knock on effects on other countries like potential U S auto tariffs on all vehicle imports South Koreans have higher portions of vehicle imports in the U S than peers making them vulnerable to U S potential tariffs Kwon Soon woo an analyst at SK Securities said Kia Motors KS 000270 shares fell 2 2 percent while Hyundai Motors KS 005380 dropped 1 9 percent For a graphic on U S trade with China please click on |
MS | Siris Capital unit to buy Web com for 2 billion | Reuters Web com Group Inc a provider of internet domain name registration services said on Thursday an affiliate of private equity firm Siris Capital would buy the company for about 2 billion in cash Shares of the company which also helps businesses build websites rose 8 percent in premarket trading matching the offer price of 25 per share The deal comes as the sector becomes increasingly crowded with companies such as Wix com Ltd Weebly Inc and Squarespace seeking to gain market share from established players such as GoDaddy Inc Jacksonville Florida based Web com will be open to other offers during a go shop period until Aug 5 the company said The deal is expected to close in the fourth quarter of 2018 Morgan Stanley Co LLC NYSE MS RBC Capital Markets and Macquarie Capital are Siris s financial advisers while Sidley Austin LLP is its corporate counsel and Kirkland Ellis LLP its financing counsel BofA Merrill Lynch and JP Morgan are serving as financial advisers to Web com and Cooley LLP is its legal counsel |
MS | Global markets are flashing a new ominous signal that investors are bracing for the worst | An increasing number of experts across Wall Street are warning that the ongoing market and economic cycles are entering their final stages One statistic compiled by Morgan Stanley NYSE MS suggests investors are already getting more risk averse which could usher in the end of the cycle even more quickly than previously thought As the threatens to divide the world a unified front is forming in global markets It s just not the type any risk seeking investor wants to see A gauge that monitors the between asset classes and geographic regions has spiked to its highest level since 2016 This implies that financial assets around the world are trading more in lockstep than at any other point in recent memory Perhaps more important for those seeking market signals it also means investors are shifting into risk off mode one that could be setting in for the long term And it s a definite warning signal for the risk hungry traders still scouring the landscape for yield Tim Emmott the executive director at Olivetree Financial takes it a step further by suggesting that cautious investors are bracing for the possibility of a The fact that this index is trending higher currently could well be the true signal for market players to realize that current multi asset moves toward risk aversion may be more than short term he wrote in a note The move in correlation here may be the canary in the coalmine for the medium term trajectory of real systemic risk to markets To fully appreciate what s at stake as global cross asset correlations surge consider that by exacerbating volatility This is particularly true for the models used by risk parity and balanced mutual funds which are designed to de lever when price swings spike according to Nikolaos Panigirtzoglou a global market strategist at As if that s not worrisome enough Binky Chadha the chief global strategist at recently pointed out that lockstep moves in major asset classes could portend contagion driven weakness The tight in the moves across the major asset classes oil up dollar down equities and bond yields up suggests a pullback in one for idiosyncratic reasons would likely spill over to the others he wrote in a client note earlier this year To Keith Parker the chief US equity strategist at rising cross asset correlations can be a sign that an economic expansion has entered its final stage He that he was closely watching the relationship between US stocks and bonds for recessionary signals In the end if today s expansion is trudging through its final innings it would seem to be a prudent decision for investors to start leaning toward risk off positions But is it really time to pack it in and flee to safety Any investor you ask is likely to suggest a different timeline for derisking Some might urge you to seek shelter immediately while others would be incredulous at the prospect of missing another leg of strength Regardless of where on the spectrum you fall you d be best advised to keep an eye on all these disparate elements The signal you re looking for is probably there somewhere and half the battle is knowing where to look |
MS | China Stocks Poised for Bear Market on Trade and Growth Jitters | Bloomberg China s benchmark Shanghai Composite Index is headed for bear market territory as concern over a slowing economy and trade tension with the U S shows no sign of abating
The Shanghai gauge fell 1 2 percent as of 9 34 a m local time Friday taking its loss since its January peak to almost 20 percent The index is at its lowest point since June 2016 and is one of the world s worst performers this year The descent toward a bear market has coincided with Beijing stepping up its deleveraging campaign Losses accelerated this month after May economic data trailed economists forecasts and as the trade dispute with Washington became increasingly heated
Some 1 6 trillion has been wiped from Chinese stocks since Jan 24 Morgan Stanley NYSE MS expects the CSI 300 Index which is down 19 percent since a January peak to enter a bear market that could last a year weighed by slowing momentum in China s economy and liquidity tightness If U S President Donald Trump goes through with a threat to put tariffs on another 200 billion of Chinese imports it could cut as much as half a percentage point from the nation s economic growth according to economists
Chinese policy makers have tried to soothe investor concern People s Bank of China Governor Yi Gang pledged on June 19 to use monetary policy comprehensively to keep liquidity appropriate and stable a view echoed in a subsequent cabinet meeting chaired by Premier Li Keqiang
At 2 847 points the Shanghai gauge is trading below levels that previously were seen to trigger state support The generally accepted definition of a bear market is a correction of 20 percent or more from the most recent peak |
JPM | Why IBM s Blockchain Isn t a Real Blockchain | Stuart Popejoy has 15 years experience in building trading systems and exchange backbones for the financial industry Prior to o founding Kadena in 2016 with Will Martino Stuart worked at JPMorgan Chase NYSE JPM in the new products division where he led and developed JPMorgan s main blockchain product Juno Stuart also wrote the algorithmic trading scripts for JPMorgan which informed his creation of Kadena s simple purpose built smart contract language Pact
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph |
JPM | Grim Earnings Forecasts Are Getting Worse by the Week | Bloomberg On Wall Street it s not exactly a news bulletin when companies cut profit forecasts two weeks before earnings season Easier to clear a lowered bar when results are released Right now though something more worrisome may be at work
More than 80 of S P 500 companies that have revised their profit estimates one way or the other in the lead up to reporting have slashed them data compiled by Bloomberg show Analysts are in on the action too reducing company projections at the fastest pace in near three years
One of the things that investors seem to be overlooking is how poor the earnings environment is said David Spika president of GuideStone Capital Management We re so focused on monetary policy and this mythical China deal that we just don t seem to be paying attention to earnings which are really what should be driving stock prices
In and of itself a flurry of downward revisions is nothing unusual at this time of year Companies are always more likely to disclose bad news and a few may be interested in lowering estimates before they report But the extent of the negativity this time around is notable and is another burden for investors struggling to formulate views on the economy global trade and the Federal Reserve
Of S P 500 companies that have revised their profit outlook over the past couple months 82 cut data compiled by Bloomberg show The proportion bears an eerie similarity to the third quarter of last year right before stocks plunged nearly 20 Before that you have to go back to 2015 to find more pessimism
Wall Street analysts have been forcefully downgrading estimates too In June they cut forecasts on 116 more stocks than they upgraded them for the worst reading since September 2017 according to Sundial Capital Research Typically analysts firm up their forecasts during the last month of a quarter and this time they re worried said Sundial s Jason Goepfert
There is some sagging in earnings said John Lekas chief executive officer and senior portfolio manager at Leader Capital I m not disputing that earnings across the board are priced to perfection You know you re going to get some disappointments in there
The earnings headwinds have been plenty from a relatively stronger dollar in the second quarter to lower oil prices higher input costs and uncertainty from the ongoing U S China trade war While a recent truce between the two world superpowers was taken as a positive the benefit is likely short lived since company executives are still in the dark on what comes next
Companies are still wait and see Samantha Azzarello global market strategist for JPMorgan NYSE JPM ETFs said in an interview at Bloomberg s New York headquarters The earnings outlook probably has downside because we didn t get this resolution of any type
Citigroup Inc NYSE C is set to kick off the official second quarter earnings season in earnest on July 15 with other large banks following shortly thereafter After avoiding a profit decline in the first quarter companies in the S P 500 will again be tested Estimates call for a 2 5 drop in earnings for the three month period ended in June Should the negative reading hold it would mark the first profit contraction in three years
On Wall Street it s assumed that companies lower their forecasts only to make beating them easier With that in mind earnings per share will likely come in positive for the second quarter according to Jonathan Golub the chief U S equity strategist at Credit Suisse SIX CSGN Strip out the positive effect from share buybacks though and an earnings contraction is still in the cards
Still it s not like anyone is calling for Armageddon A modest decline in the second quarter is expected to be followed by a modest rebound in the third and a 7 gain in the fourth By the middle of 2020 companies should start seeing double digit profit growth once again if the forecasts hold true But with geopolitical tensions lingering and a question mark surrounding global growth those estimates are feeble
It s a high stakes season
Even as a macro strategist I will be watching individual earnings reports said Frances Donald chief economist for Manulife Investment Management One of the big reasons is most economists and the Federal Reserve are going to be watching for signs that the uncertainty created by trade tensions have already weighed on the economy Not just the tariffs themselves but the lack of visibility into future trade relationships |
MS | Critical Levels Coming Up For AUD And NZD | In the backdrop of today s call by Morgan Stanley that the AUD USD will fall to 67c in 2018 and then to 65c in 2019 it s interesting to analyze where the price is now leading into 2018 The Australian dollar has fallen from the great height of 81c reached in September to be at now around 75c per US dollar The fall was generally expected as the macroeconomic risks coupled with declining commodity prices produced large headwinds for Australia s economic outlook
Although its stock market is at near highs many economists and analysts are asking foreboding questions about the economy including the RBA which may be surreptitiously disappointed by the lack of wage growth despite a reasonably healthy declining unemployment rate and has not given any indication of interest rates changes in the near future With the USD rising in value while the Fed proceeds with its monetary policy tightening program I m inclined to agree with Morgan Stanley NYSE MS
The approaching AUD level somewhere around 0 745 to 0 5 should determine the future for the Australian dollar for the coming months If it were to break below the indicated support the next level of support would be somewhere in the low 70s Should it manage to bounce up from it we ll have to wait a little longer to see the price in the 60s sometime mid 2018 It seems the central bank of New Zealand is far closer to raising rates than their counterparts in Australia
The same analysis is true for the New Zealand dollar which has dropped even more dramatically from a 0 75 handle to 0 68 The New Zealand dollar and the Australian dollar are highly correlated though I would vouch to say that as the NZ economy is in far better shape than the Australian one the worst is over for the Kiwi The NZ dollar might continue to fall to the indicated descending trend line though I believe it may consolidate around the current area for a while Should it fall further it would need to break this support in which case it is likely to settle somewhere between 0 62 and 0 65 in 2018 2019 And if this eventuates the aussie and kiwi may find themselves at parity |
MS | Daily Market Analysis 28 11 2017 | Market Summary
Asian markets got off to a weak start Monday dropping broadly in response to renewed selling in China and with South Korea and Taiwan being hit by downgrades to their largest index components by Morgan Stanley NYSE MS The Shanghai Composite on mainland China dropped more than 2 intra day before recovering somewhat and ending the day 0 9 lower Chinese investors remain very concerned over regulatory reform in China as well as signs of a slowdown in the Chinese economy The move lower took the Shanghai Composite below an important trendline and there s now a possibility of a greater correction that would see the mainland Chinese benchmark index shedding another 5 before finding support Both South Korea and Taiwan saw their benchmark indices finish solidly lower after Morgan Stanley downgraded Samsung KS 005930 and Taiwan Semiconductor the largest components of each respective index Australia proved a beacon of hope ending the day modestly higher despite China being its largest trading partner
European markets spent the day swinging between gains and losses as investors continue to monitor the stalemate in German politics News from Julius Baer Gruppe said their CEO would be resigning suddenly sent banking shares tumbling late in the session pulling the broader market lower as well Weakness from the energy sector contributed to the final broad based losses as crude fell for the first time in four sessions The U K benchmark FTSE100 finished lower for a third consecutive session with losses from the mining sector pulling the index lower Investors in British mining companies are becoming increasingly concerned about developments in China where rising bond yields are raising borrowing costs The higher borrowing costs could lead to a slowdown in economic activity in China which would impact the miners as China is one of the largest consumers of raw materials
U S markets got off to a good start Monday on the back of strength from the retail sector as investors celebrated a strong Black Friday and what is forecast to be an equally strong Cyber Monday That strength wasn t enough to keep the broader market afloat however and major indices ended the day mixed with the Dow edging higher while the Nasdaq and S P500 edged lower Weakness from the energy sector contributed to the losses with the energy sector putting in the worst performance of the eleven S P sectors in response to crude falling for the first time in four sessions There was also an increased probability of a December U S interest rate hike as Robert Kaplan the Dallas Fed president said he would now support a quarter point hike in December even though he was previously uncertain over the need for a December rate hike
Today s Assets
Cryptocurrencies
Despite warnings of oversold conditions and bubbles from the mainstream financial media and bankers the cryptocurrency space continues climbing to new record highs session after session Early Monday saw Bitcoin nearly reaching the 10 000 level although it wasn t quite able to overtake that huge psychologically important resistance level just yet After dropping sharply off its early morning highs it resumed its climb and was above the 9 700 level by late Monday afternoon Most other major cryptocurrencies rallied along with Bitcoin rising by several percentage points and in some cases by 10 or even 20 percent It s uncertain how long the rally will last but if Bitcoin gets above the 10 000 level it s difficult to see it doing anything but continuing to climb right into 2018
EUR USD
After three strong days of gains that saw the pair rising to its highest level in two months we got a pullback on Monday The pair initially extended its rally overtaking the 1 1950 level but then sank back to the 1 1900 level that was topped last Friday After sinking slightly below the pair recovered trading back above the 1 1900 level and it looks as that level it will now provide support for the pair While we could get further gains we think that the 1 2000 level will be strong resistance which could give us a sideways market between the 1 1900 and 1 2000 levels in the coming weeks |
JPM | Does Climate Change Bug You Buy These 3 Low Carbon Funds | In the past few years investors divested at least 6 trillion of assets from fossil fuel funds Fossil free funds on the other hand bear minimal climate risk These fossil free funds invest in companies that reduce its carbon footprint by assessing its total carbon emissions derived from the company s operations One more thing that is assessed is whether a company s management is taking necessary actions to reduce carbon emissions and produce products that are less carbon intensive Companies with low carbon emission risk will be at an advantage to adapt to stricter carbon standards in the coming days Growing awareness about burning environmental issues and mitigation measures have made low carbon funds attractive to investors Further such funds not only cater to philanthropic and societal responsibilities but also provide spectacular returns This is why it makes sense to invest in low carbon mutual funds now Large Cap Growth Funds Have the Lowest Carbon FootprintCreated in the spring of 2017 by Morningstar the Low Carbon Designation for mutual funds seeks to identify funds which hold assets that are relatively greener and leave low carbon footprints on the planet Such funds are easily found among funds because funds in this category invest extensively in tech companies and refrain from investing in energy utilities and materials stocks Morningstar has found more than 100 low carbon mutual funds that provide higher than average returns in the United States alone Furthermore healthcare and technology stocks have the lowest carbon footprint These Fund Houses Invest the Least in Fossil Fuel StocksAccording to Fossil Free Funds and Morningstar the top three fund families American Funds 10 Vanguard 9 and Fidelity 7 in terms of assets under management have the lowest exposure not more than 10 to fossil fuel stocks The total number of Vanguard mutual funds and exchange traded funds that have no exposure at all to fossil fuels stocks stands at nine As of February 2019 the number of Five badge fossil free funds funds having no fossil fuel stocks for Fidelity was 49 Although American Funds have no fossil free funds it has one Carbon Underground 200 free fund 3 Best ChoicesWe have thus selected three low carbon mutual funds with a Zacks Mutual Fund Rank 2 Buy that are poised to gain from such factors Moreover these funds have encouraging three and five year 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 JPMorgan NYSE JPM Realty Income A seeks high total investment return through a combination of capital appreciation and current income URTAX invests the majority of its assets in equity securities of real estate investment trusts REITs URTAX may invest in both equity REITs and mortgage REITs The fund may also invest a maximum 15 of its assets in illiquid holdings The fund does not invest in any fossil fuel stocks and is a five badge fossil free fund This Zacks sector Real Estate 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 URTAXhas an annual expense ratio of 1 18 which is below the category average of 1 23 The fund has three and five year returns of 6 1 and 6 8 respectively American Funds New Economy A focuses on securities of those companies that are expected to benefit by exploiting new technologies or by providing products to meet demands of the changing global economy The fund is invested in only six fossil fuel stocks and holds two This Zacks sector Global Equity 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 ANEFXhas an annual expense ratio of 0 76 which is below the category average of 1 07 The fund has three and five year returns of 17 7 and 9 respectively Fidelity Blue Chip Growth seeks capital growth for the long run FBGRX invests the bulk of its assets in those blue chip companies that Fidelity Management Research Company FMR believes have above average growth prospects The fund invests both in U S and non U S companies The fund is invested in only six fossil fuel stocks and holds two fossil free badges This Zacks sector Large 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 FBGRX has an annual expense ratio of 0 72 which is below the category average of 1 07 The fund has three and five year returns of 20 9 and 12 9 respectively Want key mutual fund info delivered straight to your inbox Zacks free Fund Newsletter will brief you on top news and analysis as well as top performing mutual funds each week |
JPM | Is JPMorgan Dynamic Small Cap Growth A VSCOX A Strong Mutual Fund Pick Right Now | If you ve been stuck searching for Small Cap Growth funds consider JPMorgan NYSE JPM Dynamic Small Cap Growth A VSCOX as a possibility VSCOX holds a Zacks Mutual Fund Rank of 2 Buy which is based on nine forecasting factors like size cost and past performance
Objective
The world of Small Cap Growth funds is an area filled with options such as VSCOX These funds tend to create their portfolios around stocks that sport large growth opportunities and market capitalization of less than 2 billion The companies in these portfolios are usually on the smaller side and are in up and coming industries and markets
History of Fund Manager
VSCOX finds itself in the J P Morgan family based out of Boston MA Since JPMorgan Dynamic Small Cap Growth A made its debut in May of 1997 VSCOX has garnered more than 80 78 million in assets The fund is currently managed by a team of investment professionals
Performance
Investors naturally seek funds with strong performance This fund has delivered a 5 year annualized total return of 9 97 and is in the top third among its category peers If you re interested in shorter time frames do not dismiss looking at the fund s 3 year annualized total return of 23 91 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 Over the past three years VSCOX s standard deviation comes in at 16 29 compared to the category average of 11 43 The fund s standard deviation over the past 5 years is 18 52 compared to the category average of 11 24 This makes the fund more volatile than its peers over the past half decade
Risk Factors
Investors cannot discount the risks to this segment though as it is always important to remember the downside for any potential investment In VSCOX s case the fund lost 54 48 in the most recent bear market and underperformed its peer group by 1 51 This makes the fund a possibly worse choice than its peers during a sliding market environment
Investors should note that the fund has a 5 year beta of 1 3 so it is likely going to be more volatile than the market at large 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 The fund has produced a negative alpha over the past 5 years of 2 86 which shows that managers in this portfolio find it difficult to pick securities that generate better than benchmark returns
Holdings
Exploring 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 largely on equities that are traded in the United States
The mutual fund currently has 97 67 of its holdings in stocks with an average market capitalization of 3 49 billion The fund has the heaviest exposure to the following market sectors Industrial Cyclical Technology Finance Other Health Turnover is 89 which means on average the fund makes more trades in a given year than the category average Expenses
For investors taking a closer look at cost related metrics is key since costs are increasingly important for mutual fund investing Competition is heating up in this space and a lower cost product will likely outperform its otherwise identical counterpart all things being equal In terms of fees VSCOX is a load fund It has an expense ratio of 1 24 compared to the category average of 1 25 From a cost perspective VSCOX is actually cheaper than its peers
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 Dynamic Small Cap Growth A VSCOX has a high Zacks Mutual Fund rank strong performance worse downside risk and lower fees compared to its peers
Your research on the Small Cap Growth 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 |
MS | Escalating tariff war hits Europe s autos stocks and multinationals | By Helen Reid LONDON Reuters European shares extended a sell off on Tuesday as a trade war between the United States and China escalated with autos mining and technology stocks taking the brunt Europe s main equity benchmark the STOXX 600 fell for the third straight session down 0 7 percent after U S President Donald Trump threatened to impose a 10 percent tariff on 200 billion of Chinese goods following Beijing s decision to raise tariffs on 50 billion in U S goods For now we are talking about the U S and China not Europe directly but certainly overall it s a de risking because global trade integrates everything said Britta Weidenbach head of European equities at DWS The STOXX 600 STOXX recovered slightly after German Chancellor Angela Merkel and French President Emmanuel Macron agreed on a euro zone budget which traders said was a helpful show of unity Italian banks FTIT8300 up 1 percent were further supported after the European Central Bank s top supervisor said the central bank could adopt a softer approach in pressing banks to reduce bad loans confirming an earlier Reuters report Germany s DAX GDAXI home to some of the carmakers that Trump has explicitly targeted in his tariffs rhetoric fell the most down 1 2 percent BMW DE BMWG Daimler DE DAIGn and Volkswagen DE VOWG p dropped 0 8 to 2 4 percent The STOXX 600 autos sector SXAP hit a seven month low The automotive sector is one of the main sectors that could potentially be impacted by import tariffs said Weidenbach adding that the impact on different German carmakers may depend on how much of their production is U S based Europe s companies in general are more exposed to the global economy than their U S counterparts making them more vulnerable to countries imposing higher tariffs on goods Some 18 percent of European company revenues comes from North America and 9 percent from China Thirty two percent is derived from emerging markets U S companies get just 4 percent of their revenues from China and 10 percent from Europe according to Morgan Stanley NYSE MS Multinational sportswear company Adidas DE ADSGn fell 2 5 percent as the fear of an end to unfettered access to global markets also bruised luxury stocks Kering PA PRTP Hermes PA HRMS LVMH PA LVMH and Moncler MI MONC Industrial conglomerate Siemens DE SIEGn was one of the biggest drags on the STOXX along with French planemaker Airbus PA AIR Mining shares SXPP tumbled 2 4 percent tracking a decline in London copper prices amid the escalating trade tensions Highly valued tech stocks were also selling off as investors shed the sectors that have led the strong equity rally The tech sector SX8P fell 1 4 percent having hit a 17 year high as recently as Friday
The most impressive falls were in the UK retail and housing sectors Debenhams L DEB shares plummeted 10 percent after the British department store warned on profits for the third time in six months blaming its poor trading on increased competitor discounting and weakness in its key markets |
MS | Italian prosecutor appeals against Morgan Stanley case ruling | ROME Reuters Italian prosecutors said on Tuesday they would appeal against a decision by an administrative court not to hear a case over derivatives that targeted Morgan Stanley N MS The case centers on Morgan Stanley derivative transactions made by the Italian state between 1995 and 2005 and terminated in December 2011 and January 2012 The prosecution had asked for 2 7 billion euros 3 1 billion in damages from the U S investment bank but in a ruling published last week the Court of Accounts said it did not have the jurisdiction to take the case
Morgan Stanley has denied any wrongdoing and its lawyers have argued that a civil court should have jurisdiction over proceedings |
MS | Stocks May Slide 5 by End of Summer Stifel s Bannister Says | Bloomberg With all the headlines about peaking growth and a potential trade war U S stocks haven t given in But don t let your guard down says Barry Bannister chief equity strategist at Stifel Nicolaus
The S P 500 will slide to 2 635 in the third quarter as analysts slash earnings estimates on trade tension escalation a stronger dollar and speculation of faster monetary tightening Bannister wrote in a note to clients released late Tuesday That s the level that last served as support in early May and represents roughly a 5 percent decline from the last close
While the strategist expects the index to rebound in the final months to finish the year at 2 800 he reiterates his view that the nine year bull market is at a very late stage With valuations looking bubbly and bond yields going higher the impetus to buy stocks will dissipate and a bear market is likely less than two years away he said
A decade of buy the dip is running out of gas Bannister said Psychological conditioning of investors implies a rapid S P 500 decline when it arrives
Bannister is the latest Wall Street strategist sounding alarms on the market Earlier this week Morgan Stanley NYSE MS urged investors to go defensive while Citigroup NYSE C flagged a potential bubble in growth stocks
Despite these caveats stocks have barely budged since the February rout Poised for its third monthly gain the S P 50O is up more than 3 percent this year |
MS | Here s Why India ETFs Are Still Worth Buying | It s been a great year for India ETFs The minimum returns offered by any India ETF hovered around 30 this year as of Oct 31 2017 against 14 1 returns offered by the S P 500 and 31 6 delivered by iShares MSCI Emerging Markets ETF NYSE EEM Investors might be surprised to know that the highest returns were even more than 48 read
Decent GDP data defying demonetization the victory of the pro growth prime minister s party in some state elections implementation of a goods and services tax or GST from July and still solid inflows from retail investors are driving Indian stocks
Columbia India Consumer ETF JK INCO Columbia India Infrastructure Index Fund and iShares MSCI India Small Cap ETF LON SMIN have high P E ratios of 34 15x 25 18x and 23 29x respectively No doubt overvaluation concerns may start bothering investors read
Look At Still Low P B
Ridham Desai Head India Equity Research and Managing Director Morgan Stanley NYSE MS prefers to look at P B ratio than P E because the latter has a According to him India investing has experienced a P B ratio in the range of over the last 25 years and the present P B ratio is 3x This implies room to run in India equities and ETFs
Bullish Analysts Comments
Morgan Stanley that the India government s emphasis on digitalization may result in a threefold rise in India s gross domestic product GDP and equity market capitalization in the coming 10 years Almost 90 of the market gains would be realized in the coming five years itself as per Morgan Stanley
Increasing acceptance of e Commerce and dynamism in the financial sector rise of middle income group and higher consumption growth are likely to be instrumental in future growth Over the next decade domestic led sectors like will take an upper hand while foreign facing sectors like software services and pharmaceuticals may slow down as India s growth will likely be faster than the global economy as per Ridham Desai quoted on BloombergQuint
Fiscal Second Quarter to Bounce Back
Plus a indicated that India s fiscal second quarter growth may offer some positive surprise could be more than 7 following three year low growth registered in the first quarter of fiscal 2018 Factors including manufacturing indices passenger and freight traffic and corporate earnings during the quarter should contribute to stronger growth
All these make it important to look at these India ETFs and stocks
ETF Picks
EG Shares India Consumer JK INCO
As the consumer segment is expected to grow meaningfully this consumer ETF is a must buy The fund has a Zacks ETF Rank 2 Buy
VanEck Vectors India Small Cap Index ETF
Since domestically focused stocks will get precedence investors should bet on Zacks Rank 2 fund SCIF
iShares India 50 ETF JK INDY
Banks take about 26 2 of the portfolio making it a good choice for India investing at least if we go by Morgan Stanley s preference for financial stocks
Stock Picks
MakeMyTrip Limited NASDAQ MMYT
It is an online travel service company which offers travel products and solutions in India and the United States It has Zacks Rank 3 Hold and belongs Zacks Industry Rank in the top 28
Yatra Online Inc NASDAQ YTRA
This is a provider of online travel agency services The stock has a Zacks Rank 3 Its Zacks Industry Rank is in the top 36
Azure Power Global Ltd NYSE AZRE
The Zacks Rank 3 Azure Power Global Limited is a producer and developer of solar energy However the Zacks Industry Rank is in the bottom 31
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MS | 3 Reasons To Invest In MLP ETFs | Master limited partnerships or MLPs have been under pressure this year Alerian MLP ETF F AMLP is down 17 this year as of Nov 10 2017 But things may take a turn for the better in the near term courtesy of an oil price recovery and a high dividend yield
Let s delve a little deeper into what could propel the space this year
Jump in Oil Prices
At the end of October Brent since July 2015 and U S crude reached a level not seen since February on a likely extension of the OPEC output cut Markets are now hoping that output reduction could be protracted beyond March As a result United States Brent Oil AX BNO and United States Oil NYSE USO gained about 14 9 and 10 1 in the last one month as of Nov 10 2017 respectively read
As soon as oil price staged a rally energy MLPs started to stabilize Several MLP ETFs were in the green in the last one week and one month frame read
Lure of Dividends
MLPs are known for their high yielding nature as these do not pay taxes at the entity level and are thus able to pay out most of their income more than 90 in the form of dividends like the REIT firms While most traditional income asset classes produced miniscule yields MLPs lured investors with their higher payouts
Yes MLPs underperform in a rising rate environment as these have to depend on the debt market to finance their operations or fresh projects Naturally higher rates amid the Fed tightening cycle would cut back their profitability But investors should note that many MLPs use a fixed rate debt for their borrowings
Moreover treasury yields spiked lately on Fed rate hike speculation and chances of tax cuts in the medium term As of Nov 10 2017 the yield on 10 year U S Treasury notes was 2 40 Since most of the MLPs offer treasury beating yields investors can tap the segment Even if they end up witnessing capital losses a higher yield would protect their portfolio to a large extent read
Strong Industry Rank
The dual benefits of an oil price recovery and a high yielding nature amid Fed policy tightening might favor MLP ETF investing at the current level Investors should note that the Zacks Industry Rank of the energy and pipeline MLPs is in
ETF Choices
Below we highlight a few MLP ETFs that were in the green in the last five trading sessions and have solid dividend yields as of Nov 10
Morgan Stanley NYSE MS Cushing MLP High Income Index ETN Yields 8 84 annually
iPath S P MLP ETN Yields 6 87 annually
Global X MLP Energy Infrastructure ETF Yields 6 06 annually
UBS ETRACS Alerian Natural Gas MLP ETN DE MLPG Yields 6 01 annually
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MS | Opening Bell Commodities Lead Stocks Lower Euro Yen Pressure USD | by Pinchas Cohen
Key Events
Ever since US tax reform hit a bumpy patch in Congress risk off has been dominating markets as US investors reconsider whether the recent string of market records was actually justified
This morning global equities extended the decline as fundamentals continue fueling the risk off sentiment Yesterday the IEA cut their forecast for oil demand The agency performed an about face by saying the global market will likely remain oversupplied the opposite of their position over past months As well there appears to be a less acknowledged risk to global oil markets
Crude oil plunged yesterday falling 1 71 or 3 the biggest percentage decline since the 3 25 percent slide but only a 1 60 loss on September 8 It was the biggest fall in absolute dollars since the 2 31 tumble of July 5
Global Financial Affairs
An additional trigger for oil s plummet was yesterday s API Weekly Crude Oil Inventories report It showed an increase of 6 51M barrels versus an expected drawdown of 2 2M On signs of a commodities glut mining oil and metal stocks all fell in Japanese trade They were the biggest losers this morning on the TOPIX which retreated for a fifth day
At the same time the Nikkei 225 saw a sixth day of losses as it retreated from its 25 year high It was the longest losing streak in over a year for both Japanese indices which yesterday led the S P 500 to its third day of losses in four days
In the US session yesterday defensive sectors once again far outperformed growth stocks with Utilities taking the lead gaining 1 25 percent followed by Consumer Staples up 0 35 percent The two sectors with the biggest losses were Energy down 1 62 percent and Materials off 0 91 percent
Though the Bloomberg Commodity Index continued its worst run since June it s still considered to only be a correction as it returns toward a rising trend line Various ETF benchmarks including BlackRock Resources Commodities Strategy Trust NYSE BCX and United States Commodity Fund NYSE USCI reveal a similar dynamic
The US Commodity ETF chart above for example demonstrates that the decline is a correction toward a rising trendline suggesting this commodity scare will be short lived
The Stoxx Europe 600 Index followed Japan s lead this morning and fell for a seventh day The European index is set to record its most sustained losses in a year dropping closer to a neckline for a potential massive double top once the 366 level is breached The implied target would be 334 or another 10 percent slide
Investor focus today will be redirected to US consumer prices and retail sales as they look for signals on the strength of the US economy after the flattest Treasury yield curve in a decade stirred institutions to reconsider their outlook on growth Some are already taking a stand
Morgan Stanley advised clients to buckle down and keep portfolios overweight on stock allocation Granting that valuations are historically high the major investment bank believes equities can still get richer as the firm s cycle indicators all continue to point to expansion Perhaps this cross market outlook is the effect to the cause stated above with regard to commodities the fundamental culprit of the current risk off as opposed to potential tax cuts whose benefit to markets has been a hotly debated issue
Robust growth in Germany and Italy both reports released yesterday knocked the euro out of its coma sending the common currency higher by 0 42 percent a surge that started yesterday when it jumped 1 07 percent
The sudden turnaround spurred bulls to push through two bearish lines in the sand a head shoulders neckline that connects the two prior lows which is expected to suppress the price below and a downtrend line since September 8 the head of the H S While an uptrend can t be called until two peaks and troughs post at higher prices the failure of the H S top a classically reliable pattern makes further advances more likely Still beware of a bear trap With just 1 percent penetration that s also a possibility
The dollar is seeing pressure from the yen as well In addition to its safe haven status during periods of risk off as Japan s economy has grown for a seventh straight quarter the currency has received a boost from the country s longest expansion since 2001
Up Ahead
Bank of England officials address the bank s future on Thursday while European Central Bank chief Mario Draghi speaks on Friday
A string of Fed member appearances may further illuminate the FOMC s commitment to a December hike
U S CPI and retail sales data will be released Wednesday morning
Market Moves
Stocks
The TOPIX closed 2 percent lower in Tokyo to seal its longest streak of losses since September 2016 The Nikkei 225 was down 1 6 percent
Australia s S P ASX 200 Index declined 0 6 percent and the KOSPI in Seoul fell 0 3 percent
Hong Kong s Hang Seng Index slipped 1 percent the Shanghai Composite Index was down 0 8 percent
The Stoxx Europe 600 Index dipped 0 5 percent as of 8 18 a m London time hitting the lowest in eight weeks with its seventh consecutive decline
The MSCI All Country World Equity Index declined 0 2 percent reaching its lowest point in almost three weeks on its fifth consecutive decline
The U K s FTSE 100 fell 0 3 percent hitting the lowest in almost seven weeks with its fifth consecutive decline
Germany s DAX dipped 0 6 percent reaching the lowest in five weeks on its fifth consecutive decline
The MSCI Emerging Markets Index dipped 0 5 percent hitting the lowest in almost three weeks with its fifth consecutive decline its largest contraction in almost three weeks
S P 500 Futures sank 0 4 percent to the lowest in almost three weeks the biggest dip in 10 weeks
Currencies
The Dollar Index fell 0 38 percent extending yesterday s decline to a full percent to the lowest in almost four weeks
The euro climbed 0 2 percent to 1 1823 reaching the strongest in almost four weeks on its sixth consecutive advance
The British pound gained 0 1 percent to 1 3176
Bonds
The yield on 10 year Treasuries fell three basis points to 2 34 percent The 10 year yield s failure to rise above the 2 year yield which suggests a no growth outlook has spooked institutional investors
Germany s 10 year yield fell two basis points to 0 38 percent the biggest fall in more than a week
Britain s 10 year yield declined three basis points to 1 29 percent the largest drop in almost two weeks
Commodities
Gold gained 0 2 percent to 1 283 31 an ounce
West Texas Intermediate crude fell 1 percent to 55 14 a barrel the lowest in almost two weeks |
MS | SendGrid Raises Hefty 131 Million After Ambitious IPO | SendGrid NYSE SEND a cloud based customer communication platform with lofty market ambitions brought in an impressive 131 million from its IPO on Wednesday The company famed primarily for its email distribution services enjoyed a surge in share prices of nearly 16 with stocks ending at the day at 18 per share
After selling some 8 2 million shares most of them at 16 above its initially expected 13 50 15 50 range SendGrid NASDAQ SEND may yet inspire more investors to get on board while its prices are hot According to made with the SEC the company saw a serious increase of revenue in the past few years After pulling in 42 3 million in 2014 SendGrid rose to rake in 58 5 million the next year and totaled almost 80 million in revenue in 2016 Before it can lure in more investors however it will need to translate those growing revenue figures into positive profits
SendGrid 3 9 million in 2016 for instance a factor likely to discourage investors looking for immediate returns on their investments The company has shown progress cutting said losses however given it lost 5 9 million in 2015 For SendGrid to remain viable well into the future it will need to continue chipping away at those loss figures while keeping its revenue figures growing steadily as they re perhaps the last thing keeping its head above its water
After last year s SendGrid s beating of expectations could come as welcome relief that the market is alive and well heading into 2018 Tech IPOs like SendGrid s which possesses a unique ability to woe in business savvy investors as well as tech gurus could very well become the new norm if the email distribution service shows it s capable of generating serious returns for its backers
SendGrid is no stranger to accumulating financial backing either The company enjoyed having Morgan Stanley Co NYSE MS as well as J P Morgan Securities as its book running managers and accumulated more than 80 million in venture funding in 2009 With the money pouring in like that and with the new mountain of capital gained from its IPO SendGrid could foster in new business changes to help stem its losses while boosting its already impressive revenue figures
Relying on market changes for success The Denver based startup had some impressive non financial figures to flout in its IPO too SendGrid is responsible for sending some 36 billion emails a month the company claims which could wow investors looking for companies with an established footprint in their fields While SendGrid faces competition such as that from Amazon s SparkPost and Hongkong storage s mini storage its existing customer base is growing given its steadily rising revenue figures these past few years
SendGrid s key to remaining relevant in the market may just be to pump as much capital as it can into retaining and boosting its existing consumer base then in order to keep its revenue figures growing until such a time as it can iron out whatever kinks are causing it to post losses With a market cap of some 725 million assuming its prices hold at around their 18 high mark it will certainly find itself well funded and capable of making the changes needed to thrive in the marketplace for years to come
As email marketing continues to grow alongside of the rapidly expanding IoT and more companies embrace business models that see them sending out newsletters rewards programs and purchase confirmation emails in greater numbers businesses like SendGrid stand to benefit Now that the company has overcome the poor press that dogged it a few years ago too and remade its public image it could stand to broaden its consumer base among tech gurus who previously shunned it
SendGrid s future is anything but certain but then again no company s future in the marketplace is As long as the company keeps showing positive revenue growth and continues to cut back on its current losses it can rely on the continued business of its existing customer base and expect future growth as email marketing and other digital trends increase demand for its services It s not easy to rebrand your company after a PR scandal but SendGrid s determination to redefine itself as an ethical company capable of tackling the demands of a 21st century market could very well see it rise to the top of the market in the coming years |
MS | Japan s central bank dials down inflation view complicates stimulus exit | By Leika Kihara and Stanley White TOKYO Reuters The Bank of Japan on Friday downgraded its view on inflation in a fresh blow to its long held 2 percent price goal giving the central bank barely any room to maneuver as it tries to map a path to roll back its crisis era stimulus As widely expected the BOJ maintained its ultra loose monetary policy keeping its short term interest rate target at minus 0 1 percent and a pledge to guide 10 year government bond yields around zero percent The move contrasts with the European Central Bank s decision to end its asset purchase program this year and the U S Federal Reserve s steady rate increases which signaled a break from policies deployed to battle the 2007 2009 financial crisis Consumer price growth is in a range of 0 5 to 1 percent the BOJ said in a statement accompanying the decision That was a slightly bleaker view than in the previous meeting in April when the bank said inflation was moving around 1 percent BOJ Governor Haruhiko Kuroda conceded that price growth remained somewhat weak despite a solid economic recovery But he blamed it mostly on temporary factors like past yen rises that pushed down prices of durable goods made mostly by imported parts More companies particularly in the service industry are passing on rising costs to consumers Companies price setting behavior appears to be changing The economy is sustaining momentum to achieve the BOJ s 2 percent inflation target Kuroda told a news conference after the policy meeting The BOJ stuck to its view the economy was expanding moderately unfazed by a first quarter contraction that many analysts blame on temporary factors like bad weather But it also maintained its cautious assessment on prospects for hitting its elusive 2 percent inflation target saying that inflation expectations were moving sideways The central bank said it will continue buy bonds so that the balance of its holdings increases at an annual pace of 80 trillion yen 722 67 billion The delay in pulling out of crisis era stimulus would leave the BOJ with a lack of ammunition to fight another economic downturn even as its U S and European peers start restocking their tool kit It is almost certain the BOJ will cut its inflation forecasts at its next meeting in July when it conducts a quarterly review of its projections said Hiroshi Miyazaki senior economist at Mitsubishi UFJ Morgan Stanley NYSE MS Securities The BOJ is already stealth tapering and it wants to sound out markets for an exit but it may have to wait until inflation gets above at least 1 percent The central bank has been slowing its bond buying to around half the pace it commits to purchase annually arguing that it can keep long term rates around its yield target with less purchases due to its dominance in the bond market In a sign of concern over feeble price growth BOJ board member Goushi Kataoka a consistent sole dissenter to keeping policy steady said the bank should ramp up stimulus if it offers a bleaker view on inflation expectations in the future TRADE CLOUDS OUTLOOK Japan s economy shrank an annualized 0 6 percent in the first quarter though many analysts expect growth to bounce back on solid exports and capital expenditure Before the latest contraction the economy benefited from a global exports boom that continues to underpin a synchronized uptick in world growth Core consumer prices rose 0 7 percent in April from a year earlier slowing for the second straight month casting doubt on the BOJ s view a solid recovery will prompt firms to raise wages and help accelerate inflation to its target Given weak inflation the central bank may look more closely into structural factors that may be holding back price growth at its July meeting according to sources familiar with its thinking No matter how long the BOJ continues its current easing it won t be able to achieve 2 percent inflation target for the foreseeable future said Izuru Kato chief economist at Totan Research The Fed and ECB are moving flexibly to rectify excessive monetary stimulus as their economies expand but the BOJ would lack such flexibility in guiding policy as long as it persists in achieving the 2 percent inflation target Escalating trade frictions also cloud the outlook as U S President Donald Trump threatens to impose tariffs on auto imports a move that could deal a body blow to Japan s export reliant economy The International Monetary Fund warned on Thursday that Trump s new import tariffs threaten to undermine the global trading system prompt retaliation by other countries and damage the U S economy |
MS | Italy court rules it cannot hear Morgan Stanley derivatives case | By Domenico Lusi ROME Reuters An Italian administrative court has ruled that it cannot hear a case over derivatives brought against Morgan Stanley N MS that included a request for 2 7 billion euros 3 1 billion in damages from the U S investment bank The ruling by the Court of Accounts published on Friday was made on April 19 A spokesman for Morgan Stanley declined to comment This court does not have jurisdiction reads an excerpt from the ruling obtained by Reuters The administrative court can appeal The state now has three months to bring the matter before a new tribunal if it so chooses Morgan Stanley had denied any wrongdoing and its lawyers had argued that a civil court should have had jurisdiction The case centers on Morgan Stanley derivative transactions made by the Italian state between 1995 and 2005 and terminated in December 2011 and January 2012 The interest rate derivatives were meant as a form of insurance for the Italian government one of the most heavily indebted in Europe in the event that market rates rose Instead after the 2008 2009 global financial crisis interest rates plunged and the state incurred large losses on its derivative positions as it was able to borrow more cheaply in the bond markets State prosecutors had argued that some contracts negotiated with Morgan Stanley were speculative in nature and contained termination clauses that were overly advantageous to the bank It cannot be held that the derivatives contracts being contested constitute a violation of law reads an excerpt from the 80 page document that explains the ruling Morgan Stanley has repeatedly said the claim is groundless and in August 2016 the bank rejected a settlement proposal from an Italian prosecutor for a one off payment a securities filing showed The case also included claims against former senior officials at Italy s Treasury for a total of 1 18 billion euros All the defendants have denied any wrongdoing
1 0 8624 euros |
MS | Japan s exports accelerate in May surplus with U S lowest since 2013 | By Stanley White TOKYO Reuters Japan s exports rose in May at the fastest rate in four months thanks to increased shipments of cars car parts and semiconductor equipment a sign that global demand is gaining strength Exports rose 8 1 percent in May from the same period a year ago more than the median estimate for a 7 5 percent annual increase expected by economists in a Reuters poll In April exports grew an annual 7 8 percent Exports are likely to continue to grow thanks to increased demand for manufacturing equipment cars and car parts but Japan s trade surplus with the United States makes it a potential target for U S President Donald Trump s protectionist policies Japan s exports to the United States rose 5 8 percent year on year in May faster than a 4 3 percent year on year in April due to higher shipments of car parts Imports from the United States rose 19 9 percent year on year as imports of U S aircraft and coal grew As a result Japan s trade surplus with the United States fell 17 3 percent year on year to 340 7 billion yen 3 08 billion the lowest such surplus since January 2013 The decline in the trade surplus with the United States is unlikely to exempt Japan from White House criticism as President Donald Trump s administration raises tariffs to lower the U S trade deficit and combat what it says are unfair trade policies Trump is pushing ahead with hefty tariffs on 50 billion of Chinese imports and China s Commerce Ministry has said it would respond with tariffs of the same scale and strength sparking fears of a full blown trade war Trump has imposed tariffs on steel and aluminum imports which affect Japanese companies and has also criticized Japan for its low level of imports of American vehicles Exports will continue to recover but I am a little worried about the pace of growth said Shuji Tonouchi senior market economist at Mitsubishi UFJ Morgan Stanley NYSE MS Securities Friction between the United States and China on trade policy could impact Japan This is a risk factor for Japan and for global trade In terms of volume which strips out the impact of currency moves Japan s exports rose an annual 4 2 percent in May versus a 4 6 percent annual increase in the previous month Japan s overall imports rose 14 0 percent in the year to May versus the median estimate for an 8 2 percent increase due to the rising price of oil The trade balance was a deficit of 578 3 billion yen 5 23 billion versus the median estimate for a 235 0 billion yen deficit |
JPM | Go Short U S 10 Year Notes Say Chart Gurus at RBC JPMorgan | Bloomberg The relentless slide in Treasury 10 year yields may be about to end and it could be time to go short according to technical analysts at RBC Capital Markets and JPMorgan Chase Co NYSE JPM
U S yields will probably rise in the short term though they are probably still in a longer term downtrend RBC Capital s Technical Strategist George Davis wrote in a note Thursday
The one common theme that stands out for 10 year yields is valuations with overbought readings and study divergences presenting the scope for short term corrections to materialize Davis wrote We view such corrections as a buying opportunity in bonds based on established downtrends for yields
Davis s analysis largely echoes that of JPMorgan Technical Analyst Jason Hunter who sees the most overbought weekly momentum and sentiment conditions in years and the developing price pattern continues to favor a short term mean reversion to higher yields in the weeks ahead
The U S benchmark yield has fallen almost 70 basis points this year as the Federal Reserve turned more dovish and trade tensions added to concern about slowing global growth Markets are also on edge before a planned meeting on Saturday between U S President Donald Trump and China s Xi Jinping at the Group of 20 meeting at Osaka
Hunter said in the note that the overwhelming technical setup is countered by headline risks from the G 20 and upcoming economic data so he s holding off re entering short positions to see if a more developed reversal pattern sets up over the next week or so
Louis Capital Markets Technical Analyst Andy Dodd sees an engulfing candle in the U S 10 year yield a signal that the decline is near exhaustion At the same time the longer term trend for yields remains lower he said meaning he will be on the lookout for signs that another leg of the downtrend is about to begin
The move higher might not be so small according to RBC and JPMorgan
A close above 2 06 for the 10 year yield would trigger corrective momentum toward 2 11 and 2 17 and an increase to 2 17 and 2 29 would be an opportunity to rebuild long positions according to RBC JPMorgan expects material buying interest in the mid to low 2 20s if a backup develops
The 10 year yield was little changed at 2 02 as of 10 28 a m in London Friday |
JPM | JPMorgan Rises 3 | Investing com JPMorgan NYSE JPM rose by 3 04 to trade at 112 14 by 09 37 13 37 GMT on Friday on the NYSE exchange
The volume of JPMorgan shares traded since the start of the session was 1 68M JPMorgan has traded in a range of 111 03 to 112 20 on the day
The stock has traded at 112 2400 at its highest and 107 6700 at its lowest during the past seven days |
JPM | JPMorgan Chase CEO Crypto Projects Pose No Threat to Banking System | JPMorgan Chase NYSE JPM CEO Jamie Dimon said that he does not think that cryptocurrency projects pose an existential threat to JPMorgan s core business
During an interview with Yahoo NASDAQ AABA Finance on June 27 Dimon discussed crypto s potential impact on the existing banking system |
MS | Yen Bears Show Themselves As Abe Wins Big | With Prime Minister Shinzo Abe securing a strong mandate to continue in office in Japan on Sunday bank analysts have USD JPY in their sights again Dutch bank ING argues that Shinzo Abe s call for a snap early election has paid off delivering his LDP party the two thirds super majority in the Lower House In ING s view this will allow the LDP to push ahead with its policy agenda of another consumption tax hike in 2019 and potential reforms to the Constitution It is the Dutch bank s contention that the big win suggests another round of Abenomics including the greater likelihood that Kuroda extends his term as BoJ Governor when it ends in April With the prospect of US tax reform marginally improving this looks like a pretty bullish environment for USD JPY ING feels that Monday s dip in USDJPY may be shallow just filling the gap to 113 50 left in Asia before a test of some good resistance at 114 50
Elsewhere France s Credit Agricole feels USD JPY continues to chase its fair value higher At last Friday s close our fair value estimate stood at 115 26 or around one standard deviation above spot not enough to trigger a model trading signal but suggesting that USD JPY still has room to rise following the outcome of the Japanese election
The fair value has been lifted by a combination of rising U S 2 Year yields the steepening US yield curve and gains in the Nikkei US firm Morgan Stanley NYSE MS sings from a similar hymn book In Morgan Stanley s view this week s focus will be on the USD with U S 10 Year bond yields trading near the 2 40 breakpoint A move beyond this technical resistance level opens upside potential to 2 54 which in light of Japan s election results should push USD JPY up to 114 70 Traders will make their own minds up but with the Japanese election now out of the way and with markets not yet knowing how Abe will spend his political capital may conclude that the direction of the USD JPY will now again be driven by US considerations |
JPM | What To Consider Watching In March Tariffs Fed Oil | March is often a transitional month from a weather perspective It comes in like a lion and out like a lamb the saying goes
The stock market on the other hand possibly faces the opposite scenario if events don t go right It approaches March looking a lot less volatile and arguably more soft and fuzzy than it did at the end of last year Whether it exits March like the proverbial big cat however could depend on a bunch of deadlines hanging over investors and if they get resolved in the weeks ahead
Many of those hard geopolitical stops that helped keep volatility elevated until recently might face their respective Waterloos in March including U S trade talks with China Brexit and a U S government debt ceiling debate While stocks seemed to shake off a lot of these worries in a long January February rally March could be when investors might have to come face to face with the outcomes of each event It s one thing to chase prices higher based in part on rumors and innuendo It s another when the actual news hits the headlines
Investors Sense U S China Resolution On Horizon
Will March be the month when we finally see a resolution of the year long trade battle between the U S and China In a late February move that seemed to cheer the markets President Trump cancelled a March 1 deadline that was scheduled to trigger an increase in tariffs on some 200 billion in Chinese imports to 25 from 10 And he suggested that talks were going well with a summit between the two countries leaders expected in the next month or so The question is whether there s really going to be a formal signing of some sort of deal Trump hinted at that but progress hasn t always followed a straight line over the last year when it comes to U S China trade relations
The recent earnings season helped to make it clear that many U S companies are already having trouble navigating China s slowing economy and also that there s been some sluggish capital investment as executives try to play a game where the rules aren t yet known A deal whether in final form or even a draft might give U S executives a better sense of how trade relations might proceed and potentially help to lift this sense of mystery from the market It s been these hopes rather than worries about a non deal that arguably helped accelerate the rally so far this year
Remember too that trade relations with China aren t just about goods going back and forth That s probably the least complicated part Long standing battles over intellectual property and forced technology transfers are likely far more complex and it s unclear if any progress has been made on those issues
Stocks Head Into March On An Upswing
This rally has raised valuations of S P 500 stocks to more than 16 times earnings on a forward basis from around 14 at the market lows late last December The Dow Jones Industrial Average DJI and Nasdaq COMP both posted nine week win streaks to start the year and by late February the markets had recovered about 75 of the losses sustained between late September and Christmas Eve research firm CFRA noted Investors appear to be willing to pay a bit more for equities as positive tidings come in about trade talks Remove the positive tidings and substitute any kind of breakdown and we ll see what happens to those optimistic valuations
In other political events that could help to shape stock movements in the month ahead the Brexit situation enters another month this time facing a March 29 limit on negotiations That s when Britain is supposed to leave the European Union but the British parliament s failure to pass Prime Minister Theresa May s plan for a Brexit deal earlier this year has left things in limbo Now there s some talk of a possible delay in that deadline while Parliament prepares for a new vote but things are still up in the air as the new month dawns
The Financial Times Stock Exchange 100 Index FTSE 100 Index that tracks the top 100 London Stock Exchange companies by market capitalization was up more than 7 in late February trailing the wider European averages and the S P 500 SPX As March 29 draws closer assuming the deadline doesn t change it might be interesting to see how the FTSE performs as well as how the broader European market reacts
A dive into uncertainty can sometimes initiate what analysts call a flight to safety meaning investors fleeing toward what they might see as safer investments in gold the dollar and U S Treasuries though no investment is truly safe The dollar index was on the rise much of February before trailing off at the end of the month However the euro has been relatively flat vs the dollar
Financials Fate May Hinge On Brexit Shakeout
One sector to consider watching as the Brexit parley plays out over the coming weeks is Financials A lot of big banks do major business in London which is one of the financial capitals of the world A messy Brexit might potentially be a boon for U S banks which might attract more international business if London looks less stable
However if U S Treasury yields start to buckle under pressure from investors shifting funds toward the U S bond market financial stocks could face challenges Back in January Bloomberg quoted J P Morgan NYSE JPM CEO Jamie Dimon saying a hard Brexit will be a disaster for Great Britain We don t think it s going to happen because it s bad for Europe too
Dimon told Bloomberg that JPM has spent hundreds of millions on preparations to avoid scrambling to continue operating across Europe It s likely other U S banks have done the same but you can t rule out possible bumps in the road for the sector in late March if things look unruly overseas
Another outside event investors have no control over is the U S debt ceiling The bad news There s a March 1 deadline The good news The Treasury Department can do what it s often done over the last few years to juggle accounts and maybe put off the day of reckoning until later this year according to media reports Still it s another unpleasant reminder that the U S debt continues to grow and it also could mean a harsh debate in Congress to avoid default
Potential Fed Moves In The Background
We ve spent a lot of time talking about events outside the market s purview but a Fed meeting on March 19 20 puts investors back into familiar territory The Fed pushed the pause button earlier this year so a rate hike seems awfully unlikely in March judging from futures market action
CME futures put the odds of a March hike at below 3 as of late February The Fed could also potentially provide an update on its balance sheet plan something many investors have been watching closely The Fed has been reducing the amount of bonds it holds in its 4 trillion balance sheet for about a year but Fed officials have discussed that possibly being brought to a halt at some point in 2019 as part of the Fed s more dovish profile
The March Fed meeting also brings an update of the Federal Open Market Committee s FOMC s dot plot which maps Fed officials individual outlooks for rates moving forward Last time we got one of these back in December the Fed forecast two rate hikes in 2019 and one additional hike in 2020 Since then the market and the Fed have gotten way out of whack with futures values predicting just 4 odds of any rate hike at all this year The question is whether the Fed dials back A dot plot that looks more hawkish than investor expectations might raise questions about whether investors are reading the Fed s intentions correctly
As the Fed eased its policy outlook the minutes from January s Fed Meeting and Fed Chair Jerome Powell s testimony to Congress in late February seemed to reinforce that impression market volatility also eased By late February the market s most closely watched fear gauge the VIX fell below 14 for the first time since last fall after climbing above 30 in December It did tick up again slightly in the very last days of February to above 15 likely the result of some investors seeking potential protection in case of a trade deal not working out Even with that VIX remains near its historic average and the number of 1 daily gains or declines in the stock market has dropped considerably from late last year
The VIX could be a good tracking tool for investors as March advances A relaxed VIX might serve as a sign of investors feeling more confident about future geopolitical developments If things start to look more unsettled and the lion comes roaring back perhaps expect VIX to reflect that by charging higher
Economic Indicators For Your March Radar
One thing to keep in mind is that the Fed said it would be data dependent So far in 2019 the inflation data have been pretty benign which seems to support the Fed s decision to remain on pause However the first day of March brings the Fed s preferred inflation meter Personal Consumption Expenditure PCE prices If these show more of a move than the consumer and producer price index numbers saw in February the Fed would likely take that into account
It also seems safe to presume that the Fed will be closely watching the February payrolls report due March 8 Jobs growth in January exceeded expectations in a major way but there s some thought that a revision might be in order due to the government shutdown that month We ll have to wait and see and also see if a slack housing market and some soft consumer spending seen in February s data reports had any impact on hiring in the year s second month
March isn t normally a big earnings month but it does come ahead of April s Q1 earnings season Many Wall Street analysts have been ramping expectations for corporate profit growth being down ahead of that and more estimates might come in as March continues Negative earnings prognostications could be another potential lion s den for the market to navigate past during the transition from winter to spring
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 |
MS | Morgan Stanley s fixed income business has great potential CEO | NEW YORK Reuters Morgan Stanley N MS Chief Executive Officer James Gorman said on Tuesday that in recent years the bank s fixed income group has had the greatest opportunity for delivering growth Speaking at a conference hosted by the Wall Street bank in New York Gorman said that in 2015 he thought that the fixed income division one of the bank s smallest was its most attractive business because it stood to see rapid growth if interest rates rose and there was more volatility in markets I thought actually fixed income is the most exciting business if those two things happen Gorman said Indeed Morgan Stanley s fixed income group has seen positive returns in recent quarters Last year the bank set a target to produce 1 billion in quarterly fixed income revenue on average each year
Gorman who is also chairman of Morgan Stanley added the U S bank will move 400 500 employees out of the United Kingdom to other European nations as a result of Britain s vote to leave the European Union |
MS | Trial begins in 20 million insider trading case over hacked press releases | By Brendan Pierson NEW YORK Reuters Nearly three years after federal prosecutors unveiled a landmark case charging nine people with trading on inside information stolen through computer hacking a trial of two of the defendants began on Tuesday Jurors in Brooklyn federal court heard opening statements from prosecutors and from lawyers for Vitaly Korchevsky 53 and Vladislav Khalupsky 47 who stand accused of making close to 20 million by trading stocks based on corporate press releases stolen by hackers before they were released to the public They face charges including securities fraud and conspiracy The case unsealed in August 2015 marked the first time criminal charges have been brought for a securities fraud scheme involving hacked inside information This is a case about stealing and cheating Assistant U S Attorney David Gopstein one of the prosecutors told the jurors Korchevsky a Pennsylvania pastor and former Morgan Stanley NYSE MS vice president and Khalupsky got information stolen by Ukraine based hackers from financial newswires through an international network of conspirators Gopstein said He said their scheme continued for years Korchevsky was arrested at his home in 2015 Gopstein said Khalupsky was arrested in Ukraine and extradited Gopstein told jurors that prosecutors would prove their case using electronic communications trading records and testimony from witnesses who took part in the scheme themselves Those witnesses are expected to include Arkadiy Dubovoy and his son Igor Dubovoy who have pleaded guilty to related charges and agreed to cooperate with prosecutors Lawyers for both Korchevsky and Khalupsky told jurors that their clients had been unwitting dupes of the Dubovoys Steven Brill representing Korchevsky said his client made money ahead of company earnings reports based on his own research Brill said Korchevsky did sometimes trade at the direction of Arkadiy Dubovoy but did not know they were based on stolen information He said Dubovoy saw Korchevsky as someone he could keep in the dark Arkadiy knows that Vitaly is a well respected minister and would never agree if he knew the source of the information Brill said LaKeytria Felder representing Khalupsky also attacked the Dubovoys credibility saying they would lie to protect their inner circle and to protect themselves She said they Khalupsky also knew nothing of the illegal hacking The Dubovoys were using him and his company as an unknowing pawn in their scheme she said
Jurors are expected to begin hearing testimony from witnesses early on Wednesday |
MS | Brazil watchdog fines Morgan Stanley Royal Bank of Canada for forex manipulation | BRASILIA Reuters Brazil s antitrust watchdog on Wednesday fined Morgan Stanley N MS and Royal Bank of Canada TO RY a total of 42 9 million reais 11 6 million for meddling with foreign exchange rates charged to clients The board of regulator Cade unanimously approved a proposal to fine Morgan Stanley 30 280 million reais and RBC 12 586 million reais The banks are accused of colluding to manipulate spreads between bid and ask rates on offshore spot market transactions involving the Brazilian real
Cade had already fined Barclays Plc L BARC Citigroup Inc N C Deutsche Bank AG DE DBKGn HSBC Holdings Plc L HSBA and JPMorgan Chase Co N JPM 183 5 million reais in 2016 as part of the investigation |
MS | China steel output jumps to record despite smog campaign | By Muyu Xu and Manolo Serapio Jr BEIJING MANILA Reuters China s steel output surged to a record in May as mills ramped up production to chase fat profit margins with a strong outlook for demand likely to keep mills running at nearly full capacity for the rest of the year The increased output comes despite China s efforts to limit production in key areas as part of its anti pollution campaign and highlights Beijing s challenge in tackling overcapacity in the world s top steel producer China produced 81 13 million tonnes of crude steel last month up 5 8 percent from the previous month and 8 9 percent from the same month last year according to data from the National Bureau of Statistics Year to date output rose 5 4 percent to 369 86 million tonnes To view a graphic on China s Monthly Crude Steel Output click Daily average output climbed 2 4 percent to 2 62 million tonnes in May from April according to Reuters calculations based on the official data Steel mills have been running full load and adding scrap steel to increase output in order to cash in on strong margins said Zhuo Guiqiu senior analyst at Jinrui Futures Given firm demand and smog battling production curbs in areas including the key steelmaking hubs of Hebei and Jiangsu provinces analysts say mills can earn up to 900 yuan 141 by producing a ton of steel at present not far from more than 1 000 yuan late last year UPBEAT OUTLOOK The utilization rate at steel firms across the country was above 71 percent from late May a level last seen before winter production curbs which kicked in in October and lasted through March Recent environmental inspections in some 10 regions have forced some mills to cut production But analysts do not expect the curbs to last long unless new environmental policies add to pressure on supplies Demand from downstream sectors may be better than expected said Zhuo The market generally believes the infrastructure construction sector is more active in the second half than in the first half which could lift demand for steel products Underlining firm demand steel stockpiles at both mills and traders declined in May despite rising output Mysteel consultancy data showed To view a graphic on Steel products inventory at Chinese mills click China s output has been increasing despite its closure of 255 million tonnes in steel production capacity in the past two years including illegal induction furnaces That is part of Beijing s vow to address overcapacity that has dogged its steel sector for years Outside China Chinese steel companies have built or acquired 13 5 million tonnes of capacity and are building an additional 8 6 million tonnes over the next few years Morgan Stanley NYSE MS analysts said |
MS | Hercules Capital sees net proceeds 81M from stock offering | Hercules Capital NASDAQ HTGC closes its public offering of 6M shares plus over allotment of 900 000 shares and expects net proceeds of about 81M HTGC up a penny to 12 49 in after hours trading The underwriters purchased the shares at 11 78 per share the shares priced at 12 15 each Source Press ReleaseNow read |
JPM | JPMorgan Will Pilot JPM Coin Stablecoin by End of 2019 Report | The United States largest bank JPMorgan Chase NYSE JPM is expecting to pilot its own cryptocurrency JPM Coin by the end of 2019 according to a Bloomberg report on June 25
Umar Farooq head of digital treasury services and blockchain at JPMorgan has revealed the company s intention to launch pilot testing of JPM Coin with selected clients around the end of the year in case if relevant regulators approve the bank to do so |
JPM | StanChart HSBC sharpen EU focus to help clients cut path through Brexit red tape | By Lawrence White LONDON Reuters Just as Britain moves to sever its ties with the European Union two of its biggest banks HSBC and Standard Chartered LON STAN are building up their operations in the bloc in a bid to win more business helping clients grappling with red tape and Brexit HSBC L HSBA this month launched an internal Europe Means Business campaign aimed at building internal awareness of its capabilities in the region and prompting staff to pitch the Asia focused bank s abilities to clients in other markets Meanwhile StanChart has in the last year and a half increased its staff in Frankfurt from 90 to 200 its head of corporate and institutional banking Simon Cooper said Brexit was the catalyst for us to set up a local subsidiary in Europe but strategically it makes sense anyway said Cooper adding that StanChart plans to hire tens more in the German financial hub as well as in Paris The loss of some EU market access for British financial firms resulting from Brexit means many large companies that have traditionally run all their European finances from London now need a bank that can help them operate between multiple hubs For HSBC and StanChart which make more than two thirds of their revenues in Asia and have seen Europe as less important that means refocusing on the world s largest trading bloc Europe and the Americas contributed just 11 percent of StanChart revenues in 2018 while for HSBC Europe including its very large British business contributed 30 percent Both banks hope to lean on existing relationships in their strongholds in Asia as well as a growing client base in other parts of the world to feed their European operations Their bids for more European business are aimed not so much at investment banking such as advice on mergers but the more day to day activities of trade finance and cash management known as transaction banking This is a lucrative business with overall revenues for the Europe Middle East and Africa region climbing to 10 billion in 2018 from 9 5 billion the previous year data from industry analytics firm Coalition shows HSBC vies for a top 3 spot in competing for that pot with U S rivals Citigroup N C and JP Morgan N JPM while StanChart ranks between seventh and tenth Coalition data reveals OPPORTUNITY BECKONS Firms working in Europe are seeking guidance on dealing with evolving EU regulations such as a new payment services directive which is set to transform banking by allowing customers to manage their finances through third party providers On the flipside StanChart is also targeting smaller corporates in EU countries that have significant business in its core markets of Asia Africa and the Middle East Cooper said A quick analysis showed there are something like 1 000 companies in Germany that operate in three or more of our markets we re very under penetrated among this European client base and so there s a real opportunity there he said For HSBC the renewed focus on Europe is less about hiring new staff in its 12 continental EU markets than galvanizing them to work more closely together James Emmett the bank s Chief Executive for the region said Our priority is to build the leading international bank in Europe and we have a unique opportunity to do that because the franchise is already in place he said Emmett said that companies from countries including China and the U S are increasingly seeking to work with a single bank in continental Europe to manage their cash flow financing and other needs especially as Brexit looms
Chinese companies for example aren t saying they ll pull out of the UK into Europe but they want us to help them manage between the two Emmett said |
JPM | Yen Is Breaking Down Barriers Toward 100 Threshold | Bloomberg The barriers preventing the yen from reaching 100 per dollar a target that has proved elusive for the past two years are dropping one by one
An escalation of the U S China trade war took the haven asset through 110 in mid May Next to go was resistance at 108 50 which crumbled late last month when President Donald Trump threatened to put a 5 duty on Mexican imports The threshold of 105 now looks vulnerable as U S Iran tensions worsen and investors await a planned meeting between Trump and Chinese counterpart Xi Jinping at this week s Group of 20 summit
What s come out fresh over the past week as a catalyst to push dollar yen toward 100 is the geopolitical risk over Iran said Daisuke Karakama chief market economist at Mizuho Bank Ltd in Tokyo If war breaks out in the worst case that would typically push the dollar lower
Leveraged funds swung to a net long position on the yen this month for the first time in a year as the U S China trade war boosted haven assets At the same time the dollar fell as traders priced in Federal Reserve interest rate cuts The yen has strengthened about 4 6 from this year s low set in April advancing to 106 78 on Tuesday when Iran said new U S sanctions meant the path to a diplomatic solution was closed
The yen is particularly sensitive to geopolitical news and may break through the 105 level in the coming days and weeks if Iran or China tensions escalate said Jane Foley head of currency strategy at Rabobank International in London
Next Hurdle
If the yen strengthens beyond 105 the next hurdle is likely to be 104 87 the high set during January s yen flash crash and then the psychological level of 103
Getting to 103 will probably hinge on a Fed rate cut according to Tohru Sasaki head of Japan markets research at JPMorgan Chase Co NYSE JPM in Tokyo As expectations for U S rate cuts have accelerated amid concern the U S stance on trade negotiations is much tougher than previously thought our forecast for dollar yen has had to be move lower he said
The yen has typically tracked the rate differential between Treasuries and Japanese government bonds strengthening as the spread narrows As expectations have grown that the Fed will cut rates the extra yield on 10 year Treasuries over similar maturity JGBs has dropped by almost a percentage point from a November high
Overnight swap markets are pricing in three Fed rate cuts this year with the first expected as soon as July The timing is right to lower rates preemptively Fed Bank of St Louis President James Bullard said in St Louis Tuesday At the same time Bullard who votes on monetary policy this year played down the need for a 50 basis point cut
In order for the yen to strengthen to 100 Treasury yields would need to extend their decline and the Bank of Japan would have to cut its policy rate further to minus 0 2 JPMorgan s Sasaki said The 10 year U S yield needs to be around 1 for dollar yen to touch 100 he said
Corrects description for Bullard and location where he spoke in second last paragraph in story published on June 27 |
MS | Take Five World markets themes for the week ahead | LONDON Reuters Following are five big themes likely to dominate thinking of investors and traders in the coming week and the Reuters stories related to them 1 PRICE OF PEACE U S President Donald Trump and North Korea s Kim Jong Un are due to meet for a historic summit in Singapore on June 12 In an ideal scenario Kim would agree to abandon all of the North s nuclear capabilities in return for Trump easing sanctions on his economy But things are rarely ideal and they are unlikely to be simple either Complete verifiable and irreversible dismantlement or CVID as it is known in nuclear circles almost certainly isn t what Kim has in mind so whether Trump shows any flexibility will be crucial Financial markets barely reacted when the two were trading bombastic barbs last year but investors still aren t sure how to trade Trump s new softer side or Kim s readiness to trade his nuclear arsenal for recognition and aid There is a whole multitude of options and assigning probabilities to scenarios as extreme as nuclear Armageddon or lasting peace on the Korean peninsula is no easy task Markets will also be having to digest the outcome of the likely arguments over trade and security between Trump and leaders of the other G7 nations at a weekend summit in Canada For graphic on markets vs North Korea s provocations click 2 FED UP AGAIN The world s most influential central bank the Federal Reserve looks all set to raise U S interest rates on Wednesday for a second time this year and the seventh since December 2015 Strong jobs data last week and signs that inflation is nearing the 2 percent sweetspot mean Fed chairman Jerome Powell and his Open Market Committee are in a good position to lift rates again despite the angst over Trump s global trade tariffs Markets are fully priced for the move so what could the effects be According to a recent poll by Reuters the average 30 year mortgage rate will rise to 4 60 percent by year end and then touch 5 0 percent by end 2019 That will mean loan affordability is getting steadily worse Emerging markets who borrow heavily in dollars won t enjoy it much either if it pushes up the greenback again A number of key countries in the EM complex are already under intense pressure and higher U S rates won t help at all For graphic on Federal Reserve meets Tuesday Wednesday click 3 BYE BYE BOND BUYING European Central Bank rate setters have put the cat among the pigeons by suggesting they will look past Italy s political problems when they meet on Thursday and push on with discussions to close their 2 55 trillion euro bond buying scheme It has made it one of the most keenly anticipated meetings for a long time If the bond buying ends rate hikes can t be far behind Investors are starting to price in the summer of 2019 for a possible first move with some even suggesting the bank s 0 4 percent deposit rate could be back up to zero by the end of next year Italian politicians have also ramped up their war of words accusing the ECB of showing bias against Italy by favoring Germany in its bond buying program While Mario Draghi and co are unlikely to take the bait investors are speculating that they may decide it is not worth the hassle to continue with the program and get embroiled in further political squabbles For graphic on brewers outperform in World Cup year click 4 WORLD CUP BINGE The biggest sporting event on the planet the soccer World Cup starts in Russia on June 14 And as much as bookmakers agree that either Germany and Brazil will lift the famous trophy financial analysts are equally unified on another matter large amounts of beer will be consumed Morgan Stanley NYSE MS found that 2 3 percent more beer gets drunk in a host country during a World Cup year when they looked at the four previous hosts France Germany South Africa and Brazil Carlsberg CO CARLb the market leader in Russia and Budweiser maker ABInBev BR ABI an official sponsor could therefore be the top scorers ABInBev has also estimated that its sales in soccer hotbeds Brazil and Argentina will go up by 0 5 to 1 percentage points and though it s difficult to attribute it to football fever with certainty both Heineken and ABInBev outperformed other brewers during the last World Cup in 2014 For graphic on ECB s Balance Sheet click 5 REBEL REBEL After months of building up immunity to the slow moving Brexit saga investors may be hit by a dose of sterling volatility next week as the process enters a potentially critical phase Britain s parliament votes on June 12 on amendments to the government s EU withdrawal bill ahead of a critical summit of EU leaders later in the month Time is running out for Prime Minister Theresa May and her cabinet appears more divided than ever May s future is again being called into question and speculation is even growing again that there could be a general election later in the year While sterling and gilts look relatively calm on the surface traders are beginning to take cover via the options market 1 month sterling dollar implied volatility this week rose nearly 1 pct a relatively small move in nominal terms but the biggest weekly rise in four months
For graphic on sterling dollar volatility click |
MS | Take Five World markets themes for the week ahead | LONDON Reuters Following are five big themes likely to dominate thinking of investors and traders in the coming week and the Reuters stories related to them 1 PRICE OF PEACE U S President Donald Trump and North Korea s Kim Jong Un are due to meet for a historic summit in Singapore on June 12 In an ideal scenario Kim would agree to abandon all of the North s nuclear capabilities in return for Trump easing sanctions on his economy But things are rarely ideal and they are unlikely to be simple either Complete verifiable and irreversible dismantlement or CVID as it is known in nuclear circles almost certainly isn t what Kim has in mind so whether Trump shows any flexibility will be crucial Financial markets barely reacted when the two were trading bombastic barbs last year but investors still aren t sure how to trade Trump s new softer side or Kim s readiness to trade his nuclear arsenal for recognition and aid There is a whole multitude of options and assigning probabilities to scenarios as extreme as nuclear Armageddon or lasting peace on the Korean peninsula is no easy task Markets will also be having to digest the outcome of the likely arguments over trade and security between Trump and leaders of the other G7 nations at a weekend summit in Canada To view a graphic on Markets vs North Korea s provocations click 2 FED UP AGAIN The world s most influential central bank the Federal Reserve looks all set to raise U S interest rates on Wednesday for a second time this year and the seventh since December 2015 Strong jobs data last week and signs that inflation is nearing the 2 percent sweetspot mean Fed chairman Jerome Powell and his Open Market Committee are in a good position to lift rates again despite the angst over Trump s global trade tariffs Markets are fully priced for the move so what could the effects be According to a recent poll by Reuters the average 30 year mortgage rate will rise to 4 60 percent by year end and then touch 5 0 percent by end 2019 That will mean loan affordability is getting steadily worse Emerging markets who borrow heavily in dollars won t enjoy it much either if it pushes up the greenback again A number of key countries in the EM complex are already under intense pressure and higher U S rates won t help at all To view a graphic on Federal Reserve meets Tuesday Wednesday click 3 BYE BYE BOND BUYING European Central Bank rate setters have put the cat among the pigeons by suggesting they will look past Italy s political problems when they meet on Thursday and push on with discussions to close their 2 55 trillion euro bond buying scheme It has made it one of the most keenly anticipated meetings for a long time If the bond buying ends rate hikes can t be far behind Investors are starting to price in the summer of 2019 for a possible first move with some even suggesting the bank s 0 4 percent deposit rate could be back up to zero by the end of next year Italian politicians have also ramped up their war of words accusing the ECB of showing bias against Italy by favouring Germany in its bond buying programme While Mario Draghi and co are unlikely to take the bait investors are speculating that they may decide it is not worth the hassle to continue with the programme and get embroiled in further political squabbles To view a graphic on ECB s Balance Sheet click 4 WORLD CUP BINGE The biggest sporting event on the planet the soccer World Cup starts in Russia on June 14 And as much as bookmakers agree that either Germany and Brazil will lift the famous trophy financial analysts are equally unified on another matter large amounts of beer will be consumed Morgan Stanley NYSE MS found that 2 3 percent more beer gets drunk in a host country during a World Cup year when they looked at the four previous hosts France Germany South Africa and Brazil Carlsberg CO CARLb the market leader in Russia and Budweiser maker ABInBev BR ABI an official sponsor could therefore be the top scorers ABInBev has also estimated that its sales in soccer hotbeds Brazil and Argentina will go up by 0 5 to 1 percentage points and though it s difficult to attribute it to football fever with certainty both Heineken and ABInBev outperformed other brewers during the last World Cup in 2014 To view a graphic on Brewers outperform in World Cup year click 5 REBEL REBEL After months of building up immunity to the slow moving Brexit saga investors may be hit by a dose of sterling volatility next week as the process enters a potentially critical phase Britain s parliament votes on June 12 on amendments to the government s EU withdrawal bill ahead of a critical summit of EU leaders later in the month Time is running out for Prime Minister Theresa May and her cabinet appears more divided than ever May s future is again being called into question and speculation is even growing again that there could be a general election later in the year While sterling and gilts look relatively calm on the surface traders are beginning to take cover via the options market 1 month sterling dollar implied volatility this week rose nearly 1 pct a relatively small move in nominal terms but the biggest weekly rise in four months To view a graphic on Sterling dollar volatility click |
MS | Morgan Stanley Cools On Red Hot Micron | investing com At least one Wall Street firm has seen enough of Micron s dizzying stock price rally Morgan Stanley NYSE MS lowered its rating on the chipmaker to equal weight from overweight saying the stock is close to the firm s 65 stock price target and has reached full valuation Micron s stock has almost doubled in the past 12 months and is up some 50 already this year In a note to clients Morgan says it is no longer bullish about the DRAM memory chip market and would rather err on the side of caution in an environment where we can see storm clouds on the horizon Morgan s stock price target for Micron is among the more conservative on Wall Street Several other firms have the stock rising to 100 or more |
JPM | Bank of England to plow lone furrow with rate hike message | By Andy Bruce LONDON Reuters The Bank of England looks set to plow on alone among major central banks on Thursday by sticking with its message that it plans to raise interest rates just as trade wars and a global slowdown have forced others to turn more cautious The BoE is expected to repeat its intention of raising borrowing costs Brexit permitting in a week in which European Central Bank President Mario Draghi broached another round of stimulus and the U S Federal Reserve signaled it could cut interest rates later this year The BoE is due to announce its June policy decision at 1100 GMT Economists polled by Reuters think there will be a unanimous vote to hold rates at 0 75 despite two officials talking recently of the need for higher borrowing costs sooner rather than later Looking at Britain in isolation there are reasons why borrowing costs might need to rise before long assuming that whoever succeeds Prime Minister Theresa May can avoid a damaging no deal Brexit Wages are growing at their fastest pace in a decade and while inflation fell to the BoE s 2 target in May public expectations for future price rises have strengthened markedly But Britain is highly sensitive to the ebbs and flows of the global economy meaning that if other central banks begin to cut rates again while the BoE holds firm Britain s monetary policy stance would become tighter in relative terms If the rest of the world is going to be on an easing path and we hold tight all else being equal it does the job on sterling said Simon French chief economist at merchant bank Panmure Gordon The pound has fallen by 5 since early May as concern grew that Boris Johnson the top contender to become prime minister will lead Britain out of the European Union with or without a deal by Oct 31 But in a taste of what may be to come this week s recent dovish tilt by the ECB and the Fed has already lifted some of the gloom over the British currency which rose for a second day on Wednesday WORDS NOT ACTION Last month BoE Governor Mark Carney warned investors were underestimating how much interest rates could rise But financial markets which are focused almost entirely on Brexit developments failed to budge perhaps also reflecting the fact that similar warnings from Carney in the past failed to translate into higher borrowing costs Money markets show investors see virtually no chance of a rate hike until at least mid 2020 Carney is due to leave the BoE next January BoE Chief Economist Andy Haldane said this month that the time was nearing for a rate rise to prevent inflation pressure building Michael Saunders another member of the Monetary Policy Committee MPC said Brexit uncertainty was not a reason to delay tighter policy forever Rather than merely preparing the public and businesses for higher rates their words may serve another purpose nipping in the bud any notion that the BoE will soon follow other central banks and reverse direction One interpretation of recent MPC commentary is that it is motivated by a desire to push back on the need to cut rates JPMorgan NYSE JPM economist Allan Monks said in a research note
While it was possible that some dissent in favors of hiking rates could appear in the minutes of this week s meeting it would be surprising if it was widely shared on the MPC Monks said |
JPM | JPMorgan Warns Trilemma Will Limit Stock Gains as Fed on Hold | Bloomberg As emerging market assets rallied on signals from the Federal Reserve that it s prepared to cut rates as early as next month JPMorgan NYSE JPM Asset Management warned traders not to get ahead of themselves
Ben Mandel a New York based global multi asset strategist at the firm said that the Fed will probably keep borrowing costs on hold this year even as investors price in a high probability of a cut next month
His thinking is that the U S and China are on the verge of reaching a narrow trade deal and that the resulting gains in business confidence will stabilize the economic outlook In that scenario the extent of rate cuts priced by markets diminishes substantially putting a cap on equity upside according to Mandel You can t have a trade deal faster growth and falling rates all at the same time he said
There is clear optionality for a cut but it will not be warranted if risks to the growth outlook begin to recede Mandel said The trilemma highlights the trade offs between that outcome which reflects stable economic growth and the Fed put
Mandel who began his career as an economist at the Fed said he favors U S equities over the rest of the world The S P 500 Index will absorb much of the good news on trade whereas Europe Japan and emerging markets are at greater risk in the event of future trade disputes he said
In principle one would also expect Treasuries to sell off in that instance though we are wary of going underweight in an asset that has been the best hedge in portfolios for late cycle growth shocks Mandel said |
JPM | U S labor market on solid ground manufacturing struggling | By Lucia Mutikani WASHINGTON Reuters The number of Americans filing applications for unemployment benefits fell more than expected last week pointing to underlying labor market strength despite a sharp slowdown in job growth in May But the outlook for the economy continues to darken Other data on Thursday showed factory activity in the mid Atlantic region stalled in June likely reflecting a recent escalation in trade tensions between the United States and China The trade war has increased uncertainty over the U S economic outlook prompting the Federal Reserve on Wednesday to signal it could cut interest rates by as much as half a percentage point over the rest of this year The U S central bank kept rates unchanged on Wednesday Solid labor market conditions supporting a strong consumer sector provides a solid base underneath the economy said Jim Baird chief investment officer at Plante Moran Financial Advisors in Kalamazoo Michigan Initial claims for state unemployment benefits dropped 6 000 to a seasonally adjusted 216 000 for the week ended June 15 the Labor Department said Economists polled by Reuters had forecast claims would decrease to 220 000 in the latest week The Labor Department said no states were estimated The drop in claims followed three straight weekly increases Claims are being closely watched for signs of a rise in layoffs stemming from the trade dispute The four week moving average of initial claims considered a better measure of labor market trends as it irons out week to week volatility rose 1 000 to 218 750 last week The claims data covered the survey period for the nonfarm payrolls component of June s employment report The four week average of claims was little changed between the May and June survey periods Still economists expect payrolls to pick up in June after increasing by 75 000 jobs in May Fed Chairman Jerome Powell on Wednesday acknowledged the meager job gains in May and said in light of recent developments this bears watching but also noted that many labor market indicators remain strong The dollar was trading lower against a basket of currencies as investors digested the Fed s signal that it would ease monetary policy Stocks on Wall Street rallied with the S P 500 index hitting a record intraday high U S Treasury prices rose SLOWING ECONOMY Claims have been roughly flat this year indicating some easing in labor market conditions Job growth has cooled from the brisk pace in 2018 in line with the economy which is slowing as the stimulus from last year s massive tax cuts and increased government spending fades The recent flattening out in the data could be viewed as a negative change in momentum said Daniel Silver an economist at JPMorgan NYSE JPM in New York But at least the recent trade developments haven t led to a noticeable increase in filings for unemployment insurance The Atlanta Fed is forecasting gross domestic product will rise at a 2 0 annualized rate in the second quarter The economy grew at a 3 1 pace in the January March quarter boosted by a temporary burst in exports and an accumulation of inventories The surge in exports together with a decline in imports helped to shrink the current account deficit in the first quarter to 130 4 billion from 143 9 billion in the fourth quarter the Commerce Department said in a separate report on Thursday Exports however tumbled in April in response to softening global demand Weak exports and an inventory overhang especially in the automotive sector are hobbling manufacturing Bottlenecks in the supply chain resulting from the U S China trade war are also squeezing manufacturing which accounts for about 12 of the economy A third report on Thursday from the Philadelphia Fed showed its business conditions index dropped to a reading of 0 3 in June from 16 6 in May There were decreases in measures of new orders employment and shipments A gauge of prices received by manufacturers in the region tumbled to near a three year low this month A measure of prices paid by factories was also the lowest in nearly three years These findings support expectations that inflation will remain muted this year The sharp braking in manufacturing in the region that covers eastern Pennsylvania southern New Jersey and Delaware was the latest indication that national factory activity continues to slow A report from the New York Fed earlier this week showed a record plunge in its Empire State manufacturing index to more than a 2 1 2 year low in June But there are some rays of hope for manufacturing The Philadelphia Fed survey s six month business conditions index rose to a reading of 21 4 this month from 19 7 in May Its six month capital expenditures index increased to 28 0 from a reading of 23 3 in the prior month
We continue to expect manufacturing reacceleration said Samuel Coffin an economist at UBS in Stamford Connecticut Confidence has declined but we saw signs of an upturn in the last industrial production report |
JPM | Soft U S factory activity darkens economic outlook | By Jason Lange WASHINGTON Reuters U S manufacturing activity barely grew in early June and the service sector cooled signs that President Donald Trump s trade war with China could be weighing on the economy Other economic data released on Friday showed a rise in home resales during May suggesting the Federal Reserve was seeing dividends from its efforts to avert a recession by keeping interest rates low While many indicators still point to a healthy economy Fed policymakers are increasingly concerned that the 10 year economic expansion could be in danger Data firm IHS Markit said its U S manufacturing purchasing managers index PMI declined to a reading of 50 1 in early June the lowest level since September 2009 A reading above 50 indicates growth in the manufacturing sector which accounts for about 12 of the U S economy The data firm s PMI for the U S services sector dropped to 50 7 the lowest since February 2016 Both the manufacturing and the service sector readings were below expectations of analysts polled by Reuters It is likely that the news on trade policy has weighed on business sentiment and activity Daniel Silver an economist at JPMorgan NYSE JPM said in a note to clients The U S China trade war began last year and escalated last month after Trump who has vowed to rebalance the global trading system in favor of the United States raised tariffs on 200 billion in Chinese imports China one of the top U S trading partners responded by increasing its tariffs on a revised 60 billion list of U S goods Trump has threatened to slap tariffs on another 300 billion in Chinese imports if Beijing doesn t agree to a trade deal soon He has said he plans to meet Chinese President Xi Jinping next week at a Group of 20 nations summit in Japan All three major U S stock indexes were trading in a tight range on Friday as investors focused on a report that U S Vice President Mike Pence had said there were signs of progress with China on trade The trade tensions are widely believed to have been a factor in the Fed s policy shift this week Fresh projections released with the latest policy statement on Wednesday showed nearly half of Fed policymakers expect to cut interest rates this year Fed Chairman Jerome Powell told reporters on Wednesday that business uncertainty had risen since May and that the Fed would act promptly if needed to keep the economy growing In early June some two thirds of all manufacturers attributed some or all of their raw material cost increases to tariffs during the month said IHS Markit economist Chris Williamson referring to the details of his firm s surveys of purchasing managers The Fed already had made clear earlier this year that it was pausing the rate hike campaign it began in 2015 That led to a drop in mortgage interest rates
Resales of U S homes rose 2 5 in May to a seasonally adjusted annual rate of 5 34 million units the National Association of Realtors reported on Friday |
MS | Morgan Stanley MS Beats On Q3 Earnings Revenue Estimates | Have you been eager to see how Morgan Stanley NYSE MS performed in Q3 in comparison with the market expectations Let s quickly scan through the key facts from this New York based leading financial services holding company s earnings release this morning An Earnings BeatMorgan Stanley came out with earnings from continuing operations of 93 cents per share which surpassed the Zacks Consensus Estimate of 81 cents Improved revenues were the main reason for earnings beat How Was the Estimate Revision Trend You should note that the earnings estimate revisions for Morgan Stanley depicted pessimism prior to the earnings release The Zacks Consensus Estimate has declined 2 4 over the last 30 days However Morgan Stanley has a decent earnings surprise history Before posting the earnings beat in Q3 the company delivered positive surprises in all the prior four quarters as shown in the chart below Morgan Stanley Price and EPS Surprise
RevenuesMorgan Stanley posted net revenues of 9 2 billion which compared favorably with the year ago number of 8 9 billion The Zacks Consensus Estimate was 9 billion Key Statistics Sales Trading revenue were 2 9 billion down 9 4 year over yearInvestment banking revenues were 1 3 billion up 18 2 from the prior year quarterRepurchased 1 25 billion worth shares during the quarterWhat Zacks Rank SaysThe estimate revisions that we discussed earlier have driven a Zacks Rank 3 Hold for Morgan Stanley However since the latest earnings performance is yet to be reflected in the estimate revisions the rank is subject to change While things apparently look favorable it all depends on what sense the just released report makes to the analysts You can see How the Market Reacted So FarFollowing the earnings release Morgan Stanley shares were up nearly 1 7 in the pre trading session This is in line with what the stock witnessed in the last day s session Clearly the initial reaction shows that the investors have considered the results in their favor The full session s price movement may indicate a different picture Check back later for our full write up on this Morgan Stanley earnings report
Looking for Stocks with Skyrocketing Upside Zacks has just released a Special Report on the booming investment opportunities of legal marijuana Ignited by new referendums and legislation this industry is expected to blast from an already robust 6 7 billion to 20 2 billion in 2021 Early investors stand to make a killing but you have to be ready to act and know just where to look |
JPM | 4 Commodity ETFs To Tap At New Highs | Broad commodities have bounced back sharply after a weak fourth quarter thanks to Fed s cautious stance which has kept U S dollar under pressure A weak dollar made dollar denominated assets attractive for foreign investors raising the appeal for commodities Additionally signs of progress in U S China trade talks as well as stimulus in Chinese economy lent strong support amid global growth slowdown worries Further demand supply fundamentals are improving for most of the commodities leading them higher read In particular oil had a strong run up in its prices led by fresh OPEC output cut falling OPEC production and U S sanctions against Venezuela In the precious metal space palladium and gold have been shining Palladium is enjoying its longest bull run in its history prompted by a global shift from diesel to gasoline and hybrid vehicles that has led to higher demand for the metal and resulted in the speculation of supply deficit Gold is on a tear due to investors flight to safe havens amid still unresolved trade tensions Brexit concerns as well as political infighting in the United States and Europe
Industrial metals like nickel and copper are also on the rise given hopes of a trade deal that will ease slowdown concerns in the world s second biggest economy and will boost demand Notably China is the top consumer of raw materials Agricultural commodities are also staging a recovery Coming to soft commodities sugar has been leading the way higher with the global market swinging into deficit in the 2019 20 season Additionally reports of a drop in sugar output in India added to the strength Given this we have highlighted a few commodity ETFs that hit new highs in the recent trading session and will continue to trend higher given the same trends persist Aberdeen Standard Physical Precious Metals Basket Shares ETF 52 Week Price 66 58This fund seeks to reflect the performance of the price of all the precious metal in a physically backed form Gold takes the top spot at 57 7 followed by 25 2 in silver 12 6 in palladium and the rest in platinum The product has amassed 368 2 million in its asset base while trading in moderate volume of about 34 000 shares per day It charges 60 bps in annual fees and added 5 4 so far this year GLTR has a Zacks ETF Rank 3 Hold with a Medium risk outlook see SPDR Gold MiniShares Trust 52 Week Price 13 40This product seeks to reflect the performance of the price of gold bullion Being a low cost product with expense ratio of just 0 18 GLDM has gathered 603 6 million in AUM and trades in solid average daily volume of 712 000 shares It has gained 4 5 so far this year read Aberdeen Standard Physical Palladium Shares ETF 52 Week Price 141 31The fund seeks to match the price of palladium It owns palladium bullion in plate or ingots kept in Zurich or London under the custody of JPMorgan Chase NYSE JPM Bank The product has amassed 224 5 million in its asset base and trades in lower volume of about 23 000 shares a day It charges 60 bps in annual fees and has gained about 18 6 so far this year The fund has a Zacks ETF Rank 3 with a High risk outlook read Sprott Physical Platinum and Palladium Trust NYSE SPPP 52 Week Price 11 34This product provides a secure convenient and exchange traded investment alternative for investors who want to hold physical platinum and palladium It offers a number of compelling advantages over traditional exchange traded platinum and palladium funds The ETF has AUM of 101 5 million and charges 1 13 in annual fees It has surged 14 2 in the year to date timeframe Want key ETF info delivered straight to your inbox Zacks free Fund Newsletter will brief you on top news and analysis as well as top performing ETFs each week |
JPM | Is It Time For The Long Bitcoin | Finally Bitcoin managed to leave the bearish consolidation zone The digital currency had been trading sideways since November 2018 Since the beginning of the year the cryptocurrency didn t differ with big liquidity Several spikes during two months couldn t determine the direction of the BTC USD pair Now it seems that the time has come or not
Bitcoin managed to cross the psychological level of 4000 Many experts associate the boost of bitcoin with the JPM Coin JPM Coin is the own cryptocurrency of JPMorgan NYSE JPM One of the banking giants announced it created and successfully tested a cryptocurrency that would have a value equivalent to one USD It s not a surprise that such news boosted the BTC But was it enough to push bears from the market Although bitcoin left the correction zone it s too early to talk about the uptrend Firstly the cryptocurrency has to confirm the bullish market mood The upward movement will be possible if only there is encouraging news for the cryptomarket For example if Nasdaq launches bitcoin futures contracts in the first quarter of this year
Technical Side
On the daily chart of BTC USD the pair managed to break above the psychological level at 4000 After the surge the rise of the pair started slowing down To prove the further rise the pair needs to break above 4080 Until then the consolidation is likely The RSI indicator has been placing above the 70 level that is a strong sign that the pair is overbought MACD indicator has formed the bearish divergence with the price that signals a potential reversal as well To confirm the uptrend the pair needs to overcome the 4200 level 4380 is the reversal point As soon as it s broken we can anticipate a resume of the upward movement Until the uptrend is confirmed the pair may test support at 3930 Next supports will lie at 3775 and 3645 A break below 3422 will resume the downtrend
Predictions
The most interesting thing about the cryptomarket and especially about bitcoin is forecasts Analysts of Fundstrat predict bitcoin not lower than 36 000 in 2019 mentioning 64 000 and 20 000 as its maximum and minimum respectively Michael Novogratz Galaxy Digital CEO forecasts bitcoin above 10 000 by the end of the first quarter of 2019 with an additional rise to 20 000 and higher during 2019 And one more prediction that seems the craziest is from billionaire investor Tim Draper who predicts that in just 5 years we all will use bitcoin instead of fiat currencies The interesting thing is that he claims that only criminals will hold on fiat Previously Mr Draper predicted bitcoin to soar to 250 000 as soon as in 2022
As we can see two of the predictions are not that impossible However the cryptomarket needs more encouraging events Making a conclusion we can say that it s early to talk about the bullish market However a recovery of the digital currency is already a good sign We need supportive news and additional confirmations from levels to be sure that it s worth being long on BTC |
JPM | JPMorgan Chase s Cryptocurrency Is It A Gimmick Or The Real Deal | The announcement last week by JPMorgan Chase Co NYSE JPM that it plans to launch its own digital token JPM Coin caused ripples throughout the blockchain and cryptocurrency space It s an unexpected development from an unlikely issuer It s also the first cryptocurrency to be launched by a major global bank
The bank is characterizing the introduction of this alt currency as a pilot project aimed at institutional clients According to JPMorgan it will enable instant fund transfers and will allow both clients and the lender to settle payments over a blockchain network
What makes this particularly startling are previous statements by JPM s CEO Jamie Dimon who famously bashed Bitcoin more than once In late 2017 he referred to the most popular cryptocurrency by market cap as a fraud and compared the drivers of its then rapidly rising price to the mania that in the 1630s drove Dutch tulip bulb speculation
In late 2018 even after the speculative Bitcoin bubble had burst he denigrated the asset saying blockchain is real it s technology but Bitcoin is not the same as a fiat currency By those measures JPM Coin appears to be something of a hybrid it s based on blockchain technology and will be pegged 1 1 to a fiat currency the U S dollar which makes it a stablecoin similar to Tether or TrueUSD
JPM Coin is a very positive development for the asset class and the industry says En Hui Ong head of business development at blockchain technology platform Zilliqa It demonstrates how blockchain can improve the way legacy payments are handled
Don t Call It Cryptocurrency
However he adds it shouldn t be viewed as a cryptocurrency Rather it can best be described as a digital asset
JPM Coin will be built on Quorum a distributed ledger platform described as an enterprise focused private version of Ethereum As Quorum was developed by JP Morgan and some of its partners the network will be controlled by the bank itself rendering it both centralized and permissioned therefore implying that any participants have to be vetted in order to join the system
Contrast this with other cryptocurrencies such as Bitcoin and Ethereum where anyone located anywhere can spin up a node and join the system without permission
These restrictions mean only a small number of participants will likely able to join the network Information from the bank says Ong indicates that JPM Coin is a prototype being tested by a restricted number of institutional clients Though JPMorgan plans to expand the pilot program later this year there are no plans to offer the cryptocurrency service to retail clients
In contrast true cryptocurrencies are available to anyone notes Ong All one has to do is to set up a wallet in which to store it Nevertheless says Ong
Despite its differences from cryptocurrencies the launch of JPM Coin and the participation of a major financial institution lends greater legitimacy to the wider blockchain industry as a whole
Angelo Laub EOS lead at private data computation and data marketplace Slant agrees with Ong
The only users of JP Morgan coin are likely to be JP Morgan and their clients I can t even see other banks wanting to use it as it will make them reliant on JP Morgan Bank for processing transactions Still it s a big step for a bank to go ahead and do something like that This concept would have been unthinkable one or two years ago
Others don t see this development as particularly notable Marcel Vaschauner Chairman of Slant s board argues that JPM Coin which is issued by the bank and linked to the funds of the customer using it most closely resembles a European digital payment instrument called e money He says it s a concept that s already widely used by Fintechs
Still because of Dimon s past criticism of cryptocurrencies some within the industry can t help but appreciate the irony even if he s not convinced about the coin itself Pedro Anderson COO and co founder of Winding Tree says
JPM Coin is great validation of the asset class We ll take it However the entire case for the coin is built on trusting JPM that they ll make everything right if they are in control because they have a lot of money
Crossing the Chasm
Ned Myers senior vice president of Product Management at AlphaPoint believes JP Morgan s entrance into the digital asset space is another clear sign that the security token industry is rapidly crossing the chasm to cite Jeffrey Moore moving from early adoption to mainstream acceptance
Combined with other announcements from Fidelity and ICE s BAKKT s announced entry into the digital asset exchange space we see JPM s move as a clear harbinger that the use of digital assets by traditional financial institutions has arrived I am looking forward to the tipping point in which tokenized securities become the de facto standard for unlocking market liquidity
Others however would argue this nothing more than an advertising stunt Vaibhav Kadikar founder and CEO of CloseCross believes JPM Coin though billed as a cryptocurrency is seen by critics as a self promotional gimmick with little in the way of real value
The pioneering bank is relying on both its dominant market share with 80 of Fortune 500 companies as clients and other banks imitating this strategy to drive increased adoption |
MS | Intelsat 10 8 after shelf registration | Intelsat NYSE I is off 10 8 after a late shelf registration suggests future equity raises Shares have more than quadrupled since April 3 amid increasing interest in the company s proposal for monetizing C band spectrum by sharing it with wireless carriers Use of proceeds points to general purposes including repaying debt acquisitions capex and working capital the company s talked about using equity for debt repayment though its nearest maturity comes in late 2020 Previously Intelsat in multi year deal to speed Myanmar deployment Jun 01 2018 Previously Intelsat jumps again as CTIA leans on FCC over mid band progress May 31 2018 Previously SES Intelsat move as Morgan Stanley NYSE MS embraces C band proposal May 29 2018 Now read |
MS | Economists stick to view ECB will end quantitative easing this year Reuters poll | By Rahul Karunakar BENGALURU Reuters The European Central Bank is expected to end its stimulus program by the end of this year according to Reuters poll data that shows economists confident following comments from ECB policymakers over the past week reinforcing that view The latest Reuters poll data which updated a survey published May 24 of over 80 economists showed forecasts were largely unchanged before the June 14 Governing Council meeting Every Reuters poll since the question was first asked in September 2017 has forecast the ECB will stop buying tens of billions of euros a month of bonds by the end of this year ECB policymakers including Jens Weidmann the head of Germany s central bank his Dutch counterpart Klaas Knot and Chief Economist Peter Praet have said the 2 55 trillion euro scheme might end this year While some economists argue that a decision is coming at the June 14 meeting others expect the ECB to provide a timeline on when it will conclude its asset purchases program Rather than action the upcoming policy meeting is all about the message With growth slowing inflation mostly pushed up by rising oil prices and higher uncertainty there are grounds for caution But a QE tapering announcement is getting closer noted economists at Morgan Stanley NYSE MS We expect a relatively cautious press conference with the central bank on high alert This is because of the deceleration in growth the recent imposition of the US import tariffs and uncertainty about the Italian situation However we also believe that the message will have to shift soon The central bank was expected to raise the deposit rate by 15 basis points to 0 25 percent in the second quarter of next year and raise refinancing rate by 10 basis points the following quarter The comments from policymakers have come despite softer economic data and helped to push the euro to a three week high of 1 1838 on Thursday
The single currency EUR was expected to shrug off recent losses and climb over 5 percent in a year and end the dollar s reign according to a separate Reuters poll of foreign exchange strategists published on Thursday EUR POLL Additional reporting and polling by Indradip Ghosh editing by Larry King |
MS | Abenomics may be losing steam just as trade friction escalates | By Stanley White and Leika Kihara
TOKYO Reuters A disappointing reading on Japan s economy which suddenly seems to be faltering after two years of steady growth raises the possibility that it is peaking just as trade friction with the United States escalates
Economists believe Japan will avert a recession two quarters of contraction as they see the first quarter slump as a soft patch caused by temporary factors like bad weather and weak stock markets
But looming uncertainties suggest that Prime Minister Shinzo Abe s program to reflate the economy known as Abenomics is losing momentum and could force policymakers to ponder additional measures to keep the recovery going
If signs of recession emerge that would derail Japan s path to beat deflation and show Abenomics failed said Atsushi Takeda chief economist at Itochu Economic Research Institute
The government could compile a spending package worth up to 3 trillion yen 27 33 billion that includes tax breaks for cars and home appliances if recession risks heighten he said
Left with little ammunition to jump start growth the Bank of Japan will hold off on ramping up stimulus but maintain its ultra easy policy despite the rising cost of prolonged easing analysts say
The government confirmed Friday that the economy shrank 0 6 percent at an annual pace in the first quarter worse than the 0 4 percent upward revision in GDP expected by analysts
The revised data showed that while capital spending rose consumer spending came in slightly weaker than the preliminary reading
OUTPUT EXPORTS KEY
The first quarter contraction marked the end to eight consecutive quarters of growth the longest period of expansion since the 1980s bubble economy
Private consumption which accounts for more than half of GDP fell 0 1 percent in January March from the previous quarter versus an unchanged preliminary reading as households held off on buying cars and mobile phones
There are initial signs consumption is picking up
A BOJ index that incorporates spending of retailers and households seen as the most broad based measurement of consumption rose 2 4 percent in April from March marking the first increase in five months
Vegetable prices have fallen sharply after spiking in the first quarter due to bad weather suggesting that households will have more money to spend on non necessities analysts say
Some say the bigger worry is weak factory output It rose just 0 3 percent in April well short of market expectations and inventories rose in a sign firms may have over produced smartphone parts on hopes of strong global demand
I still expect the economy to bounce back in the second quarter but industrial output forecasts are not strong and trade friction could become a problem said Shuji Tonouchi senior market economist at Mitsubishi UFJ Morgan Stanley NYSE MS Securities The risks are tilted to the downside
Escalating trade frictions and threats by U S President Donald Trump to impose tariffs on Japanese cars could also hurt corporate bottom lines and capital spending analysts say
Yoshiki Shinke chief economist at Dai ichi Life Research Institute expects the economy to grow by an annualized 1 0 percent in April June but warns of longer term risks from Trump s protectionist trade policies
Companies don t like uncertainty so they could put off investment plans if trade frictions escalate he said If the economy were to peak out that would probably come from external factors beyond Japan s control |
MS | Ant Financial raises 14 billion in world s largest ever single fundraising | By Adam Jourdan and Cate Cadell SHANGHAI BEIJING Reuters Ant Financial Services Group operator of China s biggest online payment platform on Friday said it raised around 14 billion in what market watchers called the biggest ever single fundraising globally by a private company The cash will boost Ant s firepower ahead of a widely expected initial public offering IPO in Hong Kong and mainland China as early as next year though the company has neither publicly set a timetable nor chosen a likely stock exchange The exercise amounted to the largest confirmed single fundraising round in history according to data provider Crunchbase Ant Financial spun off from Alibaba NYSE BABA Group Holding Ltd before the e commerce firm s 2014 listing has played a major role in shaping China s financial technology landscape It oversees the largest mobile payment app in what is increasingly becoming a cash less society In a statement Ant said the funding included both U S dollar and Chinese yuan tranches The dollar share made up over 10 billion said people with knowledge of the matter Canada Pension Plan Investment Board said in a statement that it will invest about 600 million in Ant Financial s unit Ant International Co Ant listed Singaporean sovereign wealth fund SWF GIC Pte Ltd GIC UL and state investor Temasek Holdings Private Ltd TEM UL as well as U S private equity firm Warburg Pincus LLC WP UL as participants in the dollar tranche Other global investors included Malaysian SWF Khazanah Nasional Bhd KHAZA UL and U S private equity firms Silver Lake and General Atlantic it said Ant did not release details of its valuation following the funding round Reuters reported earlier that Ant was likely to be valued at around 150 billion making it one of the world s most valuable financial firms It s the most uniquely positioned TechFin company in the world said Ben Zhou a managing director of Warburg Pincus who led the firm s investment in Ant Participants in the yuan tranche were mainly existing shareholders Ant said Among them was China focused private equity firm Boyu Capital which invested in both the yuan and dollar tranches said two of the people with knowledge of the matter who declined to be identified as details were private Ant declined to comment on specific investors beyond those disclosed in its statement Boyu did not immediately respond to requests for comment Ant in its statement said it would use the funds to speed up globalisation plans for its Alipay payment platform and to invest in developing financial technology Figures seen by Reuters showed that in five years Ant expects 65 percent of revenue to come from business oriented financial technology including assisting banks and other institutions as well as providing fraud prevention services The emphasis on business comes as Ant shifts focus away from consumer finance in China amid increased regulatory scrutiny of financial risk Nevertheless it aims to reach 2 billion consumers globally with its payments network in coming years backed by investments and strategic partnerships with Southeast Asian payment firms as well as tie ups in South Korea Japan and India Now with the help of our partners we are going to accelerate our strategy said Ant Chief Executive Eric Jing Aside from payments Ant also offers consumer finance products including credit services wealth management products and micro loans
Deutsche Bank DE DBKGn Citigroup NYSE C China International Capital Corp CITIC Securities JPMorgan NYSE JPM and Morgan Stanley NYSE MS acted as financial advisors to Ant |
JPM | Australia s Sticky Unemployment Rate Underscores RBA s Challenge | Bloomberg Australia s jobless rate held above 5 in May despite a surge in hiring underscoring the Reserve Bank s challenge to drive down unemployment and stoke inflation
While the economy added 42 300 roles last month new entrants were absorbed by a jobs market that swelled to a record the statistics bureau said in Sydney Thursday That left the jobless rate at 5 2 which is well above the 4 5 level the RBA estimates is needed to revive price pressures
The result was further diminished by most jobs being part time potentially workers hired for the May 18 election and fewer hours worked suggesting a less robust labor market and likely explaining the currency edging lower RBA Governor Philip Lowe resumed cutting interest rates last week after a three year hiatus as he bids to spur hiring and return inflation to target
The data confirm the RBA s view that the economy needs to generate more jobs to reach full employment and that policy loosening which will stimulate domestic and external demand is needed to achieve this said Sarah Hunter head of macroeconomics at BIS Oxford Economics in Sydney We expect the RBA board to follow June s interest rate cut with two more this year
Australia s labor market has shown surprising resilience as hiring persisted despite weakness across much of the economy One explanation is that much of the hiring is coming from government related programs that are impervious to prevailing economic conditions
Lowe has made clear that easing monetary policy isn t the ideal path to boosting hiring and investment and has urged the government to undertake structural reforms Following its surprise re election last month the government is trying to pass tax cuts that Commonwealth Bank estimates could provide stimulus equivalent to two quarter point rate cuts
Other Details
Underemployment rose 0 1 percentage point to 8 6 while the underutilization rate held steady at 13 7 two key indicators of excess slack
Job gains were led by New South Wales and Victoria the nation s most populous states up 38 500 and 28 600 respectively The mining hub of Western Australia which has been struggling since the end of an investment boom led the losses down 4 000
For much of the past year Australia s debt laden households have hunkered down and cut spending as they grapple with stagnant wages and watch falling house prices erode their wealth Consumption accounts for almost 60 of GDP and weaker spending has slowed economic growth
Lowe signaled last week the RBA is likely to cut rates again and two sentiment surveys Wednesday suggested this will be necessary as the first easing failed to shift the needle on confidence
The headline jobs increase was nearly entirely driven by growth in part time employment and this is not the sustainable employment growth the RBA wants to see said Kerry Craig global market strategist at JPMorgan NYSE JPM Asset Management Meanwhile the decline in hours worked is not great for the consumption outlook |
JPM | External Pressure Can Accelerate China s Opening Up Liu He Says | Bloomberg China s chief trade negotiator said that the external pressures the nation is facing now can help it open up the economy to the outside world
Right now we do face some external pressures but they are the necessary test for China s economic restructuring and upgrading Vice Premier Liu He said at the Lujiazui Forum in Shanghai on Thursday Until talks broke down last month Liu served as China s chief negotiator in trade talks with the U S
China will further speed up reform and opening up especially on market access fair competition and protection of property especially intellectual property he said
A Group of 20 meeting in Osaka at the end of this month where Presidents Donald Trump and Xi Jinping are due to meet is looming as a high stakes chance to defuse the trade war between the two nations Liu in line with other officials is signaling that they won t be deflected from their policy aims even if the tariff conflict escalates
No matter what occurs temporarily the long term positive momentum for China s economy will not be changed Liu said
People s Bank of China Governor Yi Gang spoke after Liu on Thursday though he didn t comment on monetary policy or the yuan Last week Yi said that there s tremendous room for policy to be adjusted if the trade standoff worsens
China is seeking to encourage international investors to become more involved in its financial sector and is heavily promoting Shanghai as the place for that activity to be centered on the mainland The government has removed some limits on foreign ownership of financial institutions as well as taking steps to ensure local bonds can be bought by global funds
In recent months authorities have approved plans by JPMorgan Chase Co NYSE JPM UBS Group AG and Nomura Holdings Inc to take majority stakes in local securities ventures
Yi Gang said Shanghai mainland China s financial capital should be a center for financial technology and provide a world class business environment The city should also be a risk management center for yuan denominated financial assets he said Hedging tools are a key requirement for international investors
Even amid a slowing growth outlook incoming economic data signal a degree of stability Credit growth picked up in May according to data released Wednesday showing that stimulus measures to stem the economic slowdown are continuing to have an impact |
JPM | Markets May Be Underpricing Major Risks in Fed G 20 Events | Bloomberg Financial markets are signaling investors see little risk of disruption from upcoming events despite the potential for major shifts in the course of Federal Reserve policy and U S China trade negotiations
The range of options for this week s Fed meeting spans a surprise interest rate cut a set up of one down the road or a continued stance of patience given still solid economic growth Late next week the outcomes of the Group of 20 summit look binary either U S China trade talks get back on track or investors must anticipate further tariff hikes And the usual run of data must be added to the mix such as the July 5 payroll report
Yet despite the potential for major market moves from these events JPMorgan Chase Co NYSE JPM strategists estimate that the embedded volatility risk premium is significantly below its historical average The group including Nikolaos Panigirtzoglou cited a gauge of implied to realized volatility using 12 measures across five asset classes
Other oddities include a large number of short positions on futures tied to the VIX the so called fear gauge tied to U S stocks and a low amount of hedging as seen in the put to call open interest ratio for S P 500 Index options the JPMorgan team wrote in a note Friday
Option markets do not embed enough cushion against the significant event risk markets are facing over the coming weeks the strategists concluded
And then there s equity positioning which is still on the high side and vulnerable to a spike in volatility according to Deutsche Bank AG DE DBKGn Positioning from hedge funds is light on U S equities though concentrated in the same stocks as the S P 500 while in equity futures it s near the top its historical range strategists including Hallie Martin and Binky Chadha wrote in a separate report
Systematic strategies are heavily allocated to U S equities and would be sellers on a significant vol spike into a record low liquidity environment the Deutsche strategists wrote Buybacks which have been supportive of U S stocks will start to run into quarterly blackout periods later this month coinciding with the G 20 meeting they highlighted
Read As Threats Mount Equity Bulls Retain Footing in Tumultuous Week
There are some markets appearing to gird for stormy weather ahead Treasuries have been climbing since early May when President Donald Trump announced he d expand tariffs on Chinese imports Five year notes are effectively pricing in a recession the JPMorgan analysts calculated Base metals too are discounting trouble ahead they estimated
Not so for the S P 500 The benchmark closed Friday just 2 below its record high from April and futures were up 0 1 as of 8 17 a m Monday in New York That leaves equities vulnerable to a Fed disappointment Indeed one consideration for Fed policy makers is that they might lose the power of surprise should they hold off this week then lower rates in the aftermath of a negative outcome on trade talks the JPMorgan team noted
The resilience of the equity market is in our opinion showing that equity investors have been leaning towards the thesis of a preemptive Fed the strategists said A more cautious and patient Fed next week could cast doubt on the above thesis creating the risk of an equity market correction
Adds futures in second to last paragraph |
JPM | JPMorgan to convert Highbridge multi strategy fund into credit fund | By Svea Herbst Bayliss BOSTON Reuters JPMorgan Chase Co NYSE JPM plans to convert its 2 billion Highbridge multi strategy fund into a credit focused fund as the bull market shows signs of slowing and clients want to invest elsewhere a company spokesman said on Tuesday The Highbridge fund which is available to institutional and wealthy private investors is part of JP Morgan s 150 billion global alternatives business which offers real estate private equity credit infrastructure and hedge fund portfolios As part of the change one of the four lead portfolio managers Arjun Menon will be leaving the company As markets and clients evolve we continue to innovate and examine our alternatives offering to ensure we deliver the solutions clients want and need today and into the future company spokesman Darin Oduyoye said explaining the move Three of the four key portfolio managers Mark Vanacore and Jon Segal and Jason Hempel who have been leading the multi strategy credit business for the last decade will stay with the fund Investors will be allowed to shift their capital to the new fund or pull some or all of it out at a time the fund was delivering gains to investors Exact returns for 2019 could not be learned JPMorgan first bought a piece of Highbridge co founded by Glenn Dubin in 2004 and purchased the rest five years later In 2015 the lender agreed to sell the majority of Highbridge s 22 billion private equity business to senior executives Vanacore who joined Highbridge at its founding in 1992 was named the chief investment officer for Highbridge Capital Management in 2012 a position he holds in addition to being a portfolio manager Menon who had concentrated on investing in Asian stocks plans to launch his own fund in the future
As investors speculate that the bull market which has pushed ahead for a decade will inevitably slow in the months ahead many investors are looking for alternatives and are showing signs of preferring more niche oriented strategies fund managers and analysts have said |
JPM | JP Morgan JPM Up 0 6 Since Last Earnings Report Can It Continue | It has been about a month since the last earnings report for JPMorgan Chase JPM Shares have added about 0 6 in that time frame underperforming 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 its most recent earnings report in order to get a better handle on the important drivers JPMorgan Q4 Earnings Lag on Trading Underwriting WoesDismal fixed income trading and underwriting business performance affected JPMorgan s fourth quarter 2018 earnings of 1 98 per share which lagged the Zacks Consensus Estimate of 2 20 However the figure surged 85 from the prior year quarter As expected Markets revenues recorded a fall A 15 rise in equity trading income was offset by 16 decline in fixed income trading revenues Further home lending business revenues fell 8 year over year mainly due to lower net production revenues Further operating expenses increased in the reported quarter Also provision for credit losses recorded a rise Notably investment banking fees recorded modest growth with 38 jump in advisory fees partially offset by decline in equity and debt underwriting fees Decent loan growth driven largely by rise in wholesale and credit card loans and higher interest rates supported net interest income growth Among other positives credit card sales volume was up 10 and merchant processing volume grew 17 Further Commercial Banking average core balances jumped 2 and Asset Management average loan balances were up 13 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 surged 67 from the prior year quarter to 7 1 billion The year ago quarter included a 2 4 billion reduction to net income due to the enactment of the Tax Cuts Jobs Act Higher Rates Loan Growth Aid Revenues Costs RiseNet revenues as reported were 26 1 billion up 7 from the year ago quarter Rising rates and loan growth were the main reasons for the improvement The positives were partially offset by decrease in Markets net interest revenues and mortgage banking fees However the top line missed the Zacks Consensus Estimate of 26 7 billion Non interest expenses on managed basis were 15 7 billion up 6 from the year ago quarter The rise was primarily due to investments in business and auto loan depreciation Credit Quality A Mixed BagProvision for credit losses was 1 5 billion up 18 year over year The increase was mainly due to reserve builds in consumer and wholesale loan portfolios As of Dec 31 2018 non performing assets were 5 2 billion down 19 from Dec 31 2017 Also net charge offs declined 2 year over year to 1 2 billion Strong Capital PositionTier 1 capital ratio estimated was 13 7 as of fourth quarter end compared with 13 9 on Dec 31 2017 Tier 1 common equity capital ratio estimated was 12 0 as of Dec 31 2018 down from 12 2 Total capital ratio was 15 5 estimated at the end of the year compared with 15 9 on Dec 31 2017 Book value per share was 70 35 as of Dec 31 2018 compared with 67 04 on Dec 31 2017 Tangible book value per common share came in at 56 33 at the end of December compared with 53 56 a year ago First Quarter 2019 OutlookManagement expects NII to be nearly stable sequentially given the benefits from higher rates and loan growth offset by lower day count Also fee income will likely witness seasonal strength driven by strong capital market pipelines and favorable operating environment Further expenses are anticipated to be up mid single digits on year over year basis
How Have Estimates Been Moving Since Then
It turns out fresh estimates have trended downward during the past month
VGM Scores
Currently JP Morgan has a subpar Growth Score of D however its Momentum Score is doing a bit better with a C However the stock was allocated a grade of F on the value side putting it in the fifth 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 broadly trending downward for the stock and the magnitude of these revisions indicates a downward shift Notably JP Morgan has a Zacks Rank 3 Hold We expect an in line return from the stock in the next few months |
JPM | JPMorgan JPM Plans To Launch JPM Coin Using Blockchain | JPMorgan Chase Co NYSE JPM plans to launch its own cryptocurrency called the JPM Coin in order to help corporate clients instantly settle payments between themselves With this move JPMorgan becomes the first global bank to incorporate blockchain technology into its system The JPM Coin will be transferable over a blockchain network Whenever a customer deposits money at the bank he will be issued the digital coin The coin can then be used for transferring money to other corporate clients over the same network Each of the JPM Coin will be redeemed for a single U S dollar Hence its value will not fluctuate making it similar in concept to the stablecoins Using these digital coins customers at JPMorgan will be able to settle transactions instantaneously thereby reducing settlement risk Moreover the bank feels that this will help in mitigating counterparty risk and decrease capital requirements Initially JPMorgan s CEO Jamie Dimon was not very keen on using the blockchain network In fact in 2017 Dimon criticized bitcoins calling it a fraud and saying that cryptocurrencies are worse than tulips bulbs However it seems that he regrets his decision now While discussing JPM Coin the bank informed that it would be in favor of cryptocurrencies as long as they are properly controlled and regulated Umar Farooq JPMorgan s head of digital treasury services and blockchain stated As a globally regulated bank we believe we have a unique opportunity to develop the capability in a responsible way with the oversight of our regulators Notably this JPM Coin is just a prototype by the bank and JPMorgan plans to roll it out only on its in house blockchain technology Quorum thereby making it operational to only a few of its clients for now However once successful the company intends to make it operable on all standard blockchain networks While JPM Coin comes as the first cryptocurrency that has been created by a U S bank other banks like Barclays LON BARC PLC NYSE BCS Credit Suisse SIX CSGN Group AG NYSE CS HSBC Holdings LON HSBA plc NYSE HSBC and a few more continue to experiment with the blockchain technology JPMorgan remains on track for top line growth given its continued efforts to expand into new markets and focus on the card business Moreover higher interest rates and increasing loan demand are expected to support profitability Shares of JPMorgan have lost 10 7 over the past year compared with 13 8 decline of the Currently JPMorgan carries a Zacks Rank 3 Hold You can see Zacks Top 10 Stocks for 2019In addition to the stocks discussed above wouldn t you like to know about our 10 finest buy and holds for the year From more than 4 000 companies covered by the Zacks Rank these 10 were picked by a process that consistently beats the market Even during 2018 while the market dropped 5 2 our Top 10s were up well into double digits And during bullish 2012 2017 they soared far above the market s 126 3 reaching 181 9 This year the portfolio features a player that thrives on volatility an AI comer and a dynamic tech company that helps doctors deliver better patient outcomes at lower costs |
JPM | Weekly Cryptalk JPM Coin Jack Dorsey And Bitcoin Mt Gox Resurrection | Weekly Cryptalk 19
This week JPMorgan has become the first major US bank to issue its own cryptocurrency JPM Coin Taking into account that JP Morgan processes upwards of 5 trillion in transactions every day is this the beginning of widespread adoption or a gimmicky move by the global financial institution We ll talk about the coin its purpose and its potential effect on XRP which hopes to become the banks settlement coin
Jack Dorsey founder of Twitter and Square recently took part in a Twitter trust experiment between Bitcoin enthusiasts involving passing around a torch symbolizing the community around the lightning network He voiced his support for the Lightning Network a Bitcoin layer 2 protocol and seemed keen on implementing cryptocurrency payment technology in his products Can Dorsey spur a new Bitcoin bull market
Finally crypto investor Brock Pierce seems hell bent on resurrecting Mt Gox the infamous failed Japanese crypto exchange from which 650 000 Bitcoins disappeared in 2014 But it isn t going to be easy as the ownership status of the defunct exchange is unclear We ll explain why he wants to reviving the moribund exchange whose name is synonymous with crypto mayhem what s happened so far and what s next for Mt Gox
Join us each week for a new edition of Cryptalk with Clement Thibault It s released every Sunday You can also find it on Spotify iTunes or your favorite podcasting service |
MS | Charah Solutions announces launch of initial public offering | Charah Solutions CHRA launched an initial public offering of 7 352 941 shares of its common stock at an anticipated initial offering price between 16 00 and 18 00 per share Of the 7 352 941 shares to be sold in the offering Charah is offering 5 294 117 shares and the selling stockholders are offering 2 058 824 shares Underwriters over allotments is an additional 1 102 941 shares The shares have been authorized for listing on the New York Stock Exchange under the ticker symbol CHRA The company expects to use the net proceeds from the offering to repay borrowings outstanding under its term loan and the remaining net proceeds for general corporate purposes Morgan Stanley NYSE MS and BofA Merrill Lynch are acting as joint book running managers for the proposed offering Source Press ReleaseNow read |
MS | Coinbase Coming To Japan to Accelerate Global Reach of Cryptocurrency | the best visited service for US European and Australian buyers is considering a move to Japan to increase the global outreach of crypto coins
As part of our effort to accelerate the global adoption of cryptocurrency today we re announcing the launch of Coinbase s office in Japan we plan to take a deliberate approach to our rollout in Japan which means working hand in hand with the Japanese FSA Financial Services Agency to ensure compliance with local laws at every stage said Vice President and General Manager Dan Romero
Coinbase is available to the residents of 32 countries with major pairings with global currencies Coinbase already has presence in Singapore To enter the Japanese market Coinbase would partner with Mitsubishi UFJ Group one of the largest global banking companies
The news created speculation of a potential Bitcoin bull run as prices are once again depressed sinking toward 7 400
The path to serving Japanese investors with a fully legalized exchange may be long The company has already hired a CEO for the Japanese operations Nao Kitazawa will build the Coinbase presence in Japan Formerly he was an investment banker at Morgan Stanley NYSE MS Japan and has experience in fintech by running as the COO of Money Design a company that brought automated investment advice to Japan
Coinbase has set a year s deadline to acquire a license and offer services to Japanese buyers
The regulatory climate in Japan has allowed mostly large entities to run exchanges due to strict regulations for transparency and security Even Binance considers moving away from the country Recently HitBTC closed for Japanese buyers Kraken also closed its services for Japanese traders due to cumbersome regulations
However SBI Group has managed to provide the complete set of procedures for compliance and launched Ripple XRP trading on June 4
Japan is one of the most active markets for crypto coins with 16 exchanges applying for licenses At the time of writing the share of Bitcoin trading against the Japanese yen is more than 56 of the entire market nearly three times more active compared to trading against the US dollar |
MS | UBS s Ermotti Advises Clients to Stay in Market Amid Turmoil | Bloomberg UBS Group AG Chief Executive Officer Sergio Ermotti said investors shouldn t take fright after political turmoil in Italy sent tremors through global financial markets in recent weeks
We are recommending clients to still be in the market Ermotti said in an interview with Bloomberg Television in Zurich on Tuesday The underlying profitability the growth that we see are still supportive of equities in general terms But we are also very careful in signaling that cyclicality may come in the geopolitical risk may be there
The long simmering political crisis in Italy threw global markets into turmoil before populist parties agreed to form a government last week prompting diverging views on the severity of the situation in Europe Billionaire George Soros warned that the European Union is at risk of breaking up amid Italy s challenges while Morgan Stanley NYSE MS Chief Executive Officer James Gorman downplayed suggestions that another major crisis may be in store
Hedging is an absolute must in this environment Ermotti said One has to pay attention not to be too complacent he said adding that Europe needs to work on deeper reforms and will struggle to be credible in its current form
UBS itself has about 1 1 billion francs 1 1 billion of net exposure to Italian corporate bank and sovereign debt as well as counter party risk from financing trades and trading inventory at the end of the year according to the bank s annual report Ermotti said he s comfortable there s no substantial short term risk to Europe or any single country in the region
Bank Mergers
As headwinds in Europe hold back bank earnings while those of larger U S banks forge ahead speculation about mega mergers of European banks is gaining speed UniCredit SpA is considering a merger with France s Societe Generale PA SOGN SA a move that would combine two of Europe s largest financial institutions the Financial Times reported on Sunday Ermotti said consolidation could be part of the solution to reshape the banking industry in Europe and resolve lingering overcapacity
The spike in volatility after the political turmoil last week has prompted investor concern but not panic according to Ermotti
Investors are very cautious still They are out there observing the situation They are not panicking but they are starting to get concerned Ermotti said This is clearly not an environment where you put on more risks
UBS is seeking to buy wealth management assets more aggressively after gaining greater clarity from global regulators on how much capital the bank will need over coming years people familiar with the matter said in March UBS in January bought Nordea Bank AB s private banking business in Luxembourg after scooping up the firm that was Brazil s biggest independent multifamily office Consenso Investimentos Ltda
Whereas regulation had previously hindered cross border banking deals in Europe that may be changing Ermotti said
I think in general regulators look like they are already moving in this direction they do understand that the issue is not too big to fail per se but maybe too small to survive he said
Adds comment from UBS CEO Italy exposure from second paragraph |
MS | Getting Into Japanese Market Won t Be Easy For Coinbase | On June 4 Coinbase one of the largest wallets and cryptocurrency exchanges in the US revealed its plans to enter the Japanese crypto market While Japan is renowned for its rather progressive views toward crypto it was one of the first countries to officially recognize Bitcoin after all entering arguably the world s hottest crypto market is no easy task At the very least Coinbase will have to please the Japanese Financial Services Agency FSA the country s major watchdog that has been noticeably nervous ever since January s infamous Coincheck hack
Currently the San Francisco based Coinbase Inc operates in 32 countries Now that the company is expanding to Japan Nao Kitazawa a former investment banker at Morgan Stanley NYSE MS will be named CEO of the new branch according to Bloomberg In a blog post announcing the Japanese branch Coinbase referred to itself as a regulated compliant crypto company in the US that will focus on building that same level trust sic with new customers in Japan |
MS | Japan s first quarter GDP likely shrank less than initial reading on capex gain Reuters poll | By Kaori Kaneko TOKYO Reuters Japan s economy likely shrank less than initially estimated in the first quarter reinforcing views that it will quickly regain traction in coming months a Reuters poll found on Wednesday Weighed by weak domestic demand and a slowdown in exports the world s third largest economy probably shrank an annualised 0 4 percent in the first quarter less than a preliminary reading of a 0 6 percent contraction the poll of 16 economists showed On a quarterly basis growth was expected to dip 0 1 percent marginally less than a 0 2 percent fall indicated in preliminary data Revised figures will be released on Friday Expectations of a milder contraction were driven by a less pessimistic view of company spending Capital expenditure was seen rising 0 2 percent for the quarter up from a 0 1 percent decline in the preliminary data The expected upgrade in capital spending likely helped the GDP to revised up said Yoshiki Shinke chief economist at Dai ichi Life Research Institute But there is no change that the economy came to a temporary standstill at the beginning of this year after having grown solidly Many economists project the economy will rebound in April June and return to a moderate growth trend but weak data on Tuesday raised the possibility of a recession Household spending unexpectedly fall in April and services sector activity slowed in May Also industrial production grew less than expected in April We expect the economy will grow in the second quarter but the latest data suggest we need give heed to a possibility of a slower pace of recovery than previously expected said Shuji Tonouchi senior market economist at Mitsubishi UFJ Morgan Stanley NYSE MS The Cabinet Office will issue revised GDP data at 8 50 a m on Friday June 8 Japan time 2350 GMT on June 7 The first quarter contraction ended Japan s longest period of economic expansion since its 1980s bubble economy |
JPM | U S job openings slip hiring hits all time high | By Lucia Mutikani WASHINGTON Reuters U S job openings fell slightly in April but a surge in hiring to a record high suggested strong demand for labor before a recent escalation in trade tensions that was partly blamed for a sharp slowdown in employment growth last month The Job Openings and Labor Turnover Survey or JOLTS report from the Labor Department on Monday also showed an uptick in layoffs though they remained at historically low levels Trade tensions between the United States and China worsened following a move by President Donald Trump in early May to impose additional tariffs of up to 25 on 200 billion of Chinese goods prompting retaliation by Beijing A tariff on all goods from Mexico to force authorities in that country to stop immigrants from Central America from crossing the border into the United States was averted after the two nations struck an 11th hour agreement late on Friday The April JOLTS report probably is not the most useful indicator about current labor market conditions said Daniel Silver an economist at JPMorgan NYSE JPM in New York But for what it s worth the JOLTS data show that conditions in the labor market generally remained favorable as of April Job openings a measure of labor demand slipped to a seasonally adjusted 7 4 million from 7 5 million in March the government said The job openings rate was unchanged at 4 7 Hiring jumped by 240 000 jobs in April to 5 9 million the highest level since the government started tracking the series in 2000 The hiring rate increased to 3 9 from 3 8 in March The economy created only 75 000 jobs in May after adding 224 000 positions in April the government reported last Friday The unemployment rate was unchanged near a 50 year low of 3 6 QUITS RATE STEADY Job openings have been trending sideways since hitting an all time high of 7 6 million in November Some economists viewed this as a sign that the labor market was slowing regardless of the impact of the trade fights on hiring decisions by companies The lack of improvement in job openings points to demand for labor leveling off and suggests that the slowdown in hiring evidenced in Friday s payroll report was not a blip said Sarah House a senior economist at Wells Fargo NYSE WFC Securities in Charlotte North Carolina While today s report is consistent with some cooling in hiring the labor market is hardly falling off the rails Vacancies in the federal government increased by 22 000 jobs in April But job openings decreased by 172 000 in the professional and business services sector The increase in hiring was concentrated in the private sector with employers in the real estate and rental and leasing industries filling 34 000 vacancies in April The number of workers voluntarily quitting their jobs was little changed at 3 5 million in April keeping the quits rate at 2 3 for 11 consecutive months The quits rate is viewed by policymakers and economists as a measure of job market confidence Layoffs edged up in April lifting the layoffs rate to 1 2 from 1 1 in the prior month Layoffs increased in the real estate and rental and leasing industry
While these data obviously precede the May payroll report they do show that there was no signs of labor market demand beginning to fade said John Ryding chief economist at RDQ Economics in New York We think payroll growth will bounce back in June |
JPM | Swiss Franc Is Best Bet in History of Fed Easing JPMorgan Says | Bloomberg Swiss franc bulls have history on their side as speculation grows that the Federal Reserve is about to cut rates
The franc was the best performing currency during the past four rate cutting cycles according to JPMorgan Chase Co NYSE JPM It s already rallying as Treasury yields plummet evidence the pattern might repeat JPMorgan believes it will leading the bank to upgrade its franc forecast on Monday
A downturn in the global economy and risk markets would have the potential to drive sharp and accelerated gains in CHF Paul Meggyesi currency strategist at JPMorgan said in a report
He now sees the franc strengthening to 0 95 against the dollar the strongest since March of last year versus the previous target of 0 98 reflecting the likelihood of Fed easing The rates market is pricing in about 78 basis points of cuts over the next 12 months according to forward contracts
With recession risks rising amid trade tensions between the U S China and other global partners investors have rushed to haven currencies In the past month the franc has advanced more than 2 versus the greenback topping all other peers in the Group of 10 The Swiss currency was little changed at 0 9900 per dollar as of 8 06 a m London time Tuesday
Switzerland s current account surplus which amounts to 10 of gross domestic product or three times as much as Japan makes the franc a stronger refuge JPMorgan said The yen is the franc s preeminent rival for safe haven status among currencies according to the report
The yen is also expected to lure buyers seeking safety from trade wars But it s been topped by the franc s average performance in the 12 months following the first cut in major Fed easing cycles of 1981 1989 2001 and 2007 according to JPMorgan The franc is also one of the top three performers around the last five U S recessions the bank said
To be sure the Swiss National Bank could consider slowing the franc s appreciation But JPMorgan points out that the SNB did not intervene in any material size during the Italian crisis last year
The currency is rather less constrained by the SNB than it has been for much of the past decade Meggyesi wrote Entering the next recession with reserves at 120 likely means that the SNB will need to be more accepting of fundamental pressure for CHF appreciation than it was entering the financial crash when FX reserves were less than 15 of GDP
He added The SNB s magazine may not be entirely empty but it has far fewer bullets than it once did |
JPM | Former Wall Street Exec Tone Vays There Is No Evidence That the Crypto Winter Is Now Over | Former Wall Street executive and current blockchain researcher Tone Vays has expressed skepticism about the fact that crypto winter is over Vays made his comments in an interview with Cointelegraph on June 10
Vays a former financial analyst at United States banking giant JPMorgan NYSE JPM revealed that he does not trust the recent rally in the crypto markets claiming that he has not observed too much external money coming into the space |
JPM | Muted U S inflation strengthens case for Fed rate cut | By Lucia Mutikani WASHINGTON Reuters U S consumer prices barely rose in May pointing to moderate inflation that together with a slowing economy increased pressure on the Federal Reserve to cut interest rates this year But the report from the Labor Department on Wednesday will likely not shift Fed officials views that temporary factors are behind the weak inflation readings Airline fares among the transitory factors identified by Fed Chairman Jerome Powell rebounded and apparel prices stabilized after two straight monthly decreases U S central bank policymakers are scheduled to meet on June 18 19 against the backdrop of rising trade tensions slowing growth and a sharp step down in hiring in May that has led financial markets to price in at least two rate cuts by the end of 2019 A rate cut is not expected next Wednesday This soft inflation backdrop reinforces our call for two rate cuts later this year said Michael Feroli an economist at JPMorgan NYSE JPM in New York We think next week is probably too soon to expect that action given that growth is still holding in and trade related risks remain two sided The consumer price index edged up 0 1 last month as a rebound in the cost of food was offset by cheaper gasoline the government said The CPI gained 0 3 in April In the 12 months through May the CPI increased 1 8 slowing from April s 1 9 gain May s rise in the CPI was broadly in line with economists expectations Excluding the volatile food and energy components the CPI nudged up 0 1 for the fourth straight month the longest such stretch since April 2017 The so called core CPI was held down by a sharp decline in the prices of used cars and trucks as well as motor vehicle insurance In the 12 months through May the so called core CPI rose 2 0 after advancing 2 1 in April U S Treasury prices were trading mostly higher while the dollar was little changed against a basket of currencies Stocks on Wall Street slipped as the rate cut hopes were overshadowed by investor anxiety over the U S China trade war GROWTH SLOWING U S President Donald Trump in early May slapped additional tariffs of up to 25 on 200 billion of Chinese goods prompting retaliation by Beijing Trump on Monday threatened further duties on Chinese imports if no deal was reached when he meets Chinese President Xi Jinping at a G20 summit at the end of this month in Japan Economists have warned that the tariffs will undercut the economy which will celebrate 10 years of expansion in July the longest in history Powell said last week the Fed was closely monitoring the implications of the trade war on the economy and would act as appropriate to sustain the expansion Data so far have suggested a sharp slowdown in U S economic growth in the second quarter after a temporary boost from exports and an accumulation of inventory early in the year Job growth slowed sharply in May Manufacturing production exports and home sales dropped in April while consumer spending cooled The Atlanta Fed is forecasting gross domestic product to increase at a 1 4 annualized rate in the April June quarter The economy grew at a 3 1 pace in the first quarter A survey of chief executive officers published on Wednesday showed unease about trade policy negatively impacting sales expectations as well as capital spending and hiring plans over the next six months The Fed s preferred inflation measure the core personal consumption expenditures PCE price index increased 1 6 percent in the year to April after gaining 1 5 in March Data for May will be released later this month The core PCE price index has been running below the Fed s 2 target this year Gasoline prices fell 0 5 in May after rising 5 7 in April Food prices rebounded 0 3 in May after dipping 0 1 in the prior month Owners equivalent rent of primary residence which is what a homeowner would pay to rent or receive from renting a home increased 0 3 in May after rising 0 3 in April Healthcare costs increased 0 3 matching April s rise That mirrored an increase in healthcare costs at the producer level suggesting a pickup in the core PCE price index in May There were gains in hospital and doctor fees But prices for prescription medication fell 0 2 Apparel prices were unchanged in May after tumbling 0 8 in the prior month They had declined for two months in a row after the government introduced a new method and data to calculate apparel prices Economists expect the duties on Chinese goods to lift apparel prices in the coming months That s going to change with new tariffs on the way unless apparel companies can teach other nations to knit sweaters as well as Chinese workers can do said Chris Rupkey chief economist at MUFG in New York Prices for used motor vehicles and trucks tumbled 1 4 That was the largest drop since last September and marked the fourth straight monthly decrease The cost of motor vehicle insurance fell 0 4 the most since May 2007 The cost of recreation also decreased
But prices for airline tickets rebounded 2 0 after falling for two straight months Prices for household furnishings and new vehicles rose in May Household furnishings prices are likely to trend higher in the coming months because of the duties on Chinese imports |
MS | 5 Things To Know As Meal Kit Startup HelloFresh Preps For IPO | Meal kit startup HelloFresh recently announced plans to go public despite the post IPO woes of rival Blue Apron NYSE APRN The company announced on Tuesday its plans to raise as much as 352 million in an initial public offering in Frankfurt Germany
HelloFresh is set to list on the Frankfurt Stock Exchange with the help of Deutsche Bank NYSE DB J P Morgan Chase NYSE JPM Morgan Stanley NYSE MS and others
The public listing marks the next logical step to further expand our business to secure our position as the leading global player and to pursue our long term growth strategy HelloFresh co founder and CEO Dominik Richter said in a company release
HelloFresh clearly plans to buck the trend that saw investors dump Blue Apron s stock which has been cut in half since going public this summer
Now let s take a look at HelloFresh so potential investors can gain a better understanding of the recipe kit delivery company as it nears its first days of trading
Young Simple
Founded in 2011 HelloFresh delivers between two and four meals a week for two to four people as part of three different plans classic veggie and family The company delivers the ingredients and recipes for free seven days a week
HelloFresh gives users the chance to either be surprised or select their meals every week from a range of options The company works with chefs and dietitians to create 15 new meals every week
Family plans cost 8 74 per serving while the classic and vegetarian options for two people run 9 99 per serving In the U S HelloFresh delivers seven days a week in specific areas and on Wednesday Thursday and Friday everywhere else
International Operations
HelloFresh sells its meal kit services in 10 countries Its more than 2 000 employees help operate the business across Europe including Austria Belgium the Netherlands the U K Germany and others
On top of that HelloFresh is currently in Australia and operates throughout the continental U S This might help give the company a leg up against its American rival Blue Apron which only offers its services in the U S
Scale
The company s CEO says that his meal kit company is its competitors citing faster growth and market share gains as primary justifications for the claim HelloFresh reported 53 year over year sales growth in September
HelloFresh claimed that it added 90 000 accounts during the second quarter and now boasts about 1 3 million customers worldwide The company said it delivered 33 7 million total meals last quarter
Current Outlook
Despite its German roots HelloFresh s biggest market is the U S However in order to gain market share the company has been spending heavily to offer trials and discount offers as well as pumping promotions on radio and TV
With heavy spending and rapid expansion HelloFresh is still unprofitable and reported a 66 9 million loss in the first half of 2017
The push to expand has helped the company grow overall The company s revenues doubled in 2016 and it is projected to grow by as much as 50 this year HelloFresh also hopes to reach its break even point within 15 months
Experienced Owner
German venture capital and technology incubator Rocket Internet SE owns a 53 stake in HelloFresh Shares of Rocket gained slightly after the IPO announcement
As of last year Rocket which is one of Europe s most high profile incubators had helped launch roughly 100 businesses in 110 countries in the last decade according to a
Rocket has already helped another food delivery company go public recently The company owns a portion of Berlin based Delivery Hero which has seen its stock price climb despite the crowded space
Aside from its potentially helpful guidance Rocket s majority stake in the company means that new HelloFresh investors will have less access to shares as only 20 of the company is up for grabs
Bottom Line
The company considered an IPO in 2015 when it was valued at over 3 billion HelloFresh s valuation fell to about which is still greater than Blue Apron s current 969 million market cap
HelloFresh plans to continue to expand its business and add to its offerings by adding more choices and personalization options including wine and desserts
Today s Stocks from Zacks Hottest StrategiesIt s hard to believe even for us at Zacks But while the market gained 18 8 from 2016 Q1 2017 our top stock picking screens have returned 157 0 128 0 97 8 94 7 and 90 2 respectively And this outperformance has not just been a recent phenomenon Over the years it has been remarkably consistent From 2000 Q1 2017 the composite yearly average gain for these strategies has beaten the market more than 11X over Maybe even more remarkable is the fact that we re willing to share their latest stocks with you without cost or obligation |
JPM | WisdomTree Delays Plan To Explore Sale Until Shares Rebound | Per an article by Bloomberg WisdomTree Investments Inc NASDAQ WETF was in talks with JPMorgan Chase NYSE JPM regarding sale of business in late 2018
However the parties failed to reach a conclusion per people familiar with the matter as they could not agree upon an acceptable sale price WisdomTree has delayed plans of sale until its shares rebound
Amid cyclical movements in the asset management industry asset managers are striving for growth through different avenues In April 2018 WisdomTree acquired ETF Securities European exchange traded commodity currency and short and leveraged business which included 17 6 billion of assets under management AUM as of Apr 10 2018
ETFs are one of the fastest growing products in the asset management industry These allow investors the ease of trading the entire portfolio of stocks against trading only one stock ETFs are often constructed to track a broad market index which can be done at quite a low cost
On Feb 1 the asset manager released fourth quarter numbers It reported a net loss of 11 6 million for the quarter against net income of 0 2 million a year ago WisdomTree witnessed rise in AUM along with higher advisory fees which were more than offset by rise in expenses
The company remains focused on executing strategic growth initiatives including expansion of distribution capabilities investment in technology launch of innovative products as well as addition of personnel
However the asset manager has significant exposure to internationally hedged products particularly major currency hedged funds HEDJ and DXJ which are highly unstable and might act as headwinds
Shares of WisdomTree have lost 22 2 over the past six months compared with 13 5 decline recorded by the
Currently WisdomTree carries a Zacks Rank 4 Sell
Stocks to Consider
Evercore Inc NYSE EVR has witnessed 1 4 upward estimate revisions over the past 30 days Moreover the stock has appreciated more than 12 in the past three months It currently carries a Zacks Rank 2 Buy You can see
LPL Financial Holdings Inc NASDAQ LPLA has witnessed 5 3 upward estimate revisions for the past 30 days Additionally the company s shares have rallied 24 3 in the past three months It holds a Zacks Rank of 2 at present
Zacks Best Stock Picking StrategyIt s hard to believe even for us at Zacks But from 2000 2018 while the market gained 4 8 per year our top stock picking strategy averaged 54 3 per year How has that screen done lately From 2017 2018 it sextupled the market s 15 8 gain with a soaring 98 3 return |
JPM | You Won t Believe What Stocks The Insiders Are Buying | In February 2016 as bank stocks hit new lows JPMorgan Chase NYSE JPM CEO Jamie Dimon dove in with a 26 million open market stock purchase of JPMorgan s stock
Other bank insiders followed suit that year and continued to buy in 2017
It was a sign that the financial stocks were cheap
Quietly in 2018 the insiders of another sector have been equally as enthusiastic the energy insiders
Do you know who Joseph Foran is
He s the CEO of Matador Resources an oil and natural gas exploration and production company
On four different occasions beginning on Nov 23 2018 and ending on Dec 11 2018 Foran bought shares of Matador totaling 169 860 as the shares plunged over 42 from the beginning of October through Dec 11
He wasn t the only Matador insider to buy
From Nov 11 to Dec 14 2018 18 Matador insiders bought stock as it tumbled down This included the CFO Executive Vice Presidents and directors
What did Foran and the other Matador insiders know last year
The shares have rebounded in 2019 gaining 13 6 year to date
Energy Insiders Went on a Buying Spree in 2018 as Crude Plunged
But he wasn t the only energy company insider to buy in 2018
There was a huge cluster buy at Encana In November and December 2018 over a dozen insiders including the CEO CFO General Counsel and directors all jumped in to buy as the shares took a dive as crude fell
The shares have rebounded in 2019 and are up 5 7 year to date
There were also insider buys at other exploration and production companies such as Berry Petroleum and Parsley Energy which are up 24 and 12 respectively year to date
More
When in the know officers dip into their own pockets to buy shares of their own company there s only one reason They expect the stock price to go up
Zacks is now targeting insider moves that include a CEO who just bought 1 million of stock in his medical technology company even though he already owns half a million shares and an energy company so confident that it announced a 100 million share buyback program
Our recommended insider trades are normally closed to public view but you can gain access until midnight Sunday February 17
Insider Buying Sends a Strong Signal
Why would these CEOs and corporate insiders spend so much of their money on their own companies stock when they already own a ton shares already
Greed
Pure and simple
The opportunity to make more money motivates people even people who are already millionaires like Jamie Dimon
If top insiders are buying it s because they know something very good is going on at the company Maybe it is a new product Or contract Or pending merger
Whatever the reason they are very confident that shares will be on the rise After all who would buy more stock in a company if they knew it was sinking
Buy When the Insiders Buy
When high level insiders buy they are required to report the purchases to the SEC within 48 hours of the trade The trade then becomes public information
Hedge funds and other professional investors routinely use this information to get an edge on their trades
For most of us though it s not easy to get access to the insider information While the media will trumpet huge insider buys like Dimon s 26 million buy did you hear anything about the Matador CEO s 4 insider purchases
The challenge is getting easy and reliable access to all the insider trades and then figuring out which ones to buy
Where to Find the Insider Buys
Anyone can go on the SEC website and get the insider trading information but it s time consuming to search by individual companies
Some investment firms collect the insider buying data and can provide it to you as a weekly list Have you ever seen one of those lists The sheer number of companies can be overwhelming
In some instances the insiders have been known to buy en masse Then what s an investor to do
This happened during the stock market dip in August 2011 As stock prices fell insiders felt that their companies were undervalued and rushed out to buy shares
That August insiders bought stock in 50 different S P 500 companies in just one week Even if you got a list of those stocks how would you narrow it down to the stocks that were truly worth buying
To solve this problem our Zacks research team developed a strategy that monitors selected insider buying activity at companies that already show strong earnings and excellent valuations We do the work of sifting through all the insider buys so you don t have to
Just a handful of stocks meet the demanding criteria of our Zacks Insider Trader Right now we ve narrowed it down to 7 insider buys that make the grade
The portfolio is normally closed to public access and closes again this Sunday But today I m inviting you to look into it and see our live recommendations with strong fundamentals and substantial upside
One of the insider buys is a medical technology firm where the CEO snapped up 1 million of shares in his first open market purchase since joining the company in 2011 The CFO also added more than 250 000 in her first buy since coming onboard
Just for exploring our insider picks you may download Zacks Special Report 5 Stocks Set to Double free of charge These 5 buy and holds offer an enticing balance to our more active Insider Trader moves Each is the 1 favorite of a Zacks expert for its potential to jump 100 or more over the next year
Important Your chance to access the Insider Trader portfolio and Special Report is temporary The number of investors who see these recommendations must be limited The portfolio closes again to entry Midnight Sunday February 17
Best
Tracey
Tracey Ryniec Zacks insider and value strategist is Editor in Charge of the |
MS | Reuters poll Celebratory mood sours in world stock markets | By Rahul Karunakar BENGALURU Reuters The celebratory mood has dampened among even the most bullish equity market analysts polled by Reuters who now expect global stocks to recover most of this year s losses but close out 2018 below the peaks hit in January World stocks have been whipsawed since early February by several broad based sell offs led by trade war fears rising interest rates the turbulent U S North Korea relationship and a spiraling Italian political crisis The S P 500 has dropped from its record high in January and volatility has picked up dramatically leaving many investors worried a near decade long bull run was ending After nine years of markets outperforming the real economy we think the opposite now applies as policy tightens noted Andrew Sheets chief cross asset strategist at Morgan Stanley NYSE MS We think that this bull market has limited runway which has not been extended by tax changes technology or other factors We think it is in the midst of a topping process following a normal historical pattern where credit peaks first yields peak second and equities peak last Still the May 15 31 Reuters poll of over 300 equity strategists analysts and fund managers from around the world showed all 17 stock indexes polled were expected to climb from here and close out the year with gains That despite 11 of those indexes still in the red so far this year and well below where they were predicted to be by mid year in the previous poll in February The latest consensus though was a downgrade to forecasts made just three months ago for 13 of the 17 indexes polled and the range of forecasts across most major stock markets showed optimism was dented with lower highs Still about 58 percent 84 of 145 strategists who answered an additional question were confident or very confident world stocks will continue rising over the next 12 months The rest said they were not confident or not at all confident Global equity indices very likely are in a top building process where selective highs are possible but where further upside potential has become rather limited said Gerhard Schwarz head of equity strategy at Baader Helvea Top global fund managers recommended a cut to equity allocations to a nine month low in May after a turbulent month according to a separate Reuters survey on Thursday ASSET WRAP Still in the latest poll U S and European stocks were expected to find firmer footing and recover in the second half of the year on expectations those economies overcome the current slowdown and corporate earnings there continue to rise EPOLL US EPOLL FRDE But for some their conviction clearly is weak I don t think the story in equities is compellingly bullish It s more that bonds look terrible Equities look better than bonds and you have to put money somewhere said Robert Phipps director at Per Stirling Capital Management in Austin Texas British stocks were expected to end this year around where they were currently trading partly on worries about the approaching divorce date with the European Union in March 2019 EPOLL GB While Canada s stock index was expected to rise and eclipse January s record high by year end an uncertain outlook for trade including renegotiation of the North American Free Trade Agreement has dampened strategists enthusiasm EPOLL CA Emerging markets have had a torrid time in recent months coming under sustained selling pressure on concerns of a rise in protectionism and a possible decline in world trade and as U S 10 year Treasury yields US10YT RR climbed above 3 percent and on a stronger dollar That trend is expected to continue with nearly 75 percent of strategists expecting emerging markets to be more at risk of a sell off over the next 12 months than developed ones While Russia s stock market was forecast to hit record highs later this year a lingering standoff with the West could limit those gains EPOLL RU Indian stocks were expected to wipe out recent losses and gain a little but an array of political developments in and outside the country will likely restrain the market EPOLL IN Brazilian stocks were predicted to power through the rest of the year on a solid economic growth outlook but a lack of conviction about the October presidential elections could weigh EPOLL BR The subdued tone of expected gains and the vast number of risks cited in the latest poll stands out from previous global surveys of strategists and fund managers in recent years Rich equity valuations and geopolitical concerns should weigh on investor sentiment as we reach the end of the U S economic cycle Italian instability in Europe and mid term elections in the U S should further unsettle what has otherwise been broad based investor complacency said Kevin Redureau equity strategist at Societe Generale PA SOGN
To read other stories from the Reuters global stock markets poll Additional reporting and polling by correspondents in Bengaluru London Mexico City Milan Moscow New York Sao Paulo Shanghai Tokyo and Toronto Editing by Ross Finley and Hugh Lawson |
MS | BOJ Unexpectedly Cuts Bond Buying in Test of Yen Speculators | Bloomberg The Bank of Japan cut purchases of five to 10 year bonds for the first time since August indicating that it wants to stem a slide in yields that could threaten its stimulus policy
The BOJ trimmed buying of debt maturing in the zone by 20 billion yen 183 million to 430 billion yen at Friday s regular operation While the 10 year yield jumped as much as 1 5 basis points to 0 045 percent following the move the yen weakened instead of strengthening as expected by analysts
Traders had suggested that the BOJ would hold back a reduction in bond purchases on concern that currency speculators may read any such move as a rollback of its stimulus policy and lead to yen gains Bonds have rallied globally amid concerns over the political turmoil in Italy and renewed trade tensions between the U S and its partners
It s a victory by the BOJ given the market consensus is that the bank can t act as long as there s wariness over yen appreciation said Naoya Oshikubo rates strategist at Barclays LON BARC Securities Japan Ltd The limited yen reaction may pave the way for further reduction in bond purchases he said
The move also surprised the markets as it came after the central bank on Thursday left its planned purchase ranges for operations in June unchanged from May The BOJ had kept buying amounts unchanged at all its regular operations since cutting purchases of debt due in more than 25 years on Feb 28
Japan s 10 year yield dropped to 0 025 percent on Tuesday its lowest close since April 3 It was at 0 04 percent as of 11 25 a m in Tokyo The yen traded 0 2 percent weaker at 109 06 per dollar
Although the BOJ s move was unexpected the market is behaving differently this time than before said Daisaku Ueno chief currency strategist at Mitsubishi UFJ Morgan Stanley NYSE MS Securities in Tokyo Speculative move drove up the yen initially but it soon ran out of steam as follow through was limited he said |
MS | Global shares shrug off trade tensions as U S data reassures | By Kit Rees LONDON Reuters Global shares rose on Monday as worries over a trade war between the United States and other major economies took a back seat with investors focusing on an easing of political risks in Europe and strong U S jobs data The MSCI world equity index which tracks shares in 47 countries rose 0 4 percent while European stocks enjoyed a positive start to the day s trading as tensions calmed in Italy and Spain The mood is mainly positive due to better U S job creation seen in Friday s NFP data which has carried stocks higher despite headwinds such as escalating trade disputes analysts at FX Pro Insights said The risk is that sentiment shifts and catches traders off balance as volatility increases Following a week in which Italian stocks hit their lowest since July Italy s anti establishment parties formed a coalition government on Friday to end three months of political deadlock Italian bond yields fell in early trade They soared last week on fears a snap election would be called that might effectively become a referendum on euro membership The spread on Spanish bond yields over benchmark German Bunds also narrowed after a new prime minister was sworn in Madrid though Socialist Pedro Sanchez s minority administration faces a tough baptism from a revived independence drive in Catalonia The euro traded at 1 1687 well clear of Tuesday s 10 month low of 1 1506 While the risk of political crisis receded in Europe concerns over a possible global trade war rumbled on in the background Finance ministers of the closest U S allies vented their anger on Saturday over Washington s imposition of metal import tariffs setting the tone for a heated G7 summit next week in Quebec In a rare open show of divisions among the club of wealthy nations six of the G7 member countries issued a statement asking U S Treasury Secretary Steven Mnuchin to convey their unanimous concern and disappointment to President Donald Trump The G7 summit this weekend could be equally terrible There s even talk that Trump may not go Concerns on trade frictions are likely to continue to weigh on markets said Norihiro Fujito senior investment strategist at Mitsubishi UFJ Morgan Stanley NYSE MS Securities Washington also remained at odds with Beijing after U S Commerce Secretary Wilbur Ross met Chinese Vice Premier Liu He either China warned the United States on Sunday that any bilateral agreements reached on trade and business would be void if Washington implemented tariffs and other trade measures But this did not stop Asian shares from rallying MSCI s broadest index of Asia Pacific shares outside Japan gained 1 2 percent to a high last seen on May 17 while Japan s Nikkei rose 1 4 percent U S ECONOMY POWERS AHEAD Signs of strength in the U S economy helped keep bears at bay Data released on Friday showed U S job growth accelerated in May and the unemployment rate dropped to an 18 year low of 3 8 percent indicating a rapidly tightening labor market We had strong headline figures on employment but the rise in wages was still well contained and did not point to a sharp acceleration in inflation Hirokazu Kabeya chief global strategist at Daiwa Securities The strong report added to a string of upbeat economic data including consumer spending industrial production and construction spending making the Federal Reserve all but certain to raise interest rates at its policy meeting next week U S Treasury yields continued to climb with 10 year paper at 2 9131 percent while the dollar eased 0 2 percent against its currency basket to 93 993 U S crude futures traded flat at 65 79 having fallen as low as 65 51 per barrel on Friday their lowest in almost two months Rising U S crude production and a glut due to a lack of pipeline capacity have pressured prices
Global benchmark Brent was down 0 3 percent at 76 59 |
JPM | JPMorgan economist who predicted BOJ s April policy tweak sees it easing in Sept | FUKUOKA Reuters A prominent JPMorgan NYSE JPM Securities economist who predicted the Bank of Japan s communication tweak in April said the central bank could take interest rates deeper into negative territory in September amid growing global economic risks Hiroshi Ugai the major securities firms chief economist and a former Bank of Japan official wrote in a research note released on Friday that the BOJ will cut its short term interest rate target to 0 3 from the current 0 1 The move would be aimed at staving off an unwelcome spike in the yen that could hurt Japan s export reliant economy and would be triggered by a possible rate cut by the U S Federal Reserve Ugai said in the research note Expectations are rising in the markets that the Fed may cut interest rates in the coming months to shore up growth that has come under pressure from U S President Donald Trump s trade war with China and tariff threats against other countries Global economic growth will be hurt by Trump s trade war with China and Mexico Ugai said The anticipated Fed rate cuts in September and December could cause the yen to appreciate potentially forcing the BOJ to respond he added Ugai said he does not expect the BOJ to cut the 10 year government bond yield target even if it were to deepen negative rates in September A BOJ cut in its short term rate target is still a minority view among market participants as many say such a move would narrow financial institutions already thinning margins Ugai was among few economists who predicted the BOJ s decision in April to set a timeframe for the first time on how long it will keep interest rates super low
Under a policy dubbed yield curve control the BOJ pledges to guide short term rates at 0 1 and 10 year bond yields around zero percent |
JPM | JPMorgan CIBC See Bank of Canada Cutting Rates as Trade Weighs | Bloomberg Canada may have just printed its lowest unemployment rate since at least 1976 but two big North American banks are now forecasting its central bank to cut rates
JPMorgan Chase Co NYSE JPM reduced its forecast for Canadian growth in the third and fourth quarters of this year to 1 5 from 2 25 and expects the Bank of Canada to cut rates at its October announcement The New York based bank had previously expected an acceleration in Canadian growth for the second half of 2019
We doubt that this upswing can be sustained amid the recent re escalation of trade policy tensions renewed declines in oil prices and signs of slowing U S growth Jesse Edgerton a JPMorgan analyst said in a note
Canadian Imperial Bank of Commerce expects the Bank of Canada to reluctantly join the rate cutting party in the second quarter of 2020 following reductions from the U S Federal Reserve in the fourth quarter of 2019 and the first quarter of next year
While the Bank of Canada isn t intrinsically tied to Fed policy soft global growth means there s even less reason to believe exports and associated business investment will be able to make up for slowdowns in other parts of the economy strategists led by Ian Pollick said in a note
The Bank of Canada is expected to hold rates steady at 1 75 through the rest of the year according to the median forecast of analysts surveyed by Bloomberg
On Friday Canada reported it added 27 700 jobs in May while the unemployment rate fell to 5 4 the lowest in data going back to 1976 That brought job gains in the past 12 months to 453 100 The data added to evidence of a rebound from a stall at the end of the year though trade tensions and a slide in oil prices may start to weigh |
JPM | Kuroda Says BOJ Has Enough Ammunition Wary of Side Effects | Bloomberg The Bank of Japan can deliver more big monetary stimulus if necessary but needs to take care with its side effects on the financial system said Governor Haruhiko Kuroda
The BOJ will ease further if momentum toward its 2 inflation target is lost Kuroda said in an interview with Bloomberg TV s Kathleen Hays in Fukuoka Japan where central bankers and finance chiefs from the Group of 20 met over the weekend The governor emphasized that the BOJ doesn t need to act now citing the health of the economy
Kuroda s comments come as investors question whether the BOJ s ultra aggressive stimulus program is sustainable given the harm it has caused in markets and for commercial banks Gross domestic product data released Monday provides some support to Kuroda yet inflation is still less than halfway to his goal
Asked if the BOJ still has the capacity to do something big Kuroda said I think so He cited four policy options cutting the 0 1 negative rate further lowering the target for 10 year yields increasing the monetary base or boosting asset purchases
If the momentum to our 2 inflation target is lost then of course the Bank of Japan will swiftly respond by changing our policy Kuroda said
The yen weakened immediately after publication of the governor s remarks falling to as low as 108 67 per dollar
The Federal Reserve is increasingly expected to cut rates this year a move that would likely strengthen the yen This has prompted more BOJ watchers to see additional easing as the central bank s next move given that a weak yen helps Japan s efforts to spur inflation
JPMorgan Chase Co NYSE JPM last week said it now expects the BOJ to lower its negative interest rate to 0 3 percent in September
Trade Risk
Even before the escalation in U S China trade tensions in May some economists had flagged the possibility of extra easing by the BOJ given an unfavorable economic outlook and a sales tax hike set for October Previous increases in the tax have squeezed consumption and caused the economy to shrink
The BOJ is widely expected to keep its policy unchanged at the end of its next policy gathering on June 20
It s time for the BOJ to examine the data said Takeshi Minami chief economist at Norinchukin Research Institute The BOJ wants to be careful in adding stimulus because they don t have many tools left and side effects are piling up |
MS | Fitch Lowers India s Growth Forecast ETFs In Focus | Fitch ratings lowered India s GDP growth forecast to 6 9 from 7 4 after the Indian economy reported weak performance in the April June quarter
India s GDP grew 5 7 annually in the April June quarter of 2017 a three year low The primary factors responsible for this negative growth in GDP were prime minister Narendra Modi s demonetization move in November which led to slowdown in business activity and the introduction of a major tax reform in the form of Goods and Service Tax GST GST weighed on manufacturing activity as manufacturers were running down inventories on the eve of GST
What Lies Ahead
However the rating agency expects the impact of demonetization and GST to fade away in the coming months Hence this might lead to acceleration in economic activity Moreover the festive season in India is expected to spur spending and might lead to an increase in growth in the coming months
In a separate development per an article citing a report by Morgan Stanley NYSE MS the financial services giant has predicted that digitization will pave the path to India becoming a 6 trillion dollar economy by 2027 read
Moreover this emerging market nation s demographics show an optimistic future as more than 65 of the population is below the age of 35 Therefore Indians are expected to comprise a major chunk of the global workforce in the future
Risks Involved
The large stock of non performing loans on bank balance sheets could however dampen the outlook for credit growth and business investment Fitch ratings said in its statement
Moreover the Indian economy is at present not adding proportionate jobs to the number of people joining the workforce Per Raghuram Rajan former RBI Governor the Indian economy faces huge risks if the number of job additions does not match the number of new entrants to the labor force and could serve Modi a defeat in the parliamentary elections in 2019
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 4 96 billion and charges a fee of 71 basis points a year Financials Computer Software and Consumer Discretionary are the top three sectors of the fund with 23 5 13 1 and 12 4 allocation respectively as of Sep 29 2017 Housing Development Finance Co Reliance Industries Ltd and Infosys Ltd are the top three holdings of the fund with 9 5 7 4 and 6 0 allocation respectively as of Sep 29 2017 The fund has returned 9 63 in a year and 21 9 year to date as of Oct 2 2017 INDA currently has a Zacks ETF Rank 2 Buy with a Medium risk outlook
WisdomTree India Earnings Fund TO EPI
This fund provides exposure to Indian equities in multiple capitalization segments
It has AUM of 1 66 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 24 1 18 8 and 16 2 allocation respectively as of Oct 2 2017 Reliance Industries Ltd Infosys Ltd and Housing Development Finance Co are the top three holdings of the fund with 8 3 7 0 and 6 4 allocation respectively as of Oct 2 2017 The fund has returned 14 1 in a year and 24 2 year to date as of Oct 2 2017 EPI currently has a Zacks ETF Rank 2 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 11 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 26 9 10 2 and 8 9 allocation respectively as of Sep 29 2017 Housing Development Finance Co Reliance Industries Ltd and ITC Ltd are the top three holdings of the fund with 7 4 6 9 and 5 8 allocation respectively as of Sep 29 2017 The fund has returned 12 6 in a year and 24 1 year to date as of Oct 2 2017 INDY currently has a Zacks ETF Rank 2 with a Medium risk outlook
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MS | SYNNEX Jack In The Box Tencent Royal Bank Of Canada And Rio Tinto Highlighted As Zacks Bull And Bear Of The Day | For Immediate ReleaseChicago IL October 10 2017 SYNNEX Corporation NYSE NYSE SNX as the Bull of the Day Jack in the Box NASDAQ NASDAQ JACK as the Bear of the Day In addition Zacks Equity Research provides analysis on Tencent OTCMKTS OTC TCEHY Royal Bank of Canada NYSE NYSE RY and Rio Tinto LON RIO PLC NYSE NYSE RIO Here is a synopsis of all five stocks SYNNEX Corporation NYSE recently reported record revenue and profit This Zacks Rank 1 Strong Buy is expected to see double digit earnings growth this fiscal year SYNNEX provides distribution logistics and integration services for the tech industry including outsourced services It s wholly owned subsidiary Concentrix offers a host of strategic solutions including process optimization technology innovation and front and back office automation It operates across the globe Another Beat in the Fiscal Third QuarterOn Sept 25 SYNNEX reported its fiscal third quarter results and beat the Zacks Consensus by 17 cents Earnings were 2 16 versus the consensus of 1 99 Beating the estimate has become commonplace with SYNNEX It has only missed once in the last five years Revenue rose 16 5 to 4 3 billion from 3 7 billion in the year ago period Technology Solutions its largest segment saw revenue rise 15 8 to 3 8 billion while Concentrix revenue jumped 21 9 to 496 million year over year It generated about 65 million in cash in the quarter Guides Higher for the Fiscal Fourth QuarterSYNNEX continues to be bullish heading into its final quarter of the year Its fourth quarter earnings guidance was in the range of 2 63 to 2 73 well above the Zacks Consensus of 2 52 As a result 2 analysts raised quarterly and full year earnings estimates The fiscal 2017 Zacks Consensus Estimate jumped to 8 79 from 8 44 in the past month That s earnings growth of 25 as the company only earned 7 04 in fiscal 2016 2018 earnings estimates have also been on the rise moving up to 9 56 from 8 92 over the last month That s another 8 7 earnings growth Jack in the Box Nasdaq is still trying to exit the Mexican food business as it continues to seek a buyer for its QDOBA brand However this Zacks Rank 5 Strong Sell isn t seeing great sales on the burger side either Jack in the Box operates two restaurant franchises Jack in the Box one of the largest hamburger chains in the United States with 2 200 restaurants in 21 states and Guam and QDOBA Mexican Eats with 700 restaurants in 47 states the District of Columbia and Canada A Miss in the Third QuarterOn Aug 9 Jack in the Box reported its fiscal third quarter results and missed on the Zacks Consensus by 6 cents Earnings were 0 99 versus the consensus of 1 05 During the quarter the company took over 31 franchised Jack in the Box restaurants from an under performing franchisee This caused it to incur costs of 4 4 million or about 0 10 per share which likely resulted in the earnings miss Jack in the Box system same store sales fell 0 2 which lagged the QSR sandwich segment by 1 9 QDOBA s actually rose 0 5 system wide Company same store sales fell 1 6 at Jack in the Box and 1 1 at QDOBA however Company sales saw a 2 8 decrease in transactions Jack in the Box also got hit by higher labor as well as repair and maintenance costs Additionally it saw the return of commodity inflation Refranchising InitiativeThe company is operating a Jack in the Box refranchising initiative It sold 58 restaurants in the third quarter and has now sold 118 year to date As of the end of the third quarter it also had non binding letters of intent with franchisees to sell 63 additional restaurants The Sale of QDOBA Jack in the Box let it be known earlier in the year that it had hired Morgan Stanley NYSE MS to assist the Board in finding alternatives for QDOBA to enhance shareholder value The company hasn t made it a secret that it wants to return to its roots and focus solely on burgers There s no timetable for the possible sale however This is still just hanging over the company Disappointing GuidanceOnce again Jack in the Box provided disappointing guidance which led to the analysts cutting estimates Same store sales in the fiscal fourth quarter are expected to be flat to down 2 at Jack in the Box and at QDOBA Both saw increases a year ago Similarly for the year Jack is expected to increase just 0 5 while QDOBA is projected to be down 2 2 5 As a result the Zacks Consensus Estimate for 2017 has fallen to 4 06 from 4 23 in the last 90 days with 7 analysts cutting and none raising for the year That s earnings growth of just 5 versus fiscal 2016 Shares Down on the YearThe restaurants are a tough industry right now Many are struggling to attract consumers in a crowded market place Jack in the Box shares are down 10 year to date but they re not exactly a value Additional content A Dark Horse Winner for Traders AttentionIn the Global Week Ahead be aware of a dignified monetary policy conference held in Manhattan It s the dark horse winner in gaining institutional traders attention The conference title is Globalization Dynamics E U U S perspectives Low and stable long term bond rates those are major ingredients steady the stock market marches to higher valuations the world over right now Global fixed income market accommodation hinges in turn on the Eurozone s European Central Bank led monthly bond buying for the rest of 2017 and 2018 Known by the French language acronym SUERF the European Money and Finance Forum when translated to English is the sponsor The European Central Bank the ECB and the Swiss based Bank for International Settlements called the BIS are key multi lateral members in SUERF as are 21 or so European central banks According to their website SUERF is an independent non profit network association of central banks supervisors financial institutions academic institutions and financial sector practitioners Their meeting provides a unique NYC based financial market forum for a timely global debate While the conference is fairly wide ranging in topics it addresses a significant theme will be the way out of QE balance sheets across major global central banks Notably on Wednesday ECB Executive Board Member Peter Praet speaks on European Exit Strategies The NY Fed s Simon Potter will deliver another session on American Exit Strategies Do exits from huge multi trillion dollar central bank balance sheets merit attention Yes That should be on your front burner as a lowly retail stock investor If these coordinated bond market exits go awry you will lose big On Tuesday eyes in Spain and abroad will be cast towards Catalonia s regional legislature and Catalan President Charles Puidgemont Economic pressure on the pro independence camp there is rising On Monday three more major companies expect to discuss moving offices out of Catalonia sources have told Reuters Major lenders Caixabank and Sabadell have already announced they would be moving offices out of the region The scope for tensions to flare is high in the face of a united front against the Catalan separatists including the central Spanish government and the King of Spain himself Demonstrations for and against independence happened all weekend The EU also made it clear it is unwilling to acknowledge the Oct 1st referendum On Monday European Affairs Minister Nathalie Loiseau said the Catalan crisis had to be resolved through dialogue with Spain Also out this week latest import and export trade figures for India and China Traders and investor alike will read these international trade reports closely They seek fresh global clues on where the manufacturing and commodities markets might go next Top Zacks 1 Rank STRONG BUY Stocks Tencent OTCMKTS This is a 230 billion market cap Tech monster in Mainland China There is a momentum run for Chinese Internet stocks going on Royal Bank of Canada NYSE Foreign banks are worth paying attention to given the role of global bond market accommodation keeping interest rates low But more importantly realize the bank stock game shows the collateral damage that can be done if central bank balance sheet exits go awry This stock is a long term Zacks Rank of F based on a D in the stock s valuation score Rio Tinto PLC NYSE This big Australian iron ore mining giant is both a Zacks Rank 1 Strong Buy and a long term Zacks VGM score of A The stock looks about right for an entry point Key Global Macro Data Wednesday s minutes to the FOMC meeting on September 20th come out This is likely a non event Pending October and November data matter more Also on Wednesday a 4th round of NAFTA talk gets underway Top Fed officials also speak over the course of the week including Governor Powell a candidate for the top job who speaks on two occasions Governor Brainard and four regional presidents also speak including Dallas s Kaplan twice Chicago s Evans twice Minneapolis s Kashkari and Boston s Rosengren On Friday a U S retail sales report hits This will include auto sales About the Bull and Bear of the DayEvery day the analysts at Zacks Equity Research select two stocks that are likely to outperform Bull or underperform Bear the markets over the next 3 6 months About Zacks Equity ResearchZacks Equity Research provides the best of quantitative and qualitative analysis to help investors know what stocks to buy and which to sell for the long term Continuous analyst coverage is provided for a universe of 1 150 publicly traded stocks Our analysts are organized by industry which gives them keen insights to developments that affect company profits and stock performance Recommendations and target prices are six month time horizons Strong Stocks that Should Be in the NewsMany are little publicized and fly under the Wall Street radar They re virtually unknown to the general public Yet today s 220 Zacks Rank 1 Strong Buys were generated by the stock picking system that has nearly tripled the market from 1988 through 2015 Its average gain has been a stellar 26 per year Follow us on Twitter Join us on Facebook NASDAQ FB Zacks Investment Research is under common control with affiliated entities including a broker dealer and an investment adviser which may engage in transactions involving the foregoing securities for the clients of such affiliates Media ContactZacks Investment Research800 767 3771 ext 9339Zacks com provides investment resources and informs you of these resources which you may choose to use in making your own investment decisions Zacks is providing information on this resource to you subject to the Zacks Terms and Conditions of Service disclaimer Past performance is no guarantee of future results Inherent in any investment is the potential for loss This material is being provided for informational purposes only and nothing herein constitutes investment legal accounting or tax advice or a recommendation to buy sell or hold a security No recommendation or advice is being given as to whether any investment is suitable for a particular investor It should not be assumed that any investments in securities companies sectors or markets identified and described were or will be profitable All information is current as of the date of herein and is subject to change without notice Any views or opinions expressed may not reflect those of the firm as a whole Zacks Investment Research does not engage in investment banking market making or asset management activities of any securities These returns are from hypothetical portfolios consisting of stocks with Zacks Rank 1 that were rebalanced monthly with zero transaction costs These are not the returns of actual portfolios of stocks The S P 500 is an unmanaged index Visit for information about the performance numbers displayed in this press release |
JPM | EUR USD Dovish Fed Disastrous For The Dollar | The Fed s policy announcement in January sent EUR USD up above figure 15 base
The Federal Reserve sounded too dovish and Powell gave the markets more than he had been expected to The FOMC instead of announcing further gradual increasing the interest rate said in the new statement alongside its monetary policy decision that the central bank s future decisions will depend on the incoming data Furthermore there are said to be fewer reasons to continue the normalization cycle Powell rejected to answer directly whether the Fed would hike or cut the federal funds rate further referring to the future economic data
In the previous years when the Fed started speaking that its decisions were dependent on the incoming data it was followed by the end of monetary normalization The derivatives market suggests a lower probability of the Fed rate hike in 2019 at 10 from 25 a week ago The chances of monetary expansion on the contrary have increased to 9 from 4 Both CME futures and interest rate swaps signal an easier monetary policy in the second or a third quarters 2020 and Capital Economics announces that higher recession risks will get the Fed to cut the federal funds rate in early 2020
Dynamics Of Possible Fed Rate Changes
Source Bloomberg
The major issue investors wonder about is how the Fed outlook could have changed during such a short period of time as 6 weeks In December the central bank was willing to continue monetary normalization almost at the same pace as in 2018 Powell tried to explain the change in the FOMC policy course by tighter financial conditions slower economic growth in China and in the euro area Brexit and the U S government shutdown however these factors were also relevant in late 2018
According to JP Morgan it is because the doves have won in the FOMC due to Vice Chairman Richard Clarida Barclays LON BARC supposes that the Federal Reserve surrounded to the financial markets volatility Although Powell denies that Donald Trump affects the Fed policy Donald Trump s policy to appoint the opponents of the rate increase to the FOMC seems to work Only one thing is clear the Fed Chairman and his team are not that confident that the strongest U S employment for the past few decades can generate inflation Besides it is easy to hike the interest rates when global growth is at 4 and more and it is a different matter if the growth rate is down to 3 5
Powell s dovish speech turned out to be a real disaster for the U S dollar The EUR USD rate has instantly exited the consolidation range of 1 1265 1 1485 and might break through the January highs However the euro bulls first need to live through the report on the U S employment Positive statistics will hold them back The negative report on the contrary will support the EUR USD rally towards 1 1615 1 163 |
JPM | Is JPMorgan Small Cap Growth Fund A PGSGX A Strong Mutual Fund Pick Right Now | Small Cap Growth fund seekers should consider taking a look at JPMorgan NYSE JPM Small Cap Growth Fund A PGSGX PGSGX carries a Zacks Mutual Fund Rank of 2 Buy which is based on nine forecasting factors like size cost and past performance
Objective
The world of Small Cap Growth funds is an area filled with options such as PGSGX These funds tend to create their portfolios around stocks that sport large growth opportunities and market capitalization of less than 2 billion The companies in these portfolios are usually on the smaller side and are in up and coming industries and markets
History of Fund Manager
J P Morgan is based in Boston MA and is the manager of PGSGX JPMorgan Small Cap Growth Fund A debuted in July of 1991 Since then PGSGX has accumulated assets of about 280 66 million according to the most recently available information A team of investment professionals is the fund s current manager
Performance
Of course investors look for strong performance in funds This fund carries a 5 year annualized total return of 7 18 and it sits in the top third among its category peers If you re interested in shorter time frames do not dismiss looking at the fund s 3 year annualized total return of 13 13 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 PGSGX s standard deviation over the past three years is 18 61 compared to the category average of 10 27 Looking at the past 5 years the fund s standard deviation is 18 38 compared to the category average of 10 14 This makes the fund more volatile than its peers over the past half decade
Risk Factors
One cannot ignore the volatility of this segment however as it is always important for investors to remember the downside to any potential investment PGSGX lost 55 68 in the most recent bear market and underperformed comparable funds by 2 71 This makes the fund a possibly worse choice than its peers during a sliding 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 PGSGX has a 5 year beta of 1 29 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 PGSGX s 5 year performance has produced a negative alpha of 2 45 which means managers in this portfolio find it difficult to pick securities that generate better than benchmark returns
Expenses
As competition heats up in the mutual fund market costs become increasingly important Compared to its otherwise identical counterpart a low cost product will be an outperformer all other things being equal Thus taking a closer look at cost related metrics is vital for investors In terms of fees PGSGX is a load fund It has an expense ratio of 1 24 compared to the category average of 1 25 So PGSGX is actually cheaper than its peers from a cost perspective
Investors need to be aware that with this product the minimum initial investment is 1 000 each subsequent investment needs to be at least 50
Bottom Line
Overall JPMorgan Small Cap Growth Fund A PGSGX has a high Zacks Mutual Fund rank strong performance worse downside risk and lower fees compared to its peers
Don t stop here for your research on Small Cap Growth funds We also have plenty more on our site in order to help you find the best possible fund for your portfolio Make sure to check out for more information about the world of funds and feel free to compare PGSGX to its peers as well for additional information And don t forget Zacks has all of your needs covered on the equity side too Make sure to check out Zacks com for more information on our screening capabilities Rank and all our articles as well |
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